You don't have to make a lot of money to have a happy life.You'll need to learn how to budget.Living on less than $20,000 a year isn't easy, but it's not difficult if you save.You can live on an income under $20,000 a year, even if you don't have all the toys and clothes of people in a higher tax rate.
Step 1: How much your guaranteed monthly income adds up to is what you have to figure out.
Making the most of everything you have is what successful living on a limited income is all about.You need to know what you have.Adding up the income that you know you will be getting each month is what you want to do.If they all turned up empty, you need to know that you can live on your guaranteed income alone.Write the number down as "monthly income."
Step 2: You can track your expenses using online apps.
To get an accurate picture of your spending habits, keep all your receipts.Thanks to modern technology, you can log-in online to see your bank and credit card activity.Most banks break this up by type of spending, such as "food/Groceries," "Gas," or "Rent."You can use apps like Mint, Mvelopes, and HomeBudget to keep track of your spending.Make a note of what you bought and keep the receipt.Write the number down as "monthly expenses"
Step 3: To make sense of what you have to buy, break your expenses down into fixed, essential, and non-essential.
Rent is due every month no matter what.Food can change a bit but can't be cut much shorter.You realize you didn't need to spend on other expenses with hindsight.You can analyze places to save money by putting your expenses into these categories.To get a more accurate number, average the expenses from a few months.They are due every single month.Rent, car/loan payments, etc.These can't be avoided, but can be cut down through careful budgeting and saving.This is your money for entertainment, fun, and everything else.This is often where you will be able to save the most money.
Step 4: Subtract expenses from income to figure out how much free money you have.
You have leftover money.The amount of money left after essential bills are paid can be determined by adding back the money from non-essential expenses.You now know how much free money you can spend each month.
Step 5: You should split the rest of your money into different categories.
You know how much money you should have left for entertainment, debts, and savings once you know your expenses and income.To see how feasible each month will be, figure out what you will spend on each category.Everyone deserves to have fun, no matter how much money they make.You don't have to be low income to enjoy yourself.You need to be careful with your money.It will help if you have an "entertainment budget".The quicker you pay off debt, the more money you save.Paying off debt with spare money is something you should always keep an eye on.If possible, pay more than the minimum payment.Even low-income workers need to save, as it is an essential safeguard in case of an emergency.If not six months, you want at least three months of expenses covered.
Step 6: You should repeat this record-keeping every month to find any issues or savings.
Surprises are the enemies of a good budget.It's not possible to do this once and get a perfect budget, and you may find that you can spend or save more than you thought.It's important to keep an eye on your money when you're living on a limited income.At the end of the month, compare how you spent your money to what you planned.Think about how you can fix it when you find the places where there were differences.
Step 7: Each grocery store has a meal plan.
It's important to know what you're eating ahead of time to avoid throwing out food.You can save money by buying things in bulk if you match up ingredients between meals.Make use of leftovers and carry over ingredients whenever possible to start small.Ensure you have the perfect amount of food at the right price as you get used to it.Save money and get fresh food by buying in-season fruits and vegetables.Buy store-brand or generic products.They're just as good and cheaper.Generic medication must be the same as the name brand.
Step 8: Saving leftovers for lunch is a good way to cook meals.
You won't have much for the rest of the week if you spend a lot on restaurant food.Fruits and vegetables are often the cheapest, and they are versatile enough to be in many dishes.
Step 9: Furniture, clothing, and appliances can be purchased second-hand.
The internet has made it easier to find deals.Better yet, head to your local flea market.You can save a lot of money by rotting in a landfill.If you're willing to clean or fix things up, you can often get them for nothing.Don't forget lightly worn or dirty items.Be prepared to bargain.Most people will give you a discount if you let people know your situation and compromise.
Step 10: You can buy items in large quantities.
If you buy more things at the same time, you can save money.You can save a lot of money by shopping at bulk stores or through the internet.You will need to pay more upfront to get goods in bulk.The price per pound/ounce/gallon is the unit price.It's important at the bottom of the price tag to buy in bulk.The bigger the item, the lower the price.
Step 11: Keep an eye out for free stuff.
There is so much you can do for nothing.You can check out bars with free music, local art galleries or museums on the Parks and Recreation Department calendar.You can make your own fun without spending a dime by going for hikes, setting up a game or watching a movie.Weekly fun is almost nothing if you join a group or adult team.San Francisco's SF FunCheap.com is a website devoted to free activities.You can search online to see what's in your area.
Step 12: The purpose is to shop with a purpose.
Before you go to the store, make sure you know what you're buying.Making lists of priorities, essentials, and goals will allow you to make the most of every dollar.Do I need this when I buy something?Will this increase my quality of life in a week or a month?You can avoid impulse buys if you come into each store with a plan.
Step 13: If you want to save money, give yourself a goal to strive for.
How do you want to change things if you are living on $20,000 or less?Maybe you want to go on vacation, buy a car, move to a new city, save for school, etc.It will be easier to save money if you have a reason to do so.Saving will be more doable if you give yourself an exciting financial goal.
Step 14: Try to live in a city.
It is difficult to live off of $20,000 a year or less in NYC or San Francisco.In smaller towns, rural areas, and inland cities your dollars go further.You can change the relative value of your income by moving to a city that costs less."Cost of Living Comparisons" provides up-to-date information on prices across the country.When possible, aim for rent to be no higher than $600.A $20,000 a year job has a good financial cap.
Step 15: Nicotine, coffee, and sweets are addictive and should be cut down.
Spending just $3 a day on coffee will add up to $90 a month, or 5% of your yearly income.The price of cigarettes will go up even more.Saving money and budgeting requires sacrifice at the end of the day, and you should find a way to cut out unnecessary expenses.It's a great starting point to cut these habits in half.Whenever possible, find alternative, cheaper habits.Take a walk around the block whenever you get an urge to smoke.
Step 16: To make sure you can pay off your credit cards in full, use them very little.
If you let credit cards run rampant, they will come with high interest rates that will ruin your finances.Use your credit cards wisely as extensions of your budget to manage your money wisely.Know your rates and how they can change.Make sure you understand your terms and interest by calling your bank.If possible, pay more than the monthly minimum.You should stay within 40% of your credit card limit.The interest will get worse if you reach your limit.It's a good benchmark to stay at our below 20%.
Step 17: If you struggle to budget, take cash out of the bank and divide it into envelopes.
A debit card can be dangerous if you keep spending.If you can't hit a budget, take all the expenses out at the beginning of the month and put them in envelopes.You only spend the money where it was intended to be spent.
Step 18: Save 3-6 months of living expenses at all times.
3 is the bare minimum, but many financial advisers suggest going further, saving for at least 12 months.If there is an emergency, you need to be financially prepared.This money should only be spent in emergencies.To get a good number for savings, Multiply your monthly essential and fixed expenses by 3 or 6 months.