How to Budget and Save Money on Low Income
Budgeting can seem impossible when you have a low-income job. How are you supposed to budget your money when there’s never any extra to work with between paychecks?
Having a budget on a low income is not only possible — it’s highly recommended. Read on to learn why and how you should budget and save money with a low income.
How budgeting and saving money works
You’re probably wondering how to budget with low-income wages, but it’s as simple as tracking your income and expenses.
For the sake of budgeting, income sources include your regular paycheck and anything else that brings in money. This might include child support payments, alimony, Social Security, passive income, side gigs, stimulus money, and tax returns.
Expenses are everything you spend money on, including bills, groceries, gas, clothing, entertainment, and spur-of-the-moment purchases.
When creating a low-income budget, compare your monthly expenses to your monthly income. Once you have a clear financial picture, you can make a game plan to better manage and save your money.
Why budgeting and saving money are important
Budgeting works regardless of your income level because it’s meant to help you understand where your money comes from and where it’s going. This knowledge is essential for cutting unnecessary expenses, keeping track of payment dates, and reaching big financial goals.
When you stick to a budget on low income, you’re more likely to pay your bills on time, avoid spontaneous purchases, and have more wiggle room to grow your savings. Plus, having money in your savings account reduces financial stress when unexpected financial situations arise.
Can I budget and save money with a low income?
Yes! You can budget and save money on any income!
In fact, creating a low-income budget can be fun! The key is to be mindful of every dollar you spend and find creative ways to reduce your spending.
For example, using coupon codes, downloading cashback apps, and shopping clearance racks may require extra forethought, but saving money is worth the effort.
How to create a low-income budget
If you’re learning how to save money fast on a low income, here’s what you need to do:
1. Calculate your income
First, you need to get an accurate picture of your earnings. Since low-income earners tend to work hourly or tip-based jobs, you’ll want to review your recent pay stubs or bank deposits. Then, calculate how much money you’ve taken home each month for the last few months.
If your income varies, average the monthly earnings and use this figure to budget for the coming months.
2. Calculate your monthly expenses
Now, it’s time to add up your monthly expenses. First, list your fixed expenses, such as housing, electricity, internet, mobile service, streaming services, and other utilities. You should also include monthly bills like medical payment plans and credit card payments.
Calculating fluctuating expenses like groceries and gas takes a bit more effort. Review your spending habits for these items and average the costs. This is the amount you’ll allocate for non-fixed expenses.
Anything else that doesn’t fall into these categories should go into a miscellaneous category.
3. Choose a budgeting method
Numerous budgeting methods help track low-income spending habits.
The envelope method (or “cash stuffing”) has reemerged recently, becoming a viral trend on social media . The idea is to break your expenses into categories and create a physical envelope for each. You then put cash into each envelope based on how much you’ve allocated for that category that month.
The envelope method works because there’s something about holding cash in hand that makes you less likely to spend it on nonessentials.
If you’d rather not deal with cash, don’t worry — plenty of other budgeting techniques are worth exploring. Budgeting apps, spreadsheets, zero-based budgeting , and other methods appeal to different people. The trick is finding the one that appeals to and works for you.
4. Adjust your budget as needed
Just because you create a budget for the upcoming month doesn’t mean it’s set. What if your income is more or less than you’d expected? Or if gas prices rise?
You may need to adjust your budget for many reasons, and they’re all valid. Simply make realistic adjustments and keep those financial goals in mind to stay on track with your low-income budget.
How to save money on a low income
Now that you know how to budget money on low-income wages, let’s talk about saving money. Here are some helpful ways to start building your savings today:
Automate your savings
Setting up a prescheduled, automatic transfer from your checking account ensures you never forget to prioritize your savings. Many banks and credit unions offer this service, but if yours doesn’t, consider opening a new savings account that does allow you to deposit a portion of each paycheck.
It’s more difficult to save when most of your money goes to bills, so eliminating debt is often the only way to free up enough cash to put toward savings.
Assess your current debts and make a plan to reduce how much you owe. For example, you may want to focus on one credit card at a time, paying more than the minimum monthly payment until it’s paid off — then move to the next one. Alternatively, you might consolidate your debts to potentially reduce your interest rates and payment amount.
Lower housing and food costs
While you can’t eliminate basic expenses like housing and groceries, you might be able to cut the costs to save money. Moving to a more affordable apartment is ideal, but with housing prices rising everywhere, that option isn’t always feasible. More realistic options include negotiating your pet rent and reducing your utility usage.
To save on food costs, evaluate how much you spend on restaurants and takeout versus groceries. Would shopping at a different grocery store or buying generic cut costs?
Reduce unnecessary spending
We all like to treat ourselves occasionally, but you should avoid the temptation to splurge and prioritize your household’s needs over wants.
When you come across an item you want, note the price and wait for it to go on sale. If you’d rather not chance losing it, see if the item fits into your budget’s miscellaneous category. When you walk away from a splurge purchase and give yourself time to think about it, you may realize you don’t need it after all.
Increase your income
Because a low-income budget can feel limiting, consider how you can increase the money you bring in. That could mean finding another job, asking for a raise, or generating passive income. Whichever way you achieve it, supplementing your current income will help improve your overall financial stability.
How low-income borrowers can get money now
Creating a budget and saving money are essential when working toward a financial goal, but what if you need money now? Coming up with extra cash on a low income isn’t easy.
Fortunately, Advance America offers a variety of loan options for low-income earners, including:
Also known as cash advances, payday loans are short-term loans you pay back on your next payday. The great thing about payday loans is that you don’t need good credit to qualify; the amount you can borrow depends on your income.
Consider an installment loan if you need more cash than a payday loan offers. Installment loans are paid back over an extended period, allowing low-income borrowers to receive more money and make smaller payments over time.
A title loan gives you access to cash based on your vehicle’s appraised value. Of course, you’ll need to have already paid off your vehicle to use the title as collateral. Still, you can keep driving your car while you repay the loan, which makes this a smart option for borrowing a more significant amount of money.
Lines of credit
Having a personal line of credit ensures you have access to cash (up to a certain amount) whenever you need it. Lines of credit are like credit cards in that you’re approved for a maximum borrowing amount. The difference is you can withdraw funds from your approved amount as needed. Best of all, you only pay interest on the amount you draw.
Start budgeting and saving money today
“How can I save money with a low income?” is a common question. Budgeting and saving money on a low income is challenging, for sure, but not impossible.
Find the budgeting method that works for you, stay focused on your goals, and practice smart, low-income spending habits. In the meantime, if you still need money while building your savings, consider an Advance America personal loan to get the cash you need today.