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11 Tips to Budget Money on a Tight Income When You’re Broke

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how to plan a budget and save money

We work hard to earn our income, and it’s important that we use that income wisely to get the biggest bang for our buck. A household budget is a vital foundation for learning how to budget money on a tight income.

1. Budget Money on a Tight Income by Creating a Budget Plan

A household budget is a framework we use to:

  • Exactly how much money is coming in
  • Exactly where the money is being spent
  • Exactly how much money is left for savings

Consequences of not having a budget

  • We spend more than we make.
  • We spend more on things we don’t need.
  • We don’t realize how much we spend
  • We lose control over our spending
  • We develop a habit of spending

When I didn’t keep track of my budget, I would lose track of online memberships I signed up for, forgot I had, didn’t use, and paid for anyway. Recently, I realized I spent fifty dollars a month buying nail products to support a friend’s business. I wasn’t keeping track of my household budget, and here I am, three months later, with more nail products that I will use in a year’s time.

Finally, make sure you set a realistic budget. We can’t possibly budget money on a tight income if we set impossible goals.

2. Track All of Your Income as Part of Your Budget Plan

While it’s easy to mentally keep track of the larger payments like rent and a car payment, it’s much more challenging to keep track of smaller expenses like apps and games that cost less than five dollars a month.

Can you tell me if your water or heating costs have increased or decreased over the last three months? While we might remember what we paid for last month’s water bill, I’m not going to remember what I paid two months ago.

A budget allows you to track your money, and identify patterns.

Simple Steps to budget money on a tight income:

  • Record the source of the money you receive. (such as income)
  • Write out your priority regular, necessary bills. (mortgage/rent, car payments, utilities)
  • Write out secondary, necessary bills (gas, prescriptions, Netflix)

Record other, less fixed costs: Grocery bill estimates, pet food, and supplies, personal care supplies, and other things that you spend money on, regularly.

After subtracting the amount you spend, from the amount you receive, is called “Discretionary Income”.

Discretionary income is what you have to spend on purchases such as dining out or new clothes. Or if you are like me, new dog clothes. I spend more money on dog outfits than I do on clothes for myself!

3. Record All of Your Spending as Part of Your Budget Plan

We all have spending habits. If you keep track of everything you spend, you will be able to see your spending habits and be more successful when you budget money on a tight income.

There’s just no way in our fast-paced world that we can keep track of every spending purchase, in our head. We buy things online impulsively (Facebook ads), when we are tired (If I browse Amazon after 9 p.m. I always buy) and subscribe to online memberships and courses with the best intentions.

This doesn’t take into account in-person purchases.

Even mindful grocery shopping is a challenge when stores are out of the item you planned to buy.

how to budget money on a tight income

4. Write Every Purchase Down to Budget Money on a Tight Income.

Let me say it again. Write It Down.

Writing things down, makes us remember.

Writing it down makes spending tangible. (Dang, I really DID spend $55.07 on Starbucks this month?)

Writing it down gives you recorded data to identify, and manipulate.

This allows you to use money as a tool to build with, versus money as a fluid substance that flows through our hands like water.

5. Adjust Any Unhealthy Spending Habits in Your Budget

  • Go through your recorded list of expenses and highlight the monthly expenses.
  • Go through your recorded list of expenses and highlight (in a different color) one time purchases.
  • Do this for three months, and after three months- a pattern will emerge.
  • Target the pattern, and start deciding what items you may want to reconsider.

Do this for both you and your partner, because each person’s pattern will most likely be different. I tend to spend money on coffee, pet clothes, and used books. My husband spends less than I do, but he still overspends on groceries.

Both of us do practice getting good value for our money.

But getting good value for your money and spending money, are TWO DIFFERENT HABITS.

Target your spending habits and address these issues objectively, without negating or justifying. This way, you can see the power you have to get more bang for your buck. This is key when you have to budget money on a tight income.

Before I started a budget and wrote down my expenses to track them, I wasn’t even able to save one dollar.

“Why isn’t there any money left, I didn’t buy anything!” I would ask myself in complete exasperation.

Simple, if I don’t know record what I have, I don’t know what I have. Even our monthly income isn’t fixed, because the number of days in a month, varies. There are paid holidays, and sometimes overtime.

