How to Budget When You’re on a Very Low Income

If you have a low income, here is how to create a budget that will help you save money and be sure your expenses are covered.

If you have a low income, here is how to create a budget that will help you save money and be sure your expenses are covered.

Although there are many budgeting blogs and tips, many of these don’t appear to be relevant when you have a low income or your income varies.

Some 80% of those surveyed in 2021 have a budget, according to, a 12% jump from 2019. Having a budget or spending plan is one of the first steps towards financial wellness because it acts as a guide for your money.

Fortunately, there are ways that you can budget on a low income, and here we’ll explore this topic in more detail, so you can start getting your finances in order.

Work Out Your Basic Expenses

First and foremost, you need to know what your basic expenses are. These are things that you must pay each and every month, so they include costs such as rent, transportation, utilities, and food. These basic expenses will dictate how much “disposable” income you have available, which we will explore later.

Fortunately, there are some great expense tracking apps that can help you to determine where your money is going each month. When looking at the two most popular apps as a Empower vs Mint comparison, you will need to see which platform you feel most comfortable using. Both of these apps have features to make expense tracking and budgeting easier.

Once you start getting a handle on your finances, you can also use these apps to start planning for the future, including paying off your student loans or even saving for a down payment so you can become a homeowner. However, for the moment, your main priority is likely to be to stabilize your finances and try to manage your modest income as best as you can.

Of course, if you don’t yet feel comfortable using an app, you can work out your expenses the old fashioned way, with a pen and paper. Just gather your bank and credit card statements to note down all of your regular expenses. You will need to prioritize your essential expenses, so don’t include that morning latte in your costs, just yet.

Your list of essential expenses should include:

  • Rent
  • Utilities
  • Transport costs
  • Food

Add up the expenses that are needed to survive comfortably each month to create a baseline to start your budgeting efforts. Once you are aware of how much you have to cover each month, you can start to add in other expenses as you can afford them.

Set Your Budget

Once you have established your basic costs, you will be aware of just how much you have to spend each month. The fundamentals of how to make a budget are quite straightforward; take the figure you calculated above from your income to determine if there is a surplus. You can then plan in any additional costs that make your life more comfortable.

Try to be realistic about your expenses and look at things you can afford. So, while you may not be able to afford fancy new clothes every month, it is inevitable that you will need a few new items throughout the year. Additionally, you’re not likely to want to spend all of your time stuck at home, so plan in a fund for entertainment.

However, once you have worked out all these costs and set limits, you will need to stick to them. Write out your budget in full and keep it handy, so you can track your spending and ensure that you stick to your budget.

This can be a challenge on a low income, but we’ll discuss some ways to increase your financial flexibility in more detail.

Try to Minimize Your Biggest Expense

One of the biggest challenges of managing a budget on a low income is covering all those essential expenses. If your budget is particularly tight, you may wonder how you’re supposed to have a life when you can barely cover your rent, food, transportation, and other essential costs.

To make sure that you’re not living like a hermit, it is crucial to start looking at any large expenses that can be minimized. But, there are very simple ways to cut down your monthly expenses. The chances are that your largest expense is your rent, but it is not always possible to change this. Many people are tied into a lease, where it would be extremely costly to move even if they could afford first and last in a new place.

However, if you have space in your home, you could find a roommate to help share the costs. Many students are already sharing a home with roommates, but it may be worth discussing the situation and deciding if there is room for another person. If you have the space for a couch and television in your kitchen, you may be able to convert your living room into another bedroom.

Shop Smart

If you can’t minimize your rent, don’t worry as there are other large expenses that can be trimmed to create a little financial breathing room. Even something as simple as learning to cook can save a small fortune in food costs. You can easily make two or three dinners for the cost of a take out, so this can drastically reduce your expenses.

According to a Forbes report, it is five times more expensive to order restaurant delivery compared to cooking at home. So, you should really rethink your takeout habits. In fact, if you want to save money, throw out your takeaway menus and keep a shopping list handy, so you can plan your groceries.

Another way to cut the costs of your groceries is to shop in bulk and buy only seasonal produce. There are lots of discount grocery stores around, so it may be able to save money by traveling a little further to a cheaper store rather than relying on the store on the corner. Of course, you can only make savings if you buy foods you like in bulk; there is no point in buying a 10 pound bag of rice if you only like to eat rice dishes once every week or two.

You can also save money on groceries by shopping for offers. Look out for offers on your favorite items including:

  • Buy one get one free
  • Three for two
  • x% off

When you see an offer, stock up. Additionally, look out for coupons, as a dollar here and 50 cents there can really start to add up. Lastly, it's easy to use free apps to help you save money on your groceries. The top apps to save money on groceries are:

  • Drop — Best app to save money on groceries
  • Ibotta — Best if you want cash back on everyday purchases
  • Fetch Rewards — Best if you want to earn money on every receipt

My personal favorite is Drop, because not only can you save money on groceries you can also use it to play games and win real money.

Stick to Cash

Another issue with budgeting on a low income is sticking to the budget. It can be very easy to overspend by 5 dollars here or there and find that you’re really over budget by the end of the month. Beyond cutting up your credit cards, one of the best ways to avoid this is to stick to a cash budget.

