Do you ever feel like there’s never enough money? You’re not alone. Low income budgeting can feel like a Herculean task.

This is especially true when you’re just trying to make ends meet. But here’s the thing: no matter how much you make, you can still take control of your finances and work toward your goals.

I know this from experience—I’ve been there, struggling to stretch every dollar. Through trial and error, and a lot of research, I found strategies that worked for me.

In this guide, I will show you how to do low income budgeting the right way. But first;

How Much is a Low Income

Defining “low income” can be tricky since it varies based on household size, location, and even the age of family members. But I will break it down simply.

A widely accepted guideline in the U.S. is the federal poverty level (FPL). For 2024, the FPL defines low income as $15,060 annually for a single person. For a family of four, it’s $31,200 a year. These figures are used to determine eligibility for various assistance programs like Medicaid, SNAP, and the National School Lunch Program.

However, it’s not a one-size-fits-all. Some programs use multipliers (like 125%, 150%, or even 185% of the FPL) to set their eligibility criteria. Plus, where you live can affect these numbers—Alaska and Hawaii have different thresholds due to their higher living costs.

How to Create a Budget with Low Income?

One thing that many people won’t tell you is that budgeting isn’t just about cutting back—it’s about taking control of your financial future. So, instead of viewing low income budgeting as a restrictive practice, think of it as a tool for empowerment.

When you create a budget, you’re not just tracking expenses; you’re making intentional decisions about how to allocate your resources to achieve your goals. Whether it’s saving for a dream vacation, building an emergency fund, or investing in your education, a well-planned budget can help you turn your financial aspirations into reality. Here is how to do low income budgeting the right way;

Step 1: Understand Your Financial Situation

The first step in managing your money is to understand your financial situation. You will want to begin by writing down all your sources of income. This should run the gamut from salaries, to part-time work, side hustles, stipends, child support, disability, and social security—basically any way you get paid every month.

Next, track your expenses for a month to get a clear picture of where your money is going. You may want to use a budget template to categorize your spending into essentials, wants, and savings.

• Create a Budget

Now that you know where your money is going, it’s time to create a budget. A detailed budget will outline your essentials (rent, utilities, groceries, transportation), wants (entertainment, dining out), and savings (emergency fund, retirement). The focus here is to ensure that you give each and every dollar a job.

A great way to do this is by using the zero-based budgeting method, which means your income minus your expenses should equal zero. This doesn’t mean you’re spending every dollar but rather that every dollar is accounted for in your plan.

Step 2: Prioritize Expenses

When you’re doing low income budgeting, it’s crucial to prioritize your essential needs first. These include housing, utilities, groceries, and transportation. Covering these basics ensures you have a roof over your head, food on the table, and a way to get to work.

• The Four Walls of Budgeting

When doing low income budgeting, it is best to think of your budget as a house with four walls: food, utilities, shelter, and transportation. These are your non-negotiables.

Start by budgeting for these categories, and make sure they’re fully funded before moving on to other expenses. This approach ensures that your most critical needs are met, even if it means cutting back elsewhere.

Step 3: Cut Unnecessary Spending

Once you’ve prioritized your essentials, it’s time to trim the fat. Identify non-essential spending like dining out, entertainment, and impulse purchases.

While treating yourself occasionally is important, overindulging can quickly drain your budget. So;

• Skip the Restaurants

Eating out is one of the biggest budget busters. If you’re used to grabbing lunch or dinner on the go, consider cooking at home instead.

Meal planning and prepping can save you a ton of money. For example, if you spend $10 on lunch five days a week, that’s $200 a month and $2,400 a year. By packing lunch, you can save thousands annually.

• Shop Smart

When it comes to groceries and household items, be a savvy shopper. Start buying in bulk, using coupons and taking advantage of sales.

Sign up for your local grocery store’s weekly newsletter to stay updated on the latest deals. Here is how to save money at Whole Foods.

Step 4: Improve your Debt Management and Saving Strategies

Debt can be a significant burden, especially when you’re on a low income. Once you’ve began low income budgeting and have a budget in place, allocate a portion of your extra money toward paying off debt.

This may seem daunting, but it’s all about discipline and mindful spending. Paying down debt can save you hundreds of dollars in interest, and free up more of your budget in the long run.

• Plan for Savings

Even if you have a low income, it’s important to save a portion of your earnings. Start small, even if it’s just $25 a week.

With time, these small amounts will ultimately add up. Once you get comfortable, move up to other savings methods like the 10% savings rule, where you save 10% of your income.

