How to Live On a Tight Budget

Co-authored by Trent Larsen, CFP® and Amy Bobinger

Last Updated: May 6, 2021 References Approved

Managing your money is hard enough for anyone, but when you're on a tight budget, it can seem nearly impossible. While it's certainly not easy to stretch a dollar, there are things you can do that can help you feel more in control of your wallet. For starters, keep yourself organized by planning out and sticking to a budget every month. Then, look for ways to trim a little extra here and there—you'll be surprised how quickly a few dollars can start to add up!

Method 1

Method 1 of 3:

Creating a Budget

1
Figure out your total income for a month. Before you can decide how to divide up your budget, you'll have to know exactly how much money you'll have available. Add up your income from any different sources, including your primary job, and side hustles, financial aid from school, or monetary help you get from your family or others.^{[1]
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- Since most bills are due once a month, it's usually easiest to plan a monthly budget, regardless of how often you get paid. However, if you'd prefer, you can make your budget for any time frame—like a weekly or annual budget.
- It's okay to estimate how much you'll earn, especially if you don't get regular paychecks—like if you're a gig or seasonal worker. If you expect to earn about the same as you did last year, look at your last tax return to see what your income was for that year. Then, divide that amount by 12 to estimate your monthly income.
2
Calculate your average expenses for a month. Your expenses include everything that you spend money on. These include fixed expenses, which are the same every month, like your rent or mortgage, car payment, insurance, and utilities, as well as expenses that vary monthly, like your groceries and entertainment money.^{[2]
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- To get a good idea of what you're spending, read over your bank and credit card statements for the past several months. If you don't have these available or you mostly use cash for your purchases, try writing down everything you spend for about a month, then use that to build your budget.
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3
Subtract your expenses from your income to see your starting budget. The best way to ensure you'll actually stick to a budget is to build it around the way you already spend your money. If you subtract your expenses from your income and you get exactly 0, your budget is already balanced, meaning you don't spend more or less than you earn.^{[3]
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- Ideally, you'll get a positive number, meaning you spend less than you make. In that case, you don't need to make any changes to your budget unless you want to increase your savings or add in a new expense.
- If you get a negative number, you're spending more than you earn each month, and you'll have to find some way to cut back on your expenses.
4
Look for areas you can cut back if there's not enough left over. Sometimes, you don't realize how much money you're spending on things until you see it written out. Go over your expenses and see if there's anything that you're spending a lot of money on. Then, think about whether that spending matches your priorities. If it doesn't, it may be an area where you can save some money each month.^{[4]
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- For instance, when you add everything up, you might be surprised to see how much money you're spending on snacks and sodas on your way home from work each day. That might be something you can easily cut out, and you can use that money for something you really need!
- Remember, you'll probably do better at sticking to your budget if it's realistic, so leave a little money to treat yourself occasionally. You don't have to stop going to new restaurants or buying books if you really love it—just be deliberate with the money you spend doing it so you don't overspend.^{[5]
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- You don't have to cut out all of your extra spending, but you do need to understand where your money is going. That way, you'll know whether you're spending money on the things you really prioritize, and you'll be less likely to overspend.^{[6]
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  Expert Source
  
  Trent Larsen, CFP®
  Certified Financial Planner
  Expert Interview. 22 July 2020.}
5
Save some of your leftover money each month. It can seem really hard to put extra money aside when you're on a tight budget. However, it's essential to have a savings fund, especially if you wouldn't be able to financially cover an emergency. It's a good idea to have 3-6 months' worth of expenses in your emergency savings, but it's okay if you can't save that all at once. Even if you start out only saving $5 or $10 a month, it will help to have that extra cash on hand in case you run into something like an injury, unexpected expense, or loss of wages.^{[7]
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Expert Source

Trent Larsen, CFP®
Certified Financial Planner
Expert Interview. 22 July 2020.}.^{[8]
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- Set a savings goal for yourself and stick to it, like saving $10 out of your paycheck every week. It can help if you automatically deduct some of your savings from each paycheck. You won't miss the extra money as much since you'll never actually see it.
- Keep your savings in a separate account from your bill and spending money so you don't accidentally use it.^{[9]
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- Once you have your emergency savings built, you can set new savings goals, like taking a vacation or buying a car.