In simple terms, instead of using your debit or credit cards, you will have the cash to spend on most of your expenses. Of course, your rent and some other expenses may be taken directly out of your bank account, but keeping a cash budget for spending, including grocery shopping, nights out, and clothing will help you live cheap and keep better track of your spending.

The most effective way is to have an envelope for each type of spending. So, if you’ve budgeted $100 for grocery shopping a month, at the start of the month, put $100 dollars in an envelope marked groceries. Each time you visit the store, pay out of this envelope.

While this may seem a little daunting, having the physical cash will stop you from overspending. No one likes the embarrassment of not having enough money at the checkout, so you’ll be forced to check how much you have before you start loading up your grocery cart.

Restructure Your Debt

According to an AIG report, over one-third of college students already have credit card debt totaling more than $1,000, no college savings, and many of them have no plans to get out of debt in the near future. If you’ve been struggling to manage your finances on a low income, you may have already been using your credit cards for basic expenses, including rent and food.

So, in addition to trying to manage your expenses, you now have to cover the payments on your credit cards.

Fortunately, many credit card companies appreciate that their customers may struggle to manage their debt and may be willing to negotiate your terms. If you’ve been struggling to pay even the minimum payment each month, it is worth giving your credit card company a call to see if they will put a freeze on your account interest.

While this may not seem like much, if you are not accumulating interest on your credit card account for six months or a year, you will be able to pay the same amount, but start tackling the balance. This will create a little breathing space, so you can start to plan your long term finances.

Look for “Free” Money

If you’re struggling to cover all of your expenses on your income, be on the lookout for free money. This doesn’t mean finding a $10 bill on the street, but rather all of the potential money that is available to you that you may not have taken advantage of, such as tax refunds, bonuses, and even ways to make $20 fast on a daily basis.

But how?

There are lots of apps and platforms that will pay you cash back or gift cards just for doing your usual regular activities, including shopping in certain stores, playing online games, or browsing the internet. Many of these apps require the completion of simple tasks that are easy to fit around a class schedule, and while you’re not likely to make a full-time income, they can provide a nice side hustle.

For example, Swagbucks allows you to accumulate points to save for free gift cards by performing short online tasks. Once you’ve accumulated enough points, you can exchange them for a gift card that can be used to buy groceries, enjoy a meal out, or just treat yourself to a little something. This can be a great reward for sticking to your budget, without needing to find the extra money to buy something.

Increase Your Earnings

Even if you’re great at budgeting, a low income should only be a temporary situation. Whether you’re still in school or working an internship, your low income should only be in the long term. However, it may be possible to increase your earnings until you can reach a higher income potential.

Once you’ve lowered your expenses and cut costs, making $500 a month more can have a dramatic impact on your quality of life. Fortunately, there are a number of ways that you can start making a little extra each month. As we mentioned above, there are money-making apps that can provide a decent side gig to earn a little extra each month.

However, there are other ways to increase your earnings and get paid. You could ask for a raise or promotion at work. Many employers appreciate employees asking for more responsibilities, and you could be rewarded with a raise.

If this is not possible, you may need to look at applying for better paying jobs. While it can be challenging to manage a job around your school schedule, there are some decent opportunities, which can allow you to boost your income.

You could also consider turning your interests and current skills into an income stream. If you’re on an academic path, consider tutoring, if you enjoy media, consider becoming a YouTube creator. These types of opportunities should not detract from your studies and can also be a welcome feature on your resume when you apply for employment or a post grad course.

Start Saving

When you’re on a low income, even the thought of saving can be daunting, but it is worth adding into your plans. Even if you can only manage to save $20 a month, it can provide a buffer if you have an unexpected expense or bill. While it may take a little belt tightening to provide some savings each month, once you get used to automatically putting a little away each month, it will seem easier.

Then you can start building an emergency fund, if you don't already have one. Ultimately you'll want to have a savings goal for each dollar amount you receive from each paycheck. Your spending habits can improve and you'll be prepared if you have any unexpected expenses.

This will help you avoid payday loans that have high interest rates simply by having a budgeting plan in place. Learning how to budget on low income can help alleviate any financial stress in the short term and long run. These budgeting tips can help anyone save money even on a tight budget.

Because I get it, being on a low income can be a real challenge, particularly when you’re at school and want to enjoy socializing with your friends. However, there is no need to get trapped in spiraling debt, if you can budget correctly. Budgeting need not be daunting, and with our tips, you can take control of your finances.

Budgeting your money on a low income can allow you to ensure that all of your necessities are covered and maybe even find a little extra cash to pay off debt and start a savings account. You’ll need to get used to tracking your spending, but once you get the hang of budgeting, it is a valuable tool for the future.

Brian Meiggs
Brian Meiggs
Brian Meiggs is a personal finance expert, and the founder of Smarts, a personal finance site helping you easily explore your best money options. He helps readers follow the smart money in order to increase their earning potential and start building wealth for the future. He regularly writes about side hustles, investing, and general personal finance topics aimed to help anyone earn more, pay off debt, and reach financial freedom. He has been quoted as a top personal finance blogger in major publications including Business Insider, Yahoo! Finance, NASDAQ, Discover, and more.
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