How to Budget Money on Low Income

Low income can seem too little to budget for. One may feel that the income is nowhere close to covering their expenses and might be wondering where to begin. The good news is no income is too little to budget for and in fact through proper budgeting and sticking to it, you might see a growth in your savings and see your debt beginning to shrink.

First, take care of the 4 walls

The four walls as Dave Ramsey coined the term refer to things you must pay for to live. These include food, housing, basic clothing, basic transportation. Taking care of these 4 items ensures that your priorities are in order and your family is taken care of first before other stuff.

1. Food – First you want to make sure you and your families have food. You can keep food bills down through meal preparations in advance, preparing a groceries list before going shopping to prevent impulse buying, and buying no-name brands over branded items.

2. Housing – Next, you want to make sure you and your family have a roof over your heads and utilities are well taken care of.

3. Basic clothing – Most times you don’t need to buy clothes every month but if you must, thrift stores like Value Village sell good quality.

4. Basic transportation – In most cities, basic transportation would be public transport as it’s most times cheaper when compared with owning a car or taking a Uber taxi.

Additional but essential expenses

These are essential expenses outside of the basic four that you need to live worry-free. You can get creative with these to keep the monthly bills as low as possible. For example, downgrading your cell phone plan

·       Cell phone plan

·       Internet service (especially if you work from home)

·       Home maintenance expenses

·       Medical insurance (can be avoided if employer or government provides for free)

·       Additional insurance costs (such as life insurance, car insurance )

·       Daycare

·       School tuition for you or your dependents

·       Salon & haircut expenses (DIY as much as you can especially if working from home)

·       Toiletries

·       Pet supplies

·       Cleaning supplies

·       Anything else you cannot live without

 Eliminate non-essential expenses

Cancel that cable service, delete your Uber Eats app, break up with your barista, and instead make your coffee at home, take stock of all your subscriptions and cancel the ones that are not essential. I’m sure no one needs Netflix, HBO, Hulu, Disney, Fubo, Tubi, etc at the same time. You get the point. You might choose to do this temporarily until you get back in shape financially which is okay. If you can’t cut some expenses out, there is always an option to decrease them through downgrading plans, renegotiating contracts, etc.

Budget minimum payments for your debts

There are two ways of attacking debt – avalanche, and snowball. At Topspin Finance, we like the snowball method more, which involves paying off all your debt except mortgage by starting with your smallest debt and making minimum payments for the bigger debts to avoid penalties.  Pay as much as you can for the smaller debts until you check that off you roll to the next. Repeat the process until you’re debt-free.

The psychology behind the debt snowballing strategy is that when you check off the small debts from your debt list, the excitement and motivation will keep you going to the next and the next until you’re debt-free.

Sell items you don’t need and use that money to pay off your debt

Facebook marketplace, Kijiji, garage sales are a starting point to make extra cash out of things that are laying around in your house.

Stick to your budget

At first, following your budget will feel strange and difficult. But keep going. Budgeting creates transparency on where your hard-earned dollars are going, it guides your spending to prevent impulse buying.

Other practical ways to cut costs include borrowing books from the library instead of buying, changing to no-fee bank accounts, shopping in budget grocery stores, and many other ways. I know you might be looking at your income and wondering where to start. There is no better time to start than today. Hey, you can do it!

Got any questions? Need help regaining control of your finances? Talk to a TopSpin Finance money coach today.