Do you want to learn how to budget money on a low income?

Budgeting money on a low income is no easy task and requires discipline and the right plan to stay on track.

If you’re struggling with overspending and living paycheck-to-paycheck, then this post is right for you! 

Learning to budget on a low income will help you to:

  • Get out of debt
  • Save more money each month
  • Build up a solid 3-6 month emergency fund
  • Reach your financial goals
  • Grow your income
  • End the stress related to money and personal finance

In this post, we’ll cover beginner budgeting tips, teach you how you can create your own budget, and provide helpful budgeting tools to help you reach your financial goals. 

About Me: My name is Miguel and I’m a simple living and budget spreadsheet advocate! I’ve been decluttering my life since 2018 and love everything simple living related. I aim to help you learn how to live a simple life, become intentional with your spending, and manage your money right!

Disclosure: This post may contain affiliate links, which means I’ll receive a commission if you purchase through my links, at no extra cost to you. Please read the full disclosure for more information.

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how to budget money on a low income

How To Budget Money On A Low Income (5 Easy Steps)

1. Assess Your Current Financial Situation

When you’re first learning how to budget on a low income, you need to take a step back and see where you currently stand.

Start by evaluating your income and expenses by checking your bank accounts, receipts, and statements. 

Once you understand how much money you’re bringing in each month, you’ll know how much money you can budget for the month.

Next, you need to get an average of your expenses each month. Once you have these values, write them down on paper 

Now that you have the two most important components of budgeting money, you can begin to take note of your banking statements and receipts. 

Identify areas where you tend to overspend…

These areas could be categories such as:

  • Shopping
  • Restaurants/delivery
  • Clothes shopping
  • Coffee
  • Travel

Whichever you find to be your weakness when it comes to spending, start identifying trends and problem areas. 

As someone who has been learning to budget effectively, some spending habits can be eliminated quite easily, and others may take much much longer to overcome.

In some cases, these types of spending habits can be a form of addiction and simply making a budget won’t fix it…at least in the beginning. 

It takes practice and commitment!

Think shopping addiction or eating out too often. These are some of the more common categories which people have the most trouble with.

For me, It used to be Amazon and food delivery! Yikes!! -____- 

Amazon was a lot easier to give up because it was more of a subconscious thing to take a look at when bored or to just search for new things to buy to get a dopamine hit.

The hardest of all to put an end to was food delivery made easier with apps like DoorDash and Grubhub!

This is because of the convenience and time it saves. Not to mention how good the food was! 

And I swear if I hadn’t ordered for weeks I was fine, but if I ordered one time, it’s almost a guarantee I would order again the next day or sometime later in the week like clockwork.

Terrible if you need to be saving!

But living on a budget is the key to changing these poor spending habits and reaching your financial goals! 

Get educated on your personal finances and learn how you can build a solid financial foundation with this book!

Set Realistic Financial Goals 

After you have started to plant the seeds of financial responsibility by identifying your spending habits, it’s time to take a look at your complete financial picture and where you plan to be in the future.

Analyze your finances and record these values:

  • All Debts – Credit cards, Student loans, Car loans, Mortgage, etc. 
  • Liquid Funds – Checking and Savings accounts
  • Investments – Roth IRA, Taxable account, HSA, 401k Retirement account
net worth calculator

Record these values in our FREE Net Worth Calculator to see if you have a positive or negative net worth.

This way you’ll be able to see your assets compared to your debts! 

Once you know where you stand, you’ll understand more about where you should be aiming to improve your finances.

After understanding what money you currently have saved up and your debts, it’s time to start setting financial goals. 

The key to budgeting is consistency and you need a motivating factor! 

These goals will be the destination you’d like to reach with your finances. 

Keep in mind these can change and evolve over time!

Without these financial goals, you won’t have any direction and thus any reason to continue with your budget! That’s why these budgeting goals are vital. 

Here are some beginner financial goals to shoot for when learning how to budget and save money on a low income:

  • Build an emergency fund of $1,000
  • Build an emergency fund of 3-6 months worth of expenses (Ex. $2000 a month = $6000 – 3 months | $12,000 – 6 months)
  • Use the Avalance and Debt Snowball methods to pay off all debt

In the beginning, this will be very difficult depending on your financial situation. 

However, you need to be ready for emergencies and you need to pay off debt effectively so that you can put more toward your savings. 

Later in this post, we’ll cover how you can achieve these financial goals and learn how to save money on a low income! 

