According to NerdWallet, the median household income in the United States is $74,580. With the cost of living on the rise, people that have earnings around or below this number may have a hard time-saving money and learning how to budget money on low income.
If you are finding it difficult to budget your money at your current income level, then there are a few important steps you should take. This is what you can do to efficiently budget your money while also creating savings.
Table of Contents
1. Assess Your Current Financial Situation
Start the process by taking stock of your current financial situation. Calculate your total monthly income, including wages, government assistance, and any other sources. You will also want to list all of your fixed expenses like rent, mortgage, and utilities.
Once you have your fixed expenses added up, then make a list of your variable expenses. This includes things like groceries, transportation, and entertainment. Getting a good idea of how much you spend every month is the first step to creating a budget that works for you.
2. Create a Budget
Put together a budget that works with both your variable and fixed expenses. You can use budgeting tools or apps to help streamline and digitize the process. You will want to guarantee that your budget covers all of your fixed expenses and considers fluctuations in earnings.
With the money you have leftover from your fixed expenses, you will want to determine how much you should spend on your variable expenses. Ideally, you will want to budget for your variable expenses while still having a few hundred dollars left over each month.
3. Figure Out Your Priorities
Prioritize your expenses based on your necessities. Items like housing, utilities, and groceries should be your top priority. Then, you can consider non-essential expenses like dining out or entertainment. You may need to minimize these non-essential expenses to create a stronger budget.
4. Cut Unnecessary Spending
Identify areas where you can cut back on expenses. Instead of eating out or ordering food delivery, consider taking the time to cook at home with food you already have. Take a look at all of your subscription services and unsubscribe from those that you don’t use often.
Instead of having five or six different streaming services, consider choosing a few of your favorites. These small adjustments can contribute to significant savings in the long run.
5. Negotiate Bills
It is entirely possible to negotiate your monthly bills with service providers. Contact insurance providers, utility companies, and creditors to discuss what can be done to reduce your bills. Most companies are fully willing to work with individuals who are facing financial challenges by providing temporary relief or adjusting payment plans.
6. Take a Look at Government Assistance Programs
You may want to consider exploring government assistance programs that can offer support for housing, utilities, food, or healthcare. These programs are designed to help individuals and families with limited income to meet their basic needs. To find out whether or not you are eligible, do some basic research online.
It is always a good idea to set some money aside for emergency circumstances. Even small contributions over time can provide financial security for unexpected expenses. According to Wells Fargo, a good rule of thumb for an emergency fund is to set away at least three to six months’ worth of expenses.
8. Earn Extra Income
If you have the time and resources, you could seek additional income streams. This could involve searching for part-time work, freelancing, or exploring platforms such as DoorDash or Uber, where you can set your own hours and work whenever you want. Make sure you are mindful of your time constraints and seek realistic opportunities that align with your skills and schedule.
9. Track Your Spending Patterns
Your budget is not set in stone, and you will likely need to adjust as time goes on. Make sure you regularly track your spending against your budget and make adjustments as needed. At the end of the month, review your budget to decide where you can improve or reallocate funds.
10. Tackle Debt
If you have outstanding debts, then make a plan to strategically tackle them. Start with your high-interest debts and see if you can negotiate with creditors for flexible repayment terms. If your debt is manageable, then you can work your monthly debt payments into your budget.
Sometimes, debt is too high to manage on your own. There are many resources to help you tackle your debt, such as this company for debt relief Tyler, Texas.
11. Learn More About Money Management
There is nothing more powerful than the knowledge of how to manage finances. Take some time to educate yourself about personal finance, budgeting strategies, and money management. There are several free online resources, books, and programs that can provide you with valuable insights and tips for managing your limited income.
12. Seek Support From Friends and Family
It is incredibly important to have a strong support system. Make sure you request support from your friends and family and share your budgeting goals with them. This way, your loved ones will become aware that you are trying to save money and won’t put you in any uncomfortable financial situations.
13. Create a Plan For the Future
It is important to make sure you are always looking toward the future. Take the time to set realistic financial goals, such as saving up for your child’s education, homeownership, or retirement. Having these goals will make you more likely to stick to your budget.
Learning How to Budget Money on Low Income
Learning how to budget money on low income may seem intimidating at first, but it can be done with the correct strategies and resources. By carefully assessing your finances, establishing your priorities, and sticking to your plan, you can create a budget that aligns with your income and helps you to meet your goals.
If you want to learn more about establishing financial well-being, then check out the rest of our finance section.
