How to Budget on a Small Income

How to budget on a small income - picture of girl with magnifying glass

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This article was written by our guest Francesca with From Pennies to Pounds. All thoughts expressed are solely those of the author. Enjoy!

When you’re starting out with making a budget for the first time, it can be pretty overwhelming.

It’s even more so when you have a small income to budget all of the things you need to pay for.

I know how you feel – I’ve been there. I’ve been a single mom with a part-time job, wondering how I was going to pay all of the bills and have money left over.

Want to know my secret?

A realistic, positive budget that I can use with a small income to make sure all bills are paid and my savings goals are being met.

You can do it, too! I’m happy to guide you through the best way to create a successful budget – even if you have a small income.

Not only that, but if you are trying to pay off debt on a small income, this will help set you up for success.

Figure Out Why You Want to Budget

It may seem strange to start off with this, but when it comes to money, our mindset is much more powerful than we realize.

After all, the way we spend our money is often based on the way we feel at that moment, rather than math.

When we are on a financial journey, there are things that will pop up and get in our way. It may be tough, and having something strong that motivates you will mean more than you realize.

Reasons for wanting to budget could be:

  • The feeling of security
  • Being able to save for goals like a house or vacation
  • Having a plan to guide you through where your money should be going
  • Paying off debt

The problem is, without a budget, our money can disappear pretty easily and you’re left wondering where on earth it all went!

For me personally, budgeting enabled me to pay my bills as a single mom, get out of debt, save up for some important goals, buy a house, start my own business, and spend my money on the things that make me happy.

Track Your Spending

I realize that this doesn’t sound like the most thrilling thing to spend your spare time on!

Without this though, it’s likely your budget won’t be very realistic, which is a big no-no. In case you’re not sure what I mean – tracking your spending is essentially writing down all of the things that you are spending money on.

Yep, all of it.

If this is filling you with a bit of fear, you know that you 100% need to do this. There are 2 main reasons for tracking your spending, which are:

To be able to create a realistic budget – You are probably going to see me mention a realistic budget a few times, and for good reason. We (myself included) like to think things like “oh…I think I spend about $400 on groceries a month.” And then after we add it all up, it’s actually around $800. This is going to set you up to fail from the start! As much as you may want to reduce your expenses, knowing what the numbers are now will help you to create a budget, which you can then adjust over time.

To keep yourself accountable – I don’t know about you, but I don’t want to write down all of my expenses! It means I have to look at what I am spending and why. This is perfect for money management of course, and why it’s important to do. Once you see all of your spending written out in black and white, it’s kind of hard to argue with it.

It doesn’t need to be complicated – it can be as simple as keeping all of your receipts and writing them down in a notebook each day. I recommend doing it every day so that you get into the habit.

Something that is really handy is to pay with cash – a cash envelope budget system is a great place to start out for beginners.

Look at Your Income

When you have a small income, it can be pretty scary to be in charge of the family expenses. Things cost a lot of money these days! And when you have little ones, it gets even more so – especially if you are doing it on your own.

While we are talking about budgeting on a small income, I do want to suggest looking at extra ways of bringing in some more cash too.

I realize you may not have a lot of time, but there are side gigs you can start off doing that don’t cut into your time too much and can help out a lot.

Make a Plan for Your Money

Once you know what your income and expenses are, you can start to make a plan.

Ideally you should be able to do: Income – Expenses = Money for your goals

We want to get to the place where the income is higher and the expenses are lower, as that means more money to put toward your goals.

The problem with not budgeting, is that the money will go toward bills and then seem to disappear, because you don’t have a plan for it.

When you have money left over after bills, it’s important to decide what you want to do with the extra money – with the idea of ending up with a zero at the end.

Don’t panic about the zero sum though, as we will be making sure that everything is covered. I do recommend leaving a small buffer in your account just in case, though.

Ideas of things you can do with your money for your goals:

  • Debt payments
  • Saving for a house deposit
  • Saving for a vacation
  • Fun/entertainment money like date nights, going to the movies, etc.

