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7 Ways to Make Budget When you have low income

Have you started thinking about where you and your family want to go next? Is it possible for you to retain your current lifestyle if you go on a sabbatical? Perhaps you’ve come to the realization that you’re splurging a little too much and want to tighten up your expenditures. Congratulations on realizing the importance of setting up a spending plan.


  1. Why Make a Budget
    If you’re making a budget just for the heck of it or because someone else is making one, the idea is doomed even before you start. Make a budget so you get more control over your finances and have money left over to live a good life.
  2. What You Earn
    If you’re a salaried employee, you already know how much you earn. In case you’re a professional or a freelancer with irregular income which includes client payments, commissions etc, take an average from the past 6-12 months. Add income from rent, dividends and bank interest if you wish to.
  3. What You Owe And Average Monthly Spend
    Always pay yourself first and set aside an emergency fund. This will come in handy during medical emergencies or when you suddenly lose your job. Then find out how much you owe, and to whom. This would include rent, utility payments (phone, electricity etc), credit card bills (paying only the minimum due each month?), loan EMIs, insurance premiums and any other payments you make, whether occasional or recurring.

Also Read: 10 Cashback Tips to Save Money on Online Shopping And Recharge, Bill Payments

Aha, does the thought of digging up your old bills and receipts give you the shivers? 😉 This is where an app like Walnut comes in handy – letting you track your spends and bill reminders with barely any input.

  1. What You Have And Your Net Worth
    This includes your cash in hand, bank account balances, your investments and any other assets. Subtract what you owe and spend from what you earn and have, and you get an idea of your net worth. Try it – was it as expected, or was it a shock to see a negative net worth?

Now that you’re aware of the bottom line, you can tweak your budget to ensure you live within your means.

  1. Your Goals – Short Term and Long Term
    What are your goals? A new job, higher education, vacation abroad every year, bigger car, buying your own house, becoming debt-free, getting married, having kids, saving for their education? Classify them as short-term and long-term, depending on your time horizon. Decide how to save for these expenses – which means reducing spends on some others.

Note: a budget is not a one-time exercise. Depending on your income, spends, financial goals, and inflation, you will have to keep making adjustments.

  1. Set Realistic Expectations
    If you create a budget and expect the numbers to match ground reality straight away – you could be in for a rude surprise. Don’t expect miracles from day one. Once the budget is in place you will realise the changes you need to make in your lifestyle and financial habits. Make small adjustments, maybe reward yourself when you stick to your budget, then make slightly larger adjustments and so on.

Having unrealistic expectations sets you up for failure and negativity towards your budget – much like in a weight-loss program 😛

When you have Low income then Track Budget

  1. Track Your Budget
    Making a budget is the easy part. Now you have to track it and adjust as needed. How often depends on your convenience – once a week, fortnight or a month to start with, and maybe a longer period later once you’re on track.

Here’s a very simple and broad budget allocation to get you started:

60% – monthly committed and known expenses
10% – long term expenses (can include long term emergency fund)
10% – small irregular expenses (can include short term emergency fund)
10% – entertainment & miscellaneous spends
10% – savings / retirement fund

– Expenses should not exceed income
– Under-estimate income and over-estimate expenses
– Follow and stick to your budget

You need to know how much money you make every month. Include all of your earnings, including those from normal employment and any odd jobs you may have.
Make a list of your monthly costs.
Do a cost-benefit analysis on your spending and revenue.
Make a strategy of action.

Have you already made a budget? How has your experience been? Do share your thoughts and any other tips in the comments.

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