Method 2

Method 2 of 3:

Practicing Good Money Habits

1
Keep a calendar to help you pay all your bills on time. If you accidentally forget that a bill is due, you can end up paying a lot extra in late fees and penalties. To avoid that, use a calendar to track the due date of each of your bills. Check it frequently, and mark off each bill when it's paid. To help you plan your budget for the next month, write down the amount of each bill in your calendar as you pay it.^{[10]
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Trustworthy Source
US Consumer Financial Protection Bureau
U.S. government agency for protecting consumers in the financial sector
Go to source}
- Find the calendar system that works for you! For instance, if you're on your phone a lot, you might prefer to use a calendar or bill tracking app. If you prefer a physical calendar, try hanging it somewhere you'll see it often, like on your fridge or near your desk.
- Setting up automatic payments can also help you avoid missing a due date. However, you may still want to track your bills in a calendar so you always know what's about to come out of your account. Also, be sure to check your bank account online to verify that the payment went through.
- Making late payments can also have a negative impact on your credit score. This can cost you even more money in the long run, because you may have to pay higher interest on things like a car loan or mortgage.
2
Avoid using credit cards unless you can pay them right off. When you're on a tight budget, every dollar counts, and you don't want to waste money each month on interest charges. Only buy something if you can afford to pay cash for it. If you do use a credit card, pay off the entire balance at the end of the month.^{[11]
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- If you have credit cards, it's easy to use them for impulsive purchases that don't fit into your budget. Unfortunately, this can end up getting you deep into debt. If you have trouble controlling your spending, it's probably best not to have credit cards at all. Instead, use a debit card for things like online shopping.
3
Conserve power and water in your home to save on utilities. Your utility bills likely make up a large portion of your monthly budget, so finding ways to cut down on those can make a big difference. It might take some time to save up for brand-new, energy-efficient appliances, but there are still plenty of little things that can help you save throughout the year, like:
- Turning the heater down a few degrees in the winter, or using the air conditioner less in the summer.^{[12]
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- Keeping your curtains and blinds closed to block out the sunlight during the summer to save on air conditioning costs.
- Checking your insulation and weather stripping and repairing or replacing it if necessary.
- Installing low-flow shower heads to save on your water bill.
- Lowering the temperature on your water heater to 120 °F (49 °C).
- Showering on a timer to limit your water consumption.
4
Comparison shop for everything. Thanks to the internet, it's never been easier to compare the prices of various goods and services before you buy them. Make the most of your budget by shopping around for the best deal for everything from clothes and shoes to cell phones and car insurance.^{[13]
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- In addition, you can use the internet to keep an eye out for sales and coupons on things you're already planning to buy. However, try to avoid the temptation to buy things just because they're on sale—if you do that, you're not actually saving anything!
5
Plan out your meals a week at a time. It's almost always more cost-efficient to cook at home, especially if you plan out your menu in advance. Each week, look at the grocery ads in your local paper or online to find what's on sale. Then, plan out the meals that you and your family will eat for the entire week. If you stick to your list, it should help you avoid overspending when you shop.^{[14]
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- Try to use the same ingredients in more than one meal. For instance, if you buy a roast and a large bag of potatoes, you could have the roast with mashed potatoes and gravy for dinner one night. Then, you could serve the leftover roast on sandwiches the next day for lunch and use the rest of the potatoes for fries with dinner another night.
- Proteins and veggies can be expensive. Stretch them further by including inexpensive, filling foods like oatmeal, whole grain pasta, potatoes, brown rice, and beans with each meal.
- It's often cheaper to buy groceries in bulk, but not always—calculate the price per item (or price by volume) to see if the larger option is actually more cost-effective. Also, only buy something in bulk if you're sure you'll use it all before it expires.
6
Shop secondhand when you can. You can save a lot of money by buying pre-owned clothes, furniture, household items, and even vehicles. Before you pay retail for something you want, check out local thrift stores, social media marketplaces, and online resale sites to see if someone else has one they don't want anymore.^{[15]
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- Be sure to carefully examine a secondhand item before you buy it—you won't save money if you get home and realize it's torn or broken, since you'll just have to replace it. This is especially true for larger items you can't necessarily fix yourself, like a vehicle or an appliance.
- If there's anything you prefer to buy new, try checking the clearance section to find off-season savings. For instance, you can sometimes find really inexpensive swimsuits, shorts, and tank tops when the weather starts to get cool, and the best time to buy holiday decor is usually the day after the celebration.