Discover: 15 Best Apps for Saving Money in 2024

• Build an Emergency Fund

An emergency fund is your financial safety net when doing low income budgeting. Aim to save $1,000 to cover unexpected expenses.

This fund will prevent you from going into debt when life throws a curveball. Having this cushion can provide peace of mind, especially when you’re living paycheck to paycheck.

Step 5: Reduce Fixed and Variable Expenses

Cutting utility costs is another way to save money and do low income budgeting the right way. Simple changes like turning off lights, unplugging electronics, and using energy-efficient appliances can make a big difference. Also, consider adjusting your thermostat by a few degrees when you’re not home to save on heating and cooling costs.

• Negotiate Bills

And, don’t be afraid to negotiate with service providers for better rates. This includes cable, internet, and insurance.

Many companies are willing to work with you to keep your business. Get quotes from multiple providers and see if your current provider will match or beat their offers.

• Cancel Unnecessary Subscriptions

Review your subscriptions and cancel those you don’t use frequently. This your gym memberships, streaming services, and magazines, etc. Take advantage of free trials and look for special promotions to save money.

Step 6: Increase Your Income

If cutting expenses isn’t enough for your low income budgeting goals, consider finding ways to increase your income. This could mean getting a side hustle, working overtime, or freelancing.

From driving for Uber to selling homemade crafts, there are many opportunities to make extra money. Please, check this guide on How to make $2000 a Month on the Side Online.

• Sell Unused Items

Decluttering your home and selling items you no longer need is a great way to make extra cash. Online platforms and yard sales can help you turn unused items into money.

• Secondhand Shopping

Buying secondhand items like clothes, furniture, and electronics can save you a lot of money. Thrift stores and online marketplaces offer great deals. Some people even make a side income by flipping secondhand items for profit.

Step 7: Maintain and Adjust Your Budget

Impulse purchases can rapidly throw your budget off track. Implement the 24-hour rule: wait a day before making non-essential purchases to see if you still want them. Also, delete saved credit card information from online shopping sites to make you think twice before buying.

• Review and Adjust Your Budget

Your budget is an evolving framework. So to ensure that you do low income budgeting the right way, regularly review and adjust it to reflect changes in your income and expenses. This will help you stay on track and make improvements where necessary.

Step 8: Get into Long-Term Financial Planning

It’s never too early to start planning for retirement. If your employer offers a 401K plan, enroll and contribute enough to get the employer match. This is essentially free money that will grow over time and secure your financial future.

Discover: How AI can Help with Retirement Investing

Frequently Asked Questions about Low Income Budgeting

• How do I make a budget without income?

To make a budget without income, list your essential expenses first (rent, utilities, groceries). Then, identify potential income sources (side jobs, selling items). Prioritize your spending, cut non-essentials, and seek assistance programs if needed.

Discover: 35 Best Jobs that Require no Experience, but Pay Well

• How do you start a budget when you’re broke?

Starting a budget when you’re broke involves listing all income sources, tracking every expense, and prioritizing essentials (food, rent). Cut non-essential spending, find ways to increase income, and adjust your budget regularly to stay on track.

• How do you create a small budget?

To create a small budget, first list your income and essential expenses. Allocate funds to necessities (housing, food, utilities) and minimize spending on non-essentials. Use free budgeting tools and apps to track your expenses and adjust as needed.

• What is the simplest budget?

The simplest budget is the 50/30/20 rule: allocate 50% of your income to needs, 30% to wants, and 20% to savings and debt repayment. This straightforward approach helps manage spending and encourages saving.

• What is the 50/30/20 budget rule?

The 50/30/20 budget rule suggests dividing your income into three categories: 50% for needs (housing, food), 30% for wants (entertainment, dining out), and 20% for savings and debt repayment. It’s an easy way to manage your finances.

• How to be financially stable with low income?

To be financially stable with a low income, create a detailed budget, prioritize essential expenses, reduce debt, and save regularly. Look for ways to increase income through side hustles, freelancing, or negotiating better rates on bills and services.

• How can I reduce my spending quickly?

Reduce spending quickly by cutting non-essential expenses, cooking at home, using coupons, canceling unused subscriptions, and shopping for sales. Prioritize needs over wants and track your expenses to identify further savings opportunities.

Closing Thoughts

On the outside, low income budgeting can seem almost impossible but practically it isn’t. While it sure takes time and effort, the peace and freedom it brings are worth it. Start today, and take the first step toward a brighter financial future.