And of course, I may have paid for something that I don’t buy on a regular basis, or eaten out three times instead of twice during the month.

I have used both physical jars to save change, and dollars. I recommend these printable jar savings trackers from as a convenient way to save money for gifts and big purchases.

how to budget money on a tight income

6. Budget on a Tight Income to save money:

  • Mindset: Savings is a priority expense, not an option.
  • Set aside money for savings as if it is a bill. Twenty Bucks is Twenty bucks, and lets face it, twenty bucks is nothing in todays economy.
  • Set your budget amount aside in a way that is separate from your normal spending account. We do this and if the account falls below $100, we are charged so that’s an extra incentive not to spend.
  • Set it aside in a cash jar. I do this for myself personally, because I use a card to pay for everything. I hate carrying cash because it can be lost. So I rarely touch the “Money jar”. Because this is physical and I can see the cash, it translates into “I’m proud of myself” emotion.
  • Hide it from yourself. I’ve also stashed a $20 dollar bill in unusual places. Then I forget about it.

You do you. It’s not the amount. Starting off with saving five dollars a month, is still saving. It’s not the how. Whether you use “mind tricks” like I do, or a savings account or whatever, use the method that works for you.

Track expenses, set aside a savings amount like it’s a bill, then set the savings money aside.

Finally, recording and reviewing your budget allows you to stay on track for spending. It is a tool that allows you to account for any increasing mandatory expenses and track spending. A budget helps you to adapt to inflation, and adjust spending as needed.

7. Effective Auditing: Review to Budget Money on a Tight Income

When I started my budget, I had to review it on the same day every week. I chose Sunday. I planned the time to audit my budget, for two hours every Sunday so I could make sure I was mentally prepared and objective.

You may find that once your write out your budget, hidden expenses or forgotten expenses show up. I found one online account that only charged every three months, which is why I lost track of it.

After a three-month period, I audit monthly and I continue to audit monthly. I still set a day aside to audit. Between the first and the third is when I audit after we pay our monthly priority bills. Choose the best time that works for you, it may be before the kids wake up after they go to school, or during your lunch hour. Whatever the time, it needs to be a time where you are not brain-fatigued or distracted. Once you get used to auditing it will probably only take fifteen minutes because your budget is routine, stable and you’ve been tracking.

After you audit your budget as a habit, start assessing it. Can you add five more dollars to pay into your savings? If you received birthday cash, can you add this to your savings for the month? When we have overtime or extra pay because there are 31 days in the month instead of 30 days, we stick that day’s pay into savings.

Small increments that we don’t spend but save, are barely noticeable, but add up for savings.

One final tip: Our current bank savings account doesn’t have a good interest rate. Talk to your bank, or even online banks or a credit union. Again, do what you’re comfortable with. Talk to people who you notice have learned to budget money on a tight income. My husband is only comfortable with our bank, but a friend of mine who runs a successful small business gave me some good money advice.

how to budget money on a tight income

8. Expect the Unexpected: Emergency Savings Plan

Unexpected expenses are going to happen. You can cross your fingers and hope that you have the money when your tire goes flat, or you can prepare for it. Even though we budget our money on a tight income, we have been successful in growing our emergency savings.

We went through a period where we had to spend our savings at the same time I lost three clients. We had to buy brand new tires for a vehicle, and our neighbor complained about our dog running her fence, so we had to put up a new fence of our own. (Prepare for the Karen’s)

Then I lost three clients and this all happened within three weeks!

Even though it was a bummer to have to rebuild the savings we had, the point is, we had the savings for emergencies. That is the point of savings.

Okay, yes, we want savings for retirement, etc., but when one is first starting out, on a moderate income, this is where we were at. Learning to create the best habits to budget on a tight income helped us stay afloat until I brought in more income.

Being prepared for unforeseeable expenses equips you to deal with and respond to that situation with less stress. It’s good for your stability and its good for your mental health.

While anticipating upcoming expenses can seem like a good idea, it’s not. It can lead to anxiety and worry. Most things don’t break down overnight, so you can keep a casual eye on replacing things like tires, and other big expenses like computers and appliances.

A better strategy is to have an Emergency Savings Fund. Only use this fund for unexpected emergency expenses. This is how you prepare for the unknown. Prepare with action and put money into your Emergency Savings Fund every time you receive income.

