Living on a tight budget sounds about as fun as hugging a porcupine, doesn’t it?
But making a small budget work might be your reality if you’re a one-income family. Fifty-nine percent of Americans live paycheck to paycheck and once upon a time, I was one of them. Living on a tiny budget means you have to be especially careful about how you manage the money you have coming in and going out each month.
There are different reasons for living on a small budget.
For example, you might be a stay at home mom whose spouse or partner is the family breadwinner. Or you may be a dual-income family but a high cost of living means your money doesn’t go as far. Or you could be a single parent who’s trying to make ends meet.
I won’t lie, living on less money isn’t always a picnic. But I’ve got some tips to help you make the most of the money you have so you can enjoy life.
How to Live Well as a Family on a Tight Budget
1. Embrace the idea of budgeting
Budgeting often gets a bad reputation but it’s truly your friend, not your enemy. So if you’ve avoided budgeting in the past or you look at it as a dreaded chore, it’s time to rethink things.
Here’s what a budget is really meant to be: a plan for managing your money.
That’s it. It’s not this torturous thing that means you can’t have any fun as a family, ever. A budget is just you telling your money where to go each month.
Learning to love (or at least like) the idea of being in charge of your money is key for living on a tight budget. Because there’s only so much money to go around.
Here’s where creating a money vision for your family can help. Ask yourself what purpose living on a tight budget serves.
I get that sometimes you don’t have a choice. That was me, once upon a time when I first became a single mom.
But other times, you might be choosing to downsize your budget because there’s something bigger you want.
Maybe it’s paying off all your debt or upgrading your home or just having some savings in the bank so you’re not constantly worried about an emergency blowing your plans out of the water.
Keeping your vision in sight can help make the idea of budgeting less scary so it’s something you want to do.
2. Figure out your wants vs. needs
To live well on a tight budget, you have to be crystal clear about what you’re spending money on and why. So ask yourself what’s most important when it comes to wants versus needs.
Needs are what you have to have to live: housing, food, clothing, health care. Wants are anything you can live without.
Make a list of everything you spend money on as a family. Then really consider what’s a need and what you can cut out.
One way to test this is to try a no-spend challenge. This is where you commit to not spending money on anything other than essentials for a set period of time, like a week or a month.
Not spending money does something really powerful for you. It helps you get some clarity on what’s truly needful and what’s not.
If you haven’t given a spending freeze a try before, I highly recommend it. You might be surprised at what you don’t need to spend money on.
Being able to cut out even one thing from your spending can help create some wiggle room in a tight budget.
Must-have tools to help you get ahead financially
3. Find the budgeting system that works for you
The great thing about budgeting is that there’s no one way you have to do it. There are lots of different budget systems you can try as a family.
For example, there’s:
- Zero-based budgeting
- Cash envelope system
- Half-payment method
- Values-based budgeting
- 50/30/20 budgeting
In my opinion, the cash envelope system is the easiest to start with. This is the budget system I used for a long time.
You create envelopes for different budget categories, then allot your budgeted amount of cash to each envelope. Once you’ve spent all the cash in the envelope, you can’t spend anything else in that budget category for the month.
You can swap out jars for envelopes but it works the same way. I loved this budget system but it doesn’t work for everyone.
So as you work out a plan for thriving on a tight budget, it’s okay to experiment with different budgeting methods. The key is finding one that suits your family’s needs best.
4. Include saving as a budget item
“Pay yourself first” is something almost every financial expert says. But if you live on a tight budget, you might think trying to save money is impossible.
It’s a defeating feeling, right? You’re struggling to pay the bills so where does saving fit into the picture?
The truth is, no matter how small your budget is it’s still important to make saving a priority.
Having money in savings just makes it easier to sleep at night, or at least it does for me. I know that if an emergency comes along I’ll be able to pay for it without having to charge it to a credit card.
So as you’re putting together your family budget, add saving as one of your regular monthly expenses.
I don’t care if it’s only $5 or $10 a month. The amount doesn’t really matter at the beginning. What’s important is saving this money regularly.
Because the act of saving alone sends a signal to yourself and the universe that you’re not letting a small budget hold you back.
For tips on saving money, check out these posts:
5. Track your spending
If you want to do one thing to make budgeting easier as a family then it’s tracking your spending.
When you live on one income or a small income, you can’t afford for any of your dollars and cents to go astray. Keeping track of your spending can help you avoid blowing your budget or running up debt.
Because here’s the thing, it’s so easy to spend money mindlessly. And that can create real headaches for you if you only have so much money to go around each month.
