Steps on How to Budget Money on Low Income in 2024
How to Budget Money on Low Income: When you have insufficient income, having a household budget is very necessary. Having a workable budget is quite important as it will make you spend your money wisely.
It puts you in control of your money, rather than allowing money to control your life. In this article, we will list out the 10 steps on how to budget money on a low income.
Steps on How to Budget Money on Low Income
Many people plan to save money on a daily or monthly basis for a particular purpose, but they never did due to emergency needs, unexpected expenses, and a lot more. Here are some steps that can help you cut down some of your expenses.
1. Track Your Expenses
Before you can create a workable household budget you have to know where your money is going.
Certified Public Accountant Mark Noel recommends tracking family spending for at least a month to six weeks before you start working on a budget. “As inconvenient as it sounds, every member of the family should get a receipt for everything, and I mean everything, they purchase,” he says.
Use these receipts to get a clear picture of how and where you spent your money. Using personal finance tracking software can help you track expenditures: you might find some obvious expenses you can cut right away.
2. Create a Budget
“Implementing a workable budget is the single most important thing a low-income family can do to get control of their money,” Noel shares. Getting input from each member of the family will help keep you from leaving out budget items.
“Because every member of your family will be affected by your family budget, creating that budget should be a family affair. Having an extra set of eyes on your budget always helps,” Noel adds. If everyone has a say in creating the budget, they are more likely to buy into maintaining the budget.
3. Budget for Sufficiency
The key is making your household budget work is ensuring it is sufficient for your needs. For example, if you need $200 per month for food, but you only budget $125, your budget won’t work.
You’ll end up taking $75 from some other budget category to spend on food which will make that category short, so you’ll take from a different category to fill that need.
It becomes a vicious cycle. This is the time in the budgeting process when you might have to make some tough decisions, particularly if your income isn’t sufficient to meet all of your needs, much less your wants.
4. Make Adjustments
If your budgeted expenses exceed your income, you need to make some adjustments. You only have two options: cut your expenses or increase your income.
Increasing your income might not be an option and cutting your expenses could take some time. For example, you might discover you don’t earn enough money to support the amount you’re paying in rent.
You might need to find a cheaper home or apartment but breaking your lease is expensive, so you might be better off moving after your lease is up. You might need to sell your gas-guzzler and buy a more fuel-efficient car.
5. Emergency Fund
Conventional wisdom says you need three to six months’ worth of living expenses saved up for a rainy day. When you live on a low income, every day is a rainy day, so saving that kind of money might seem unrealistic.
But unexpected expenses come up in everyone’s lives regardless of income level and having a few hundred dollars in an emergency fund can meet those needs without wrecking your budget and forcing you into difficult choices. Noel suggests making your emergency funding a top priority right after creating your budget.
6. Request Partial Refunds on Recent Purchases
Retailers often refund partial payments on an item when there is a price drop. But most online shoppers forget to take advantage of this fact and request a refund. Paribus can be used to check for price changes on recent purchases.
It will scan your email and locate your digital receipts. Paribus will then contact the retailer on your behalf to request a partial refund.
7. Invest Your Pennies
An arcon is an investment app that allows you to round your purchases up to the nearest dollar and invest the increase. Investing extra pennies (or quarters) into an interest-bearing account is simple!
You won’t even notice the difference. If you mainly use cash for purchases, you can place all one and five-dollar bills into savings.
8. Refinance Your Loans
Did you know that a refinance of school, home or vehicle loans could save you thousands? If you have a loan, then you know all too well the reality of interest rates. Review your rates and research your refinance options with Lend Key.
A minuscule decrease in interest rates can change your monthly payment. This puts more money in your pocket each month and helps you save extra bucks quickly! Even a lowered interest rate with the same monthly payment will save money (long-term savings).
9. Pick Up Some Extra Hours At Work
If you’re in a hurry to save cash, consider working extra hours at your day job. Most employers pay overtime when the hours are available. Even if overtime is not offered, reach out to your bosses to see if they can use the extra help.
It might surprise you to find that they have extra work for you. At the very least, it would look great if you were willing to work more!
10. Shop Second Hand
Not everything you need can be purchased second hand. Groceries, hygiene supplies, and OTC medications are a few examples that always need to be purchased brand new. But there are many categories of items that we often forget to consider purchasing second hand.
A few types of items you can consider purchasing additional hand are clothes, shoes, toys, books, large appliances, electronics, furniture, etc. There are various places where you can purchase second-hand items today for a great deal such as thrift stores, garage sales, eBay, and Facebook Marketplace.
These are a few steps on how to budget money on a low income.
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CSN Team.
