How to Budget Money on a Low Income [Guide for College Students and Fresh Grads]

#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:

  • Ask for a raise at your current job 
  • Get a new, higher-paying job
  • Start a side hustle 
  • Get a second job

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.
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