Living on a budget can help you stay on track financially. However, you might think budgeting is too difficult if you have limited resources.
Thankfully, it’s not as hard as it may seem. This guide can show you how to wisely manage your money even if you earn minimum wage or are facing dire circumstances.
Following these steps will help you confidently become financially stable.
How to Budget With Limited Income
Earning a low income is challenging, but it’s not impossible to learn how to stop living paycheck-to-paycheck. Here’s how to budget when you’re broke and make sure your finances stay on track.
Assess Your Finances
The first step to creating a budget is taking an honest look at your finances. You need to sit down and evaluate how much you earn each month and how much you spend.
This sounds difficult, but it’s actually quite simple. Follow these steps to begin:
- Track your spending: Write your monthly expenses on a piece of paper. Reference your paychecks and bank statements to capture every detail. Determine if you’re spending more than you’re earning.
- Analyze your spending: Identify your necessary and optional expenses. A budgeting app like YNAB lets you look at all your transactions in one place to help you see where you can make cutbacks. If the service doesn’t meet your needs, you can try one of the YNAB alternatives to get on track.
- Prioritize essential expenses: Use the first part of your income for food, shelter, transportation, and utilities. In the Dave Ramsey baby steps philosophy, this is your four walls. Then you can budget money for other expenses.
Completing these steps can help if you’re struggling to budget because you don’t know where to start. It’s also vital if you’re losing your job and need to clamp down on your finances.
Review Your Due Dates
It’s essential to know the due dates of your monthly bills. Missing payments can result in late fees and potentially hurt your credit score.
Writing your payment schedule and the minimum payment due on a calendar can make managing your money easier.
Here are some common bills you want to monitor:
- Rent or mortgage
- Utilities
- Insurance
- Loans and credit cards
- Cell phone
It’s important that you pay the essential bills first, then pay non-essential bills.
Stop Spending
Now is the time to take a serious look at the things you spend money on that aren’t necessities. You should cut expenses as much as possible so that you aren’t living paycheck-to-paycheck.
This practice is crucial if you are trying to budget when you’re behind on bills. Canceling services frees up cash that you can use to pay for necessities.
Cable is a perfect example. Do you spend $200+ per month on cable?
Sling TV is an excellent replacement that only costs $40 per month. You can read our review of the Sling TV packages available to learn about how the service works as well as all of the channels you receive on the platform.
Your cell phone bill is another example. Do you spend $50+ per month on your cell phone?
You can switch to Tello to save money. Plans start as low as $10 a month.
Food can be another budget buster if you’re constantly dining out. It’s best to look for ways to save at the grocery store since that is an easy way to make cutbacks.
Cable, cell phone bills, and food are the tip of the iceberg. Here are a few other unnecessary expenses you can significantly reduce:
- Internet bill
- Entertainment
- Subscriptions
A bill negotiation service can also help you look for discounts and cancel subscriptions.
Every situation is different, so you may have other areas where you can make cutbacks. This is why analyzing your spending is so vital if you are trying to budget when you’re broke.
Contact Creditors
Debt is a key factor that keeps many people from living on a budget with little money. If you’re trying to pay off debt while you are broke, you need to contact your creditors and explain the situation.
This strategy can be helpful if you’re paying off credit card debt. The creditor may temporarily reduce your interest rate or modify your payment plan.
Another possibility is enrolling in a hardship plan when you’re unemployed or overcoming a serious illness. Either prospect is better than ignoring your debt as that will not encourage creditors to work with you.
Be honest about your situation and show a willingness to work together to determine a plan.
If they’re unable to help and you’re deep in debt, consider using one of these credit repair companies to help you find a solution.
Avoid payday loans at all costs. While these may seem like a good choice to get creditors off your back, they’re not. Payday loans only make the situation worse.
Earn Additional Income
One overlooked option to help budget when you’re broke is earning extra money.
Extra income helps you in one of two ways. It either helps increase your income, or it gives you the ability to kill debt faster.
The first place to look for extra money is your day job. Can you work overtime hours or take on additional tasks? If so, use that income to help with your budget.
If not, you can use side job apps to fin gigs that require little skill and let you work in your spare time. A popular option is to find work through on-demand delivery apps.
DoorDash is one choice to make money on the side. The DoorDash app lets you deliver restaurant meals and fast food to people at their homes or where they work.
With DoorDash, you can create your own schedule and work in your spare time. Driver pay varies depending on several factors like tips and items delivered.
You can learn about DoorDash and the other delivery app jobs to decide which is best for you.
A side hustle can be an effective way to supplement your income if you have free time. However, you should also consider getting promoted to a higher-paying job to earn more for your effort during your regular workday.
Regardless of how you increase earnings, it can be a terrific way to save $500 monthly to help bolster your efforts.
