Steps on How to Budget Money on Low Income in 2020 See Update

Steps on How to Budget Money on Low Income in 2020 See Update.

How to Budget Money on Low Income: When you have inadequate income, having a household budget is an imperative idea.

However, having a workable family budget is actually quite liberating and easy. It makes you spend your money wisely.

It puts you in control of your money, rather than allowing money to control your life. In this article, we will list out the 10 steps on how to budget money on a low income.

Steps on How to Budget Money on Low Income

1. Track Your Expenses

Before you can create a workable household budget you have to know where your money is going. Certified Public Accountant Mark Noel recommends tracking family spending for at least a month to six weeks before you start working on a budget. “As inconvenient as it sounds, every member of the family should get a receipt for everything, and I mean everything, they purchase,” he says.

Use those receipts to get a clear picture of how and where you spend your money. Using personal finance tracking software can help you track expenditures: you might find some obvious expenses you can cut right away.

2. Create a Budget

“Implementing a workable budget is the single most important thing a low-income family can do to get control their money,” Noel shares. Getting input from each member of the family will help keep you from leaving out budget items.

“Because every member of your family will be affected by your family budget, creating that budget should be a family affair. Having extra sets of eyes on your budget always helps,” Noel adds. If everyone has a say in creating the budget, they are more likely to buy into maintaining the budget.

3. Budget for Sufficiency

The key is making your household budget work is ensuring it is sufficient for your needs. For example, if you need $200 per month for food, but you only budget $125, your budget won’t work.

You’ll end up taking $75 from some other budget category to spend on food which will make that category short, so you’ll take from a different category to fill that need.

It becomes a vicious cycle. This is the time in the budgeting process when you might have to make some tough decisions, particularly if your income isn’t sufficient to meet all of your needs, much less your wants.

4. Make Adjustments

If your budgeted expenses exceed your income, you need to make some adjustments. You only have two options: cut your expenses or increase your income.

Increasing your income might not be an option and cutting your expenses could take some time. For example, you might discover you don’t earn enough money to support the amount you’re paying in rent.

You might need to find a cheaper home or apartment but breaking your lease is expensive, so you might be better off moving after your lease is up. You might need to sell your gas-guzzler and buy a more fuel-efficient car.

5. Emergency Fund

Conventional wisdom says you need three to six months’ worth of living expenses saved up for a rainy day. When you live on a low income, every day is a rainy day, so saving that kind of money might seem unrealistic.

But unexpected expenses come up in everyone’s lives regardless of income level and having a few hundred dollars in an emergency fund can meet those needs without wrecking your budget and forcing you into difficult choices. Noel suggests making your emergency fund a top priority, right after creating your budget.

6. Request Partial Refunds on Recent Purchases:

Retailers often refund partial payments on an item when there is a price drop. But most online shoppers forget to take advantage of this fact and request a refund. Paribus could be used to check for price changes on recent purchases.

It will scan your email and locate digital receipts. Paribus will then contact the retailer on your behalf to request a partial refund.

7. Invest Your Pennies

An arcon is an investment app that allows you to round your purchases up to the nearest dollar and invest the increase. Investing extra pennies (or quarters) into an interest-bearing account is simple! You won’t even notice the difference. If you mainly use cash for purchases, you can place all one and five dollar bills into savings.

8. Refinance Your Loans

Did you know that a refinance of school, home or vehicles loans could save you thousands?If you have a loan, then you know all too well the reality of interest rates. Review you’re rates and research your refinance options with Lend Key.

A minuscule decrease in interest rates can change your monthly payment. This puts more money in your pocket each month and helps you to save extra bucks quickly!Even a lowered interest rate with the same monthly payment will save money (long-term savings).

9. Pick Up Some Extra Hours At Work

If you’re in a hurry to save cash, consider working extra hours at your day job.Most employers pay overtime when the hours are available. Even if overtime is not offered, reach out to your bosses to see if they can use the extra help.

It might surprise you to find that they have extra work for you. At the very least, it will look great that you were willing to work more!

10. Shop Second Hand

Not everything you need can be purchased second hand. Groceries, hygiene supplies, and OTC medications are a few examples that always need to be purchased brand new. But there are many categories of items that we often forget to consider purchasing second hand.

A few types of items you can consider purchasing additional hand are clothes, shoes, toys, books, large appliances, electronics, furniture, etc. There are various places that you can purchase second-hand items today for a great deal such as thrift stores, garage sales, eBay and Facebook Marketplace.

These are few steps on how to budget money ona low income.

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StudentsandScholarship Team.