The Power of Living Within Your Means

last updated 6 March 2025

Creating a budget is crucial at any age, but it's especially important—and daunting—for us millennials. When rent, health care, cell phone bills and other costs previously borne by Mom and Dad gobble up our paychecks, figuring out how to handle the rest of our cash is hard. And for me, at least, travel, socializing with friends and spending on everyday needs can be tough to balance against saving for a far-off future.

But now is the best time to learn how to budget. "We're at this critical point where if we don't understand where our money goes, we will feel less and less in control of our finances as the years go on," says Pam Capalad, a certified financial planner (and millennial) who owns Brunch & Budget, in New York City.

Learning to live within your means will help you prepare for the inevitable stressors later on, such as buying a home, starting a family or taking time off between jobs.

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Budgeting well can take some trial and error. When I moved to Washington, D.C., in 2012, I dutifully recorded every dollar I spent on a spreadsheet. But I eventually got lazy and stopped adding up my expenses each month. When I revisited my budget last year to see if I could afford to leave roommate life behind and live alone, I was shocked.

My fixed expenses had mostly stayed the same, but my discretionary spending had ballooned as I grew lax about throwing money at nights out with friends. At the same time, I was accumulating too much cash in my checking account that could have been put to better use in a savings account or in my 401(k).

Strategies that stick. Start budgeting by tracking your expenses for two to three months — without judgment —says Ryan Frailich, founder of Deliberate Finances, in New Orleans. Once you're aware of where your money goes, you can set realistic, concrete goals ("save $700 in my vacation fund by August") rather than vague ones ("go out less"). This will motivate you to revisit your budget regularly.

Start gradually rather than trying to overhaul your money habits all at once. Capalad recommends that her clients choose one category at a time and spend a couple of months paring down their spending in that area.

At the same time, think about what you value most — living alone, getting in shape with a personal trainer, going to concerts or the theater — and prioritize those in your budget.

If you're thinking of going digital, budgeting apps can help you stay on top of your finances by tracking expenses, setting savings goals and managing cash flow. These tools can simplify money management and keep your budget on track.

For example, the popular budgeting app You Need a Budget encourages users to assign each dollar earned a "job" to allocate all income to expenses or savings. The service costs $109 a year, but some users think the results, breaking the paycheck-to-paycheck cycle, outweigh the fee.

Quicken's Simplifi offers easy-to-navigate menus and charts, creating a personalized spending plan to monitor income and expenses. The app adjusts your spending plan as expenses change and helps project cash flow based on upcoming bills.

If you work with a financial adviser and want real-time insights into your finances, Monarch allows secure collaboration by sharing account information for joint management of savings and investment goals. The app also supports multiple users, enabling partners or household members to access their own accounts. Monarch offers a seven-day free trial, followed by a subscription of $14.99 per month or $69.99 per year.

Setting up these tools can be tedious, but they will help you visualize your net worth, spending patterns or goals.

Try redirecting a bigger chunk of your income into a savings account when you get your paycheck (and before you have a chance to spend it). See how crunched you feel the first month before upping that amount. Similarly, if you currently contribute 3% of your paycheck to your 401(k), inch up slowly toward the ideal 15%.

Owning up to what you spend (or overspend) is scary. "Freaking out is part of the process," says Capalad. I felt disheartened when I realized that something had to give. But the important thing is spending my money on what I value most, and that's my choice. The rest is negotiable.

Miriam lived in Toronto, Canada, before joining Kiplinger's Personal Finance in November 2012. Prior to that, she freelanced as a fact-checker for several Canadian publications, including Reader's Digest Canada, Style at Home and Air Canada's enRoute. She received a BA from the University of Toronto with a major in English literature and completed a certificate in Magazine and Web Publishing at Ryerson University.