2. Create a Budget

Creating a budget and learning how to budget money each month is the next step on your journey.

Now when living on a low income, your budget will be very tight and you don’t have too much wiggle room for “wants”. 

Keep that in mind when we go over how to create your budget.

Furthermore, there are many ways to budget and I recommend you find the best way that works for you! 

But in this case, I will teach how to budget using a monthly budget printable and a budget template on 

Google Sheets!

Budget Printable

budget printable

Using a monthly budget printable is great for beginners and it’s a great way to start keeping track of your income and expenses! 

You don’t need to make anything complicated and you don’t need an internet connection!

If you’re just getting started then I highly recommend budgeting this way at least until you feel more comfortable and want to use a budgeting spreadsheet. 

And to reiterate, there is no better or worse way to budget, just budgeting methods that work best for you! 

Budget Template 

budget template

Using a budget template on Google Sheets is my absolute favorite way to budget and It’s what I use to keep track of all of my income and expenses each month!

I believe it’s the easiest and most effective way to budget because all of the math is done for you and you’re able to easily keep track of your finances month after month, year after year! 

Give it a try if you think it can help you budget! 

Monthly Budget Example

Furthermore, let’s get started and create our budgeting plan!

Step 1: Pick your budgeting method/tool

Step 2: Determine your “needs”/bills

  • Housing/Rent
  • Food
  • Auto
  • Utilities
  • Insurance

Step 3: Determine your “wants”

  • Shopping
  • Clothes shopping
  • Streaming services
  • Subscriptions
  • Memberships
  • Vacation
  • Entertainment

Step 4: Separate your remaining categories:

  • Savings
  • Investments
  • Debt payments

Step 5: Add up all of your expenses for “needs” first. Once you have this number, this will be the minimum expenses you need to pay each month. Subtract this number by your monthly income and you’ll have your leftover money that can be budgeted out to your other categories.

Here’s an example: 

Income: $2,000 a month | – |Total Monthly Expenses For “needs”: $1,700 | = Budget: $300 

In this low-income budget example, you have $300 left to allocate towards your “wants” and “savings/debt payoff”.

This is an extremely tight budget and very difficult to follow!

If you’re in debt, now is the time to allocate the $300 towards debt, savings, and wants.

Here’s an example:

  • Debt #1: $150
  • Debt #2: $50
  • Savings: $50
  • Wants: $50

As you can see, this is very little money to allocate towards your debts and savings and gives you virtually no money towards any type of wants! 

Also, If you have crippling credit card debt with a higher interest rate, then it will make sense to put $200 or more toward that first debt as a priority. 

I know this seems very tight, but if you’re learning how to budget and save money on a low income, this is the type of discipline and challenge you need to go through for the time being. 

50/30/20 Budget

If you’re looking for another monthly budget example strategy, give the 50/30/20 budget a try!

It’s similar to the budget example we just went over, but instead of allocating money based on the highest debts and other savings goals, it has us allocate our money by percentage for our monthly budget.

Now this budget is not perfect, but can be a good starting point! 

It can also be adjusted to your needs as well because for some allocating 30% for wants may be too much and you may want to allocate more towards debt and savings each month. 

Here is the 50/30/20 budget:

  • 50% – For needs
  • 30% – For wants
  • 20% – For savings or debt

Obviously, if you’re in debt and budgeting on a low income, you’ll want all of your surplus money going towards debt repayment and savings. 

503020 budget printable

Keep in mind: This type of tight budget doesn’t need to be forever, it’s something to help you stay on track and improve your financial situation. Once you can get out of debt and increase your income. You’ll have much more disposable income to spend on things that you want or enjoy! But for now, it’s important to stick to the budget, or else you’ll be paying off debt all your life and never be able to save up enough to retire or do things you enjoy for yourself or your family.

Other Low-Income Budgeting Methods

  • The Envelope System – This budgeting technique involves using physical envelopes to allocate money for different categories of expenses.
  • Zero-Based Budgeting – With a zero-based budget, every dollar you earn is allocated towards a particular category.
budget on low income

3. Cut Expenses and Save Money

Even though our budget may be tight due to your low income, there are tactics and strategies we can implement to cut expenses and save more money overall.