Monitor Your Spending
One of the best budgeting tips is to analyze your spending. Tracking your spending takes your finances to the next level because it allows you to regularly evaluate your spending habits.
Continue looking for ways to reduce your fixed expenses and variable expenses to save money every month.
Cutting expenses can be an excellent way to increase your available cash, especially when you don’t have the time for a side hustle.
You may even realize you don’t need to get help paying bills when you implement this practice. Watching your spending can be the key to financial stability once you figure out how to budget your money.
If you’re just starting to attack your finances, you may feel like lowering your spending is impossible. Progress is possible.
Read our guide on ways to save money on a tight budget to identify areas to cut costs.
Start an Emergency Fund
Starting and growing an emergency fund is critical to getting your head above water. It helps prevent panic and going deeper into debt when your next unexpected bill comes.
You should have three to six months of living expenses in your emergency fund. Even though that amount can be overwhelming when you first start, you shouldn’t let it hold you back. Saving money is critical.
When you are first starting out, start small. This could mean just $20 each month. Set a goal to save $250, then $500, then $1,000.
These smaller goals will give you the confidence you need to push ahead. And, it will help you develop the pay yourself first strategy necessary to grow your wealth.
It’s wise to keep your rainy day funds in a savings account separate from your everyday spending and long-term savings goals.
CIT Bank is one good option that has a $100 initial minimum deposit. The online bank also has various tools to help you manage and grow your money.
Read our CIT Bank review to learn more.
Bottom Line
Being broke makes it harder to save money and pay your monthly bills. Fortunately, with a little effort, you can break this cycle. It’s not always easy, but it is possible to budget when broke.
Instead of looking at the challenges, think about how improving your money habits will impact your life. A budget cultivates freedom, which is far better than struggling each month or ending up in debt.
If you take it one step at a time, you can confidently create a budget that gives you the freedom you want.
What are your tricks to living on a budget when money is tight?
*Earning more on certain types of orders (ex. alcohol): Earn more per order as compared to restaurant orders. Actual earnings may differ and depend on factors like number of deliveries you accept and complete, time of day, location, and any costs. Hourly pay is calculated using average Dasher payouts while on a delivery (from the time you accept an order until the time you drop it off) over a 90 day period and includes compensation from tips, peak pay, and other incentives.
*Get paid instantly (DasherDirect): Subject to approval
*Cash out daily (Fast Pay): Fees apply
*Start Dashing today: Subject to background check and availability
*Dash anytime: Subject to availability
Hey Laurie!! That’s great new.. Johns a great guy!
I think when one is broke and they want to budget they can but the biggest part is the plan. When it comes to budgeting all it becomes is a way to track money so we know where it’s going and how much to spend. Planning and knowing everything about one’s personal finances is the starting point. I think once people get into the swing of it they will learn where they need to start cutting expenses and find a way to make ends meet the best they can whether through those cuts or making more money. Where there’s a will, there’s a way.
Yes, I’m so excited to be staff writing for someone as cool as John. :-). You’re so right about the plan being such a huge part of thing. For us I know, it’s become habit to scrutinize every month’s spending to see where we can cut back. It doesn’t even feel like punishment, just more like fun. Thanks, Mr. CBB 🙂
Great post, Laurie! Prioritizing expenses is so important. Knowing what expenses you can and can’t live without is definitely an important part of budgeting.
Exactly, DC. It’s so important to be able to be honest with yourself about this. It’s a key to success, in my opinion.
I think having a budget to follow when you’re broke is really essential. I do agree with you that when a person is broke, he can’t really afford to spend money on any unnecessary expenses or extras, and having a plan can really help them out.
It requires some balance, but yes, you have to be very careful about spending on unnecessary items. When you’re broke and the budget is super tight, the smallest of extras can cause huge problems. Thanks for the comment, Mark. 🙂
I like the idea of evaluating your situation and making a plan. When people say that can’t do something it just pisses me off that they usually say that before they attempt to do anything. Don’t give up before you even start. There are usually a lot of things people CAN cut out but dont want to!
I SO agree, Thomas! Facing the situation and cutting those things out is likely the most difficult part of the whole thing, but it CAN be done. I remember when we decided to go back and add up all that we spent in 2012 and categorize it. I got about two months in, saw how much money we had wasted, and about had a nervous breakdown. It was horrible. But it’s what led us to the place we’re in now: making changes for the better!
I would add when prioritizing bills pay ones that will effect your credit rating after necessities (1- rent/mortgage, 2- heat/water, 3- debts) when we used to have to play aroundwith our bills I’d always make sure mortgage, heat, debts were paid followed by cell phone whilch can effect credit rating but may play around with say water or internet bill if necessary.
