Whether you are a single parent, a student, retired or have other income situations, learning to live on a limited income can take some serious hard work. We should all have a budget, but if your income is tight… it is even more of an urgent need.
When budgeting on a limited income, the key is to prioritize first. You simply might not have enough money to pay for all the standard budgeting categories. The first step will be to make a short list of your top necessities. Good examples are housing, food, utilities and transportation. There may be more, depending on your individual situation.
Once you have a list of the absolute necessities, then it is time to make a second list. These should be important items, but not as urgent as the first list. Good examples might be clothing, toiletries, and phone bills.
Next, will be a final list. These items are a little more frivolous, like entertainment. This list will include things you would love to buy, if you can manage to save for them or cut back your other expenses. They are also good for special circumstances like a bonus at work or tax return.
Now approach these three lists with a top down approach. Start with your monthly income and divvy it out to your first list of necessities. Make sure you are honest with yourself. It is okay to decide to reduce an item (like taking the bus to work instead of driving), to save money. Just be sure that it is still realistic.
Once you have set aside the correct money amounts for each necessary item. The next step is to take any leftover and balance it with your second list. With any luck, you can actually find some money for each item, but it is possible you won’t be able to. Once again, make sure your budget is realistic and select the most urgent of those items on that second list.
Lastly, if you do still have some leftover (even if it is just a few dollars), put that aside for your last list of splurges. Most likely, you will have to wait for the amount to accumulate, but it will still be good for your emotional state to set a little aside for the fun stuff too.
Related Articles:
*Setting Priorities for your Money
*Basic Budget Strategies for Achieving your Goals