Here’s the thing – you can have that life you’ve been dreaming of – and it starts with a budget. Budgets are the building blocks of getting your financial life together. But the real question is how do you live on a budget and not lose your mind.
If you think it’s impossible to learn how to live on a budget and also live your best life-stick with me here. Budgets are not meant to make you feel like you’re scrimping by and not enjoying life. Budget are meant to be used as a tool for your success. The best part about the budget tool? You get to use it how you want and need. It can take some time to change your mindset around budgeting, but here are 11 tips for how to live on a budget that will hopefully help.
11 Tips for How to Live on A Budget
We know that living on a budget can be hard, but we’ve collected some tips to help make your financial dreams possible with a budget.
1. Have a heart to heart with your money
This is the most important part of the entire budgeting journey. If you can do this, you can be living on a tight budget with less anger and frustration. But it can be very scary to get started.
First, check in with yourself about what feelings budgeting brings up. Looking at your money origins and how you relate to money can help getting past the roadblocks that budgeting can bring up.
Next, review the last three months of your spending to find out where your money is going. And again, check in with your emotions. If a purchase is causing shame or embarrassment, that might be an indication that you can remove that line item from your budget. However, if you smile at a purchase, notice that as well – because future spending in this category is probably worth it.
2. Face your financial fears
Our financial fears hinder us from creating a budget. Maybe you’re like me and totally terrified all the student debt that you’ll have to face when you start to make a budget. Maybe you’re a contract worker with variable income and that makes money stressful because you can’t budget for a specific number. Whatever your financial fears are, it’s important that you take time to wrestle with them and figure out where they stem from.
Sometimes it’s helpful to write them all down and look over every one. Ask yourself which ones are reasonable and which ones aren’t.
Use the reasonable fears, such as ‘I’m not sure I can make all my monthly credit card payments’, to help find places to improve your budgets. And tell the unreasonable fears like ‘I will never be rich’ to take a hike because they aren’t welcome here.
It can be a hard and emotional process to face your financial fears, but the payout is extremely valuable and will help you learn how to live on a budget.
3. Create a starter budget
The next step of living on a budget is to actually create a budget. It can be daunting, but if you follow these simple steps, you’ll be well on your way to having a functioning budget.
First, write down how much you make. This number will help you determine what needs to go in your budget, and what you can leave out.
Next, write a list of all your non-negotiable spending. Rent, groceries, car insurance, any debt payments, savings – that sort of thing. Anything that you cannot live without goes in this “non-negotiable” category. Cannot live without doesn’t mean you don’t want to live without. This means that Starbucks – as great as it is – shouldn’t go in your required expenses.
Third, subtract your non-negotiables from your income. The money you have left is your discretionary money. With this you can plan out some fun things. If you like going to the movies, add a movie column, or if you enjoy travel, put a travel category. This part of the budget you can really tailor to design your best life.
And now you have a working budget. Don’t worry if it’s not exactly right the first time, budgets are live documents you’re supposed to tweak over time. (We haven’t even added savings or investing yet, so you will definitely revisit it in the future.)
4. Track your expenses
Now that you have a budget in place, spend a month carefully tracking your expenses to see if the starter budget matched your spending. I love using my online banking to look at where I’m spending money, but apps like Personal Capital or Mint really help with this as well. Some people also write down every purchase in a spreadsheet to track during the month. The goal is to use whatever system works best for you.
This will really help you live on a budget because you’re making sure that you’re staying in your budget. But remember, you can always change the budget if it isn’t working for you. The budget is a tool – not a jail.
5. Save before you spend
After one month of tracking has passed, it is time to re-vamp that starter budget. Review your categories and see where you can squeeze in some saving. No number is too small. So if you have $20- save it. Plan on saving before you even start spending at the start of each budget period.
We always save first, then spend. The first day that paycheck hits our account, we move money into our savings accounts and towards our goals. This really helps us not overspend. And it helps us with some of our longer-term goals – like a cool vacation.
Saving first also helps us prepare for retirement, and is really important in general. If you put money away before you start spending it, then you won’t be as tempted to spend it. I even keep my savings in a different account so even if I wanted to touch it, it’d take 3 business days to transfer over. This buffer helps keep my savings in savings.
6. Cut Expenses
If you find that you keep being strapped at the end of the month, looking for places to cut expenses might be a good place to start. It can be hard, at first, to figure out what needs to stay and what needs to go, but it’s a really good practice.
First look at the biggest expenses, those are going to be the ones that really affect the budget.
- Car insurance
If you can find ways to lower those, then you’ll free up some other room in your budget. But if those big-ticket items are already haggled as far down as you can get them- it’s time to get creative.
I want to clarify that by “cut” I don’t mean do without. Instead, find a cheaper alternative that will keep some cash in your pocket. For example, consider cutting cable and switch to a streaming service.
Check-in with your mindless spending – if you’ve made one to many Amazon purchases this month, consider canceling your Prime subscription. That’ll save you $150/year, but it will also add up with the smaller purchases you won’t be making.
Making a bunch of small changes can really make a big difference in your budget.
