How to Budget And Save on A Small Income

We all know that a budget is a plan for our money. However, it can get stressful and depressing when our income is on the lower end and it just seems that there is hardly enough to go around.

When the going gets tough, it’s time to get creative. And below are 16 ways we can make our budget work on a small income.

1. Lower Your Housing Costs

Housing is one of the biggest expenses in our life. Consider moving to an area with a lower cost of living, moving to a smaller house or getting a room mate.

Most of the time, you can find more affordable housing in the suburbs or a less popular school district. In our experience, we lowered our housing costs by 30% by moving 5 blocks away into a less popular school district that turned out to be just as good, if not better.

A smaller house also have the added advantage of need less heating and cooling, smaller area to clean up and less space to buy and hoard stuff.

2. Spend Less Eating out

Eating out is expensive and adds up really fast. Even a meal at Macdonald’s for a family of 5 can easily come up to about $30. If you cook at home, that $30 can be stretched into 3 to 5 meals.

For example, assume a pound of ground beef cost $4, $0.50 for a can of soda, $2 for bag of frozen fries, $2 for hamburger buns from the grocery store. The total cost for making a similar meal at home comes up to about $10.

A lot of times we eat out out of convenience and when we just don’t feel like cooking. So it helps if you can set up a meal plan so you always know ahead of time what you will be making for each meal and you will be less tempted to eat out or order food delivery.

3. Stick to Your Grocery Budget

It is so easy to overspend on your grocery budget. We are already in a spending mode when we hit the store, psychologically we are geared up to spend.

Add in the clever marketing and store layout strategies that grocery stores employ to entice us to spend more, unless you have a will of steel or a firm plan, it is almost inevitable to spend more than we planned to.

To overcome all these temptation, it is best to shop your refrigerator or pantry before you hit the store. This way, you can create a list of what you need and avoid buying more of what you already have.

Shopping your fridge and pantry also forces up to finish up things that might expire or go bad soon. This gives us the dual benefit of saving money and reducing food waste.

4. Lower Utilities Bills

Other than food and housing, paying for water, heating and cooling are the inevitable costs of our new modern lives. Given that they are recurrent and never-ending, finding ways to lower our utilities bills can help save thousands over a lifetime.

Here are some ideas:

  1. Turn off the lights when you leave the room.
  2. Use energy saving LED lightbulbs instead of incandescent lights.
  3. Use less water by taking showers instead of baths.
  4. Wear more layers and turn down the heat in winter.
  5. Replace your air filter regularly so your furnace can operate more efficiently.
  6. Insulate your home as best as you can.

Doing the above not only help us to save money but also helps more be more environmentally conscious and waste less energy and resources.

5. Pay Off Your Credit Card Debt

If you have any credit card debts, pay them off as soon as you can to stop wasting money on the interest payments.

Let’s assume you have a credit card debt of $1000 with a 24.99%APR. Interest on credit card are compounded daily, so at the end of 30 days, you would have accumulated $20.54 in interest.

If you only make the minimum payment of $35 each month, only $14.25 is going towards the principal that you owe. $20.54 of the $35 is going straight to the bank’s pocket.

How about keeping that $20 for yourself? You can do that once you get rid of all your credit card debts.

6. Enjoy Frugal Entertainment

There are many ways to enjoy leisure activities for less.

Instead of going to the movies, consider a streaming service or renting a disc from Redbox. Most streaming service cost about $4.99 for a movie while it costs just $1.75 to rent a movie from Redbox.

Compare that to $6 to $10 per ticket for a show at the theatre, for a family of 5, you could save almost $50. And, let’s not forget the money we will save on the overpriced popcorn and soda.

The only downside is that you have to wait a couple of weeks or months before the latest release is available on the streaming service or Redbox.

Instead of hitting the mall to go shopping, consider going outdoors to take a walk or ride a bike. It’s good for your health and your wallet.

Another of our favorite entertainment is watching our kids play sports. Yes, even though we have to pay for the participation, the money spent is well-spent for the kids to learn new skills, learn team work, learn discipline and hard work. Watching them play is a free bonus on top of that.

7. Review Your Gym Membership

I applaud your intention to exercise and stay healthy. But there are cheaper and often free alternatives to dropping a few hundred dollars on a gym membership.

