Tips To Managing Money With A Low Income

by on July 19, 2012

Even though we all work so hard and deserve so much more than we get, there are many reasons that not everyone in the world is a billionaire. Maybe you’re a poor college student, or you haven’t hit your big break on Broadway yet, or you’re still paying off loans from medical school and life and what have you.

Whatever the cause of your low income is, managing money when you aren’t making a lot is about a million times harder than if you made hundreds of thousands of dollars a year. You really have to think about your priorities, you only have a small or nonexistent margin of error, and, if something crazy happens you could very easily be stuck financially in the dumps. And the bad kind of “I don’t have a place to live” stuck, not “oh no, I thought I could fit my hand in this honey jar but now I can’t get it out” stuck. Also, you apparently are Winnie the Pooh. Luckily, even though finances seem scary there are some simple ways to manage your funds that are so easy that Pooh could do it and still have plenty of time to romp around the hundred acre wood.

Don’t skimp on insurance. This can be really tough because it seems dumb to be paying monthly bills for car, house, or health insurance that you rarely use. While this is definitely annoying, in the long run it is worth it. It is better to pay your small monthly fee and be covered than be without insurance when you crash your car and have both a totaled car and a huge hospital bill to pay off. If you can afford to have even the most basic insurance, it could help you a lot in a time of need. Even though ninety percent of the time it seems useless, it is really a smart investment and the ten percent of the time you need it, well makes up for the ninety percent of time it seems useless.

money management tips for lower incomeLive below your means. This is actually great advice for everyone, but especially for people living on a low income. Basically, it just means that you shouldn’t spend all of your money just because you have money to spend. For example, just because you can afford to have an iPhone doesn’t mean that you should get one; instead of spending all of your money on the huge data plan, get a less expensive cell phone that does just what you need it to. The basic moral of the story is to save and spend wisely; we as a society buy a lot of things that we don’t need. If you eliminate some of those purchases, you will have more money to save or spend on other priorities.

Know your budget. Keep track of what you make each month. If you do this, you can make a budget that makes sense for your income. Then, instead of guessing prices and worrying about overspending (or, actually overspending) you will be prepared. Along with knowing your budget is knowing your priorities. If you want to be putting some money away for the future, plan your budget accordingly. A plan makes saving money and paying bills on time a lot easier; if you have a plan to follow that makes you set money aside, you are much more likely to do it.

Prioritize. Buy the essentials first! Bills should obviously come first, but once your rent and your insurance are taken care of you can decide for yourself what is most important next. Grocery shopping should probably be high on the list, along with basic amenities such as toiletries, towels, and tooth paste. Do all of your essential shopping before you even think about buying things you don’t need, like sportswear or the newest electronics.

Shop for a deal. Buy things on sale any time you can. Also, switch to using generic brand products. They are usually a lot cheaper than name brand products but are very similar. For example, medications that are generic have the same active ingredient as name brand products, so they actually do the same thing. When you buy a name brand product, part of your money goes to the brand and the conglomerate, which is why they are more expensive. Don’t spend your limited funds on a name when you can get the same product for much less.

Shop for value. While deals are great and you should always look for them to save money, you should also make sure that you spend your money on objects of value. For example, if you are buying furniture, you will ultimately save money if you buy sturdy furniture that will last you for many years than if you buy cheap furniture that is prone to breaking.

Don’t use plastic. Along with quitting using water bottles that destroy our environment, credit cards very often lead to overspending and debt, especially if you are swipe happy and don’t have the funds to back up your habit. If you don’t have an income that allows you much room with your spending, don’t take the chance that you may rack up debt and use a credit card. If you can avoid having even a debit card and stick to buying things in cash, you will have a much easier time controlling and limiting your spending. If you feel that you must have a card of some sort, get a debit/credit card that takes money directly out of your bank account so you do not have to pay interest. If you must have a credit card, shop around to find the one that has the lowest interest rate for you.

Oh dear, aren’t those things simple? That is what Winnie the Pooh would say, if he had money to manage. Above all, when managing your money try to stay calm, realize your goals and push on. Because, well, as we see when Pooh puts his hand in a jar of honey, sometimes you get yourself into sticky situations that you could have easily avoided with a little common sense. So, if you start out with these tips, you can avoid being stuck!

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