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How to Budget When You’re Making Minimum Wage

Odd Cents - Budgeting and Income

When you’re a low-income earner, money may not stretch as far as you would like it to. There may be things that you would love to purchase, but funds are allocated to something else. Every extra dollar that you earn already has an expense or a bill lined up. How many times have you had to sacrifice needs for needs? If you want to make a difference, one approach is to learn how to budget when you’re making minimum wage

Don’t ever believe that you cannot get ahead in life because of what you’re earning. Many success stories of today’s thousandaires, millionaires and billionaires started with days and nights of earning minimum wage and sometimes nothing at all. However, they realised that they wanted more for themselves and they believed that they could do it. To find that level of strength and faith, you have to believe in who you are, your talents, your abilities and skills and that what you aspire to is worth fighting for. 

No matter how much you are earning, you need a budget. If you make $10 or $10,000, you must have a plan for how that money will be spent. Otherwise, you may find that you’re spending unnecessarily and end up in a worse of position. The truth about budgeting when your income is on the low end, is that you have to be extremely resourceful, be willing to make hard cuts and stay committed to your financial goals, even when it feels like you’re up against it. 

1. Nail Down Your Income and Expenses 

If you’re going to budget, you need to know how much you make and how much you spend. Your income includes all of the money that you earn. Salaries, wages and tips from a main job; side hustle or one-off event, should be tallied. Then you need to calculate how much your expenses are. This includes mortgages, rent, utility bills, bus fare, groceries – literally everything that you spend money on. The Simple Budget Worksheet will help you to nail down your income and expenses, so that you can get your budget going. 

2. Know Where to Shop 

Knowing where to shop is one of the ways that you can make your money stretch a bit further. It’s no secret that some stores are more expensive than others and often mark-up goods a lot higher than other stores. I’ve noticed that product prices can vary from as little as a few cents to as much as five dollars. If you’re buying one off items, you may not notice the smaller differences. But when you consider a cart full of groceries, shopping at a budget friendly store, will save you lots of money. Your aim is to achieve value for money, whilst still purchasing quality products. 

3. Plan Out Irregular Expenses 

You will not be able to plan for everything, but you can plan for some things. I do not budget for birthdays or holidays (I used to budget for vacations, but I cannot remember why I stopped) and I end up spending money that I did not plan for. One helpful tip is to keep a diary of things like birthdays; names of people you want to give gifts to at Christmas. Irregular expenses which in many cases are annual expenses, should be included in your budget (Quick Tip: I use sinking fund budgeting to account for annual expenses). When planning for these types of expenses, you should over-estimate what they could be or add a cushion to how much you are willing to spend. 

4. Supplement Your Income 

Just because you are learning how to budget when you’re making minimum wage, does not mean that you cannot supplement your income. In fact, a side-hustle or part-time job are excellent options to earn extra money. If you have the time and the energy, you should consider them because they will be financially beneficial to your budget and your financial goals. The extra cash can help you to pay off debt faster; boost your emergency fund; increase your savings; or simply help you to make ends meet especially in areas that you were falling short. If you’re not in a position to take on extra work, other ways to supplement your income are to ask for a raise or find a better paying job. 

5. Keep Your Budget Lean 

There are so many explanations of what is a lean budget. For me, a lean budget is one where you focus on the absolute necessities and drastically cut back on the non-essential spending. Because of how it is set up, there are many benefits of the lean budget. By cutting back on the non-essentials, you will have more money to play with. Another benefit is that you will experience living a minimalist financial lifestyle, which will make you better off financially. This can be a smart strategic move that will help you to get ahead. 

6. Minimise Costs 

Another thing to consider when you are budgeting whilst making minimum wage is your costs. At a high-level, the tip here is to reduce all of your costs. When we get to the details, you should  minimise costs of everything from housing to food to lifestyle comforts. For many people, housing takes up a huge chunk of the budget. If you can reduce your rent, and save a couple hundred dollars every month, you can put yourself in good stead. To minimise costs on my lifestyle, I switched to a pre-paid cell-phone; started taking my lunch to work; and started partaking in free activities (like going to the beach). Over the years, these small, yet effective changes have saved me thousands of dollars. 

7. Live Frugally 

Is there anything wrong with living frugally? Of course not. So, when your income is limited and you have goals in sight, living frugally is a very smart way to stretch the budget. For some who live frugally, it is a mindset and a lifestyle that requires focus and dedication. Living frugally encompasses a wide range of options such as cutting back on things that you don’t need; waiting until the right time to make purchases; becoming a do-it-yourselfer; and looking for low or lower cost goods and services (a.k.a shopping around). One of my frugal experiences that stands out was the time that my partner and I made a washing machine pedestal using free plans that we found online.  

8. Avoid Debt

Thanks to the attractiveness of credit cards, payday loans and lines of credit, it’s very difficult to avoid debt. But it’s not impossible. If you are trying to budget and you’re surviving on minimum wage, these are the line items that you want to get rid of very quickly. Whilst you may think that you’re benefitting because you were able to purchase your item, the banks have brighter smiles than you do. Your debt is more beneficial to them and the longer you keep that balance, the more they earn from interest. To avoid debt, you should use cash to make as many purchases as possible. If you don’t have the cash, you should re-evaluate whether that item is a necessity. Are you really willing to go into debt for that new tablet or cell phone, when you already have one that works perfectly? 

9. Follow a 50/20/30 Budget Rule 

Budget rules are extremely helpful when you are learning how to budget when you’re making minimum wage. In fact, budgeting rules are helpful for anyone who wants to learn how to budget. The 50/20/30 budget rule is very popular because it simple, yet efficient way to organise your money. To allocate your salary using this budgeting method, 50% goes towards needs and non-negotiable expenses (e.g. housing, food, transportation, bills, etc.); 30% goes towards wants and personal expenses (e.g. clothing, entertainment, vacation et.c); and 20% goes towards savings and investments (e.g. savings accounts, investment accounts etc.).  

10. Update Your Budget  

The beautiful thing about budgeting is that you can update your budget if it’s not working as it should. As you progress through the week or the month, you should consult your budget to see if you are on track. This will help you to work on your accountability as you try to manage your minimum wage earnings. If you believe that you can save a bit more, then you should include this in your budget. If there is a line item that is no longer applicable, remove it. Your budget should not be a chore. Instead it should be a complement to the life that you are trying to achieve. 

These are excellent ideas to put you in a good place with your finances. The tips that I’ve shared which teach you how to budget when you’re making minimum wage. However, you have to understand that the common denominator in all of these tips is you. You are the only one who can make the budget work. If you want to give yourself a fair chance of succeeding, you have to stay committed and remain consistent. No more excuses. It’s time to start budgeting.