How to Budget—and Even Save—When Money is Tight

Why managing your money matters—especially when you're living on a tight budget.

If you’re living on a tight budget, it’s easy to assume that common spending and saving advice won’t work for you. After all, if you’re just out of college and paying off student loans on an entry-level salary, no one can really expect you to put money in savings, right? Or if you’ve got kids and are living on a single adult income, does a planned-out budget fit your needs? Your income already goes to essentials, so is there enough money left over for a spending plan?

It’s true that your monthly budget might need to be bit different than that of someone who just won the lottery. (OK, a lot different.) However, planning where your money should go is still important. The less money available, the more important it is to keep those dollars under control. Want some guidance? Here’s how to budget your money on a low income.

1. First, know your monthly income

Even if it makes you nervous, get clear on how much money is available each month. You may have a net (after-tax) monthly paycheck to start. Add to that any other income sources such as:

  • Money earned from side jobs
  • Alimony and/or child support paid to you
  • Government benefits


The sum of your monthly money sources is what's available to budget. Next, figure out how to prioritize the money you’ve got.

2. Identify the necessities

Start by looking at essential costs—bills that have to be paid to keep you and your family safe, fed and able to get to work and school:

  • Food (groceries are essential but eating out generally isn’t)
  • Shelter (mortgage or rent)
  • Utilities (including water, heat/air conditioning and basic phone service)
  • Frugal transportation (including public transportation costs, gas and tolls)
  • Insurance (rent or home owners and car)


Add up the cost of all of these essentials. Already spending more money than what you bring in (step 1)? You might want to research more ways to trim expenses. For example, consider taking steps to significantly cut grocery costs.

Once you see how much money is left after necessities, go to the next step.

3. Get a handle on debt

Student loans, car payments and credit card payments can feel like essential expenses, too. However, it’s smart to separate them out from other bills. Why? If you’re living on a really tight budget, it may be possible to negotiate changes in these payments.

Depending on your financial situation, you may qualify for repayment programs for federal student loans. These programs might allow you to temporarily stop making loan payments, or reduce your monthly payments.

Having trouble affording other debt repayments? Consider contacting a nonprofit consumer credit counseling agency. Legitimate counselors can help negotiate lower monthly payments or lower interest rates on your debts. The Federal Trade Commission (FTC) and National Foundation for Credit Counseling® (NFCC) offer helpful tips for choosing reputable counselors.

4. Save a starter $1,000 emergency fund

At first, it may seem impossible to put money into savings if your budget is super tight. But here’s why it’s so important: If you’re living on a low income or tight budget, just one unexpected expense—like a visit to an urgent care clinic for a broken arm—could put you over the financial edge.

If you have $1,0001 in a savings account instead, you won’t be tempted to turn to a high-interest payday loan or pile up extra credit card debt. Think of that starter emergency fund as one of your most crucial “bills.” Consider putting every spare dollar toward it, even if it’s just a few extra bucks here and there. Use steps 3 and 5 for guidance.

5. Stick to a spending plan

Consider using a money-tracking app, budgeting software or even a simple spreadsheet. The idea is to spend only what’s in your bank account. If you budget $100 a week for groceries, for instance, don’t hesitate to give unnecessary items back to the cashier—yep, right there at the checkout counter—if you go over your spending limit. Or if you spend more than you planned on gas one month, try trimming some expenses in another spending category.

At least temporarily, you may also need to keep your spending “wants” to a bare minimum. Later, as your financial situation improves, try creating a more balanced budget that includes spending money on fun things, too. Learn more about the 50/20/30 approach to balancing your family’s spending.

6. Take a close look at your take-home pay

You might want to increase your income, decrease expenses or both. To increase your income, talk to your boss about a pay raise, see if your company will pay for extra classes that might qualify you for a better position or make some extra money with a side job.

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Decreasing expenses is tough when you’re already living on a tight budget. If you’ve already cut unnecessary expenses, try focusing on debt. The fewer credit card and other loan payments you have each month, the more money you’ll have left for other things.

One popular method of tackling debt without letting it get overwhelming is the “debt snowball” method. The idea is to put as much money as you can toward your smallest debt while making minimum payments on other debts. From there, you’ll pay off your next smallest debt and so on.

Before you know it, you could be out of debt and looking at hundreds of extra dollars in your bank account every month.

Oh, and about that $1,000 starter emergency fund? After your debts are paid off, consider giving it some extra love. Try to save up a full 3-6 months’ worth of essential expenses. With a fully stocked emergency savings account in your life, things may feel just a little better at the end of every month.


This site is for educational purposes. The material provided on this site is not intended to provide legal, investment, or financial advice or to indicate the availability or suitability of any Capital One product or service to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional.