When you are barely living paycheck to paycheck,, it can seem impossible to get ahead but everyone can learn how to budget money on a low income. It is possible to pay off debts and save for things you want or need even with a low income that seems to barely cover your needs.
- List all of the household bills and debts. This is the time to be completely honest with yourself and your family. List every bill that is paid monthly as well as your minimum payments to things like credit cards. Make a separate list of the total amount you owe each of your debtors from your house down to the $20 bill you owe your doctor. If necessary, you may have to call your debtors to find out exactly how much you owe them. Total your monthly payments to help you budget money on a low income.
- Add in extras. Add to the total of your monthly payments, the amount you spend on gas for your vehicles, groceries, clothes, and anything else you buy on a regular basis such as a newspaper or a new video game. Make sure that you take into account the coffee you purchase on your way to work and the bottle of wine or six pack of beer you buy on your way home for the weekend. You may want to keep your receipts for a week to see exactly where all of your money is going. Even those on a low income will often spend money on items without realizing it. Total your extras together with your monthly payments.
- Do the math. Being able to budget money on a low income doesn’t take an accountant. Subtract the amount of money you are spending each month from the amount you are paid. If there isn’t anything left over, or if you are spending more than you are bringing in, then you need to go back over your list of bills and extras. Look around for cheaper car insurance, cut out the alcohol or coffee, or get an extra job until the math is in the positive. Sometimes drastic measures are called for, and the only answer may be to move into a smaller house or apartment or to sell a car and take the bus.
- Set up a schedule. Pay bills weekly or monthly, but pay them on time and at the same time every month. Set back the amount of money you need for bills from each paycheck and give yourself some pocket money, even if it is only a few dollars. Open up a separate checking account just for bills and one for everything else if you worry you will spend money earmarked for bills or debt.
- Check resources in your local area. If you are low income you may have several options available to you for help. See if you qualify for food aid to help with the groceries or aid for utilities or rent. Many cities have resources available to you to help you live better.
- Set up an emergency fund and pay down debt. For awhile, you may only have $5 or $10 a week to put into an emergency fund but do it and you will be surprised at how quick it adds up. Save until you have at least $500 that could be used for a medical emergency or to fix a car when it breaks down without having to put the emergency on a credit card. An emergency fund can often save a budget when you are working on a low income. Whether it is your car or your credit card, it is important to live as debt free as possible. Any extra money beyond bills, minimum payments, and an emergency fund, should go towards paying down your debt.
- Give yourself leeway. Learning to live on a budget isn’t easy for everyone and you have to give yourself a chance to stick with it. Remind yourself and your family what your goals are and how sticking to a budget can help you live a more comfortable life no matter what your income level is.