As many of you know, I’m now working full time online. We had to take a substantial cut in income to do so . . . and also figure out how to create a low income budget. We’ve done just that. If your income is low, or you simply want to save money, follow these principles to put you in a better financial position.
Principles for Creating a Low Income Budget
You’ll need to follow these tips simultaneously in order for them to work properly. Some will be more difficult than others you’ll find, but keep at it! Eventually you’ll get the hang of budgeting with your low income.
1. Ask yourself: “Do I really need that?”
This is an essential question to ask regarding everything in your life. There are two areas you should focus on when you’re asking yourself this question:
- Products or services you already have bought or are subscribed to.
- Products or services you are considering buying or subscribing to.
Many people tell themselves that they won’t buy or subscribe to something that isn’t needed in their life in the future, but aren’t willing to simplify their current lifestyle.
Try this: Make a list of products and services you currently own and ask yourself if you really need those things. Do you really need a cellphone if you work from home? Do you really need that cable subscription if you can get your news from the Internet?
And remember, you need to ask this question with everything you have and everything you’re considering purchasing. No exceptions.
2. Create a prioritized, capped expense list.
As with any budget, you need to create a prioritized list of expenses. But when you’re budgeting with a low income, you should take it a step further: create caps on your categories.
Many expense categories in your budget can become overfunded with time because you have not put a limit on how much you can have in that fund.
Here’s an example: Let’s say you have a transportation fund that you use for fuel, oil changes, new tires, and car repairs. Now let’s say that you can’t imagine ever needing more than $700 in that fund in one given month. You should set $700 as the cap! So, if you’re allocating your income down your prioritized expenses, currently have $650 in your transportation fund, and typically allocate $200 into your transportation fund, you should only add $50 to it this time around. This will bring you up to your cap of $700 and will save $150 that you can put into your next expense category.
To start your prioritized, capped expense list, download my Budget Category Brainstormer. It’s a printable worksheet that has over 80 budgeting categories, spaces for your own, and spaces for your allocations, caps, and priority ranks.
3. Find services that save you money.
Switching services can truly help you save some money. Here are a couple of services we’ve used to keep our expenses down and money in our pockets:
- Netflix. iTunes and Blockbuster can really but a dent in your bank account. Right now, you can get unlimited streaming of movies and TV shows from Netflix for $7.99 per month. That’s a pretty good deal. Plus, it saves you gas driving to the video store. Redbox is another option, but the selection of movies is rather limited.
- PerkStreet’s Cash Back Debit Card. By eliminating our credit cards and making PerkStreet’s Cash Back Debit Card the only one we use for everyday purchases, we’re saving money on interest and earning cash back at the same time. You’ll earn 1% cash back on every purchase that you can use to buy things from Amazon.com, Walmart.com, and many other large online and storefront retailers. Plus, you can earn 2 or 5% cash back in bonus categories. Sweet!
There are many other ways you can save money through innovative services. What are a few of your favorite?
Bonus Tip: Try the envelope budgeting system to save some extra money. Give it a shot!
Leave a comment below and tell us how you live on a low income budget. Looking forward to hearing from you!