7. Increase your income
If you’re still struggling, increasing your income is the next place to start. There are many different ways you can use your free time and rad skills to make some extra money. Consider the following options:
- Driving for Uber or Lyft
- Being a Task Rabbit
- Shopping for Instacart
- Freelance Writing
- Starting an Etsy Shop
- Graphic Design
- Working a second job like bartending or waitressing
Consider your hobbies as well. Is there a way you can use them to make some extra cash?
The ideas are endless, you might need to get a bit creative.
8. Don’t be afraid to trade or barter
Trading and bartering is a great way to get services for free or cheap. It’s also great for the environment since old stuff is getting repurposed.
If you’re in need of something specific, but don’t want to spend a ton of money, you don’t nessacarily need to go without. Instead, check on local Facebook groups to see if anyone has the item available. See if there’s something you can do for them in exchange. Or, even if you can get the item for less than market value.
This is a great way to save money on bigger ticket items, like treadmills or microwaves. And you’d be surprised how much stuff people are willing to part with.
9. Use money saving apps
Money-saving apps are especially helpful when you’re learning how to live on a budget. Some of my favorite apps are:
- Safeway Just 4 U
- Offer Up
There are many others, and they all help you shave money off of your budget and free up some cash.
10. Stay organized with your budget goals and tracking
Another huge part of budgeting is staying organized with your goals. I love using apps like Mint and Personal Capital to help track my progress. These apps track what you spend and save and you can watch your money change over time. It’s a great way to see what your money is doing and how you’re managing your finances.
You can also use productivity apps like Trello to track goals and progress. Especially on multi-step financial projects that you’re working towards.
If you are in a partnership, a money date is one of the most valuable ways to track your financial goals.
It doesn’t matter what system you use, but it does matter that you have a system in place. If you don’t, you won’t make as much progress on your money goals.
11. Check In
You have been tracking, cutting, and trying to stay organized. Now take a moment to check-in and review. How did you do? Did you meet your category money guidelines in the budget? Remember, overspending is not necessarily a bad thing. Budgets are living documents that will change over time. You just need to make sure that you’re not spending aimlessly and you adjust.
Spend time with the feelings you have around money and make sure that your money fears are being addressed. It also helps you reevaluate the progress on your long term goals. Are you making progress? More or less than you expected? Why?
And don’t forget to celebrate the milestones. That’s a huge part of checking in and learning how to live on a budget. Make sure those special moments are commemorated so you can stay motivated and on track with your budget.
Living on a Tight Budget Doesn’t Mean Deprivation
One thing you should avoid in your budget is deprivation. Some common, but faulty, personal finance advice is to cut out all frivolous expenses – even those you enjoy.
So, if you like that cup of coffee from Starbucks then get it. If it’s breaking your budget and you don’t have money to save. Then cut down on the habit- maybe a few times a week instead of every day.
If you think of your budget of a rigid box instead of a tool to help you accomplish your goals, you will burn out. This is why deprivation is so dangerous.
It’s important to remember that the goal of budgeting isn’t to suffer – it’s to thrive in a responsible way. And so deprivation should never be the goal, but moderation is important. We should still be living and enjoying life and a budget will help you do just that.
How to Live on A Budget and Still Have Fun
A balanced life is essential. That’s why you want to make sure that you’re still having fun while budgeting. Budgeting doesn’t automatically mean that you’re not having fun, it just means that you’re making choices about what fun things you’re doing.
It can feel frustrating at first, but if it does, reevaluate your priorities. Does your budget match your values and what you want to do with your life? If it doesn’t, that could be a source of frustration. And you should reprioritize your budget to accomplish those fun things you’re missing out on.
At the end of the day, budgeting is a tool. You can learn how to live on a budget. Better yet, when your budget is used well, and you create a balanced life, the stress of money can be reduced. It still takes a lot of work and practice to get to a place where you feel secure financially and mentally, but budgeting is the best tool to get you there.
Common Questions About Living on a Budget
How do I live on a budget with a family?
When you’re creating a budget with a family, sit down and look at needs and wants together. Then create a budget on that values-based spending. If you have children, talk to them about the budget and money early. Include them in the process of creating a budget – even if you and your significant other make the final decisions.
How do I live on a tight budget in college?
Track your spending for a month, and see what areas you spend in. Then write it all out on a sheet of paper and ask yourself what do you need and what do you want. On this same sheet of paper, write down your quarterly tuition and supplies you will need to pay for. These will require their own line items in your budget and may mean you save for them ahead of time.
Then, consider you daily campus life. See where you can trim your spending and still live comfortably. If your friends are big spenders, start suggesting cheaper adventures. Maybe a picnic at a park instead of Chipotle. This can help you still get the college experience without spending as much money.
How do I live an adventurous life on a budget?
Living adventurously on a budget is entirely possible. You just have to decide what adventures are worth spending money on and what can be skipped. Say you’re going on an epic, cross-country road trip. There are ways to cut costs without sacrificing any fun. So, sit down with yourself as you plan your next adventure and ask yourself “what do I want out of this experience?”. Then, build your budget off of that.
How do I live healthy on a budget?
There are plenty of ways to live healthy on a budget. Start by meal planning, looking at cheap ways to get into exercise – like cycling or running – and go from there. If you need a place to start for recipes, check out this list of 55 cheap vegan recipes.
How do I live the good life on a budget?
Living a good life on a budget comes down to living a life based on your priorities. To live a good life on a budget, you need to decide what a good life looks like, and then build your budget around that.