How to budget money on a low income learn to save big

How to Budget Money on a Low Income

Budgeting is one of the most critical personal finance practices. Learning how to create and stick to a budget can help the 64% of Americans living paycheck to paycheck become financially secure.1  

Read on to learn how to budget money on low income. And if you’re curious about more personal finance basics, then check out the rest of our blog to learn more!

How To Budget Money 

A budget is a financial plan that helps you improve your spending. Keeping track of how your money is being spent is critical for managing your money.

How to Create a Budget in 7 Steps

Below are 7 steps to help you create a budget from scratch with tips from a financial expert. 

StepDescriptionTips from a Personal Finance Writer
1. Identify Financial GoalsDetermine what you want to achieve with your budget. This could be paying off debt, saving for a vacation, or building a savings fund.Setting clear financial goals will give your budget a purpose and make it easier to stick to.
2. Calculate Take-Home PayAdd up all your sources of income after taxes. This is the money you actually have to work with each month.Your take-home pay is the foundation of your entire budget. Make sure to include all income sources, not just your salary.
3. List All ExpensesWrite down every expense you have, both fixed and variable. This includes rent, utilities, groceries, etc.Be thorough and honest. If you underestimate your expenses, you’ll derail your budget.
4. Prioritize ExpensesSort your expenses into categories of importance. Fixed expenses like rent and car payments should be at the top.Prioritizing helps you know what to cut if you need more money saved.
5. Allocate FundsDivide your take-home pay among all expenses, starting with the most important.Make sure to allocate funds for savings and financial goals, even if it’s a small amount.
6. Track SpendingKeep an eye on where your money is going. Compare your actual spending to your budget regularly.Tracking helps you identify bad spending habits and adjust your budget accordingly.
7. Review and AdjustAt the end of the month, review your budget. Did you meet your financial goals? If not, adjust for the next month.A budget isn’t set in stone. Life changes, and your budget should too. Regular reviews help you stay on track.

Budgeting Your Money On a Low Income

Understanding Your Take-Home Pay

The first step in creating a budget on a low income is to understand your actual pay. This is the amount you have left after taxes and other deductions. Knowing how much money you get paid after taxes and other deductions sets the foundation for your budget.

Prioritizing Fixed Expenses

Once you know how much you actually receive from recurring income, the next step is to prioritize your fixed expenses. These are the costs that don’t change month-to-month, such as rent, utilities, and car payments. Make sure these are covered first, as they are non-negotiable and must be paid every month.

Listing All Expenses

After covering your fixed expenses, list all your other expenses to understand how you spend money. For example,  include groceries, transportation, and any debt payments. This will give you a complete picture of where your money is going each month.

Creating Room for More Savings

With all your expenses listed, identify areas where you can cut back. Maybe you can cook at home more often instead of eating out, or perhaps you can use public transportation to save on gas. The money you save can be redirected towards your savings goals.

Setting Achievable Financial Goals

It’s crucial to have financial goals when you’re budgeting on a low income. Whether it’s building an emergency fund or saving for a down payment on a house, having a goal will give your budget a purpose and make it easier to stick to.

Tracking and Adjusting

Keep track of your spending habits and compare them to your budget. If you find that you’re consistently overspending in one area, adjust your budget or your spending. Remember, a budget is a living document that should be reviewed and updated regularly.

Easy Ways To Start Saving More Money

Trying to save money every month isn’t easy. However, having an emergency fund to handle unexpected expenses can actually keep you out of financial trouble in the future. In addition, maintaining your savings in a bank account can help you avoid risky loans, debt collection, and financial emergencies.

Open a Savings Account

If you haven’t already, open an account separate from your checking account. This makes it easier to set aside money specifically for saving, reducing the temptation to spend it.

Automate Your Savings

One of the easiest ways to ensure you save money each month is to automate the process. Set up an automatic transfer from your checking to your savings account right after you get paid. Even a small, consistent amount can add up over time.

Set Achievable Goals

Having a specific goal can make saving much more motivating. Whether it’s a vacation, a new car, or financial freedom, knowing what you’re saving for can help you stay committed.

Save Windfalls

Whenever you come into unexpected money—like a tax refund, a gift, or a bonus at work—resist the urge to spend it all. Instead, put a good portion of it into your savings account. This is a quick way to boost your savings without affecting your monthly budget.

Debt Repayment Plans to Get Out Of Debt and Save Money

Unfortunately, if you have a lot of outstanding debt at the moment, it may be challenging to save money. So, the best thing you can do for yourself is to pay down your debts so you can start to save money regularly. But, ultimately, saving money on a low income while you have a lot of debt is very difficult.

If this sounds like your current situation, the wise choice would be to focus on paying off your debts.

The Snowball Method

This method involves listing all your debts from the smallest to the largest amount owed. You focus on paying off the smallest debt first while making minimum payments on the others. Once the smallest debt is paid off, you move on to the next smallest, and so on. The idea is that the small victories keep you motivated to keep paying off your personal debt.

