When it comes to managing money, many people struggle. This is especially the case for low-income earners who may not have access to banking services or other financial resources. But, this doesn’t need to be a burden. After all, budgeting is an essential tool in helping you achieve your financial goals. It allows you to keep track of your income and expenses and plan accordingly. The first step to creating and sticking to a low-income budget is knowing how much money you have available each month for spending. Once you do that, you can identify where your money goes frequently so that unnecessary purchases are reduced and savings are increased as much as possible.
Determine how much money you have available each month
Before you can start creating a low-income budget and sticking to it, you need to first know how much money you actually have available in your budget. This is important because, if you know where your money is coming from and going to, you can make better decisions with it. Here are a few ways you can do this: – Track your spending to know where money is going – While this may not be the most accurate way to determine your income, it can still be a good indicator. The best way to do this is to make a spreadsheet where you track every single dollar you spend. You can also use budget apps to do this for you. When you track your spending, you’ll see where your money is going. – Contact your employer to find out your take-home pay – While this may seem weird, it works. If you start by finding out what amount you are receiving from your employer, you can have a better understanding of how much money you actually have to spend each month. – Sign up for a budgeting app – There are many budgeting apps available these days. Most of them allow you to create a budget and track spending. Some even allow you set savings goals. This is a great way to keep track of your spending, as well as create a budget that’s designed for you.
Review your monthly expenses
Now that you know how much money you have to spend each month, you can start looking at your expenses and identifying areas where spending is excessive. When you do this, you can create a low-income budget that’s designed to reduce these expenses. Here are some expenses you may want to review: – Mortgage or rent – While this may seem like an obvious one, a lot of people forget to track their rent and/or mortgage expenses. This is important as it’s a large expense that doesn’t show up in their salary. – Utilities – While this may seem obvious, a lot of people forget to include utilities in their monthly expenses. – Food – What other expenses are included in your monthly expenses? You may be surprised to find out that you have a few other expenses in your budget. – Healthcare – This is another expense that a lot of people forget about when creating a low-income budget.
Identify the areas where spending is highest
After reviewing your monthly expenses and identifying the areas where spending is excessive, you can start working on reducing these expenses. This is one of the keys to creating a low-income budget. Here are some areas where you may want to start reducing your spending: – Your car insurance – This may be an area that you don’t even realize you’re spending a lot on. – Your cell phone plan – There are a ton of cell phone plans out there. You may not realize that you’re currently on a plan that’s costing you a lot. – Your utilities – This may be an area that you currently don’t have control over. – Your food bill – This may be an area that you don’t really need to be spending so much on. – Your mortgage or rent – This may be an area that you can negotiate or lower the amount of the payment. – Your children’s college fund – This may be an area that you can put off instead of spending on.
Create a savings account for savings
After reducing your monthly expenses, you can move onto the next step and create a savings account for savings. This is a key part of any low-income budget, as it will allow you to save money and achieve long-term financial goals. Here are a few ways you can create a savings account: – Make a note of every dollar that you’re saving – This may sound simple, but a lot of people forget to actually do it. – Create a monthly savings plan – This may seem like a silly plan, but it can actually help you save money. – Make arrangements to automatically save a set amount of money – This can be as simple as putting a savings plan into your phone. – Keep track of your expenses to help you decide where to put your money – This can help you save more, as well as make sure that you’re not wasting money on things that don’t really matter.
Track your income and expenses to identify unnecessary purchases
After creating a savings account and reducing unnecessary expenses, you can then use the remaining money to track your income. This will help you identify any areas where money is being wasted, such as paying for subscriptions that you don’t need or buying items that you don’t really need. Here are a few ways you can track your income and expenses: – Get a side hustle – This can be a great way to make extra money to put towards your low-income budget. – Buy items on sale – This can help you save money, as well as make sure that you’re not wasting money on unnecessary items. – Watch the ads – This may seem like a weird way to track your income, but it can actually help you save money. – Make sure that you’re not being charged for things that don’t matter – This can help you identify if your phone plan for example is charging you for something that you don’t need. – Keep track of your expenses to help you decide where to put your money – This can help you decide where to put your money, such as a savings account or towards a long-term financial goal.
Tools for managing budgets
In response to the question “how to budget on a low income” it is also worth mentioning tools that help manage money. A few days ago we published an article in which we present the 10 best and, above all, free budget management tools: