Low income living is challenging. For those who have lost an income stream and are struggling to adapt, it can be particularly hard to find your new footing.
To make a budget, first know your budget
You can’t effectively budget money on low income without knowing what you have to work with. A glance at your bank balance may seem sufficient, but you can do much better.
You can accurately see your funds at a high level with an app like Money Dashboard. This connects your accounts and categorises your past and current savings, credit card debts, incomings, and outgoings.
Then, to create a low income budget planner, focus on categories of core spending like accommodation, transportation and food. See how much you historically spend in these areas, and determine how much you want to spend in these categories going forward.
Set realistic financial goals
If you have a low income or lost a source of income, you’ll want to cut back significantly on spending across categories.
But be realistic. You want to find a balance between a lower budget and accruing debt. Staying out of overdraft should be the goal.
Easier said than done, I know. To help, here are a few tips on how to save money on a low income and tight budget.
Save your money
Go through this checklist to save yourself from truly unnecessary expenses:
- Kill subscriptions – Take a careful review of monthly and annual subscriptions like the gym and Netflix. Look for any charges that auto-renew. Remind yourself that theses are a luxury.
- Switch providers – It’s financially reckless to stick with your contracts year over year. As providers of energy, phone service, etc are always in competition, there is a good chance you can find better deals by switching each year or two.
- Do your research – Want something? Don’t pay full price. Invest some time before buying to research coupons, vouchers, promo codes, and cashback offers. Wait for the sale season.
- Buy second hand – Again, don’t pay full price. There’s a good chance that someone is getting rid of the very thing you’re looking for. Go to charity shops, and look at Gumtree and eBay for bargains. Request items on local Facebook groups if you have one.
Escape credit debt and high interest rates – If you have debt on your credit card that’s costing you in interest, look for a better deal. Some cards will allow you to transfer your balance at 0% interest.
Claim your benefits
If you are on a low income or recently lost a source of income, you may be entitled to benefits assistance. These can go a long way towards paying for essential items like food, housing and energy, the care of children, and support in illness or disability.
It’s tragic how many benefits go unclaimed in the UK each year: more than £20 billion in the 2017-2018 financial year alone. So make sure you’re not missing out. Use Entitled To, an independent, anonymous and free online service to see what benefits you qualify for.
Make extra money
You can learn to live well on a small income, but it can be made better if your low income budget is subsidised with a side hustle.
A side hustle is a small side-job that in good times earns you a bit of extra fun spending money, and in harder times helps ends meet. Uber or Deliveroo, for example, can be a flexible side job. In the midst of Covid-19, there’s also a high demand for temporary staff at grocery stores.
You can also make extra money by selling some belongings on Gumtree and eBay. Some people make a lasting side income from this, although most do this more sporadically.
Monitor your budget weekly
Determining how to budget and save money on a low income is a journey. If you carefully monitor your budget goals against your actual spending each week and month, you will learn more about your habits and how to adapt them. So make budget reviews a routine part of your week.