Method 3

Method 3 of 3:

Finding Cheap Ways to Have Fun

1
Explore public areas like parks and nature trails. Being on a budget doesn't mean you have to sit at home all day. Any time the weather is nice, head out to your favorite local park, hike a nearby nature trail, or just go for a walk somewhere with pretty scenery. Being in the fresh air will help brighten your mood, and it doesn't cost anything to go outside!^{[16]
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- Bring along refillable water bottles and inexpensive snacks like popcorn so you don't get tempted to spend money while you're out!
2
Go to free concerts and events in your area. Use social media to keep up with local government, news outlets, and event organizers. That way, you'll be more likely to know about different events that are happening near you. When you hear about a free or inexpensive concert, outdoor festival, or other public event, grab a few friends and enjoy a fun, free day!
- Keep in mind that many of these events have vendors who may be selling food, crafts, and souvenirs. Usually, these are pretty overpriced, so consider leaving your cash at home in case you're tempted to buy anything.
- If there's a big music festival you've been dying to go to but you can't afford the tickets, check the website to see if they need any volunteers. Many festivals will give volunteers free entry in exchange for helping out at information tents or vendor booths.^{[17]
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3
Visit the library to find free books to read. Most people spend a lot of time reading these days, but the majority of that time is on their phones. Instead of scrolling mindlessly through social media, spend time browsing the shelves at your local library—reading will enrich your mind whether you're into self-help books, autobiographies, adventure stories, or romance novels.^{[18]
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- You can also look for free or cheap e-books online if you don't live close to a library.
4
Teach kids to have fun with things you find around the house. If you have kids at home, encourage them to play dress up, invent new games, and create props out of whatever's lying around. Children have amazing imaginations, and they don't need the fanciest toys or latest devices to have a great time. However, they sometimes can use a little inspiration.^{[19]
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- For instance, you might fold hats out of newspaper, then decorate them to look like pirate hats. Then, you could make swords out of cardboard and run around being swashbucklers for an afternoon! To keep the kids from getting bored with the game, you could even plan a treasure hunt, complete with homemade maps.
- To help kids have a good understanding of money later, talk to them early about things like the value of a dollar and how savings and investments work. Let it be an open, ongoing conversation, instead of a hush-hush thing.^{[20]
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  Expert Source
  
  Trent Larsen, CFP®
  Certified Financial Planner
  Expert Interview. 22 July 2020.}

Expert Q&A

Question

How can I cut back on my expenses?

Trent Larsen, CFP®
Certified Financial Planner
Trent Larsen is a Certified Financial Planner™ (CFP®) for Insight Wealth Strategies in the Bay Area, California. With over five years of experience, Trent specializes in financial planning and wealth management as well as personalized retirement, tax, and investment planning. Trent holds a BS in Economics from California State University, Chico. He has successfully passed his Series 7 and 66 registrations and holds his CA Life and Health Insurance license and CFP® certification.

Trent Larsen, CFP®

Certified Financial Planner

Expert Answer

Understand what you're spending your money on, and think about what it is you really want. For instance, if you really enjoy things like dating and going out, you can still do that, but you might need to cut back in another area, like cable TV or luxury items.