Budgeting Tips When Money Is Tight

Woman digging through her purse
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Many people think that there is no way to stick to a budget because they are too poor. The numbers do not add up and on paper—they come up in the red no matter how much they cut back. In these situations, it can be frightening and frustrating to try budgeting, because it looks like there is no way to work things out. But, in reality, these are the times when it is even more important to budget and keep track of your finances.

Your budget can help you fix many of your financial problems, from overspending to getting out of debt. Here are some ways a budget can help you, even—and especially—when money is tight.

A Budget Prioritizes Your Spending

A budget can help you prioritize your spending when you do not have enough money to pay all of your bills. It can help you stop running out of money before the end of the month. 

When things are tight, it's important to keep your priorities in perspective. The essentials are a roof over your head, food to eat, and basic utilities such as water and electricity. Transportation to your job should be your next priority. Depending on where you live, this may mean a car, a bus pass, or a bike.

Think about how you can be as frugal as possible with your housing, food, and transportation while you work to get your budget on track.

A Budget Shows You Where to Cut Back

A budget can also show you areas where you really can cut back. If you write down everything you spend, you may be surprised at where and how some of your costs are adding up each day. Although you may think you are spending money only on necessities, a budget can reveal a lot of small, extraneous expenses that are adding up every month.

A Budget Is a Reality Check

Sometimes a budget shows you that your problem isn't spending—it's income. It helps to have a specific amount in mind when you are considering taking on a second job, looking for a new one, or asking for a raise.

Creating a budget will show you exactly what you need to bring home each month to make ends meet, so you can determine the best course of action.

For example, if you are only running $100–$200 short each month, picking up a part-time job a few nights a week may be enough to solve your problem. However, if you are closer to $1,000 short every month, you may need to take more drastic actions. This may mean working additional shifts or looking for a new job that will pay more.

A Budget Gives You a Spending Plan 

A budget is really a spending plan. Even when you feel too broke to budget, it is important to have a solid plan in place. If you feel like you should be able to make ends meet, but things do not add up on paper, it can help to have someone else look over your expenses and offer suggestions on things you can cut back. They cannot make real suggestions if they do not have any idea of how you really spend your money.

Work Toward a Better Situation

If you are below the poverty level, you really may be struggling just to cover your most basic expenses with no extras at all. It can be very frustrating because you may be working multiple jobs and still not making ends meet. When you are in this situation, you need to look at every expense you have and make sure it is as low as possible.

Instead of renting your own apartment, consider having a roommate. Sell your current car and use cash to buy an older one that will get you around. Living frugally in this situation is not optional, and it may take you several years after you improve your income situation to fully recover. If you can limit the amount you borrow and avoid using credit cards at all, you can give yourself just enough wiggle room to work toward earning more income. Even though you are struggling and dealing with poverty, you can still make progress