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How To Budget On A Low Income

How to organise your finances and save money

How To Budget On A Low Income by using a money jar as a metaphor for saving money
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When it comes to money, we all have things we want to buy and experience. It’s all determined by how much money we have that determines what we get. We all have different levels of income and expenses that control our money habits. Then on the flip side, our habits can control how much money we have. This blog will, therefore be, about how to budget on a low income.

If you had a choice would you rather spend or save? I think like myself, most people would rather just spend it all on whatever they desire. Unfortunately, this will lead to debt. As you can already imagine -a lot of our society is in debt because of their spending habits.

The first step to”How to budget on a low income” would be to understand your expenses.

An expense in simple terms is simply a cost of something. So we first need to determine our expenses monthly and which is a necessity and what is not.

So here is a breakdown of the expenses we have. Firstly just include recurring payments.

The non-negotiable

  • Rent or mortgage payment
  • Gas and electricity
  • Water
  • Council tax
  • Food


  • Broadband
  • Mobile contract or pay as you go
  • Car

Non- essentials

  • Entertainment subscriptions
  • Takeaways/restaurants
  • Gym membership

Everyone’s expenses are going to be different, depending on where you live, your tastes and what essentials you need. This is OK as long as you have a goal in place before you start organising your finances to help save you more money. For example, if you are saving for a mortgage that cost £50k but your expenses are £40k and your income is £45k. It’s going to take you 10 years to save if all the numbers remain the same.

That’s why no matter how much is coming in, your expenses should be a least 50% of your yearly income which frees up more cash to save, invest and freedom to experience amazing moments.

This is so important for your financial mental health. I had a good income in my 20s but my expenses were just about breaking evening which led me to get into debt. The money I was earning and the life I was living was controlling me and led to some dark times. But when I halved my expenses and still kept a good standard of living – I had control back again which gave me the freedom to make better decisions in my life. When your finances control you, nothing good comes from it.

Once you have made a break down of your reoccurring payments every month, now it’s time to list every extra payment you have made in the past 12 months. You might ask why this long? Well, it’s important to find your spending patterns. There you will find what’s eating your money away. (Imagine PAC man-eating your hard-earned cash)

When I did this myself, the pattern I found was eating out. It was the highest overall cost expenditure over the year. You will also find as you go along what I like to call the impulse buys. These are things you buy with your emotions that are a great idea in the moment but hold no long term value. When you look for yourself, I’m sure you will be shocked at some of the patterns you will find.

Once you have,

  1. Calculated your monthly reoccurring payments
  2. Calculated your yearly extra payments
  3. Have a clear goal in place of what you would like to save for

Now you are ready to organise your finances to save you money.

First off when I look at my finances the first thing I would do is tackle my top 2 or 3 biggest expenses. From my experience, most people look to give up on small things first like their twice a week Starbucks or monthly Netflix subscription.

In theory, it sounds great but we are humans and we only get one life. Life needs to be enjoyed and also have some comforts that we choose to enjoy. If you break it down,

Starbucks cost £3p/cup x2p/w = £6 x4 weeks = £24 x 12 months = £288

Netflix £6p/month x 12 months = £72

These amounts aren’t life-changing but you need to look at whether the enjoyment you get from them is worth it or not.

For me when I was doing mine I kept my Now Pass for all sky sports channels at £20 a month which I and my grandad could use. It has brought us both joy when we are relaxing at home. Remember if you’re going to make a real change in your finances you’re going to have to enjoy your life still.

So I looked at my finances and my rent was the most expensive amount by far which is probably the same for you too. For a two-bedroom apartment, we were paying £1000 a month. At the time this was massively eating into our budget and our ability to invest or save money.

We went on search engines like Right move and Zoopla and searched around. When doing this it depends on you how far you want to cut back on your current lifestyle.

The highest saving options are

Shared accommodation

Move-in with parents/family/friends

For us, this wasn’t an option because we wanred to have our own space to call home.

So the standard we were looking for was something modern, accessible to town and trains to London, 2 bedrooms. What we could live without was uniquely designed apartment, en-suite and access to a gym in our apartment block.

We scowled the internet for weeks trying to find a place we felt was the right price and somewhere we would be happy living. The average price of an apartment we would have gone for was about £750 a month which would have put £3k back in our pockets over 12 months. A massive increase compared to giving up Netflix.

Then through sheer luck, we came across an apartment that met our spec but was £550 a month. At first, we thought this must be a ruse and something was wrong with it. We viewed it and it was perfect for what we were looking and a view of the city too. We even had an underground car park as well.

The price of this apartment is nearly half the price of our previous and we saved over a year £5400. This burden of living on the bread line was lifted and the path forward became so much clearer.

To round up, first tackle your highest expense and you will receive your highest return.

Then my next two i tackled was my Electricity and my eating out at restaurants.

I found out my electricity bill was on a standard tariff which is the most expensive tariff a company can offer. At the time I was paying around £100 a month. I then called my supplier and asked them for a cheaper deal. The best that they could offer was £91 a month. I thought that’s not a lot. However £118 saving is, of course a saving but I knew there was better.

Then I came across the comparison site. I put in all my details and clicked the big blue button. Then at the top of the list was a company called Bulb and they could save me a whopping £792 a year. That’s a big difference. So my hot tips are,

  1. Don’t call your supplier to get a better deal
  2. Always do a comparison search yourself

The main difference with calling compared to comparing online is that on the phone they can’t give you a better deal because they have to pay their staff whereas on a comparison site they pay a much smaller fee to the comparison site. So make sure you compare everything you possibly can within your expenses.

My third biggest expense to cut was eating out, and going to restaurants. As much as we loved the experience of going to different restaurants, we thought can we live without it? The answer was a resounding yes. Of course, it was a nice experience but not worth £500 plus a month. So we decided to go out once a month where we lived or if we travel to London. After a year we had saved £5257 compared to spending £6127 the previous year. We were shocked at the money we spent on eating out.

So overall just focussing on our top 3 expenditures we saved £11,449 compared to if we would have focussed on the Starbucks and Netflix we would have saved £360. As you can see there’s a big difference. So make sure you start with the 3 biggest hitters because £11,449 x 10 years = £114,490 in your pocket to be invested in a property, index funds or travelling around the world where you can create life-changing memories compared to none if you didn’t do this.

We all work hard for our money whether we work for ourselves or someone else. Wouldn’t you like at the end of each week, month and year that the money you worked so hard for was put to better use for your benefit than somebody else’s? I think the answer would be a resounding YES! This is why it’s important to manage your expenses as the return you will get is too big not to. I hope this helped you understand how to budget on a low income or even any income you might have.


At Future Mindset, we are here to push the boundaries of our thoughts and actions. By chasing discomfort in our lives, it can lead us to unlock things inside us we never knew was there. Let’s change our mindset to change our future.

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