How to Budget a Tight Household

Budgeting is important when living on a tight income.

When money is tight, it can be difficult to create a budget that allows for basic necessities and timely payments. In tough times a budget becomes even more important because it allows you to more efficiently manage your income. By working through your budget before your payments are due, you can get a realistic picture of your financial situation. A budget will allow you to identify problem areas and make the reductions that are necessary to break even each month without damaging your financial future.

Instructions

1. List all sources of income to get an exact idea of the money you have coming in each month. Include the income from full- and part-time jobs, government payments, student loans, and all other sources. If your income varies each month, use a low estimate. Account for any taxes, garnishments or retirement contributions that automatically come out of your paycheck before it gets to you.

2. Write down all of the expenses you have in a typical month. Group them into categories, starting with necessities like rent, utilities, food, car payments and insurance. Use common categories like entertainment, hobbies and fitness-related costs like gym memberships. Go through your bank statements, bills, and credit card statements to make sure that you don't forget anything. Add up each cost to get a final monthly number.

3. Review your expenses and eliminate any that are not absolutely necessary. Cut out extras like gym memberships, beauty appointments, membership dues for professional organizations, and daily take-out lattes. Eliminate charitable giving and anything that is not directly related to your daily survival. When your income increases in the future, add in the extras.

4. Find ways to reduce the money you spend on necessities until you can break even each month; this is particularly important if your expenses are greater than your income, but useful in any situation. Take public transportation instead of driving, reduce your car insurance coverage or join a carpool. Bring lunch from home and cook dinners instead of going out; to make it more fun, invite friends over so you don't have to sacrifice your social life. Buy generic products instead of name brands.

5. Find a way to put at least a small amount of money away for savings and occasional treats. Set aside an amount you can afford and use part of it for savings and part for a small splurge, like a movie. The knowledge that you are putting some money away and the occasional reward can make it easier to stick to a tight budget and reduce the urge to splurge.

References

• MSN Money; Live Well Without Busting Your Budget; Liz Pulliam Weston
• CNN Money: Cutting costs