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You may have heard of the phrase “live within your means.” It is good advice for people in all sorts of financial situations. Sometimes, though, people cannot seem to get a hold of how to make this advice work for them.

If you often find yourself unable to save month after month, you may be living beyond the capacity of your income. Before you get into debt and get to the point that you’d need a debt coaching program, take control of your finances with our four tips for living on a budget.

1. Base your budget on take-home pay

If you are working for an American company duly recognized by the SEC and registered with the IRS, you are definitely bringing home far less than your hourly rate or annual salary. Your company is legally obligated to pay various types of taxes as a business, and some of these are taken off your paycheck before the money even reaches your bank account.

Sometimes, your company even makes deductions for your 401k, medical copays, and other forms of insurance. Budget based on your take-home salary, the money you receive after tax and all the other deductibles. Online calculators can help you figure out how much you actually make in a month. That will help you set a more realistic ceiling for your expenses.

2. Always have more money in than coming out

Aim to spend only about 30 percent of your take-home pay. It is easier for people who live in inexpensive areas, but you can at least attempt to stay within this range. Sticking to less than half of your monthly income gives you a cushion for when you have unexpected purchases to make, or when you have sudden expenses like medical or repair bills not covered by insurance.

You will also ensure you have more money coming in than going out when you stick to a budget. Track your monthly fixed expenses, and make educated estimates of your variable ones. The sum should not exceed your 30 percent ceiling, or at least your monthly take-home pay. When it does, you need to reassess your lifestyle and cut back on unnecessary spending.

Keeping a good cash flow is easy enough for people who can rely on a regular paycheck. For freelancers or part-timers, it can be a bit more challenging. If you fall within this group, instead of allotting 30 percent of your take-home, set aside the equivalent of your average earnings. If you want to be extra sure, you can use your slowest month as your ceiling.

3. Maintain zero balance on your credit card

Credit cards are often portrayed as debt traps, and they have a real risk of turning into those. However, using a card for your purchases, especially large ones, is alright. Just be sure to pay the balance in full, every month. If you pay only the minimum, the balance will grow over time, leading to the possibility of you not making the full payments at all.

If you plan on taking debt, do the computations first. See if your monthly take-home pay can support the payments you need to make, and within the period that allows for zero interest. If you are uncertain about whether you can meet your monthly expenses, the answer is probably no. Wait for a time where you are more financially stable, or find ways of augmenting your income so that you can make this purchase.

4. Do not spend to impress your friends

Today, even experiences are made into products. The proliferation of music festivals, bar events, pop-ups and “museums” where you can take pictures are evidence of this. If you keep spending money on these events and worrying about how to meet your monthly expenses, you should beg off from a few of them from time to time.

Do not assume that your friends can afford to spend the lifestyle you are all performing. Likewise, you should be honest with them about how much you are willing to spend for the month. If they are true friends, they will appreciate your forthright attitude.


Staying within your income is entirely possible if you are realistic about how far you can stretch your money. Keep track of your take-home salary, pay off your debts and bills, and be more mindful of purchases and nights out. That way, you will be more fiscally responsible and avoid debt or bankruptcy. If you are struggling with this, consider getting a debt coach to help you.

At A Debt Coach, we provide you with by design credit counseling. We offer consumer credit counseling services and more. Get in touch with us for details on our programs.