It can be whatever you want it to be, and split however you feel would work best for you. For example, if you had $100 left after bills, you may want to have:

  • $50 fun money
  • $25 to debt
  • $25 to savings

Or you could do something like:

  • $150 to debt
  • $10 fun money
  • $40 savings

It’s completely up to you and what you are comfortable with. Just make sure you pop all of it in your budget and you are good to go.

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Be Prepared for Emergencies

If you are operating on a small income, it can be incredibly stressful when unexpected expenses crop up. After all, how are you going to magic money out of thin air?

It’s more important than ever to make sure you have some money you can access in emergencies.

There are things that happen beyond our control such as medical expenses, the car breaking down, washing machine blowing up, etc.

Luckily, although we can’t plan for these specifically, we can still make sure there is money put to the side for them.

The last thing you want to worry about in an emergency is how you are going to pay for it.

Decrease Expenses

Now that you’ve managed to put your budget template together (income, expenses, and money goals), it’s time to look at how you can reduce your expenses.

The lower your expenses, the more money you will have to put toward your goals.

As you have been tracking your expenses, you will be able to see how much money you are spending.

Start with your fixed expenses (housing, loan payments, insurance, etc.), as they will likely get you the most in savings, as they are probably a high amount.

Contact companies to see if they can reduce your bills. Get quotes from other companies or try a service like Trim to see if you can get a better deal. It may sound like a pain, but it will get you some quick savings.

Are there any larger cutbacks you can make such as on housing or transport? Can you downsize either of them?

In terms of your variable expenses, this is where you can save a lot of money based on your habits and planning. A good example of this is grocery shopping. We all do this differently and spend vastly different amounts. If you want to save money on your grocery shopping, there are a bunch of ways you can do this and still get to eat great food.

Meal Plan

This is hands down one of the best things you can do to save yourself some money.

We all tend to eat the same kind of meals on rotation – which makes it easy to create a master list of meal ideas that you can pick from.

How often do you go grocery shopping? I personally go once a week – I used to go once a fortnight when it was just my daughter and I, but I have to go more now that we live with my partner, too.

It’s important to figure out how often you will be going, as you will want to avoid as many trips to the shops as possible – because this avoids temptation!

Once you’ve got your master list of meals that you normally eat and how often you want to shop, it’s time to create your meal plan.

It’s as simple as writing out the meals for that shopping period (e.g. a weekly plan), and then writing a list of ingredients you’ll need. Don’t forget snacks, too!

Have a look through your cupboards to see if you have any of the ingredients already so that you don’t double-up.


We all like to have fun, and you can definitely still include fun in your budget. But if you are trying to cut back, this could be a good area to try first. There are a bunch of free or cheap activities you can do, such as:

  • Going to the beach
  • Going for a hike or walk
  • Try a free museum or nature center
  • Check your local tourism agency for free ideas
  • Backyard BBQ

Insource What You Outsource

If you want to outsource things, that’s completely fine – but we are looking at potential ways for you to cut back. A good place to start is to look at what you are currently paying other people to do that you could do yourself instead.

Examples could be:

  • Car wash
  • Cleaning your house
  • Mowing or yard work

Be Gentle with Yourself

We can all be guilty of feeling bad when we mess up the budget. We aren’t perfect – mistakes are going to happen.

It’s easy to slip back into old habits, but it’s worth remembering that you are doing this to make sure your hard-earned money goes toward supporting your family as well as your dreams.

Make a plan for what you are going to do if something derails your budget or temptation comes your way. It doesn’t mean you can’t ever break the rules, but understand it’s all part of a journey, and figuring out what is important to you.

Do you budget on a small income? How did you find what works best for you?


Francesca runs From Pennies to Pounds which helps young women take control of their money through budgeting, and shares ways of earning extra money that can be done from home around the kids, even with little spare time. How to Budget on a Small Income_picture of girl with magnifying glass

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