Establishing and sticking to a budget on a lower income seems overwhelming at first, especially if your dollars are already being stretched. If you’re not sure how to get started, we can help. First, take a look at your monthly expenses. This includes your mortgage, rent, insurance payments, utilities and vehicles all the way down to subscriptions and streaming services. Next, prioritize necessities and eliminate unnecessary spending.
Don’t wait to figure out your smaller-income budget - it’s important to get started figuring out your budget as soon as your income is impacted. Even small changes you make in your spending each day can help you stay in control of your finances. Our tips will help you adjust your new monthly budget and find extra money that can go directly towards your essential bills.
Steps to Consider when Budgeting on a Lower Income
1. Eliminate excess spending.
Look at all bills closely and separate household wants from needs, eliminate the wants and prioritize the rest. Remember, this situation is temporary, but cutting out all wants in the short term will help stretch your budget in the long term. Shut off auto-pay and cancel or reduce subscriptions like unused fitness memberships, magazine or newspaper deliveries, and mobile, streaming or cable services. Reducing cable costs and cell phone plans with your mobile and network providers will help reduce these monthly bills.
2. Pay essential bills first.
Laying out a budget on a lower income starts with the essentials. Essential bills include mortgage or rent payment, insurance, transportation and food. These bills are high priority and the monthly payments should be kept current.
3. Be proactive and engage creditors.
Being proactive goes a long way in managing a budget on a lower income. Don’t wait until you’re behind on payments to ask for assistance. Many lenders, banks, and landlords will work with you to provide relief options including temporary payment suspension and reduced fees or interest. Most credit card issuers and insurance companies have flexible options so you can choose your own billing date, which can help you budget on a lower income throughout the month.
4. Continue to pay credit card minimums.
You may have been tackling your high-interest credit card debt before your income was impacted. Paying more than the minimum due each month is a great financial tactic for the long term. In the short term, any extra cash on hand should go to essential bills. Continuing to pay the minimum due will keep your account current and your credit score intact.
5. Shop with a list and stick to it.
To start budgeting for food, assess all items in your pantry and freezer and make a list of only items that need to be replenished. When you’re shopping, refer to your list and don’t deviate. Only buy what you and your family need. Consider purchasing the generic brand of the same items, which can save you big time depending on the store and item.
6. Time to DIY.
There’s no time like the present to learn something new. Do-it-yourself projects not only eliminate the cost of paying someone, but also expand your skill set. Learn how to do your own landscaping, wash and change the oil in your car, and finally, fix that loose brick in your yard.
7. Reduce the urge to dip into your retirement account.
Your retirement account is a long-term investment for the future that continues to gain value over time and shouldn’t be used until retirement age. It’s not easy to resist the urge to use money set aside for the future, when you need it now. Using long-term capital to fulfill short-term needs may impact your retirement goals. If you must use the funds, meet with a trusted Jovia Financial professional to discuss penalties, fees, repayment options, and tax consequences for withdrawing some or all of the money to ensure the benefit outweighs the risk.
8. Turn your unwanted items into cash.
Your garage, attic and closets can be an untapped source of extra cash. Clean, sort and organize items you no longer want, use, need, or even knew you had. Many free apps today make it easy to sell your lightly used apparel, sporting equipment, electronics, home goods and more. Simply take a photo of the item, write a description, set a price and wait for it to be sold. Then ship to buyer and await your profits! Donate unsellable items to not-for-profit organizations.
9. Seek supplemental income.
While some individuals wait for a job in their industry, others seek new opportunities. This could be the right time to follow your passion and change your career path. You may realize that what started as a temporary job, leads you to your new profession.
Stay Positive; You Can Budget!
Many people who have experienced a disruption in their income have become stronger in the long run. They even describe leading a more purposeful, fulfilling life doing what they love. Take it one day at a time and remember, this lower-income budget is temporary.
Set your budget, take a minute to regroup, focus on what’s most important in life, then get out there and start a new chapter.