Low Income Budgeting Help For Individuals

Low Income Budgeting Help for Individuals is an article and strategy for anyone looking for a more controlled system of managing their monthly finances.

Living paycheque to paycheque with debt on your back is a frustrating and seemingly endless cycle. Constantly worrying about your financial health can negatively impact your mental wellbeing, impairing your ability to concentrate, stay upbeat and unwind.

Solid money management is a skill that needs honing through careful planning, tracking and self-discipline. For many people it is something that doesn’t come naturally and takes years of refinement. With this budgeting plan, you can sidestep the costly learning curving and begin your journey to financial stability today.

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A Simple But Effective Budgeting Plan

I devised this strategy to alleviate the stress that accumulated during years of careless spending and borrowing. My goal was to develop an easy method of monitoring and managing my outgoings on a daily basis but with minimal effort.

I found that simply drawing up a rough budget at the beginning of every month wasn't working for me. Often, I’d deviate drastically due to overspending or circumstances that I hadn’t taken into account. This meant that I was constantly revising my original monthly budget, each one becoming more desperate and unconvincing.

By the final week of the month, I was borrowing money from friends to carry me through to payday. Inevitably, my budget for the following month always began with a ‘debts to friends’ column. For my own sanity, things had to change.

After much trail and error, I finally settled on a basic budgeting plan that requires less than one minute of my time to oversee each day, but has freed me from the paycheck to paycheck grind. It has also enabled me to pay off a lot of my long term debt and acquire savings. With this new method of budgeting, I am no longer plagued by niggling worries.

Who can benefit from this strategy?

Although this method can be adapted by anyone, it is particularly suitable to those with average to low incomes. Students, recent graduates, the unemployed, single parents, individuals with moderate levels of debt, spendthrifts lacking self-discipline; all of the aforementioned can gain control of their personal finances by following this monthly low income budgeting plan. Please feel free to adapt and amend it, if needed, to fit your own unique circumstances. My plan is tailored towards a monthly salary but can be easily altered to suit different structures of income.

I've used the dollar ($) symbol throughout this article but this does not mean that the advice within is only applicable to countries using that currency. I hope that this guide will provide budgeting help for everyone on an average to low income who wishes to gain greater control of their finances, regardless of nationality.

Step One: Draw up a spreadsheet to record and track expenditure

Start by creating two charts. One will be used to record your daily outgoings and the other will be used to record solitary payments and events (such as rent/mortgage payments, utility bills, debt repayments, and even social engagements - more on this later). You can build a spreadsheet using Microsoft Excel on your computer or draw it by hand using a pen and a ruler. If you do it by hand, be sure to photocopy the template so that you can continue to use a fresh one each month.

The first chart should include 34 rows and about 7 columns. In case you are unfamiliar with charts, rows run horizontally and columns run vertically. Give names to each of the columns for outgoings that reoccur on a daily basis (groceries, travel, newspapers, coffee, cigarettes etc). The heading in the final column should be left for miscellaneous expenditure. Label each row with 1st, 2nd, 3rd etc to represent the date. Please refer to the picture below for a clearer idea of how your chart should look.

The second chart is used to record solitary or one-off outgoings. You should include at least 20 rows and four columns. The four columns should be assigned the following names:

  1. Payment/Event
  2. $ Est
  3. $ Actual
  4. $ +/-.

Please see an example of chart two below.

Step Two: Finalise your monthly budget plan

On the last day of each month, set aside twenty minutes to plan your expenditure for the forthcoming month. Make yourself a coffee or grab a beer from the fridge and find a quiet spot. Write down on a piece of paper all of the bills, debts, payments, purchases, leisure activities and living necessities that will cost you money in the following month. Indicate whether these expenses are on-going (reoccurring throughout the month), or solitary (one-off). Assign a cost or price to each one. Where the price isn’t fixed, try to estimate how much it will cost. Your list might look something like this.

Daily Expenses

  • Groceries.....................................................$180
  • Travel...........................................................$55
  • Cigarettes.....................................................$60
  • Newspapers..................................................$20
  • Miscellaneous...............................................$75

Solitary Payments

  • Rent/Mortgage.............................................$550
  • Electricity bill.................................................$190
  • Credit card payment.....................................$290
  • Savings account...........................................$100
  • Buy a new summer coat................................$60
  • Medication.....................................................$35
  • Interest on overdraft......................................$10
  • Mum’s birthday present.................................$50
  • Household products......................................$30
  • Meal/drinks with colleagues on Fri 15th.........$35
  • Comedy club visit with friends on Thu 21st....$20

Total: $1760

Step Three: Balance the books

Sometimes you will calculate your predicted monthly expenditure and find that it is higher than your monthly income. If this happens you should revise your original list by devoting less money to certain non-essential events or payments.

You might decide that you can no longer afford to attend the meal with colleagues on Friday 15th or that you will downgrade your budget from $35 to $25 and make trimmings elsewhere too. Clearly, you cannot choose to pay less in rent or in interest on your overdraft but you might consider setting a smaller budget for leisure activities.

