Does it seem like all your money is gone before you get to the end of the month? If you answered yes, then you’re not alone. It’s hard to make progress toward your financial goals when you are struggling with higher inflation rates or a low-paying job. The obvious solution is to find ways to generate more income. But, that is often easier said than done. No matter how much you make, there are still things in your control to help you better manage your money. Here are a few helpful tips on how to budget money on a low income to help relieve some of the financial pressures.
5 Tips on How to Budget on a Low Income
If you have never had to think about how much you spend, it can be a hard adjustment. However, learning how to budget on a low income is an important life skill that can keep you out of debt.
1. Revisit Your Monthly Budget.
Although it can be painful, you have to know how much money is coming in and going out every month. So if you are struggling to make ends meet, it’s time to revisit your budget.
Look at how much income you bring home after taxes and any other sources of income you have. If this varies from month to month, use the lowest monthly income to give you more flexibility. Next, calculate all your monthly expenses and subtract this from your income. If you are living below your means, your expenditures won’t exceed your income. Otherwise, you will be living in a deficit and putting yourself deeper in debt.
2. Prioritize your spending.
The next thing you need to do is prioritize your spending. Start by identifying wants vs. needs. Then, make sure that your necessities such as housing, food, utilities, and transportation are covered before you spend money on anything else.
However, you will also need to account for debt and insurance payments. If you have a family, you will also need to include the necessary expenses for your kids (school supplies, child care, etc.) And if there are additional funds, you should be contributing to your emergency fund and retirement savings. Anything beyond these categories would be considered extras and can be cut from the budget.
3. Find ways to reduce your spending.
If your income doesn’t cover your monthly expenses, then you will have to make some adjustments. Be intentional with your spending, and be ready to make some compromises to stay out of debt.
- Find ways to reduce your monthly payments. The first step is to identify ways to spend less every month. Make sure that you aren’t paying for services you don’t use and that you aren’t paying for more insurance coverage than you need. You can also look for ways to reduce your monthly bills by bundling telecommunication services or talking to a debt relief specialist. They may be able to help you consolidate your debt and reduce how much you pay in interest every month.
- Eliminate the extras. The next step is to ask yourself which things are absolutely necessary and which expenses you can cut out of your budget. You have to understand that you won’t be able to treat yourself to every indulgence and will have to learn how to say no. This means canceling memberships that you don’t use frequently, skipping the additional entertainment costs, and giving up delivery services and dining out.
- Look for ways to cut costs. Lastly, you will need to find additional ways to cut costs. Comparison shop for the best deals, look for sales, use coupons, and buy off-brand items. Meal planning and buying in bulk will save on groceries. And, you can save a ton when you buy clothes and household items second-hand. Other cost-cutting ideas include reducing energy and water consumption, joining loyalty and rewards programs, and finding free events that will be fun for the whole family.
4. Protect your financial future.
Those who are learning how to budget on a low income will need to make adjustments to protect their financial future. While some of the hardship is due to economic conditions, you still are in control of your finances. Therefore, you have to practice self-discipline and stick to your budget.
One important way to do this is by maintaining an emergency fund. Even when your budget is tight, it’s important to have a safety net in place for any unexpected expenses. It will help soften the blow if you are living paycheck to paycheck.
It’s also important to avoid accruing more debt. Make sure you are living below your means. And, don’t borrow money or rely on credit cards to maintain your current lifestyle. Instead, look for ways to cut back because debt will only compound your problems.
5. Search for ways to bring in extra income.
Learning how to budget on a low income isn’t easy. Therefore, it’s smart to find ways to bring in extra money whenever possible.
- Pick up overtime hours. The easiest place to start is with your current position. If your company is short-staffed and overtime is available, this is an easy way to increase your income. And, it will give you a nice bonus on your paycheck.
- Ask for a raise. If you have shown good performance and reliability, consider asking for a raise. Keep in mind that timing is important. So, try to do this after you have completed a big project or scored a big win. But, make sure you have a plan before you go to your boss. Explain your situation and make a strong case for why you feel it is deserved.
- Go for the promotion. Are there opportunities for advancement at work? If so, then you can see what positions are available within the company. Tell your supervisors you are interested in advancing and go for a promotion. If you get it, it usually comes with a better salary.
- Consider new employment opportunities. If you are stuck in a low-paying, dead-end job, you can also see what other opportunities are out there. If your employer is unwilling to raise your salary, it may be time to move on to greener pastures.
- Start a side hustle. When you need extra income, it’s a good opportunity to start your own business or look into freelance work. There are many part-time opportunities online. Or, you could look into driving for Uber or DoorDash to make some extra cash.
How are you bringing in extra income? Share your thoughts in the comments below!
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