Let’s be honest. Sticking to a budget is NOT easy or fun – especially if you’re a college student or fresh graduate on a low income. But having a budget is one of the best ways to pull yourself out of a poor financial situation and set yourself up for financial security down the line. 

Well… it can be. But only if you know how to develop a realistic budget for yourself. Do you know how to do that? If you’re currently shaking your head thinking “NO”, don’t worry. We got you!

Channel 9 Reaction GIF by The Block - Find & Share on GIPHY


In this blog post, we’re gonna teach you how to budget money on a low income by sharing our favorite budgeting strategies that go beyond the common advice you may be used to (e.g. “just start eating at home”). 

But before we get into those budgeting strategies, let’s have a quick chat about why you and most people tend to find sticking to a budget to be incredibly hard.  

Why Is Budgeting Hard (Even for People With High Income)?

You’re not alone. Even people with high income can sometimes find it difficult to stay on top of their finances and make ends meet. According to a recent survey, 36% of people making over $100,000 a year live paycheck to paycheck.  

How is that even possible? Well, there are definitely external factors, like rising costs due to inflation. But, for many people, things like a lack of financial literacy and a poor money mindset play a role. And those two things can make budgeting hard no matter how much money you make. 

On top of that, most budgeting advice sets you up to fail. 

The problem with most budgeting advice 

Most of the budgeting advice out there tends to focus too much on things like cutting back on coffee or eating out. But small changes like that are not going to make a big enough difference overall. 

Most budgeting advice also doesn’t take into account the emotional component of money. For example, if you’re used to using shopping as a way to cope with stress, simply telling yourself to stop spending isn’t going to work.

So, you need a budget that works for your lifestyle AND doesn’t make you feel like you’re constantly depriving yourself AND helps you get out of the low-income bracket.

To help you get started, we’ve put together 7 of the best low-income budgeting strategies.

7 Low-Income Budgeting Strategies

#1 Write down your monthly income

The first step to creating a budget is understanding your income and expenses. This means sitting down to write out how much money you have coming in from all sources every month.

If you have a job, this is usually pretty straightforward. But don’t forget to include other sources of income, such as scholarships, grants, stipends, and money from side hustles.

Once you have your total monthly income figure, you can use the following strategies to start looking at ways to budget that money.

#2 Track your spending for a month

The next step is to track your spending for at least one month. There are a few ways to do this, but the easiest is to use a budgeting app like Rocket Money.

Rocket Money allows you to connect your bank and credit card accounts so you can track your spending automatically. This makes it super easy to see where your money is going and how much you’re spending in each category.

If you don’t want to use a budgeting app, you can also track your spending manually. Just write down everything you spend for one month, including even small purchases like coffee or snacks.

At the end of the month, take a look at your spending and see where you can cut back. Maybe you’re spending too much on entertainment or maybe you need to save more for transportation. Whatever it is, knowing where your money is going is an essential step to budgeting on a low income.

#3 Monitor your debt and credit score

If you have debt, it’s important to keep track of how much you owe and make payments on time. Late payments can damage your credit score, which can make it harder to do things like get a loan or rent an apartment.

You should also check your credit score by using a free service like Credit Karma. Monitoring your credit score is a good way to catch errors on your credit report and make sure you’re on track to improve your credit. 

You’ll want to use the information you find to make a plan to build your credit. For example, you can work on paying down debt, which will help improve your credit utilization ratio. You can also work on building up a positive payment history by making at least all of the minimum payments on time.

For more ways to build credit, you can also look into getting a secure credit card from Sable, an online banking service that helps users establish good credit scores. Another option is to use a credit-building service like Kikoff, which can help you build a positive payment history by putting you on a plan to reduce your credit utilization. 

#4 Find and cut unnecessary expenses 

One of the best ways to save money is to find and get rid of hidden, unnecessary expenses. You may be surprised how many “extras” you’re paying for that you don’t even realize. One survey found that thousands of Americans waste $348/year on unused subscriptions!

