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How to budget money for low income? Money doesn’t grow on trees, of course, and that means we all need to be a little smarter with the cash we have, and try to stretch it a little further.
In addition to this rather annoying lack of a money tree situation, it’s also true that most of us don’t earn as much as we want or believe we deserve.
Living on a low income can be difficultthat’s for sure, but that doesn’t mean grinding and saving, living hand-to-mouth every day of the month. It’s about being savvylearning and of course figuring out ways to save a little here and there the vital importance of the budget.
I know, budgeting isn’t the brightest topic on the planet, but it will help your money go a little further, make sure you hit payment dates on any bills you have to pay, and hopefully help you afford some of life’s little luxuries.
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So how exactly can you budget as a low earner without breaking the bank every month?
Be honest with yourself
It’s okay to set a budget and not be honest.
That would be a complete waste of time!
Sure, it can be a pain to sit down and write down how much money comes in, how much money goes out, and then try to split the rest, but it’s a necessary evil if you want the whole process to work for you.
No one else should see your budget, so make sure you’re honest with yourself.
Many people find the process of writing down these numbers quite cathartic, and it often comes as a wake-up call – which can be quite a shocking wake-up call – but it still works!
Write All
You should have a new budget in front of you, black and whiteso you can apply anytime.
You can download a budget app or go the old-fashioned route and write it down on a piece of paper – This is my favorite because my wife and I work on it together.
But… whatever is best for you.
The actual process of writing it down makes it more real, and so it means you stick to it.
If you need a little help creating a budget, I created a budget printable that we use at home. As it is only one page, it works very well for us.
We just print it out, fill it in with a pen and stick it on the fridge – we do this every 6 months to readjust if necessary.
To download a high-quality print version, just fill out the form below.
Give Yourself a Weekly Spending Limit
Most of us don’t realize how much we really spend until we sit down and add it all up.
Write down everything you spent in your first week and how much it was.
Then, at the end of the week, go through it all and try to highlight the things you don’t need in the background.
This will make you more aware of your spending habits and hence make it easier set a weekly spending budget.
Writing down all your expenses will help you realize how many microtransactions you make each day. They may seem like small purchases, but they add up.
Once you’ve calculated how much you spend per week on useful things, do your best to stick to it and stay under it if possible.
If you go more than a week, go back the next week and check that you didn’t accidentally overspend when you didn’t need to.
It’s all about being aware of what you’re doing, and writing it down will help you achieve that.
Related article: 43 tricks to save on groceries
Review your budget at the end of each month
Some months there will be unnecessary payments from your bank – like your car insurance. That means you need some kind of planner to keep track of them.
An effective way to stay ahead of this is to sit down at the end of each month and review last month’s budget before setting next month’s budget and writing it all down to see how well it went.
Is there anything special that you have to pay that month that doesn’t recur?
Make a note of it and include it in your budget.
Maybe you’ll spend less next month, but if you budget carefully, you’ll have enough time to see you through.
How to budget for irregular expenses?
By irregular expenses, I mean payments you make annually or every few months. For example, your car insuranceyour electricity bill (if paid every six months) or your annual holidays.
- Calculate your annual expenses. How much do I plan to spend on these at the beginning of the year? For the car insurance example, it’s easy, I’m using the current year amount ($600).
- Calculate/budget your monthly expenses. Now that you know how much it is per year, you can divide this amount into 12 months. By doing this, I know I need to set aside $50 each month.
- Put that money aside every month – I usually transfer it to a savings account with a standing order – so no need to think about it.
Doing this will ensure there are no surprises when your insurance bill arrives, as you’ll have saved $600 upfront.
If you apply this technique to all your irregular expenses, you’ll be able to create a more realistic budget.
It’s always better to save money up front than to use a loan that will force you to pay extra in interest.
For example, if you want to do the same for your holidays, you can do it in reverse. First, calculate how much you can afford to pay for the holidays each month – then transfer it to a separate savings account. You can use it when you reach your cash goal for your next vacation.
Related article: How to Pay Off Your Debt in 7 Steps
Learn how to do more with less
It can be really fun to try and find ways to make money but still have fun.
It all starts to get pretty addicting, and over time you’ll find yourself refusing to spend “x” amount of money because you’ve learned the art of baking and yours taste better! – There’s nothing better than homemade pizza dough!
It’s the little savings that really add up.
Look for ways to do more with less, whether it’s hosting dinner with friends at home rather than going to an expensive restaurant, or making your own coffee and avoiding expensive coffee shops. – these Starbucks coffees are a god send, but they are expensive.
Related article: 15 Practical Ways to Start Building an Emergency Fund
Set realistic goals
Everyone needs a financial goal in place.
Let the goal be to save X amount by the end of the year (why not start at $5000?) or a plan to pay off a particular debt.
However you do this, make sure your plan is realistic.
There’s no point in piling up a lot of cash in a savings account or putting too much money into debt, leaving you short for the rest of the month.
You want to avoid using your credit card or withdrawing cash from your savings account at the end of the month.
Get out of debt and slowly save toward your long-term goals are better strategies than checking boxes too quickly.
When it comes to budgeting on a low income, you need to take small steps toward your goals rather than giant, lumpy leaps.
It’s not a race and you still have to eat during the month.
Being on a tight budget may seem like one of life’s misfortunes, but it’s still impossible to have a full and abundant life without a big paycheck to fund it.
Find joy in things that don’t cost a lot and focus on experiences rather than purchases – it’s a richer way to live!
Budgeting on a low income? What other strategies do you employ? I would love to hear them.
