How to Manage Money on a Low Income

Although managing money is important at all levels, managing money on a low income is critical.

In the past I always had a love hate relationship with money. I knew that I needed but there never seemed to be enough of it. I made the stubborn decision to move out of my parents’ house in college and in the beginning, there were moments I couldn’t make rent and found myself in credit card debt.

I have had creditors call me and I’ve had my wages garnished. When I got my first professional job out of college, I knew that things had to change.

I left my hometown to pursue my career and never went back into a financial pit again. And this is not to say that all of a sudden I made a lot more money. It was actually quite the opposite.

I accepted a full-time position at a non-profit with an offer that ended up falling through because the nonprofit didn’t end up receiving a grant they had anticipated getting. Because I had already quit my jobs, and knew in my heart it was time to leave, I accepted a new offer of a part time position making $14,000 until they could put me on full time.

So it wasn’t my financial situation that necessarily changed. It was my mindset. It was my desire to do better and it was my actions that would tie it all together. You can’t get to a good place financially without any of these.

So, here are 4 ways to manage money on a low income.

Make a plan that aligns with your financial circumstance.

Making $14,000 a year in a small metropolitan city wasn’t going to afford me a downtown loft with a city view. I knew that I needed a plan that matched my wage. It’s true when people say “there’s levels to this”. Before I moved to my new city, I contacted friends and family to see if anyone I knew lived there and had an extra room I could rent out or stay in temporarily for a moderate to low price.

This ended up panning out for me and I moved in with my friend’s mother until my job was able to put me on full time. When my job made me full time, I did my research, got a roommate and we found an affordable housing program for young professionals that was located downtown.

This helped me maintain my cost of living. A lot of people have champagne taste, can’t afford the champagne and still buy it. It’s ok to have big goals and big desires, and there will be a time and place when you can afford them, but it’s important to be realistic with where you are while working towards getting to your next level.

Allow yourself the room to grow to each level. Don’t sabotage yourself trying to go above and beyond what you can afford.

Assess needs versus wants.

Liking the finer things in life, doesn’t always mean I can afford it. Trust and believe when I say I understand you in your desire to want a better lifestyle. But the fact of the matter is that if you can’t afford it, then you don’t need it. And even if you can afford it, that doesn’t always justify making the purchase, especially if your goals really are to get your life together, have savings, and decrease debt.

I have made adjustments to my spending by cutting expenses such as my cable and maintaining a minimal cost of living. It’s has not always been easy, but it was the best decision for me financially at the time.

It’s important to consider each stage of life and balance it with your lifestyle. Part of this involves evaluating wants vs needs and making the necessary cuts and decreases to your spending to have more money.

Make your choices visible

It’s critical to watch what you spend, especially when you aren’t making a lot. Remind yourself that small expenses still add up. You’ll be surprised how quickly your money goes when you’re continuously and innocently swiping your debit card.

All of those target runs and amazon purchases add up. Use an expense tracker to track your habits and to help you deter additional spending. Make it a habit to write down your purchases so you start becoming more self-aware about where your money goes. Find ways to keep yourself accountable.

If you can’t write it down at the time, accept the receipt when it’s offered and write it down when you get home. It can be shocking to see how quickly money goes and how the small things make a huge difference.

Cash rules everything

Using cash has really helped keep me accountable for my spending. It made me stop relying on my debit and credit card as much and decreased my impulse purchasing habits.

Constantly being able to swipe a card at any moment in time makes it harder to stay on top of your finances. Having visual reminders of your budget can help keep you on budget and on track.

Learn to leave your card at home when you leave for the day. Carry cash as a replacement. Implementing the cash envelope system into my daily money routine complete game changer for me and helped me to save so much more money.

What are some ways that you have managed your money on a low income?