Sure, budgeting and saving money on a small income may seem impossible. But it isn’t. With a little knowledge, you can manage to pay your monthly bills, put food on the table every night, maintain your car, and have enough gas to get you to work each day as well as save money. The trick is to be smart about how you spend your money each month. So, if you’re wondering how to budget and save money on a small income, here are some tips that will help you.
How to Budget and Save Money on a Small Income
Here is the truth. If you don’t make a lot of money, paying all your bills and saving money isn’t going to be easy. That doesn’t mean you can do it.
It just means you will have to be motivated and stick with it.
Start with these tips…
1. Some General Thoughts
Be prepared to do whatever it takes.
If your expenses exceed your income month after month, take the steps necessary to reduce those expenses.
Either take in roommates or move in with relatives if that is possible for you.
Forget cable or satellite television.
Use the Internet to access free movies, music, and television programs.
Cut out all junk food from your diet.
In other words, be ready to make some sacrifices. While it might not be fun at the moment, you will be smiling when you see your bank account grow.
2. Get a Second Job
If you have a second job on the weekends or after work, you can increase your monthly income by at least $500 to $1000 per month.
This can help you pay all of your bills on time each month.
It also gives you a chance to save money if you are able to stash away at least 10 percent of every paycheck each month in a savings account or money market fund.
If you can save 20 or 30 percent of this extra month then all the better.
You’ll reach your goals faster.
3. Live in a Cheaper Area
If you live in a city where the average rent is $1000 per month or more for an apartment, you’ll want to either move to a smaller city or relocate outside of the city itself.
Look for low crime rate areas that are close to the public transportation network.
Not only will you save money on your housing, but your commute will be shorter too.
4. Reduce Your Transportation Costs
Make sure that your car has very little mileage on it and is not beyond repair.
If it has over 150,000 miles on it, then look into getting another vehicle.
If you are going to have a car, and by the way, you should consider getting rid of it, you need to make sure it runs well and doesn’t need a lot of maintenance or repairs to keep it on the road.
Even better, get rid of your car and walk when possible or use public transportation if it is available.
If you live in an urban area, try taking public transportation as often as possible.
If possible, take more biking trips and carpool with colleagues or friends.
These small changes will significantly cut down on gas costs and parking fees.
5. Cut Back on Luxuries
Some of these may not sound like luxuries, but if you are trying to budget and save money on a small income, then they are.
Don’t go to the movies, don’t get cable or satellite television, and don’t buy any new games or toys for your children.
Always buy used games and toys. You’ll be surprised what you can find for just a few dollars.
6. Pay Off Your Debts First
If you have any credit card or medical debt or school loans, make them the priority.
Get rid of these debts as soon as possible while still maintaining a reserve emergency fund at least equal to one month’s household living expenses.
The sooner you can get your debt paid off the sooner you can breathe a little easier and have more money in the bank.
You should also be sure you have an emergency fund, so if something does happen where you aren’t able to cover all of your expenses, you can draw from that savings account without putting yourself into more debt.
7. Don’t Use Credit
Try not to use a credit card unless it is absolutely necessary.
This will help you to remain debt-free and prevent a situation where you overspend and put yourself into more financial trouble.
If you don’t have any credit cards, don’t get one.
I know people say you need one for certain things such as travel or an emergency, but you don’t.
Have an emergency fund and use a throwaway debit card for travel.
8. Reduce Your Food Expense
If you are having a hard time budgeting and saving money on a small income, then you’ll want to reduce your food expense.
You can do this by not eating out at all, or when you do go out to eat, order the cheapest thing on the menu.
If you do decide to eat out, consider using coupons whenever possible.
Many restaurants have special offers available through local coupon booklets such as sale paper advertisements.
If you go grocery shopping for your family and buy in bulk quantities (especially with meats), then you can save quite a bit of money on food costs each month.
9. Automate Your Savings Goals
Use an app like Acorns to have money automatically put into an investment account. This is what I do, and my investments grow without me having to do anything.
You can also ask your employer to direct deposit a percentage of your paycheck into a savings account.
If your employer has a 401k be sure to sign up.
The money will go into it before you get your hands on it which will make saving much easier.
10. Pay Yourself First
Make sure you save money before you spend.
In other words, don’t save what is left over. Determine your savings goal and put that amount into savings first.
Then use the rest to pay your bills and other expenses.
Add to that money each month by reducing your expenses.
If you can do this, then it will be much easier to get out of debt and maintain a healthy cash reserve in the event an emergency comes up.
11. Set Up an Automatic Bill Payment System
Make arrangements with utility companies, credit card companies, and other companies to have your bills paid automatically out of your checking account each month.
This will ensure that your monthly bills get paid without any worries on your part about forgetting to pay them.
Your bills will be paid on time and you won’t have to worry about late fees.
It will also help your credit rating.
12. Create and Stick to a Budget
A budget is a planning tool that allows you to track your income and expenses and keep an eye on where your money goes.
It will allow you to have control over your expenses, knowing exactly what you are spending each month for each purpose.
By knowing how much income you take in each month, it will also allow you to see if there is room left over for savings or paying off debt.
13. Plan for Fixed Expenses First
This is the key to a successful budget.
Fixed expenses include your rent, mortgage or loan payments, car payments, and other similar obligations that you have each month.
Once those are accounted for, all of your remaining monthly income should be used for variable expenses which include food, utilities, and gas.
By planning this way ahead of time each month it will allow you to see if there is any money left over after paying all of your bills.
This amount should be put into savings or applied toward any debts that you may have.
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14. Prioritize Your Debt
First, pay off any high-interest rate debt such as credit cards.
If you don’t have the cash to do so, consider a low-interest personal loan to consolidate this debt.
Then you can make one payment a month instead of several.
This will help you pay the debt off faster.
15. Start Saving for an Emergency Fund
Save money in an emergency fund for an unexpected illness, accident, or if you lose your job.
Do not use this money for anything other than emergencies. Make it just as important as your rent and mortgage payments.
You should build your emergency fund first and then pay off debts.
After that, you can kick saving money into high gear.
Make Saving Non-Negotiable
This is the most important step in creating an emergency fund. By creating a habit that forces you to save, it will become an automatic part of your life.
Sit down with your checkbook and determine what you could possibly save and what you could put toward your debt payments instead each month.
16. Switch to Cash for Your Daily Expenses
Using cash for your daily expenses will force you to stick to a budget and avoid frivolous spending.
For example, if you use your debit card to buy lunch every single day, it will be much easier to overspend than if you had to carry a wad of cash with you every time you eat out.
It will also help you realize just how much you are spending.
17. Cut Down Your Biggest Expenses
When you think of big expenses you picture housing, food, and utilities.
These are your biggest expenses.
If you can reduce spending there, you will go a long way to reaching your goals.
However, making smaller changes add up as well.
If you spend $20 a week on coffee, cut down to just one cup a week and put the other $15 into savings every week.
Do you shop at an expensive supermarket?
Cut down to just one weekly trip and put the savings towards your emergency fund.
Tracking how you spend money will allow you to cut out what you don’t need.
These are small changes that will make a big difference in your life if you consistently follow through with them every single week.
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To Sum it All Up:
It’s not easy to pay your bills and save money on a small income, but you can do it. From reducing the amount you pay for housing to grocery shopping only once a week, you will find there is money in your budget that can be used to pay the important expenses and to save.