The Avalanche Method

With the debt avalanche method, you list your debts in order of interest rate, starting with the highest. Focus on paying off the debt with the highest interest rate first, as it’s costing you the most money over time. Like the Snowball Method, you continue making minimum payments on your other debts.

Debt Consolidation

This involves taking out a new loan to pay off multiple debts. The goal is to get a lower interest rate on this new loan compared to your existing debts. This can make payments more manageable and save you money in the long run.

Balance Transfer

If you have high-interest credit card debt, consider transferring the balance to a card with a lower interest rate. Many cards offer a 0% introductory rate for a certain period, giving you time to pay down the principal without accumulating more interest.

The 50/20/30 Rule

This budgeting rule allocates 50% of your income to needs, 20% to savings and debt repayment, and 30% to wants. By sticking to this rule, you can systematically allocate money for debt repayment while also covering your other financial responsibilities.

Make Bi-Weekly Payments

Instead of making one monthly payment, consider making bi-weekly payments if you have enough money. This not only speeds up the repayment process but also reduces the amount of interest you’ll pay over the life of the loan.

Ways To Increase Your Low Income

As we’ve mentioned, it can be difficult to budget or save money if you’re currently dealing with a low income. Luckily, there are several strategies to increase your income and get you back on track. However, if money is tight, then read on to learn more about these income-boosting strategies.

  • Start a Side Hustle — A side hustle is any small money-making endeavor that you do while also maintaining your primary job. A side hustle can be anything that makes you a little extra money, such as starting an Etsy shop or a small house cleaning business.
  • Part-Time Jobs — Rising housing costs, credit card bills, and high health insurance premiums are a few reasons people may need a part-time job. A couple of good options for part-time jobs include driving for ride-sharing services like Lyft or delivering food for apps like GrubHub. 
  • Sell Stuff — Selling is an excellent short-term way to save money or pay off your debts. Consider getting rid of old clothes you don’t wear anymore or selling unused electronics or jewelry to cover housing costs, credit card bills, or a car payment. 
  • Going Back to School — Getting a higher education may improve your overall financial situation over time. So, if you’re considering going back to college, trade school, or getting some other type of higher education, it could be a good idea in the long run. Again, this is not a quick solution if you need money fast

How Does a Budget Affect Your Credit?

All of these budgeting and money-saving strategies can lead to better overall financial health. Learning to manage your money will also mean a better credit report and higher credit score.

Below are the 5 factors that affect your credit score:

  • Your overall payment history
  • Your total amount of debt
  • The length of your credit history
  • New credit accounts you open
  • Your credit mix

If you’re doing a good job with budgeting money on a low income, then you’re very likely focused on these other factors as well. Luckily, there are cash advance loans and bad credit loans for borrowers with poor credit.

FAQs About Ways To Live On A Low Income Budget

How do I prioritize my necessary expenses on a low income budget?

When you’re on a tight budget, it’s essential to prioritize your necessary expenses like rent, utilities, and other monthly payments. Make sure these are accounted for first in your budget, as they are non-negotiable and must be paid every month.

How can I improve my spending habits to save money fast?

Start by tracking every penny you spend for a month. This will give you a clear picture of your spending habits. From there, identify areas where you can cut back. Redirect the money you save into a savings account or use it to make extra debt payments.

What resources are available to help me with budgeting?

Your local library is a treasure trove of free resources, including books and workshops on personal finance. You can also follow blogs or read articles from personal finance writers to get tips and tricks for budgeting on a low income.

How can I set realistic savings goals on a tight budget?

Start small. Even saving $5 or $10 a month is a step in the right direction. As you get more comfortable with your budget and your spending habits improve, you can gradually increase your savings goals.

Are there any budgeting apps that can help me manage my low income budget?

Absolutely! There are several budgeting apps designed to help you track your income, fixed expenses, and spending habits. Many of these apps can sync with your checking account to provide real-time updates.

A Note From Creditninja on How to Budget Money on Low Income

Unfortunately, 37.9 million people are currently living in poverty, which makes trying to save money challenging.2 It’s going to take a lot of hard work and dedication to improve your income, pay your bills, and have some cash leftover to save. Luckily, there are plenty of financial strategies to help you make the most of your recurring income with minimal effort. 

CreditNinja offers free financial resources that cover all types of topics. You can learn how to build good credit, how you’re affected by the Military Lending Act, and how to write the amount of a check in words

And if you need a fast financial cushion to help you deal with unforeseen emergencies, apply for a personal loan. CreditNinja offers a convenient online process with competitive rates and flexible repayment plans.  


  1. How Many Americans Are Living Paycheck to Paycheck? │ U.S. News
  2. National Poverty in America Awareness Month: January 2023 │ Census 
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