To budget money on low-income, you need to firmly track all your spending, cut unnecessary expenses, choose a suitable budget format and act accordingly then at the end of every month review your budget and minimize your spending.
Tired of your financial hardship? or trying to fight this crippling inflation?
My friend, an effective budget can solve all your financial nightmares. But if you can’t make ends meet then how can you budget?
Well, with proper planning and determination it’s achievable and I am going to assist you with this. Because in this post, I am going to provide an in-depth guideline on how to budget money on low income. Moreover, I’ll also talk about ways to save money on a tight budget and many more related topics. So, stick here till the end.
How To Budget Money on Low-Income
Budgeting money on low-income can be tough. But it’s not impossible. You just need to be persistent, bring discipline and be patient. Here are some tips on budgeting with a lower income
Take Complete Control of Your Finance
To properly budget your money you need to identify where your money is coming from and where it is going. I know it sounds funny. But think about it. You know your earnings come from your job. However, do you accurately know where it is going?
The answer is most probably negative. That’s why you need to take complete control of your finances. To do that
1. Track Your Earnings
Don’t just start spending after getting your paycheck. First, sum up all your and your family’s earnings from different sources. Now, you have a number from where you have to both spend and save.
2. Determine your Expenses
I know it’s impossible to determine all your spending on the first of each month. Because anything can come up. So, you need to at least determine all your fixed expenses and do an estimation of the variable expenses. Looking at your past financial statements can be a great help on this.
Now, you have a minimum idea of what your expenses can be. So, it’s time to choose a budget format.
Choose a Suitable Budget Rule
By this time you know a little bit about your spending habits. So, it’s time to funnel your money into a budget rule. It will help you divide your earnings for different purposes and reach your goal faster.
However, each budget rule is different and all of them are designed for people with different financial goals. So, you need to choose very carefully and never aim for something out-of-the-way budget rule like 60 30 10 rule budget.
Because these highly ambitious budget rules are not suitable for lower income. Moreover, if you try to implement these you might fail and get demotivated to use a budget. So here are some budget rules that are more suitable for lower income
These are some recommendations. You can choose one according to your preference. But no matter which budget you choose it must have an option for
No matter how good your budget rule is, if it does not have the option to save money then it won’t help you in the long run. So, you should choose a budget plan that has a dedicated option for saving money.
People always confuse emergency funds with savings. But they are not the same. Emergency funds are for unexpected events or accidents, while savings are for fulfilling your goals.
So, no matter which budget plan you choose, you must save enough money for an emergency fund first. Then you can proceed with saving. Or you can divide your saving portion of the budget in two and put it in different accounts. One for savings, and another for an emergency fund.
Please keep in mind that with a lower income, you must choose a budget rule that can be easily achievable. Because once you successfully implement one it will give you a sense of accomplishment and encourage you.
Put Your Budget Into Action
Now that you have chosen a budget plan. So, it’s time to implement it. Divide your total take-home pay into different sections according to the budget rule. You can put the money in envelopes if you prefer cash or you can put it in a different bank account.
After dividing the first thing you should do is transfer the savings or emergency fund portion into a savings account. Then put the fixed expenses and variable expenses portion into a checking account. Lastly, you should keep a small portion of your earnings for unexpected expenses.
Just remember to follow your budget rule tightly. It will be hard for the first few months to follow a tight budget but you must do it.
Firmly Track Your Spending
This is where everyone makes mistakes. No one keeps track of all their spending. As a result, they never know where their money goes and end up living paycheck to paycheck.
So, you need to be really determined about this and keep track of every penny you spend. Once you do that you will understand where to cut costs and have enough money to save.
To track your spending, you can use a spreadsheet, a third-party how to budget money calculator, and mobile apps.
By this time, your financial goals are set and you have an idea of where you spend money. So, it’s time to look for opportunities to minimize expenses.
You can start by looking at your insurance payments and credit card bills. Most opportunities can come from this. Because most insurance plans are filled with unnecessary features. So, you can talk with your insurance agent and reduce those features to cut costs on insurance payments.
Moreover, you should also use the credit card grace period and never miss credit card debt payments. Lastly, start cutting costs from daily spending. However, you should never cut costs in necessary spending. So, always protect your four walls when cutting costs.
Monthly Review and Adjustments
This is the most important part of budgeting money on low income. You should not just implement a budget but try to improve it every month.
Start by identifying where you are spending money the most. It will help you understand your spending habits. Then start making little adjustments and grow positive spending habits. Do it each month and you will find yourself saving a few hundred dollars within the first 3 months.
If you can implement it properly then this can be the best low-income budget for you.
Low-income Budget Roadmap
Keep following this roadmap until you bring financial freedom.
However, if you can’t complete a month with your wages then implementing this budget can be impossible. So, let’s have a look at some tips.
Budgeting Tips For Low-Income Families
Here are some budgeting tips for low-income families
- If you do not earn enough to save or then look for passive income opportunities to earn more money.
- Try to minimize housing costs by moving into a smaller apartment.
- Minimize your food budget by shopping from inexpensive grocery stores.
- Avoid restaurants and takeaways at any cost.
- Try to cut unnecessary living expenses like going to bars or pubs, gym memberships, and cable bills.
- Look for cheaper recreational opportunities and go to the local library, join free events and shows, and spend time in parks.
- Avoid using your car as much as you can and shift towards public transportation.
- Get rid of all your bad habits which cost money.
- Do not spend outside your limit and never go into debt.
I know these are hard things to do, but please put minimal effort into these until you become financially stable.
Budgeting is the first step towards financial literacy. I know budgeting with a low income can be tough. But you must try. It will not only help you to survive but also bring stability and help you achieve financial freedom.
Lastly, don’t go too hard on yourself and keep experimenting with your budget rules in a positive way until you find one most suitable one for you.