For example, you may have a gym membership that you never use, or you may be paying for a streaming subscription service that you don’t need. If you can identify these hidden expenses and get rid of them, you’ll be able to save a lot of money.

To find these hidden expenses, start by looking at your bank statements and credit card bills. See if there are any charges that you don’t recognize. If so, try to figure out what they are and whether or not you really need them. Rocket Money is also an excellent tool for this!

#5 Separate your money into different bank accounts 

One of the best ways to budget money on a low income is to separate your money into different bank accounts. This way, you can easily see how much money you have for different expenses.

For example, you may want to have one account for your rent and utilities, another account for food and groceries, and another account for entertainment and leisure. This will help you to better keep track of your spending and make sure that you’re not overspending in any one area.

If you apply this budgeting strategy, make sure to open bank accounts that don’t have monthly fees or overdraft fees. You want to keep as much of your money as possible. Albert is a good example of a banking service that helps you do exactly that.

And if you have any extra money at the end of the month, consider opening a high-yield savings account. It’s better to have it sit into this type of account than a checking account. Why?  Because high-yield savings accounts reward you with a small percentage of additional money just for saving your money there.  

#6 Make a plan to increase your income

No matter how much you budget and save, there’s only so much you can do if your income is low. So, if you’re serious about improving your financial situation in the long term you need to make a plan to increase your income. 

But we know… it’s easy to say that yet hard to actually do it – especially in the current economic downturn. But that doesn’t mean it’s impossible. Here are common options for increasing your income:

Which one should you choose? That’s up to you to decide. But you can click the links above to learn how to strategically approach the options that appeal to you most.

No matter which route you take, make sure that you have a solid plan in place. This will help to ensure that you are making the most of your time and effort.

#7 Create SMART financial goals

If you want to successfully budget on a low income, set some financial goals. And to give yourself the best chance at following through, your financial goals should be SMART. 

SMART is a popular acronym to help you remember the most important qualities of a goal. It stands for Specific, Measurable, Achievable, Relevant, and Time-bound. So, how do you create SMART financial goals? Like this: 

Specific. When it comes to budgeting and goal-setting, the more specific you can be, the better. When setting a financial goal, don’t make a vague goal like, “save more money.” Decide exactly how much money you want to save or how much debt you want to pay off.

Measurable. To track your progress, your goal should be something that you can measure. For example, if your goal is to save money, you need to have a system for measuring how much money you’ve saved each month.

Achievable. When setting a financial goal, it’s important to make sure that it is achievable for YOU. There’s no point in setting a goal that you know you can’t reach. For example, let’s say you have $10,000 in debt. Is paying it all off an achievable goal in one month if you have a low income? Probably not. Give yourself more time to achieve that kind of goal. 

Realistic. For your goal to be realistic, it needs to fit within your current lifestyle. If you are a college student who lives on campus, your goal of purchasing a house is not realistic. However, if you work hard, having a goal to make an extra $500 per month from a side hustle could be a realistic goal.

Time-bound. When setting a financial goal, it’s important to set a deadline. This will help you stay on track and motivated to reach your goal. For example, if your goal is to save $1,000 in one year, you can break that down into smaller goals, such as saving $250 per quarter.

Here are some more examples of SMART financial goals:

  • Put $100 into a savings account by the end of each month by reducing entertainment expenses.
  • Pay off credit card debt within 12 months by making monthly payments of $200 or more. 
  • Start a side hustle to increase monthly income by $450 by the end of the year.

Final Thoughts

Setting and achieving financial goals can be challenging, especially if you are a college student or fresh grad on a low income. But we hope the budgeting strategies we’ve shared here can help you begin to set realistic goals and develop a budget that works for you.  

And if you’re looking for more beginner finance tips, check out the rest of our blog where we discuss personal finance topics like how to build an emergency fund and how to start investing in the stock market. You can also sign up for our giveaways, like our Pay Your Bills Fund, for a chance to win free money!