First, if you have a gym membership, review your actual usage of the gym, are you still using it regularly? Second, can you find a cheaper alternative at your local community recreation center or YMCA?

Can you go for a run in the parks or around the neighborhood? How about getting some DVDs so you can do Yoga in the comfort of your home? You can even learn and practice yoga for free on YouTube.

8. Eliminate Unnecessary Fees

Does your bank charge you a monthly maintenance fee? If so, then it’s to ditch them and look for another one that provides no-fee, no minimum balance checking accounts. There are many of them out there and some even gives you a sign-up bonus for opening up a new account with them.

We recently opened a new no-fee, no minimum balance checking account with KeyBank and even received a $100 bonus for doing that. Discover Bank also offers a no-fee, no minimum checking account that gives you 1% cash back on your debit card purchases.

Ditto for credit cards, unless they are travel reward cards, there is no reason to be paying an annual fee for a credit card. There are many wonderful cash back rewards credit cards that charges $0 in annual fee. Some of them includes the Citi Double Cash that offers 2% cash back and the Chase Freedom Unlimited that offers 1.5% cash back on all your purchases.

9. Shop Craigslist Before you Buy New Stuff

Craigslist is a wonderful place to get gently used item for a fraction of their retail price. We got our oak dining set from Craigslist for $150. It is still in great shape after 6 years.

We got an air conditioner from the same seller on Craigslist for $50. They were moving out of the state and needed to get rid of it. We ended up selling the same AC for $90 because our new rental came with central air.

We have also gotten second hand bikes that looks almost brand new for almost half the retail price. It is a great way to save money and recycle and reuse things that other people no longer have use for.

10. Use Your Library

We love books and used to be a collector of books until we got tired of moving heavy boxes of books every time we have to move.

Nowadays, before I buy a book (new or used), I would first check if the book is available at the local library. Most libraries are part of a larger network of libraries, so even if a book is not available at your local library, they can help you borrow it from another library.

Beyond books, library also offer loans of DVDs, audio CDs, e-books and audiobooks.

11. You Do Not Need The Latest Phone

The smartphone is one of the greatest invention of the decade. Now we can search for information wherever we are. Take a picture without lugging a camera and watch endless YouTube videos on it.

But there is no reason to get a new one just because it is availabe. In fact, with care and proper use, most phones should last you at least two to three years.

12. Lower Your Car Costs

New cars lose as much as 20% of their value within the first year and up to 60% of their value by the fifth year. Therefore, consider buying a gently used car and save yourself from losing money on the depreciation.

Furthermore, consider carefully if you really need a bigger car, a van or an SUV. Not only are they more expensive than sedans, they are tend to be gas guzzlers so you can expect to spend a lot more on gas.

13. Refinance Your Home

If you are a homeowner, given the all time low mortgage rates, consider refinancing your mortgage if the difference between the new rate and your current rate is at least 1%.

On a $200,000 loan, you could save as much as $43,000 on a 30 year mortgage if you reduce your interest rate from 4% to 3%. Remember to shop around for quotes to compare the costs of refinancing.

14. Use a Cashback Credit Card

If you are a responsible credit card user, use a cash back reward credit card to earn some “free money”. Remember, the goal here is to only use the credit card to pay for things that you need and the cash back rewards are just bonuses for being a responsible credit card user.

If you spend $800 a month on groceries, that adds up $9,600 a year. If you paid for that with the Citi Double Cash credit card and paid off everything in full each month, you would get back 2% of what you spend, this comes up to $192 a year.

15. Contribute to your 401K up to your Employer’s Match

There is nothing better than free money and any employer’s match is literally free money. Therefore, you should try to contribute at least up to the match to get the maximum amount of free money available.

From there, you can watch your money grow and compound tax free in the 401K account.

16. Start a Side Hustle

Sometimes there is only so much you can save and cut. Therefore one of the best way to save more is to find ways to increase your income.

You can be a shopper for Instacart, or do delivery for UberEats and GrubHub. You can freelance as a virtual assistant, writer or web designer. You can sell T-shirts online, or arbitrage things on Craigslist or set up a blog.

There are many other options and the key is finding one that fits into you current schedule and interest.


With a little hard work and careful planning, saving money on a small income is possible. The key is to prioritize what is important to you and ruthlessly cut out things that are not important to you.

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