There are plenty of great financial tools you can use to track your spending. (My favorite is Personal Capital.)
But you could just as easily write it down in a notebook or a spreadsheet. The point is to be consistent with it, just like saving, so you stay in control of your spending.
6. Use Trim to find expenses you can cut
Sometimes you need an extra pair of eyes to see things you might be missing with your money, even when you’ve drilled down to a super tight budget.
For example, you may have gone over your expenses thoroughly but you could still have some money leaks that are costing you cash. That’s where a money tool like Trim can help.
Trim is a financial manager that reviews your spending and looks for things you can cut. Think bank fees or unwanted subscription services.
It’s super easy to use to cut expenses. And Trim will even negotiate with your cable and other service providers for you to help you lower your bills.
And the truth is, anything extra you can cut out helps when you have a tight budget. Even eliminating $10 a month in bank fees means you have $10 extra to put toward debt or save.
7. Stop using credit cards
Temporarily, at least.
I don’t have a problem with credit cards–now. But when I was first learning how to live on one income with a tight budget I had thousands of dollars in credit card debt to pay off.
It sucked, plain and simple. But I was determined to get rid of the debt so I stopped using my credit cards for a few years.
Debt can cramp your style if you’re already living on less money. So if credit cards are your financial Achilles’ heel, then it’s time to break the habit.
And I get that earning rewards or being able to pay things off over time is tempting. But it won’t help you get ahead in the long run.
You don’t have to close your credit card accounts altogether; and actually, that can hurt your credit score. But you should be ready to wean yourself off of them so you can reset your budget and spending.
8. Create a debt payoff plan
Here’s a secret about paying down debt: there’s no magic formula for how to do it.
You just have to commit to it and do it, which starts with having a plan and a strategy for paying down debt.
There are two main approaches for paying off debt that are popular: debt snowball and debt avalanche. With either method, you list all your debts and then pay them off in a specific order.
The difference is that with the debt snowball, the payoff order is from the lowest balance to highest. With the debt avalanche, it’s the highest APR to lowest.
The snowball will help you wipe out some of your smaller debts faster. But the avalanche will save you more money on interest.
I used the snowball method to pay off all my credit cards and loans. I needed that motivational boost that comes from seeing a zeroed-out balance. But you should choose the method that works best both financially and mentally for your family.
Also, you can make debt repayment easier on yourself by making your debt less expensive.
So if you have credit cards, you might try a 0% balance transfer or a debt consolidation loan. For student loans, you can consolidate or refinance them.
It can take a little effort to lower the interest rates on your debts but it can be well worth it if you want to save money on one income.
If you’re looking for 0% APR balance transfer offers for credit cards, check out Credit Karma.
And if you’re interested in student loan refinancing or consolidating other loans, you can take a look at borrowing options from Credible.
9. Automate your bill payments
If you’re trying to make living on a tight budget work, automating your bills is a must.
It’s so much easier to handle your budget when you’re not worrying about whether you forgot to pay a bill. And it’s super easy to schedule payments to work with your chosen budget system.
So, for example, if your family gets paid on the 1st and the 15th of every month you might use the half-payment budgeting method. You can then schedule bills to be paid automatically from each paycheck.
I automate almost all my bills, except for my water bill. Which of course, I always forget to pay. And of course, they always charge me a $2 late fee.
Automating can help you avoid late fees and money stress, not to mention saving you time.
10. Automate your savings
When you’re setting up automatic bill payments, go ahead and set up automatic deposits to savings while you’re at it.
Automating your savings can help you stick to the “pay yourself first” rule. Otherwise, the money you plan to save each month may never make it to savings.
There are a few ways to automate savings:
- Have your employer direct deposit part of your paycheck into your savings account
- Schedule automatic transfers from checking to savings each payday
- Using a spare change app to save for you
The last option is one of my favorites because it’s so stupidly simple.
You sign up for a spare change app and link it to your bank account. The app then rounds up your checking account transactions and saves the difference.
That’s exactly how Acorns works and I love the simplicity of it. You’re saving money without having to think about it or make any extra effort.
I don’t know about you but when it comes to saving money, easy is always what I love best. And the beauty of something like Acorns is that you can literally save pennies, which is perfect if you have a tight budget.
What’s your best tip for living well on a tight budget?
I hope this post offered some inspiration and ideas on how to thrive even when you have a small budget.
Have you got a success story or tip to share on thriving when you don’t have a lot of money to spare? Tell me about it!
And remember to grab your money-saving guide if you haven’t yet!