Making and working on a budget for families whose income is low can be quite challenging and most times frustrating as it fails to meet the cost of living.
Meeting up the basic needs of the family is an important factor of economic growth.
According to Statista, the annual income required for a comfortable life in Newyork and Los Angeles is $128,552 and $136,208 respectively.
|Persons in family/household
Low-income families are families whose household income is less than double the Federal Poverty Level. For a three-person household, the 2022 Federal Poverty Level was $23,030 a year. That means that a family of three persons making less than $46,000 a year would be considered low income.
Checkout: How to invest with little money
Living on a low income with high inflation, which equals a high cost of living, is really hard.
However, I found a way to live within my reach and surprisingly save despite my low income.
Dave Ramsey clearly stated, ” a budget is telling your money where to go……” and this article will guide you to tell your money where to go.
Here are 11 amazing budgeting tips for low-income families:
1. Checkmate your expenditure
When your income is limited, having a household budget is not only a nice idea but checkmating where your money is going.
Public Accountant Mark Noel believes that every member of the family should get a receipt for everything. these receipts according to him get you a clear picture of how and where you spend your money.
Also, personal finance tracking software can help you track expenditures. Through this process, you might find some obvious expenses you can cut right away.
2. Develop a Budget
Creating a budget is one thing, making it a workable budget is very paramount for a low-income family who wants to get control of their money.
Getting input from different members of the family will help you from skipping one budget or things they want, it will definitely affect your budget.
Hence, developing a budget should be considered a family affair. This way everyone is maintaining the budget.
3. Budget should be enough
To ensure a budget works, make sure it is enough for your needs. For instance, if you need $200 per month for groceries but, you only budgeted $125, your budget won’t work.
You will end up getting the remaining amount from another budget category to spend on groceries which will affect that category.
Trying to balance this, you will end up going round the same circle of taking and replacing. This is the aspect of the budgeting process where you have to make a strong decision.
4. Adjust Your Budget
If what you have budgeted for is more than your income, you will have to make some adjustments.
Here; you can cut your expenses or increase your income. However, increasing your income might not be an option, and cutting your expenses may look different and time-consuming.
For instance, you might discover your rent in a particular environment you like is way out of your income, hence, you might need to find another environment that accommodates your income or take the risk of not saving.
5. Prepare for Emergency:
There will always be that day when something unplanned comes up. It is more like “a rainy day”. For someone living on a low income, this rainy day cannot be avoidable, besides, unexpected events come up in one’s life regardless of the income level.
Having a few hundred dollars wouldn’t be a bad idea, because having a few hundred dollars can help you meet your unexpected needs without having to affect your budget or forcing you into difficult choices you may find extraneous to make.
Preparing for emergencies should be considered a priority in your budget.
6. Aviod Unnecessary Credit Card Spending
There were more than a few times when I had wished I had a credit card, travel on a few trips to Cyprus or Beirut, even if it will lead me to debt! But I’m happy I didn’t push it.
Credit cards sometimes, if not used properly can lead to a cycle of debt especially if you can’t pay off your balance in full each month. For unnecessary items, I learned it is best to save up for it, not having a credit card helped me understand this.
7. Clear your Debts!
With your low income plus an outstanding debt, living successfully on your budget becomes a problem you need to pay off your debts so they won’t keep eating into your monthly income or planned budget.
When debts are clear, your budget becomes easier to not just achieve but work on. It then gives you room to save well.
Checkout: Tips to aggressively pay off your debts
Having your debts piled-up is as good as not saving at all. Debts should be included in a budget so that when your paycheck comes in, you don’t have to be cut off on guard on a particular dollar you are to pay off.
8. Avoid Non-Priority Services
If a service is no longer a necessity to you as a low-income family, you can cancel, especially if it doesn’t answer the following questions;
Does this service worth the few dollars I am spending?
Is it a necessity?
Even if it is, can I get it at a less expensive amount?
With the above questions in mind, you can avoid unnecessary services that can cost you more. There are lots of services you don’t need and might possibly get them for free or at a lower cost elsewhere.
9. Housing should be relatively Small
Remember the mortgage becomes bigger when your house is big. As a person from a low-income family, who is living on one-income in a two-income world, I needed to be willing to buy small, stay small, so I could keep the housing expenses low.
Don’t pay for more rooms, when you can’t afford them and when it is even unnecessary, especially for a rented apartment. It is advisable to literally live within your income so, you don’t eat off your budget.
10. Double-Check Your Expenses
Using a car for a short distances movement can incur expenses on car maintenance. cars are expensive to run.
It is cheaper to use a taxi occasionally than have two or more cars as a low-income family.
This generates unnecessary expenses on your budget as sometimes the cost of maintaining a car may be way over your budget.
11. Eat at Home
As a low-income family, I’ve realized that eating out costs much more than when the food is made at home.
When you spend a few dollars to eat out, you will be surprised to find out that the same amount can be used to make a homemade meal.
Food can be kept in the freezer to save you on a day you feel tired and can’t start cooking from the scratch instead of going out to eat which will affect your budget made on food.