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How to budget money on low income? Money certainly does not grow on trees and that means we all need to be a little clever with the cash we have, to try and make it go that little bit further.
In addition to this rather annoying lack of a money tree situation, it’s also a truth that most of us aren’t earning as much as we want to, or as much as we believe we deserve.
Living on a low income can be tough, that’s for sure, but it doesn’t mean you have to scrimp and save, living from hand to mouth every day of the month. It’s about being savvy, learning ways to save a little here and there, and of course, understanding the vital importance of a budget.
I know, budgeting isn’t the most scintillating subject on the planet, but it’s one which will help your money go that little bit further, make sure you hit the payment dates on any bills you need to pay, and hopefully help you purchase a few of life’s little luxuries on the side.
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So, how exactly can you budget as a low earner, without scraping the bottom of your bank account every month?
Be Honest With Yourself
It’s no good setting a budget and not being honest.
That would be a complete waste of time!
Sure, it might be painful to sit down and write how much money you have coming in, how much money you have going out, and then trying to divide up the bit that’s left, but it’s a necessary evil if you want the whole process to work for you.
Many people also find the process of writing these figures down to be quite cathartic and it often proves to be a wake-up call – it might be a rather shocking wake up call – but it works nonetheless!
Write it All Down
You need to have your new budget right in front of you, in black and white, so you can refer to it at any time.
You can download a budgeting app or you can go down the old fashioned route and write it on a piece of paper – that’s actually my favorite because my wife and I work together on it.
But… whatever works best for you.
The actual process of writing it down makes it more real and it, therefore, means you’re more likely to stick to it.
If you need a little bit of help creating a budget, I’ve created a budget printable that we use at home. It works very well for us because it’s only one page.
We just print it, fill with a pen, and stick it to the fridge- we do this every 6 months to re-adjust it if needed.
To download the high-resolution printable version you just need to fill in the form below.
Give Yourself a Weekly Spending Limit
Most of us don’t realize how much we’re really spending until we sit down and add it all up.
During your first week, write down everything that you spend and how much it costs.
Then, at the end of the week review it all and look to highlight the things you didn’t need in hindsight.
This will make you more aware of your spending habits, and therefore, makes it easier to put a weekly spending budget in place.
Once you’ve calculated how much you spend per week in the useful stuff, do your best to stick to it, and if possible, stay underneath it.
If you go over one week, pull it back the next one 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 Hacks To Save Money On Groceries
Review Your Budget at The End of Every Month
Some months you will have payments going out of your bank that aren’t necessary all the time – like your car insurance. That means you need some kind of planner to ensure that you don’t miss these things.
An effective way to stay ahead of this is to sit down at the end of every month and review your last month’s budget to see how well it went, before putting in place your next month’s budget and writing it all down.
Is there anything specific that you need to pay that month which isn’t recurring?
Jot it down and factor it into your budget.
It might be that you have less to spend that coming month, but provided you’ve budgeted out carefully you should have enough to see you through.
How to Budget for Irregular Expenses?
By irregular expenses, I mean payments that you do yearly or every a few months. For example, your car insurance, your electricity bill (if paid every six months), or your yearly holidays.
- Calculate your year expenses. At the beginning of the year, I budget how much do I plan to spend on these. For the car insurance example, it’s easy, I use the current year amount ($600).
- Calculate/budget your monthly expenses. Now that you know how much it costs yearly, you can divide this amount by 12 months. By doing this I know that I need to set aside $50 every month.
- Set that money aside every month – I generally move it to a savings account via standing order – so I don’t need to think about it.
Doing this will ensure that when your insurance bill comes there won’t be any surprise because you would have saved the $600 upfront.
If you apply this technique to all your irregular expenses, you’ll be able to create a more realistic budget.
For instance, if you want to do the same for your holidays, you can do it inversely. First, calculate how much money you can afford every month for holidays – then move it to a separate savings account. When you hit the money goal for your next holiday, you can use it.
Related article: How To Pay Off Your Debt In 7 Steps
Learn to do More With Less
It can actually be really fun to try and find ways to save money but still have fun.
The whole thing starts to become quite addictive and over time you’ll point-blank refuse to spend “x” amount of money on a takeaway pizza, because you’ve learnt the art of bread making and yours taste so much better! – Nothing better than a homemade pizza dough!
It’s these small savings that really add up.
Look for ways to do more with less cash, whether it’s having dinner parties at home with your friends rather than going out to an expensive restaurant, or making your own coffee and avoiding costly coffee shops. – those Starbucks coffees are god-send but they are pricey.
Related article: 15 Practical Ways To Start Building An Emergency Fund
Set Realistic Goals
Everyone needs a financial goal in place.
Be it an aim to save X amount by the end of the year (why not start with $5,000?), or a plan to pay off a certain amount of debt you have.
However you do this, make sure that your plan is realistic.
You want to avoid ending up using your credit card or drawing cash out of your savings account at the end of the month.
Chipping away from your debt and slowly saving towards your long-term goals are better strategies than trying to tick boxes too quickly.
When it comes to budgeting on a low income, you need to make small baby steps towards your goals, rather than huge, galloping leaps forwards.
It’s not a race and you still need to eat during the month.
It might seem like one of life’s misfortunes to be on a low budget, but it’s still more than possible to have a fulfilling and plentiful life without having a huge paycheck to fund it.
Find joy in the things which don’t cost a lot, and focus on experiences rather than purchases – it’s a far more enriching way to live!
Are you budgeting on a low income? What other strategies do you apply? I would love to hear them.