And if you are diligent in this for a long period of time, you can achieve financial independence sooner (even if you're not super frugal ).

Whether you’re wanting to go extreme for a year to save up for a large purchase or want to keep a permanent fifty percent savings rate, you can do it.

Picture this: You’re earning $50,000 a year but for one year you decide to stretch your budget to the max and live off of a meager $20,000. Let’s say that around 10 percent of your salary goes to taxes. That leaves you with $20,000 in savings – to do whatever you want to do with. An awesome 50 percent savings rate. But do you think you can live on $20,000 per year?

What You Need

First off, I want to point out that this budget probably isn’t going to work out for people who live in high cost cities like New York or LA. Above that there are also different variables that are going to help you live off of a low income.

However, while living on $20,000 per year might not work in high cost of living (HCOL) areas, achieving a 50 percent savings rate definitely is. So, simply change the math a bit, and you can still make it work.

If you're going for the $20,000 per year, here's what you need:

Low Cost Housing: As a general rule of thumb your housing shouldn’t be more than a third of your take home pay. So if you plan on living on a $20,000 budget you should find something in the $550 per month range – tops.

This might require some sacrifice. You might need roommates, a smaller place, or both. Or, you could get creative and look into house hacking to earn money where you live.

The Size of Your Family: Feeding a house full of teenagers on a low grocery budget? Probably not going to work – although with some creativity and bargain hunting skills it definitely can. It’ll be easier to pull off a low monthly food spending amount when there’s only 1-3 people in the household. (And no, I’m not insinuating that you kick your teenagers out of the house, just adjust your budget.)

So, this might be much easier when you're single.

Your Hobbies: You only have one life to live and I’m definitely in favor of the “spend your money to enhance your life approach.” With that said if your hobby is a money sucker it’s gonna be hard to stay on budget. You might be better off finding a low cost hobby.

Or, even better, check out our list of free hobbies that are still fun!

Your Commitment: Going from living on $40,000 to living on $20,000 is no joke. It takes some serious effort. Your commitment to saving money and living a low cost lifestyle is ultimately what will determine your success.

Your Debt Level: In the $20,000 a year budget I include no debt repayment of any kind. But understandably, you might have a little or a lot of debt. If this is your situation I’d factor your retirement savings into the budget and use every penny you have left over to kill your debt. Seriously, kill it.

Your Creativity: Some people flat out don’t want to live on less and that’s perfectly fine. No judgment here! If you’re in a position where you’ve already done the heavy lifting and can afford to live the life you want to live, power to you. You deserve it. However, if you’re like me and you really need to save/invest more than this budget can help.

The $20,000 A Year Budget

Just in case you were wondering, I do live on $20,000 per year or somewhere close to it. And it’s really not bad at all.

You can have fun and enjoy your life just as much on $20,000 as on $40,000. (Although according to research $75,000 a year brings people the most happiness.)

Right now my living situation costs $0 and if I would follow my budget to the letter I’d only be spending around $15k-$18k per year. So this is not my exact budget but one more realistic for someone trying to go from 20k to 40k.

Total Monthly Budget: $1,668

Money Saved = $20,000

You can play around with this budget until it fits you the best. For example maybe you want to include retirement saving in your budget rather than taking it out of the money you’re saving. You can cut back in different areas to compensate for that.

What you can do with the $20,000 saved:

Get a jump start on retirement investing

Save up for a down payment on a home

Pay off debt

Buy a rental property (you can buy a rental property for just $5,000 with RealtyMogul )

) Start a business (you can create a blog with Bluehost for just $2.95 per month and your time)

for just $2.95 per month and your time) Use the money for emergencies

To Ensure Success...

To ensure your success there are a few preparations you can make. Preparing yourself for a lifestyle deflation will make your transition go much smoother.

Here’s what you should know.

Finding Housing Will Be Your Biggest Challenge – If you live in an expensive area finding housing will be your biggest hurdle. You want a place that a) makes you feel safe b) is livable and c) is cost effective.

In my area, $550 for rent is a pretty average number – but I live in a very rural area and many of you do not. Take your time and be creative. And realize, this is a TEMPORARY sacrifice and it will totally pay off in the long run.

Get Your Entertainment Lined Up – A common misconception is that people who live a low cost lifestyle don’t have any fun – this couldn’t be farther from the truth. I am always out do something, and most of the time it’s fun!

As far as TV and Moves go I pay $129/year for Amazon Prime (it's 50% off if you're a student with Amazon Student). This keeps the girls and I entertained at night. (And when I want to watch one of my favorite shows I go to my Mom or boyfriend’s house.) Also look for free activities – like hanging out with friends or family, taking hikes, riding bikes, or fishing.

Be Creative in the Kitchen – I’ll admit most of my meals are pretty routine. But then again, I’m not one who cares much about food. But for those of you who like a variety look online for recipes. You can recreate all of your favorite restaurant dishes for a fraction of the price.

Final Thoughts

Living on $20,000 per year isn't for everyone. It's simply one way, one approach, to achieving your money goals or getting towards FIRE sooner.

You could also look at earning more money and still saving 50% (or even more) of your income. Check out this story of saving 75% of your income.

The bottom line is that it's possible, you just have to focus on it and get creative about your lifestyle.

What other tips do you have for someone trying to live a low cost lifestyle?