If you have a low income or no income right now, then it may seem like it is impossible to set a budget. Budgeting is a lot harder when your income is low. However, there are several things that you can do to live within your means.

It takes dedication, hard work, and patience, but you can discover how to properly manage your finances even when you think you are broke. Below we’ll show you how to create a realistic budget and how to free up some cash to meet your monthly obligations. The basic ideas are the same as always, but the breakdown of your spending habits is probably going to shock you, and each individual’s financial situation is going to be unique to them.

Here’s how you budget when you are broke:

Your TOP Priorities –

  • Income – You need money. PERIOD. You need income in order to provide for the priorities listed below. Whether this is from social security, a pension, a part-time job or a full-time job, etc. Money has to be coming in from somewhere. A second job may even be required for the time being.
  • Shelter –The next top priority is keeping a roof over your head. You must pay your mortgage or rent ON TIME or face possible foreclosure and/or eviction. If you can’t afford a mortgage or rent right now, ask family or friends if you can stay with them for a while until you get back on your feet.
  • Food – You must feed yourself and family members BEFORE worrying about that cable bill or cell phone bill. If you don’t eat, you’ll get sick, and then your situation will be dire with medical debt on top of everything else.
  • Utilities – Your utility usage should be at the BARE minimum. Keep those bills as low as possible. If your utilities get shut off, it’s going to be hard to cook, clean, and wash up. Depending on where you live, heat may be vital as well.
  • Transportation – In order to have and KEEP a job, you must have a dependable way to get from point A to point B. This could be a car, riding the bus or subway, carpooling with someone, or even biking to work.
  • Other Important Expenses – AFTER you’ve paid all of the above IF you have any money left over, you need to pay your other obligations. This includes debt that you’ve incurred and any contracts that you’ve signed. Choose very carefully how you distribute any remaining money.

The first step is to create a budget –

You need to know EXACTLY where your money is going each month. How much is coming in and how much is going out. Setting up and sticking to a budget is so IMPORTANT for everyone, no matter what your current financial situation may be, but if you are broke and constantly find yourself short on cash, budgeting is a must. Sticking to a budget can help you avoid damaged credit and other financial disasters such as needing to take out a Payday loan. Even if you are broke, there are steps to take in order to set and maintain an effective budget. If you have more money going out than coming in each month, here’s what you need to do: spend less and/or earn more. It’s really as simple as that!

Then assess your financial situation –

Assessing your financial situation is the first step to budgeting. You may have more money going out than coming in. That is why you will need to look at your expenses and income.

You will need to categorize every expense that you have. Categorizing your expenses will allow you to separate your needs from your wants. You should also organize your debts. When you are looking at your finances, you will need to identify areas where cutbacks can be made.

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For example, if you buy coffee every day, then you can save money by eliminating this habit. If you buy lunch every day, then you can save money by bringing it to work instead of buying it. You can also rent movies instead of going to the movies. Making a few cutbacks will allow you to free up your income.

Request extensions or repayment plans –

If you have trouble making payments, then you can request an extension. In many cases, if it’s the first request for an extension, then it is often granted. Bill collectors understand that things can come up. If you need to request an extension for some of your bills, then this can make it easier for you to pay the most important ones first.

Here is an example of how this can work: let’s say your rent is $700. However, you are $250 short on your rent. Your utilities are $150 per month, and your cell phone is $100 per month. If you get an extension for the utilities and cell phone, then you will have enough money to pay your rent. Here are a few ways to save on your utilities: https://www.peoples-gas.com/my-account/help-pay/

Avoid immediate disasters by requesting payment plans or bill extensions. Free up money for your biggest payment by seeing if you can postpone some of your other bills for the time being. For instance, if you are short on money necessary to pay your mortgage or rent, this should be a top priority. Your living arrangement is the biggest priority and cannot be overlooked.

Contact your cell phone service provider and other utility providers and see if they will allow you to postpone your payment until your next paycheck or even until next month. You can ask for an extension due to financial hardship. It’s worth the call. Apply the money that you would’ve spent on those costs toward your rent or mortgage. If you need help we offer free housing counseling for Pennsylvania residents.

Keep track of spending and make cutbacks –

When setting up a realistic budget, it is important to take a good long look at your spending habits. Start by looking at last month’s spending very closely. Nowadays, this is easy to do thanks to online banking tools such as Online Budget Advisor or Mint.com. Take notes on last month’s spending, and then, start journaling for one whole month. Keep track of everything you spend money on and keep your expenses listed in categories such as food, utilities, entertainment, rent, and so on.

After one month of journaling, take a look at your spending habits. Take a look at your categorized items and start to free up as much extra money as you can by “trimming the fat” and cutting out any and all unnecessary expenses such as your cell phone plan, gym memberships, and magazine subscriptions. Instead of going out for lunch or coffee every day, pack your own lunch and bring it with you. You’ll be surprised at how much money you can save by making this one small change.

Reevaluate other entertainment expenses as well. Going out to the movies or out for dinner and drinks can be very costly. Instead, host game nights at home for your family and friends. Make it a potluck and ask everyone to bring a dish. There are plenty of ways to make cutbacks and save money. You might have to make small sacrifices in the beginning, but the reward (being debt-free) will be so worth it!

Make extra income –

If you are still having trouble budgeting, then you should find ways to increase your income. Many low-income people are able to improve their financial situation by getting another job. If you have been at the same job for a long time, then you should ask your boss for a raise.

There are also ways that you can make money in your spare time. For example, you can babysit or dog-sit. You can also make money by taking surveys, writing articles or driving for a ridesharing company.

If your budget doesn’t balance or you’re barely getting by each month, you may need to work some overtime hours, maybe getting a second job, or possibly finding a new, higher-paying job than the one you have now. Often times there is work that pays more, but the nature of the work is unattractive, like having to work on weekends or odd hours. You may need to find some way to make extra income, even if that means selling things you own or making something and selling your products online or creating an online store.

Tackle your debt if you can –

If you have a lot of debt, then it can be a lot harder for you to set a budget. That is why it is important for you to tackle your debt. There are two methods that you can use to reduce your debt. You can use the debt snowball method, which is where you pay your smallest debt off first. You can also use the debt avalanche method, which is where the debt with the highest interest rate is paid off first.

The interest rate on credit cards can make it hard to pay them off. That is why you should call and request a lower interest. It’s worth a shot! Also, consider free credit counseling and/or a Debt Management Program from a reputable non-profit credit counseling agency.

Don’t make these mistakes –

You can make an abundance of good decisions along the way, but if you make even a few bad decisions, you will set yourself back and make things that much harder on yourself. Some of the worst things to do when you are broke and trying to create a budget and save money include: splurging when you get money, prioritizing convenience, taking on too much debt or making bad decisions about how to handle that debt, living beyond your means, and having no savings at all in case of an emergency. Don’t get caught making these mistakes because it can be really difficult to bounce back from them.

Conclusion –

Setting and sticking to a budget is not always easy and requires responsibility and discipline. For more help on how to manage your budget contact the certified credit counselors at Advantage CCS to help get you on the right track to financial stability.

We are a national non-profit credit counseling agency that’s headquartered in Pittsburgh, and our certified counselors are available via the telephone, in person, or online to help you with your budgeting and debt management concerns.

Author: Lauralynn Mangis
Lauralynn is the Online Marketing Specialist for AdvantageCCS. She is married and has two young daughters. She enjoys writing, reading, hiking, cooking, video games, sewing, and gardening. Lauralynn has a degree in Multimedia Technologies from Pittsburgh Technical College.