HOW TO BUDGET YOUR MONEY ON A LOW INCOME

As you sit down to create a budget, the first thought that may come to mind is "how can I possibly do this on a low income?" It's a common concern, and one that can leave you feeling defeated before you even begin. But here's the thing: it's not about how much money you make, but rather your desire to change your financial life. With the right mindset and approach, creating a budget on a low income is not only doable, but can be incredibly empowering. By prioritizing your needs over your wants and considering where you want to be in the future, you can take control of your finances and work towards a better financial future.

 

1. 90/10

Living off of only 90% of income (living below your means) leaving 10% to save and/or invest. Savings is important to have for emergencies.  The emergencies will come.  This method is one of the best budget plan to start. It keeps them from having to borrow money at a high interest rate or use credit cards for these times. I recommend using this for a couple of months or until you are in the habit of saving or most of your debt is paid .  You may want to adjust to fit your needs.

2. Envelope

 

In a world where everything seems to be moving towards a digital landscape, the idea of physically setting aside cash for budgeting may seem like a thing of the past. However, the tried and true envelope budget method is still a popular and powerful tool for managing finances. The concept is simple - you divide your income into different categories and physically set aside the cash for each one in designated envelopes. This allows for a tangible representation of your budget and makes it easier to track your spending and stick to your financial goals. But why use envelopes when we have apps and online tools for budgeting? For one, it eliminates the temptation to overspend and keeps you accountable for your budget. You can't overspend in one category without taking from another, and seeing the cash physically deplete in an envelope can have a stronger impact than simply seeing numbers change on a screen.

3. ZERO-BASED BUDGET METHOD

For many people, managing and sticking to a budget can feel overwhelming and restrictive. The thought of tracking every single expense and constantly calculating how much is left in each category can be enough to make anyone throw their hands up in frustration. That's where the popular zero-based budget method comes in – the simple and effective solution that has been praised by experts and budgeting beginners alike.

So what exactly is the zero-based budget method? It's a budgeting approach that focuses on giving every single dollar a designated purpose, starting from zero. This means that at the beginning of each budgeting period, whether weekly, bi-weekly, or monthly, you allocate all of your income to various categories such as housing, groceries, and entertainment. The idea is to make sure that every dollar has a job and is accounted for, leaving no room for mindless spending.

4. COLLABORATIVE BUDGET

While some may choose to take on a more independent approach, managing their own finances and solely making decisions about their budget and payment plans, others may opt for a more collaborative approach. This involves active participation and negotiation with their partner, taking into account both parties' income and expenses, savings goals, and potential debt.

Experts emphasize the importance of regularly discussing and revisiting budget and payment plans with a partner. This not only ensures that both parties are on the same page, but it also allows for adjustments to be made as circumstances change. After all, financial stability is an ongoing process that requires constant evaluation and adaptation.

 

5. INVESTORS BUDGET

 

It's simple yet effective. By dividing your income into three parts - 75% for spending, 10% for savings, and 15% for investing - you are setting yourself up for financial success in the long run. Let's break it down. The majority of your money, 75%, goes towards your everyday expenses. This includes bills, groceries, and any other necessary purchases. By limiting yourself to this amount, you are keeping your spending in check and avoiding overspending on unnecessary items.

Next, we have the 10% for savings. This may seem like a small amount, but eventually, it will add up and provide you with a safety net for unexpected expenses or future investments. It's important to consistently contribute to your savings, even if it's a small amount each month.

Finally, we have the 15% for investing. This is where the magic happens. By setting aside a portion of your income for investments, you are creating opportunities for your money to grow. Whether it's stocks, real estate, or a retirement fund, investing is crucial for long-term financial stability.

This budgeting style is customizable to fit your individual needs. If you have more expenses, you can adjust the ratio to 70/15/15 or even 60/20/20. The key is to find a balance that works for you and your financial goals.

In today's fast-paced world, it's easy to feel overwhelmed and disorganized when it comes to managing our finances. But as we've discussed in this article, having a budget plan in place is crucial for financial stability and success. By following the steps outlined here, such as cutting unnecessary expenses, eliminating debt, and setting up an emergency fund, you can take control of your money and pave the way for a brighter financial future. Remember, choosing a budget is just the first step – it's equally important to review and adjust it as needed.