By Central Bank of Barbados
BRIDGETOWN, Barbados – Many people think that budgeting is a financial practice reserved solely for people with lots of money. This stems from the belief that budgeting involves managing large sums of money and allocating funds for big purchases such as vacations or luxury items.
However, budgeting simply means creating a plan for how you or your household will spend your money during a specified period of time such as a week or a month. It’s crucial for people and households of all financial backgrounds, and especially those with a low income.
If you’re someone surviving on a limited income, perhaps even living from pay cheque to pay cheque, you may find it particularly challenging to manage your finances. However, it’s not impossible to budget. In fact, budgeting can help you to feel more financially stable and more in control of your affairs. If you don’t make a lot of money, but you want to make the most of every dollar earned, budgeting is essential.
Practical tips for budgeting on a low-income
Budgeting on a low income may require some creativity and discipline, but it can be done. You’ll need to:
- Assess your income. Take note of all the money you make each week or month, whether it’s from your wages or salary, a side hustle, or another source.
- Track your expenses. Start by keeping track of every expense, no matter how small, for at least a month. This might feel tedious, but it will help you to see exactly where your money is going. You may be surprised when you look back at your purchases.
- Prioritise the essentials. Ensure key expenses such as rent, utilities, and groceries are accounted for before you allocate money to non-essentials such as entertainment or dining out.
- Cut unnecessary expenses. There may be areas where you can reduce your spending. Maybe you pay for a gym or cable subscription you don’t use or you’ve been paying for a service, such as having someone wash your car for you, that you can do yourself.
- Create a realistic budget. Your income and expenses determine how much you can truly allocate to various categories such as housing, groceries, transportation, debt repayment, and savings.
- Save, even if you can only set aside a small amount. If you don’t have a lot left over after meeting your basic needs, you won’t be able to save a lot. However, even small amounts add up over time.
- Find ways to increase your income. Upgrading your skills and/or taking on additional work can add some wiggle room to your budget.
So, yes, it is possible to budget even if you don’t make a lot of money. Budgeting on a low income often presents its challenges, but with careful planning and discipline, it is within reach. By tracking your expenses, prioritising essentials, eliminating unnecessary spending, and saving consistently, you can work towards a more secure future.
- Visit MoneySmart hub for more articles, videos, and tips on how to secure your finances.
