How to Budget Money on Low Income: 3 Techniques

Feb 12, 2023

Dollar bill with various coins on top of it.

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Do you know where your money is going each month? Knowing how to budget money on low income is essential to adulthood. You never know when your income stream may change or, unfortunately, when you could be left without one income in your household. The sooner you learn how to budget your money, the easier it’ll be to adapt to fluctuations in your income in the future. Here are a few techniques to help you get started on your budgeting journey.

Why You Need a Budget

Everybody needs a budget, but not every household has one. Only about 32% of American homes have a budget for their incomes, even though going without one can lead to reckless spending. A budget provides you with more benefits than drawbacks, as the only real drawbacks are that you might need to cut back on your spending and you need to pay attention to where every dollar goes.

On the flip side, keeping track of a budget can help you get your spending under control. If you’re known to blow your paycheck, having a budget can help you say no to or think twice about the things you don’t need. Budgets can help you feel prepared for the future and achieve your goals. The biggest priority for most Americans is building up their emergency savings in case they ever need to use them. You might dream of owning a home or becoming debt-free — and budgets can help you do that.

How to Budget Money on Low Income

Learning how to budget money on low income is easy once you get started. Most of what you need to learn entails how to make your budget work for you. Luckily, there are a few techniques that those new to budgeting can implement to feel more secure with their income. These are just a few of the methods that work well for others.

1. Cash Envelope System

With this technique, you convert your entire income to cash and distribute it between different spending envelopes. It works well for anyone who has trouble with overspending or may not know how to categorize their spending. Since you’ll work with the envelopes directly and make space for everything in your budget, no matter how trivial the category may seem, it’s a great way to micro-manage your money and know where every dollar is going.

These envelopes, often clear ones with labels, are made for each category of spending you have. Here are a few popular ones you might consider:

  • Bills
  • Savings
  • Student Loans
  • Online Shopping
  • Gifts

The great thing about this method is that you can customize it to your liking. You can use as few or as many envelopes as you want. The trick to this technique is that you can physically hold your money, so you can see how much you have — which might also make it more difficult to spend, since you can see your declining balance physically rather than just a number in your bank account. 

2. App Guidance

Sometimes, the best way to stick to your budget is by having an automated reminder in your pocket. A budgeting app can help people who like to have easy access to a digital budget. These apps can help you keep track of your expenses and even sort things into certain budgeting categories so you know to spend your money wisely.

With about 56% of Americans not knowing or keeping track of their spending, it’s no surprise that many people often turn to budgets to get their spending on track. Several popular budgeting apps, like Mint and You Need A Budget, are great ways to leap into budgeting because they do much of the heavy lifting for you.

3. 50/30/20 Method

According to this method, you should contribute about 50% of your income to necessities, which include things like groceries, rent, gas and anything else you need to get by. From there, you can divide up the remaining 50% into 30% and 20%. The 30% you use for your unnecessary spending, like going out to restaurants or the movies. The 20%, a very important part despite it being the smallest portion, is relegated to savings. Over time, you should be able to pay off debt and enjoy the things you love at the same time.

By having a sinking fund for fun activities, you may be more likely to eat at home and save those funds for something else you’re looking forward to. Planning your meals ahead of time can help you save money and lead a healthier lifestyle, and it will allow you to know what exactly you’re eating. Budgeting your income can lead to a healthier life overall, and you’ll start paying more attention to where your money goes.

Learn How to Budget No Matter Your Income

The great thing about budgeting is that it doesn’t have to stop once you start making more money. Learning how to budget money on low income is a crucial skill that you may need now or later in life. Once you know how to tailor a budget to your spending habits, you can modify it when things change for you in the future. Until then, work to achieve your financial goals by setting a budget that’s realistic for you and sticking to it.

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Jack Shaw is a senior writer at Modded. Jack is an avid enthusiast for keeping up with personal health and enjoying nature. He has over five years of experience writing in the men's lifestyle niche, and has written extensively on topics of fitness, exploring the outdoors and men's interests. His writings have been featured in SportsEd TV, Love Inc., and Offroad Xtreme among many more publications.