That’s a great point, Catherine. As long as they don’t shut off the water. 🙂 I remember being a kid one time and my mom got an electricity shutoff notice in the middle of winter. Yikes! Seriously, though, you’re right one here. It takes some creativity, but it can be done.
Yayyy Laurie! So awesome you’ll be writing for John. If anyone can give awesome advice on budgeting, it’s you. 😀
LOL, desperation breeds creativity, Cat. 🙂
Great post!
It’s much harder to budget when you’re broke, that’s for sure! I do think these are good tips and that it can be done with some creative thinking!
Absolutely, Holly! It just takes some work, that’s all.:-)
“…and stick to it” is my favorite part. Post the plan all over the place so you remember….tell everyone you know….just stick to it!
Exactly, Joe! That’s one of the reasons we started blogging about our journey; it really helps us stick to it.
There are so many expenses we think we “need” that we really don’t. If you’re in a desperate situation, trying cutting something out for a month and see if you miss it. Even if you find that you do, you’ll probably also find that it wasn’t the worst thing in the world to not have it for a month. Then you have the ability to make a truly objective decision rather than a theoretical one based on how much you “might” miss it.
I will warn against simply look for ways to earn a higher interest rate on your savings. If you’re really broke then chances are good you don’t have much savings to begin with and therefore you really need to know that whatever you do have will be there when you need it. Facing that reality, trying to chase a higher interest rate will likely put you more at risk than you can afford. There are certainly simple things you can do like open an online savings account instead of sticking with your brick-and-mortar, but beyond that you really shouldn’t chase higher yields that put your money at risk. That’s a recipe for getting yourself into even more trouble.
Agreed about the savings rate, Matt. Also, about cutting things out: we have cut SO much stuff out, and we don’t miss a lick of it! It brings so much more gratification to know we are getting our finances in order than it ever did to have/do all of the stuff. Thanks for the input, great advice!
I agree with Matt on the whole needs vs wants thing. If you are broke, you need to figure out why that is. What are you spending your money on? Otherwise, you will always be broke. It’s hard to change, and it’s easy to complain about having no money. You can always find someone to chime in with you on that one, but anyone can do it. Great to see you here, Laurie!
Exactly! When we sat down and tracked our expenses, we were flabbergasted at how much we were simply wasting on stupid stuff like pretzels at Target and extra trips to the grocery store because we wanted nachos for dinner. Ridiculous!
I agree! I like how you talk about having a plan, I think this is really the key. Having a plan to stay on a budget is really the first step in the process. Calling companies for better deals is another idea too.
You’re right, Monica! With no written down, thought out plan, chances of success, in personal finance or elsewhere, are little to none.
Great to see you here Laurie! I don’t have a budget but I am broke with huge debt to pay and my only real piece of advice is to increase that income and cut out the ‘wants’ in your life and after awhile you will find that you didn’t even really miss it!
Thanks, GMD! We are right there with you on the huge debt to pay. But I think commitment is key here. We’re both committed to getting rid of it, and that’s a huge part of the battle, don’t you think?
Great post Laurie! Good to see you on here! Budgeting when you’re broke is no doubt a lot tougher. But I think creativity is the key – looking for creative ways to reduce your expenses and become your own greatest resource. Whether you’re broke or not, things will break down and it’s important to not only budget for those emergencies, but to great creative and learn how to do some of those things yourself.
Thanks, Anthony, and thanks for the comment. 🙂 Totally agree about creativity too – it really does make a difference. I know we’ve saved tons since learning more DIY stuff.
Great post Laurie. It’s not easy trying to budget further when you feel broke already but it just goes to show it can be done, as you say you’ve just got to get real about what you want and what you really need.
Yeah, the “getting real” part is hard, but definitely, at least for us, was the best part of the whole thing. It allowed us to face the music.
I think prioritizing your expenses is important for everyone, but even more important for people struggling with debt. Great post Laurie.
I agree, Sean. When you’re in a tight situation, it’s got to be decision making time and prioritizing expenses really helps to make choices about who gets what part of your money.
From personal experience having a plan to follow when you are broke is key. I like to make a budget for each one of my paychecks. I list everything I am going to pay as soon as I get money in my hand. This make me feel more in control.
We do the same thing, Alexa. As soon as that money hits the account, we get rid of it by paying bills ASAP. Like you, it makes us feel on top of things.
Great post Laurie! It’s the hard part for me about really sticking to the budget but I am working on it. It’s so important to just crack down on expenses and leave the credit cards at home if necessary to follow through. Like you mention about paying bills–I do those as soon as the paycheck hits the bank. Then what little money I have left (outside of saving for next paycheck’s expenses) is what I can work with.