After you have an Emergency Savings Fund, you are going to need to use the money you worked hard to save. It can take a year or five years, but at some point your Emergency Savings Fund will be depleted.

9. Practice These Budget Money on a Tight Income Tips When Your Emergency Savings Are Depleted

  • Do a Budget Audit with the mindset of cutting back.
  • What expenses can you cut back on?
  • What expenses can you cancel?
  • What activities can you substitute with free activities?
  • Can you work overtime?
  • Can you pick up a side gig?
  • Can you switch to lower cost necessity items?

Set a goal for the minimum amount you want to save. The goal needs to be realistic because unrealistic goals are impossible and discouraging and we quit.

Our goal is $1000 as a baseline goal. We reviewed expenses to cut, and go without in the short term. (NO, I don’t “have to have” Audible haha)

10. Track minor expenses as you continue to budget money on a tight income:

Things I monitor as I work on budgeting money on our tight income:

  • TV Subscriptions: If you have cable, change to Netflix. If you have Netflix, most libraries have free online movies and shows to watch. We have other TV subscription services, so we cut out Hulu.
  • Online memberships, for business or personal. I cancelled my Canva membership, and cut back to one dog chew prescription a month. Yes I use Canva for my business, but I can get by with free.
  • Gym Membership: We hadn’t gone to the gym in 3 months. I decided once I am committed to walking my dog daily, which is FREE, going to the gym on a regular basis is wishful thinking.
  • Dining out/food to go: We live in a small town there’s not much to do so we dine out weekly. We now dine out once a month, and buy food to go once a month. This still allows us luxury but saves money for our emergency fund.
  • Shopping: Do any of us need 90% of the things we buy from Amazon? Do I need $4.25 worth of sticky notes? Or a journal? Or a holiday themed shirt for the kids? Most things we buy, whether in person or online, we really don’t need. Buying less and REDUCING-REUSING, then recycling saves us money and the planet.

The twenty dollars you spend for lunch at work? Take a bag lunch and put that twenty dollars into your Emergency Savings Fund.

Tax Refund? Take half of that and put it into your Emergency Expense Fund. We even turn our recyclable cans and bottles in and put that five or six bucks into our Emergency Fund.

Once you reach your savings goal amount for your Emergency Fund, don’t stop building it. Keep practicing all the habits you learned as budget money on a tight income. Even if you return to some old spending habits, keep a plan in place to increase your Emergency Fund consistently.

Continue to increase the goal amount for your Emergency Savings Fund.

Decide the amount for the Emergency Savings Fund “bill” to keep growing this fund.

11. Keep a Grocery Budget as Part of your Budget on a Tight Income

Sticking to a budget for groceries when you’re trying to budget money on a tight income isn’t as easy as it sounds. It requires a lot of time and energy to compare store sales through email and store apps. It requires meal planning, and it requires understanding any supply issues or shortages and seasonal fresh food and vegetables.

Groceries are probably the biggest expense after house/car payments and are definitely a necessary living expense. Here are some tips to help streamline budgeting groceries for busy moms.

grocery budget how to budget on a tight income
  • Inventory what food you have
  • Plan Frugal Meals by incorporating the food you already have.
  • Make your grocery list: priority items (like meat) and sub-priorities
  • Make a Grocery Budget (do not include non-food items like soap)
  • Check out at least two grocery store flyers/apps/sites for sales
  • Evaluate your trip(s): if there are several items at each store, then plan your errands accordingly
  • Don’t forget to check out discount stores and Farmer’s Markets and Coops
  • Make your list in the way you will walk through the store if possible, this way you aren’t going into an aisle that you don’t plan to buy from.
  • Ignore displays: “End-Caps” are set up for high profit items and frequently aren’t practical items.

celebrate small successes of budget on a tight income

12. Celebrate Each of Your Budget on a Tight Income Successes, Even Small Ones

I know from experience that it is not easy to budget money on a tight income. The great benefit of implementing these budget and savings plan practices is that you will actually be able to see and note your growth and successes. It’s the small things that make up the big things. It takes hundreds of bricks to make a building, but we only notice the building, not the bricks.

If you liked these how to budget on a tight income tips, you probably will find these tips for 7 ways to save money with jars