Key Takeaways
Record precisely where money is going before any changes. You need to know exactly where your money is going and it is crucial to gain insight into where your money goes first, before you construct a realistic budget.
Don’t create a budget based on arbitrary rules, but rather based on reality. In general, much of the percentage-based guidance isn’t applicable to a true lean income, and the most important things to do should be done first.
Try out various budget strategies. There are all sorts of budget systems out there: envelope budgeting, zero-based budgeting, and weekly mini-budgets are just a few.
It helps a lot to have small sums in emergency savings. An adequately sized buffer, whether a simple $100, can appreciably dampen the effect of unpredicted costs.
Take time to reward progress which is being made. Acknowledging small successes can keep you from losing heart when your progress is somewhat slower because you’re on a tight budget.
Introduction
I feel I had a firsthand experience that the budgeting tips were meant for someone who had a lot more free money than I did. With dollars fresh out of the budget, generic advice such as eat out less and give up your coffee habit isn’t doing much. In this article I want to tell you what truly did the job for me: when I truly had to learn to budget given a really low income for myself.
The Problem With Old Fashioned Budgeting Advice
I put up with a lot of mainstream budgeting advice before I decided that it wasn’t quite working for me, so I think it’s worthwhile to explain why, in my opinion, it did not work for me.
Most of the budgeting tips people know assume you have some money that you want to save, some income you are willing to sacrifice, some monthly cafe-habit to break, some extra chips-to-go that you can slack off on, and so on.
When someone earns just enough to pay for the basic necessities he already can’t afford, that’s not only unhelpful, it’s almost insulting.
What also caught my eye (and I’m not the only one) was that so much of the “budgeting” information is about percentages, save 20 percent, spend no more than 30 percent on your home, etc., without realizing that this isn’t realistic for everyone.
If you’re burned by spending half your income on rent, it can feel like rigid percentage rules are a no-win proposition for reducing that expense it’s just a false sense of disappointment instead.
There are a lot of “one size fits all” thought in it that I had to unlearn in order to finally find something that is right for me.
The First Step to Understanding Your Money Is to Get a Clear Picture
In my first step of changing my spending habits, and making any sort of formal budget, I just made sure to know where my money was going.
I wasn’t sure what this would do for me, in terms of clarity, before I even changed any spending, but this alone was enough.
For an entire month, I recorded all the expenses, coffee, bus fare, snack from the vending machine, you name it. Not any of I tried to alter my spending during the period I only watched it.
I noticed all sorts of patterns that I wasn’t aware of in my head; little of these tiny items here that I hadn’t been that aware of but were costing me more than I realized and most of the times I would receive paychecks, I needed to cover bills and since they weren’t the same time of the month each month it was a source of stress.
I made a complete listing of all my fixed costs (my rent, my utilities, my debt minimums, my monthly bills that are the same amount each month, etc.).
This allowed me to have an accurate starting point, in writing, not just in my mind based on mental approximations.
So there was a make myself face reality portion, which was putting my total fixed costs in line with my actual take-home pay.
As we’ve seen many of us in the restricted budget tier compare, there is no real flexibility money once one factors their necessities.
But instead of feeling defeated by this, I chose to take this as information and a clear picture I was seeking for any real progress to be made, rather than sliding on autopilot, making some guesses and hoping things will somehow resolve.
Creating a Budget Based on Reality, Not Ideals
After knowing where my money was going, I began creating a budget according to the reality of my situation, not according to what I think a “reponsible” budget should be. This change helped a lot to see if I was going to be able to follow through or not.
I started by putting money toward my true bills, and the absolute necessity items were my housing, utilities, food, work transportation, and minimum debt payments.
While this may seem like a no-brainer, I had been using those basic, “one-size-fits-all” budget guides that said to put money under “entertainment” before I could even afford to pay rent, so my budget didn’t make any sense to live with, and, naturally, they generated unnecessary anxiety.
I also gave up on imposing myself on these random percentage “rules.” Changing my percentage to save was something that I did not see as a good idea, since the amount I would be saving was not feasible given my income.
Start saving a little whatever you can will be better than to go for a savings target that is unattainable and to stop saving.
It was also imperative to incorporate a category for unexpected expenses into the budget.
Often times the reason for tight budgets is not because of planning, but because of life illnesses, car repairs, a medical copay and other unforeseen costs.
When those direct costs started to occur, even if I put aside five or ten dollars a week it made things easier than when an unplanned cost occurred and I had to pull out everything and go back to the drawing board.
Deciding on a Budgeting Method That Works for You
I can’t remember how many budgeting systems I worked through and struggled with, that I just didn’t come up with a budgeting system I liked, rather than trying to practice what I heard is “the latest or greatest budgeting system.
What I found to do surprisingly well is the envelope method which is taking money that you either physically save or virtually save in envelopes, and you only spend what is allotted to the envelope’s spending category.
The day of the week when the funds ran out for groceries or gas was a stark reality and was easier for me to grasp than numbers on a spreadsheet.
I eventually moved into a digital version of this system which was using separate savings sub-accounts, and that was as good or better as carrying cash without the hassles of cash.
I tried in a zero based budget too, which is one in which every dollar you have is allocated to a specific “expense” or “amount to be saved” before even a single month of operation.
This approach ensured a certain degree of ‘intentionality’ which helped take the ‘where did my money go’ feeling out of the end of each pay period.