Here are some effective ways to reduce your expenses and save more money each month:

  • Take shorter showers/ be aware of your water usage
  • Turn off lights and unplug unused electronics
  • Use rechargeable batteries and energy-efficient light bulbs
  • Learn to meal prep and avoid dining out
  • Make coffee at home
  • Purge unused subscriptions
  • Downgrade any services you may have
  • Refinance any loans with high-interest rates
  • Use coupons and other money-saving hacks

Take time to look through your expenses both variable and fixed. Identify areas where you can cut back or remove entirely. 

Any little amount you can reduce will greatly help your budgeting efforts and give you more wiggle room!

If you want this low-income budget to be effective, however, you need to be able to control your non-essential spending and cut back with extreme discipline.

This will take time but you need to plant the seeds NOW.

These troublesome non-essential expenses may include:

  • Shopping
  • Clothes shopping
  • Dining out/delivery
  • Streaming services

These are all luxuries and you must distinguish luxuries from actual needs in your day-to-day life. 

Cut these non-essential expenses out of your budget to the best of your abilities and you’ll be on your way to debt-free living in no time! 

4. Increase Your Income

Now that we’ve covered budgeting tips for low-income, we need to cover ways that we can increase your income! 

Budgeting can only get us so far, but we need to expand the other side of the equation. 

Don’t worry it is possible to increase your income and create successful side hustles!

Here are some of the fastest ways to earn extra money on a low-income budget:

  • Take on a part-time job (maybe a weekday or weekends)
  • Work overtime
  • Negotiate a raise or promotion
  • Get a new higher-paying job
  • Sell on eBay
  • Sell on Mercari

These certainly aren’t the only ways to increase your income, but there are some things you can do that take less time and effort.

Now if you’re looking to start a side hustle to increase your income, there are tons of ways to do this!

Here are some of the best legit side hustles you can start today!:

  • Start a Blog (for as little as $2.99/mo)
  • Start an Etsy store
  • DoorDash
  • Grubhub
  • Uber Eats
  • Postmates
  • YouTube
  • Teach on Teachable
  • Sell on Shopify
  • Become a freelance write
  • Freelance on Fiverr
  • Freelance on Upwork

If you want these side hustles to be successful you need to either apply skills that you have or develop skills that can grow over time and help you to make more!

side hustle book

5. Track Your Expenses and Adjust Your Budget

Now that you’ve taken steps to grow your income, it’s time to ensure you’re keeping track of your expenses and adjusting your budget accordingly.

As we discussed earlier there are different ways to keep track of your budget.

Here are my favorite ways to budget:

  • Monthly Budget Printable
  • Monthly Budget Template (Google Sheets)

Remember to adjust your financial goals and money habits based on your situation. For instance, if you’re able to make more money but are still in debt, throw extra money at your debt instead of needlessly spending.

Another example would be to allocate more money towards your savings after all of your debts are paid. This will now help you to reach your larger savings goals!

To do this effectively you need to track your budget and take note of how your budget is going each month.

The absolute best way to do this in my opinion is using a budget template in either Excel or Google Sheets. 

I’ve used both but prefer Google Sheets at this time.

Low-Income Budgeting Tips

Here are some of the main characteristics you’ll need when you try to stay on track with your budget:

  • Find your WHY and define your financial goals
  • Creating a solid plan ( counter eating out, make a plan to go grocery shopping every Sunday or biweekly to ensure you have enough food at home)
  • Discipline 
  • Consistency
  • Sacrifice

With these characteristics, you’ll be able to budget effectively and stay on track to hit your financial goals!


How Do I Save Money On a Low Income?

Saving money on a low income is no easy feat. To save money on a low income, you need to follow these steps:

  • Make a financial plan/set goals
  • Add up your fixed monthly expenses
  • Create a budget
  • Reduce non-essential spending
  • Determine how much money you can allocate toward your savings
  • Find ways to increase your income

Final Thoughts

Learning how to budget on a low income is the first step towards moving in the right direction! 

Managing your money can be challenging if you’re in this situation but by taking the right steps mentioned above, you can not only pay off your debt but also make more money and build a solid financial foundation.

Take action and form your budgeting plan today! Don’t forget that budgeting on a low income requires discipline and consistency, but the long-term benefits are worth it!

Good luck and leave a comment sharing your own budgeting tips or success stories!

About Me: My name is Miguel and I’m a simple living and budget spreadsheet advocate! I’ve been decluttering my life since 2018 and love everything simple living related. I aim to help you learn how to live a simple life, become intentional with your spending, and manage your money right!

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