Finding the right balance depends entirely on the strength of your financial situation. If you are deep in debt then it would be prudent to divert funds to debt repayment and limit your social activities until you feel confident that your debts are more manageable.

The key to successful low income budgeting is being realistic without scrimping too hard. Setting yourself severe spending targets will only cause demoralization when you don’t meet your goals.

Should you be fortunate enough to calculate a surplus when you subtract your estimated monthly expenditure from your income, add this amount to the category marked miscellaneous (more on this later). For the purposes of this example, let's assume that your entire income for the month is $1760 which exactly matches the budget above.

Step Four: Apply your budget to the charts from Step One.

Take your budgets for reoccurring costs (such as the $180 for food) and write them in the corresponding column headings of chart one (see example below).

Now do the same for chart two. Your solitary expense categories will fill the first column with their corresponding estimated cost in the second column (see example below).

Budgeting Help: Top Tip

The mathematically adept can seek extra budgeting help from their computer software. If you understand wow to do this (sadly, I don't!) try programing your spreadsheet to calculate your cumulative expenditure in relation to your budget for each category. An extra row could be added to the solitary expenses chart to show whether you are up or down on your original estimated costs as the month progresses.

Step five: Record your expenditure in the charts and keep abreast of your progress.

Both charts are now ready to be used to record your expenditure on a day-to-day basis. This might seem extreme but it only takes a few seconds each day to complete and gives you maximum control over your spending habits as well as highlighting any unnecessary expense that can be eliminated.

Chart one is filled out each day. Simply write how much money you spent in the relevant category. By doing this you can easily keep track of your total expenditure against total monthly budget for each category which instils you with confidence that you are living within your framework, and therefore have little to worry about.

Chart two should be filled out on the specific day that the actual payment is made. Use the column marked “$ Actual” to record the amount that was spent, and use the column marked “$-/+” to record the difference between your original estimation and the actual expense when it was paid.

Payments such as the rent are usually fixed and therefore will not generate a positive or negative figure in the “$-/+” column. But you might find that you spent less money during your meal with colleagues than you originally forecast, or perhaps your new summer coat was a little cheaper than you initially estimated. These savings (or overspendings) are reflected in the “$-/+” column and allow you to manage your finances with a certain degree of flexibility without ever having to worry about whether you will have enough money for the remainder of the month.

Every few days, take a quick glance over your figures to reassure yourself that you are on track. Reassess your budget if any unexpected expenses occur. For example, let’s pretend that your electricity bill was $205 instead of $190. This isn’t a disaster. You still have the cushion of the “miscellaneous” fund on your daily expense chart.

You also have the option of trying to balance the books by finding savings on your solitary payments chart. That extra unforeseen $15 on the electricity bill can be counter-balanced by shaving $15 off your budget for the comedy night and meal with colleagues or by purchasing a cheaper summer coat. As you can see, there are various ways to remain solvent for the month. You just require a little versatility when evaluating your budget as the month progresses.

Final Step: Evaluate your expenditure at the end of the month.

On the last day of each month, glance over your completed chart and give yourself an honest appraisal. This will make it easier to estimate your following month’s expenditure and will also highlight any areas that need improvement. Perhaps you can save money in one area and permit yourself more luxuries in another. How you manage your budget is up to you.

Let’s take a look at how your charts might look at the end of the month based on the above budgets.

As you can see from the daily expenses spreadsheet (chart one), the original budgets were adhered to. There were very minor surpluses in the food, travel and newspaper sections and a fifty cent deficit in the cigarettes section.

The budget for miscellaneous expenses was used on four occasions for a total cost of $40.74 against a budget of $75, therefore generating a total surplus of $39.48 for all daily costs that month. That’s great news! If you also come in under budget for solitary payments, then you will be carrying money forward into the following month that can be put towards debt repayments or paid into your savings account.

Looking at the solitary payments spreadsheet (chart two), we can see that a surplus was generated from the electricity bill, medication, interest on overdraft, mum’s birthday present, household products and meal with colleagues. Even when we take into account that you slightly exceeded your budget on your new coat and comedy club visit, there was an overall surplus of $6.40 against the solitary payment budget for that month. Again, this is great news. Combined with the money saved on daily expenses, you will now be carrying $45.88 over to the following month.

Overall this was a very well-managed month. You have paid all bills, reduced your credit card debt by $290, increased the balance in your savings account by $100 and still had $45.88 left over.

By now you should be feeling more confident about your personal finances. The anxiety of uncertainty has evaporated because you were in total control throughout the month and a quick glance at your two spreadsheets confirms this. There were no nasty surprises when you checked your bank balance and you never had to worry about having enough money to make it till payday because you knew your exact financial position at any given time.

How long should I use this extreme budgeting plan for?

Again, this is entirely up to you. I designed this strategy as temporary method of bringing my finances under control, paying off debt and accumulating savings. Gradually you should see a strengthening of all financial aspects of your life which will bring confidence and peace of mind. Eventually you can discard the daily expenditure chart and develop another budgeting plan more in tune with your newfound financial maturity. My advice would be to try my suggested method for a minimum of six months.

What is miscellaneous expenditure?

