How to budget—and even save—when money is tight

If you’re living on a tight budget, it’s easy to assume that common spending and saving advice won’t work for you. After all, if you’re just out of college and paying off student loans on an entry-level salary, no one can really expect you to put money in savings, right? Or if you’ve got kids and are living on a single adult income, does a planned-out budget fit your needs? Your income already goes to essentials, so is there enough money left over for a spending plan?

It’s true that your monthly budget might need to be a bit different than that of someone who just won the lottery. (OK, a lot different.) However, planning where your money should go is still important. The less money available, the more important it is to keep those dollars under control. Here are a few steps to consider.

Even if it makes you nervous, get clear on how much money is available each month.¹ You may have a net (after-tax) monthly paycheck to start. Add to that any other income sources such as:

• Money earned from side jobs
• Alimony and/or child support paid to you
• Government benefits

The sum of your monthly money sources is what's available to budget. Next, figure out how to prioritize the money you’ve got.

Start by looking at spending.¹ It might help to categorize expenses into nonessentials and essentials—bills that have to be paid to keep you and your family safe, fed and able to get to work and school:

• Food (groceries are essential but eating out generally isn’t)
• Shelter (mortgage or rent)
• Utilities (including water, heat/air conditioning and basic phone service)
• Frugal transportation (including public transportation costs, gas and tolls)
• Insurance (rent or homeowners and car)

Add up the cost of everything. Already spending more money than what you bring in (Step 1)? You might want to research more ways to trim expenses. Starting with nonessentials might make the most sense.

Once you see how much money is left, go to the next step.

Having trouble affording debt repayments? Consider contacting a nonprofit consumer credit counseling agency. Legitimate counselors can help negotiate lower monthly payments or lower interest rates on your debts. The Federal Trade Commission (FTC) and National Foundation for Credit Counseling® (NFCC) offer helpful tips for choosing reputable counselors.

At first, it may seem impossible to put money into savings if your budget is super tight. But here’s why it’s so important: If you’re living on a low income or tight budget, just one unexpected expense—like a visit to an urgent care clinic for a broken arm—could put you over the financial edge.

Consider putting every spare dollar toward it, even if it’s just a few extra bucks here and there.²

Consider using a money-tracking app, budgeting software or even a simple spreadsheet.¹ The idea is to spend only what’s in your bank account. If you budget $100 a week for groceries, for instance, don’t hesitate to put things back to avoid going over. Or if you spend more than you planned on gas one month, try trimming some expenses in another spending category.

At least temporarily, you may also need to keep your spending “wants” to a bare minimum. Later, as your financial situation improves, try creating a more balanced budget that includes spending money on fun things, too. Learn more about the 50-20-30 approach to balancing your family’s spending.

You might want to increase your income, decrease expenses or both. To increase your income, talk to your boss about a pay raise, see if your company will pay for extra classes that might qualify you for a better position or make some extra money with a side job.

Haven’t checked your credit score lately? You may want to take a look so you know what factors are affecting your score right now. You can monitor your credit for free.

Trying to budget and save when money is tight may not be easy. But taking the time to examine your finances could be one of many steps in the right direction.