As advised in the Quick Start Guide: "If you wish to install LEDE on a device with less than 8/64 MBytes Flash/RAM, please ask for help on the Installing and Using LEDE category of the forum."
For devices with less than 8 MB of flash, you will have to be careful in deciding the packages that you are including in your build.. So basically when you do 'make menuconfig', go in each and every sections to figure out if u can remove any non-mandatory packages. I had built the image for v11 of the same device and I faced similar issue.. i ended up removing the dnsmasq and LucI package since it was not affecting my requirement.. you can also check the sizes of the already built packages(*.ipk) files to understand which packages are acutally big ones..
You can also try one of the community build:
Thanks for your answers. I already installed the version provided on https://lede-project.org/toh/hwdata/tp-link/tp-link_tl-wr841n_v9 under Firmware LEDE install URL. Just wanted to make sure it is OK to use that in a production environment, since it is advised to ask for help in the Quick Start Guide. Should have written that before.
No problems. Please take note, if not already done, of the 4/32 warning:
https://lede-project.org/meta/infobox/432_warning
Depending on what you plan to install as packages, you might run out of flash space (and as @chirayu-patel implied, you will probably need to bake those packages inside a custom firmware build). AFAIK, building your own firmware allows you to incorporate packages in the compressed firmware image, so they occupy less space than if installed on the overlay at runtime.
Another consideration is that RAM memory exhaustion could occur and cause router reboots and other odd side effects.
Finally, you could circumvent flash size by using extroot (overlay on external device), but RAM still will be the culprit.
Alright. So basically I have to make sure I am not using too much space or RAM and everything will be ok, right?
Currently I only installed the luci-theme-material afterwards and probably this is everything I need for now.
Basically yes, but unfortunately RAM is harder to control if you are tight on memory. You can see how much RAM is left using the command free and flash space using df -h. You can also check in Luci under "System=>Software" for flash space, and of course the main page for RAM 
This is what I get:
root@LEDE:~# free
total used free shared buffers cached
Mem: 28176 23040 5136 584 2160 7480
-/+ buffers/cache: 13400 14776
Swap: 0 0 0
root@LEDE:~# df -h
Filesystem Size Used Available Use% Mounted on
/dev/root 2.3M 2.3M 0 100% /rom
tmpfs 13.8M 584.0K 13.2M 4% /tmp
/dev/mtdblock3 512.0K 316.0K 196.0K 62% /overlay
overlayfs:/overlay 512.0K 316.0K 196.0K 62% /
tmpfs 512.0K 0 512.0K 0% /dev
Does this look sufficient to you?
I have no experience with dealing with such low space, and thus someone else will have to step in to give you advice so I don't mislead you.