I agree, Tara, it can take a lot of discipline. Nearly every day we stand at a spending crossroads of some sort, and I always feel SO much better when I say “no” to the unnecessary stuff, or when I make it through another day without spending.
I completely agree. I was really badly in debt not too long ago and it took a lot of mirror time to realize that I was blowing through money like there was no tomorrow! It is hard to determine needs and wants and which wants you would be unhappy without (makeup for me 😉 ) As far as the additional income, it is a savings grace and can help with the transitioning period of trying to get caught up and out of the ditch you put yourself in. Another additional source of income that I’ve come to love is selling groups you can join on FaceBook.
Haven’t heard of the FB groups. Sounds interesting! I’m with you, Betsy, about facing the mirror and the wants vs. needs battle. It’s getting easier, but it was a very difficult battle in the beginning.
Hey Laurie welcome to FR!! Love your humor
Hey, Todd! Thanks, and great to meet you. 🙂
Congrats on the new gig Laurie! I love the tips.
Thanks, Nick, I appreciate your support. Have a great day. 🙂
WOHOOO! Congrats on being a staff writer, you are one of my faves 🙂
Cutting expenses is very important. Analyzing what you are spending can be a shock to some.
Same here, Michelle! (I mean you, not me, being one of my faves, LOL. 🙂 ). I’m pretty psyched about my first staff writing gig. Yeah, that analyzing stuff was tough for us in the beginning, but it’s really changes our lives.
A budget is important whether you are rich or poor. Your advice works for both! I use these concepts myself and I am not broke.
That’s great to hear, Krantcents! I agree too, no matter how much money you have, a budget is crucial. Lack of a budget is how all of those high paid celebs end up broke!
Congrats Laurie! I have a few broke friends who must eat out because they work so hard, and they must take a cab home because they stayed out late and they must buy XYZ because it’s just $25. I’ve stopped trying to put some sense into them but it pains me to hear them complain about being broke.
Thanks, Pauline!! Oh yes, we used to use those same excuses all the time. And as we’ve learned during trying to help others, it’s usually no use. They have to want to not be in denial anymore. Sad but true. 🙂
Congrats on the new gig, Laurie! You and Jon will make a great pair. 🙂 While being broke is never an ideal situation, the one good thing I believe it forces you to do is really assess how you spend your money and define wants vs needs. A lot of people don’t track how they spend their money and when they do, they are often surprised by where it goes. Making those initial cuts hurt … sometimes a lot … but over time you discover how clutter you had in your life and learn to value the simple pleasures life has to offer.
Thanks, Shannon! I’m pretty excited about it. 🙂 I know being broke really forced us to do that, Shannon. And you’re right on track about loving the simple pleasures. As I said to Matt, I can’t think of one thing that we’ve cut out that we miss. Gaining control over our finances brings SO much more pleasure than all of the “stuff” we used to spend money on!
Congrats on the new staff writing position, Laurie! I couldn’t agree more with having a plan and, more importantly, sticking with it. It’s one thing to think of a theory, but quite another to put it into practice! At times, motivation to keep on can wane, but the PF community (well, and real life loved ones) is awesome in terms of finding inspiration and staying motivated!
Thanks much, Anna! And you’re SO right, both about putting that plan into practice, and about the PF community – love, love, love it!
I totally agree with this Laurie! It’s exactly what I did for my parents. They didn’t want to know how much they owed before, but with the selling of the house and moving, they got a decent amount of money that motivated them to finally get rid of their debt. They should know how expenses look after their first month, but they have a decent plan in place now. They are figuring out which credit cards to pay off and then they’ll have a nice chunk of debt out of the way! I’m really excited for them because it’s been holding us back as a family for a while.
E.M. that’s great!!! I know you’ve been working on them for awhile, and it’s so awesome to see that they’re finally on board and making progress. Yea! 🙂
I still budgeted when I was broke in school. I think it’s even more important. It’s just not as fun! Great tips
LOL, sadly, we are finding it quite fun. That says a lot about our life right now, doesn’t it. 🙂
Budgeting is simple (well, budgets that work are simple… budgets that fail are usually pretty complicated). And budgeting is the only fool-proof way to “beat broke.” Broke sucks. But broke is temporary, as long as you budget…
In the past, I’ve found that our budgets failed only because we weren’t ready to truly make changes in our lives. We must’ve been aware, deep down inside somewhere, that we were blowing money big time, because we could never handle looking at our spending numbers for more than 2 or 3 days. Budgeting isn’t hard, but it is difficult. 🙂
We kept our cell phones as we didn’t have a landline when things got rough. Maybe it’s a 21st century thing, but being able to get in touch with people is a necessity in my mind. If for nothing else (like finding gainful employment and having a number a potential employer can reach you at,) for safety. We kicked that cable to the curb, though!