Are you currently living paycheck to paycheck? Well, then you’re not the only one finding it difficult to budget money on a low income!
Many people have absolutely no idea where exactly does their income disappear. It’s a total mystery for most low income families, which is a shame since this means getting into a vicious debt circle on a regular basis.
Running out of money before the end of the month is a very common problem. Personally, we’ve encountered it for years before figuring out budgeting on a low income is possible!
It does take some sacrifices, especially until all debt is paid off, but good financial money management is definitely worth it in the long run!
10 ways to budget money on a low income
1. Create a budget
First things first: it’s extremely important to know exactly how much money comes in, and how much goes out. When on a low income, it’s easy to get distracted and spend more than you can afford.
Create a spreadsheet, use a downloaded app or just take a pen and paper and start figuring out how much income you have available and how exactly are you spending it each and every month.
Budgeting isn’t always fun (at least not for everyone), but keep accurate track of your money for 1 month. Yes, write down how much your chewing gum even costs. You’ll be amazed by how much money you probably spend on ‘crap’.
Related article: Learn how to budget in 5 easy steps
2. Tackle debt aggressively
Being in debt on a low income can certainly be a challenge. I distinctly remember the days we ‘woke up’ with less money in our accounts because the bank took what’s rightfully theirs + interest.
In order to have more money available, you’d have to get rid of debt as soon as possible. And stay away from financial problems from now on.
They first loan we managed to pay off meant having an extra $200 available each month! It may not seem like a lot of money, but live without it for a couple of years and you’ll understand how much every penny actually counts!
Also, cut off your credit cards immediately. There’s no easier way to get back in debt than overspend ‘by mistake’.
Related article: Strategies to pay off student loan debt faster
3. Downsize, if necessary
In some cases, living paycheck to paycheck means having to make certain sacrifices. It took us a while to realize it ourselves, but downsizing a few years back was one of the best financial decisions we ever made!
Saving money on rent, utility bills and home maintenance costs can mean a lot for a strict budget!
If you’re not keen on the idea or are unable to downsize because you’re already ‘crowded’ as it is, try negotiating with your landlord to lower the rent (sometimes it’s possible, our friends ‘chopped off’ $600 a year just by being good tenants) or rent out a room if you’re a homeowner.
Related article: How to downsize and save more money
4. Cut down unnecessary expenses
Cable costs, magazine subscriptions, landline plans. These are only a few ideas of where you could start cutting expenses.
Personally, I’ve also noticed that paying more attention to what you eat comes a long way (both financially and health wise).
Chocolate chip cookies or chocolate, chips and cookies are not exactly nutritious, yet many keep buying them on a regular basis. However, by reducing the amount of junk food and sugary drinks purchased on a regular basis, we’ve actually cut our grocery bill almost in half! Not to mention the health benefits are amazing!
Related article: 10 examples of poor financial money management
5. Always plan your shopping
Spending money on a whim is never a good idea, especially if you’re on a low income budget.
The smart thing to do is to always plan ahead. Whether you go grocery shopping or need some new clothes, make a list of what is it you actually need and stick to your plan.
Plan on paying with cash as well. By spending only your available funds in your wallet, you’ll know exactly when to stop and you won’t risk being tempted to overspend.
Related article: 10 money saving tips to grocery shop smart
6. Save money wherever possible
Use coupons when shopping for food. While you’re at it, plan to eat less meat during the week. Meat usually drives your grocery bill up. Skip on meat products a couple of days a week and you’ll definitely save money.
Instead of driving to work every day, use public transportation. Maybe ride your bike to the office if possible (it’s free and it’s great exercise!)
Buy less or used items. We got some perfectly functional gym equipment and saved hundreds by buying used! Plus, we also skipped the cost of paying for a gym membership.
There are countless ways to start saving money and sticking to your budget.
Related article: Stop keeping up with the Joneses. Become them!
7. Claim ‘free money’
Taking advantage of ‘free money’ is a must if you’re on a low income.
Do you qualify for an EITC? An earned income tax credit is specifically designed for low-income families, especially those with children.
Food stamps could also be a great help. The Supplemental Nutrition Assistance Program (formerly known as the Food Stamp program) is aimed to help low income families.
There’s no shame in claiming your rights, especially if you’re having a hard time making ends meet.
8. Diversify your income
If budgeting on a low income is too difficult and you’re tired of sacrificing everything to save money, look for ways to earn more.
Starting a side hustle could help bring in extra income on a regular basis. Do you have a hobby that could potentially earn you money? Go for it and turn your hobby into a business!
Babysitting or helping the elderly with their shopping is also a way to bring in some money. I’ve done both and managed to earn a good side income for a while.
Charity work could also qualify you for certain tax deductions. Donating items to Goodwill could entitle you to claim a charitable deduction for your generous donation.
Related article: 5 brilliant ways spring cleaning can benefit your finances
9. Have fun on a budget
Having a fun time with friends is great, but when it turns your budget into mush, things stop being fun anymore.
Some people realize this and start saying ‘no’ when it comes to a night out or lunch with co-workers. While going out less is not a bad idea, people might not appreciate you avoiding them all the time.
So, try to find ways to have fun without spending too much. Invite people over for game night, take advantage of the outdoors and find free fun activities to enjoy.
Sacrifices are mandatory when on a low income, but we’re human beings after all, budgeting for entertainment is mandatory too!
Related article: How to enjoy a low-cost city break
10. Be open about your financial situation
You might think talking about your financial situation has nothing to do with budgeting, but you’re wrong!
Being honest about how much you can afford to spend will help you avoid embarrassing situations.
It sounds clichè, but real friends will understand if you’re having financial difficulties and won’t put you on the spot if they know you can’t afford to spend.
What other tips to budget money on a low income can you add? Have you ever been in this situation before?
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