HOW TO START BUDGETING ON A LOW INCOME

Start Budgeting on a Low Income

What’s A Budgeting Anyway?

Budgeting is a disciplined method used to keep track of your money, giving you the ability to know how much is coming in, and how much is going out. You can break this down further into income streams and outgoing categories.

Why Bother With Budgeting?

I had no clue about budgeting in my teenage years. To me, it was just one of those words that old working people just tossed around here and there. It really didn’t mean much to me and it sure sounded like a heck of a lot of work for something that wasn’t worth it. I couldn’t be more wrong.

There are so many benefits to budgeting including just having ‘extra’ money

When you budget, you’re saying to yourself, you respect the money that you are getting, and you respect the way you are going to use it. By this I mean you are going to use it sensibly and not spend every single penny that lands in your hand (or bank account).

It also shows that you have goals in life. You could be budgeting to save money for a car, a house, holiday, or even just a new pair of shoes. Or it could be that you’ve just found out you’re pregnant and have to budget for the baby. You could start budgeting for your children’s future. Or a long-life dream! My current dream is to be financially independent.

It’s very unlikely for you to reach financial independence if you don’t properly manage your money. And In this unstable financial world, well that’s a tragedy waiting to happen.

How To Start Budgeting

The first thing to do, as mentioned above is to work out your living costs. Work out how much money you receive from all income streams (if you have multiple streams), now work out how much is going out.

The best thing for you to do is note down ALL your cost, to help you do this you can dig out your previous bank statements. Next divide the outgoing into two categories: Essentials; like rent, council tax, gas, electric, phone bills etc. And Non – Essential, like shoe shopping, lunching, takeaways, coffee, Netflix and chill etc.

The important thing from here on is to identify exactly how much of your income you are spending on the non-essential things! You need to work this out to the T. every little last bit.

Add this money up, and this will give you roughly how much money you could be saving each month. From this, you decide how much of that you are going to carry on using to ‘treat’ yourself and how much you are going to put away as savings. This is a good way to start cutting costs without depressing yourself.

I should also just point out while we are here that personally, I feel it’s imperative to have a separate savings account. That way, once your money goes into that account, it’s no longer ‘usable’ money.

It’s entirely up to you how and when you wish to transfer the savings from your everyday account. I would recommend that you set up a standing order for the money to go out each

It’s hard and tedious enough budgeting when you have money, but when you feel like you do not have a single penny to spare, it can prove to be even harder.

Try to calm down, think positively. Think about your goal, think about what you’re saving for. Even if you’re not saving for anything budgeting can help you get out, or not get into debt.

Be Realistic With Your Goals

You need to remember to budget and save within your means. It’s not possible to save £200 each month when after bills, your balance is £75.

If that’s the case, you need to make tough decisions to cut down on expenses or increase your income. If the latter is not possible, look at how you can save money on the non-essential and the essential bills. It’s possible to save on essential bills by paying for them by direct debit.

Alternatively, shop around for a different cheaper provider on gas, electric and even phone. Food shopping is another example, you might find you spend £300 each month on food. Food is an essential bill but what kind of food are you buying? Do you reach out for branded items? Luxury treats? Most supermarket value items are just as good as branded ones. And you could save yourself a lot of money by swapping or eliminating altogether.

Benefits Of Budgeting

When I was a university student, I took out a loan to help with living expenses. This loan was paid out in quarterly instalments.

My Living arrangements meant that my rent included all my bills. So once my rent was paid, any money left over was to last till the next quarterly pay.

My rent went out by direct debit at the beginning of each quarter. Once that was paid, It was time for a shopping spree. Bought what I thought I liked, ate out every day, went to the Cinema until I had seen all the movies showing – even the ones I didn’t like.

I did this until no money was left. Which was usually within 3 weeks. By then I would be so scared to check my bank balance. Then I would try to guess how much I thought was in my account by going through what I thought I had spent. The trouble was, I only recalled the big purchases. I couldn’t go out, had no food in the fridge and no money to even catch the bus to my lectures so I had to walk…THAT was when I had no clue about budgeting.

Budgeting makes money work for you, not you work for money.

Respect your money and it will respect you.

Look after the penny’s and the pounds will take care of themselves kind of thing.

Challenge Yourself

Budgeting can be done. If you’ve never tried it or feel it’s not possible on your income, start by looking at your past bank statements. You will be surprised at how much money your statement is spent on non-essential items.

Next, give yourself a challenge to save ‘x’ amount by Christmas or your birthday. You don’t have to put aside much but it’s just the mental discipline of letting go of that money and letting it sit there without spending it.

And when the occasion finally comes around or you meet your goal, you can buy yourself a pair of shoes or that new dress you wanted. And trust me it will make you feel soo good and so proud!

Does your Income make you put off Budgeting and essentially saving?

What other Budgeting Difficulties do you face?

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How to start budgeting on a low income

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