Miscellaneous expenditure is whatever you want it to be. It could act as a safety net for unforeseen expenses or be used as a personal allowance for treating yourself on spontaneous moments such as impromptu drinks with friends.

Whenever you encounter an outgoing in your budgeting plan that you didn’t originally plan for, record this in the miscellaneous column of your daily expenses chart. Perhaps one day you’ll be short changed in a shop or feel compelled to give $10 to a homeless person. As there is nowhere else on either of your two charts to record this, it should go in the miscellaneous column.

Assuming that you spend your allotted budget in all other categories, a surplus in your miscellaneous budget at the end of the month means that you spent less money than you earned. This is money that can be carried forward to the following month and shows that you are already beginning to break free from the shackles of a paycheck to paycheck existence.

Low income budgeting help for the undisciplined
Low income budgeting help for the undisciplined

Low income budgeting help for the undisciplined: Some handy tips

  1. Wherever possible, make all payments such as rent, bills, credit cards and other debts on the first day of each month to remove the temptation of spending the money on other things.
  2. Whenever you have a social engagement, withdraw your budget for that event from a ATM then leave your cash cards at home. Again, the temptation to overspend is removed.
  3. Learn to turn down invites from friends to costly social engagements that you can’t afford. Think of it as “making a sacrifice today so you won’t have to tomorrow”, or “making a sacrifice during winter so you won’t have to in summer”. Remember: You are not becoming a party-pooper. You are partying less today in order to party harder tomorrow.
  4. Some bank accounts have transaction guarantee thresholds that permit you to spend more than your agreed overdraft limit. They are hideously expensive and should be avoided. Contact your bank and ask them to remove this facility.
  5. Do you use a credit card every month? Usually a standard debit card is equally, if not more, flexible than a credit card and is cheaper to use. Cut your credit card to shreds with a pair of scissors and concentrate on paying off the outstanding balance.
  6. Stop carrying money in your pocket or wallet and remove the temptation to spend frivolously.
  7. If you are teetering on the precipice of a financial abyss, try undergoing a 'hibernation month' to buy yourself some breathing space. A ‘hibernation month’ is an extreme, ascetic, thirty days of living like a monk and cutting every single cent of unnecessary expenditure from your budget. Buy cheaper foods, cycle or walk to work, put your social life on hold, stop buying newspapers and magazines, give up alcohol…if you can introduce some of these austerity measures to your lifestyle for just one month, you could save the several hundred dollars needed to get your head back above the water. It won’t be easy but it is good for nurturing self-discipline. I try to do this every February (the shortest month at the heart of deepest winter) and it sets me up nicely for the year ahead.

Did you find Low Income Budgeting Help for Individuals useful? If you have any comments or questions, please leave them in the section below. Maybe you have your own unique budgeting plan or strategy that you'd like to share.

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Comments 14 comments

create a page profile image

create a page 5 years ago from Maryland, USA

This is very good advice Doc Wordinger. It is always a good idea to live off a budget and you have adequately given details as to how this can be done successfully. Thank you.


Doc Wordinger profile image

Doc Wordinger 5 years ago from Manchester, UK Author

Hey create a page, thanks for the comment and feedback. It took me a lot of time to create this hub and your words are greatly appreciated.


crystolite profile image

crystolite 5 years ago from Houston TX

Informative and educating hubs,thanks for sharing this piece of creative article.


Doc Wordinger profile image

Doc Wordinger 5 years ago from Manchester, UK Author

Thanks for your comment Crystolite


Sun-Girl profile image

Sun-Girl 5 years ago from Nigeria

Educative and well organized piece of article which is well shared and properly researched.


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Doc Wordinger 5 years ago from Manchester, UK Author

Thanks Sun-Girl. I appreciate your comment.


Coolmon2009 profile image

Coolmon2009 5 years ago from Texas, USA

Thanks for sharing this informative article. Good information.


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Doc Wordinger 5 years ago from Manchester, UK Author

Thanks for your comments Coolmon.


Hareiana 4 years ago

Excellent tips indeed, I am using Out Of The Dark (OOTD) free online budgeting to implement all these tips and more, because it's completely anonymous and safe to use with all the online benefits. I find that with a good budgeting and money management tool, the budgeting chore becomes easier to take on and stick with, which is the only way to benefit from budgeting.


Doc Wordinger profile image

Doc Wordinger 4 years ago from Manchester, UK Author

Thanks for the comment and recommendation Hareiana.


Joy I-Shine Grey 3 years ago

Excellent. Very detailed.


CJMCAREY profile image

CJMCAREY 2 years ago from Milford, New Hampshire

Thank you for sharing. It is very helpful for those of us who are struggling.


capebretonflynn profile image

capebretonflynn 2 years ago from Owen Sound, Ontario

Love your article. Covers the basics and then you smacked me with the 'austerity month' concept for February! Great idea.


Doc Wordinger profile image

Doc Wordinger 2 years ago from Manchester, UK Author

Thanks capebretonflynn. Another good month to try the 'hibernation/austerity month' is November (although that might be tricky for Americans with Thanksgiving dinner to pay for). It's always a good idea to save a few dollars when Christmas is approaching.

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