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How to budget money on a low income

Save & invest

A smiling mid adult woman stands in the produce section of her supermarket and reaches down to show her serious elementary age daughter the next items on a paper shopping list.

No matter how much you earn, budgeting can help you save money and reach your financial goals. If your income is low, it’s even more important to follow a budget so you can keep all your bills paid on time and have money set aside for emergencies.

In this article, we’ll look at eight basic strategies for successful budgeting on a low income.

Here’s what we’re going to cover:

  • Review your monthly income and expenses
  • Trim your spending
  • Set goals
  • Create a realistic budget
  • Automate your savings
  • Keep track of what you spend
  • Increase your income
  • Make adjustments as needed
Key takeaways:

  • Before creating a budget, you need to know how much you’re earning each month and what your regular expenses are.
  • Sticking to a budget can be easier when you have clear financial goals in mind.
  • To stay on budget, it helps to monitor your spending throughout the month. You might try entering payments on a spreadsheet, downloading a budgeting app, or using the cash envelope method.

Review your monthly income and expenses

To create a budget, you need to have a clear picture of what you’re currently earning and spending. Start by calculating your monthly income after taxes. This should include your salary or wages, plus any money you receive from side jobs, alimony, child support, or Social Security payments.

Next, you’ll want to know where your money is going. Save all your receipts for several months to get an idea of your average spending. You can place each of your expenses into one of the following categories:

Fixed expenses

Your fixed expenses are the ones that stay the same each month. Rent or mortgage payments, minimum debt payments, and insurance premiums are examples of fixed expenses. You know exactly how much you will be paying for these bills every month.

Variable expenses

Variable expenses are those that go up and down. Food, utilities, medical bills, and entertainment are all variable expenses. Your utility bill, for example, may be higher during the winter, when it costs more to heat your home. If you visit the dentist, you may be spending more on medical costs that month.

Some expenses could fall in either category. If your phone bill is the same amount each month, then it’s fixed. If your bill goes up and down according to your phone usage, then it’s variable. Similarly, if you put the same amount of money into savings or investments every month, this is a fixed expense. If the amount changes, it’s a variable expense.

Trim your spending

The next step is to look closely at your spending habits. Do you spend more than you earn? If so, you might want to try these simple suggestions to reduce your variable expenses:

  • Eat out less often
  • Plan meals and shop from a list
  • Watch for sales and use coupons
  • Buy things secondhand instead of new
  • Take public transportation, ride a bike, or carpool to work

Cutting back on your fixed expenses may be harder, but it’s still possible. For example, you can save money when you:

  • Cancel subscriptions you don’t use
  • Pause your gym membership
  • Downsize your living space
  • Get a roommate to share the cost of rent and utilities
  • Refinance or consolidate debts

Set goals

It can be easier to bring down your spending when you have a clear goal in mind. There are lots of reasons you may want to save money. Some common goals are:

  • Having cash on hand for emergencies
  • Getting out of debt
  • Buying a home
  • Paying for a wedding or vacation

Create a realistic budget

Now that you’ve decided on your financial goals, it’s time to create a budget that fits your needs.

Don’t know where to start? Many people benefit from adopting the 50/30/20 method. With this budget plan, you can spend up to 50 percent of your income on essentials: food, rent, transportation, medical bills, and any other necessary expenses. (Note that essential expenses can be either fixed or variable.) Another 30 percent of your income goes to nonessentials, the things you may enjoy that aren’t absolutely necessary, such as travel, entertainment, and eating out. The remaining 20 percent goes into your savings.

If that system doesn’t work for you, design your own budget. The important thing is to set a realistic budget and then stick to it. Taking control of your spending can bring you peace of mind and help you achieve greater financial security.

Automate your savings

Many financial experts recommend setting aside enough money to cover three to six months of living expenses. If you lose your job or have unexpected bills, your savings or emergency fund can help you get by without having to borrow money or run up a large credit card balance.

The easiest way to save regularly is to automate payments. You can do this by setting up automatic transfers with your bank. As soon as you receive your paycheck, the amount you specify goes straight into your savings account. Then when you need money for an emergency, it will be there.

Keep track of what you spend

To stay on budget, it’s important to monitor your spending throughout the month. Here are three ways to track your expenses:

Use a budgeting app

You may also want to try downloading a budgeting app on your phone. Many of these apps can sync with your financial accounts and automatically list your payments in the appropriate category. Some will even let you set a spending limit in each category, then send you an alert when you’re close to that limit.

Use a spreadsheet

You can create a spreadsheet for your personal finances using an online template, a computer program, or a paper graph. Start by making columns for spending categories such as rent, food, utilities, transportation, medical, and entertainment.

Each time you make a purchase or pay a bill, you log the payment in the appropriate category. Digital spreadsheets allow you to keep a running total in each column, so you don’t have to do any math. It’s easy to see at a glance how much you’ve spent day to day and month to month.

Use cash envelopes

If you prefer making payments in cash, the cash envelope method may work well for you. You start by labeling one envelope for each expense category. Then you withdraw your monthly income in cash and divide it between the envelopes according to how much you plan to spend. Once an envelope is empty, you can’t spend any more money in that category until your next paycheck.

Increase your income

While it’s possible to budget and save on a low income, earning more money certainly makes it easier. Here are some suggestions for increasing your income:

  • Ask for a raise
  • Take a part-time job
  • Start a side hustle
  • Earn an advanced degree or certification
  • Sell things online

Make adjustments as needed

Try out your new budget for a few months and see how it’s working for you. You will probably know quickly if you need to make changes, allowing for more expenses in one category and less in another. You can always adjust your spending and saving plan over time as your needs change.

Save, budget, and spend with the Oportun app

Budgeting on a low income is possible if you stay motivated and organized. The reward of sticking to your budget is greater financial security for you and your family.

Ready to start budgeting and saving today? Check out the Oportun app. It helps you see what’s okay to spend while helping you budget for your bills and meet your savings goals.



Investopedia. The 50/30/20 budget rule explained with examples

Experian. How much money should you have in your emergency fund?


The information in this site, including any third-party content and opinions, is for educational purposes only and should not be relied upon as legal, tax, or financial advice or to indicate the availability or suitability of any Oportun product or service to your unique circumstances. Contact your independent financial advisor for advice on your personal situation.

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