I settled on a basic mix, putting the set costs first and then taking the remaining small flexible income and spending it out of an envelope.
If you’re just beginning, I’d suggest trying a couple of different techniques for a couple of weeks before deciding that it’s the one and only technique that will work for you.
Budget-Friendly Budgeting Methods to Try — for beginners!
In case you still don’t know where to begin, check out a handful of easy techniques that you can try:
Envelope system: It assigns budgets or ‘envelopes” to a particular spending category, and when that ‘envelope’ is depleted, you do not spend this kind of money for the remaining period of time.
Zero budgeting: Before the month starts, list the purpose of every dollar of income, such as spending, bills or savings.
Pay yourself first method: Schedule regular savings even if it is a small amount, and make it happen no matter what, before other payments.
Needs and everything else: If considering all the categories seems daunting initially, try these two categories: Needs and everything else.
Weekly mini-budgets: Divide your budget into a smaller, more manageable form of weekly budgets, which may be better for a small or fluctuating income.
I tried out some of these strategies for a couple of weeks at a time and then ultimately discovered which system really took away the finance strain in my life, instead of making it even more complicated.
Making More Money Without Spreading Yourself Too Thin
Spending less is important, but I found that if you’re on a low income, there is only so much fat you can remove before you reach the point of what you really need. Audit trail also became a critical component of my income journey, so how to get more income, no matter how small, was a key element in my finances.
I wanted to get started, so I sought out something I had to do anyway, but could add to my profits on top, without too much extra time or effort, otherwise, I ran a risk of burnout, and I didn’t think I could add to my load. It was a good one-time injection of cash – just getting rid of stuff I didn’t need in my house.
I also considered more flexible part-time positions to accommodate my current lifestyle, instead of enforcing an inflexible, typical 9 to 5 job, which would only cause more stress.
A few extra hours a week, applied consistently to a financial objective, made a difference over the months!
That said, I believe that it is important to be forthright – this isn’t always feasible or right away depending on a person’s situation, health, caring needs, or opportunities in the community.
If this is one method of staying lean and healthy that you’re not able to do at this moment, I don’t think you should feel like a failure.
It’s important to focus on what really is achievable for you whether it’s managing your expenses, improving your income or getting more awareness about your finances rather than forcing yourself into measures that do not make real sense to your lifestyle.
Creating an Emergency Fund – Even with a Little One
I used to consider emergency funds as belonging to individuals with lots of room in their spending plan, yet I currently feel that even having a small emergency savings account is among the most beneficial devices within the wallet of individuals stuck with a tight budget, particularly since unexpected expenses hit tight budgets the hardest.
When I embarked on the journey I told myself that my initial target would only be one hundred dollars, given that as a suggestion, I feel like that’s manageable right from the beginning but not all the thousands of dollars, that’s pretty much everybody piece of advice I see.
That smaller (but still realistic) accomplishment helped me felt accomplished and inspired to go on, instead of feeling disheartened that I never reached my target.
By automating these small and regular transfers, even $5 per paycheck, into a separate savings account, they eliminated the temptation to not save when it gets tight in the purse strings.
Since it was not enough to influence my spending, I hardly felt its loss, but continued to grow over the years.
Even though it was only this small an amount, the way it was changed made the way I dealt with unexpected expenditures different.
I’d never had a car repair or medical bill crash my budget, instead I had some space to absorb the shock and that meant I wasn’t as stressed, yet the fund was still relatively small.
When Your Progress Seems Slow, How To Keep Going
Working with a limited income, it was easy to become discouraged when that income didn’t increase as rapidly as I would’ve liked. It was important to me to find ways to stay focused when my progress was slow in order to stick to my budget long-term.
I began to recognize the small victories or improvements that could lead to improvements over time and not just major achievements.
When I managed to maintain my grocery budget for an entire week and save a bit for my savings account, or for a small purchase, I felt good about it, and didn’t push those accomplishments aside, instead thinking of them as steps, no matter how small.
It’s also been a big help for me to think about why I’m budgeting be it to alleviate financial strain, to save for something I want, or just to feel more in control of my situation.
When days were discouraging it was on these motivations that I found myself returning to get a feel for what is driving me and what got me started.
Putting in the time to connect, be present, and do what matters along the way.
Here are a couple of small success points I had to learn to accept and cheer on instead of write off:
Keeping track of your spending for a week without making any changes yet, but you have done it successfully!
Importance of sticking to the grocery budget, no matter what creative methods or menu changes were suggested to do so.
Hitting the milestones of $50 or $100, whatever the time to reach there.
Not taking on additional debt, when hit by an unplanned expense, including a cut to spending or using saving.
Remaining at the budget system for one month without dropping it totally, however without wheedling around.
Noticing those smaller accomplishments kept me focused on what I was doing when the larger monetary goals were still a long way off.
Summary
This starts from the ground, using realistic expectations, honest tracking and flexibility – not percentages and strict rules – to reach a budget that is realistic, given one’s net income level.
What I did notice as a big difference for me was that I was not in a situation where I had to restrict my spending as much as possible, I was trying to be clear and focus on what was intentional, know where my money was going, and make the most informed decision I could make in a genuinely limited situation.
If you are just getting started, I would say give yourself the same advice I give myself: Be patient with yourself in your progress; celebrate what small steps you can do; and create a system that works for your life, which may not align with the best financial advice.
