Young couple budgeting together.

How To Survive On A Low-Income Budget

Andrew Dehan8-minute read
January 11, 2022

With the financial independence, retire early (FIRE) movement on the rise, many individuals are curious about how they can survive on a low-income budget. From extreme savings tactics to complex investment strategies, many pre-retirees are looking for ways to accelerate their savings while maintaining a comfortable lifestyle.


Even if you don’t want to retire early, cutting back on your spending can help you achieve your vision of financial success. Whether you’re in the process of paying off debt, making a humble living or wanting to retire early, here are a few tips and tricks for surviving on a low-income budget.  

Analyze Your Current Budget

Before discussing tips for living on a tight budget, you’ll need to evaluate your current spending habits and money management efforts. Start by estimating your monthly take-home pay. Your income may include your salary, proceeds from your side hustle or any other income stream you have. If you don’t have a consistent income stream, do your best to estimate an amount.


Next, make a list of your fixed expenses. These expenses will include your mortgage payment, car payment, utility costs and any other expenses you pay on a monthly basis.


Finally, make a list of your variable expenses. These expenses could include everything from your trips to Starbucks to shopping trips at your favorite website. It may be best to separate your expenses into categories. This will help you with the next steps.


After you’ve made a list of your expenses and income, write down your monthly savings amounts. Your savings allocations include your contributions to your 401(k) or to your IRA account. Including your overall savings percentage into your budget will ensure it’s accounted for when prioritizing your financial goals.


Once you’ve entered your budget information into a spreadsheet, you can then evaluate where your money is actually going. This is your opportunity to make adjustments and highlight areas you may need to cut back on. A good rule of thumb for determining where your money should go is to implement the 50/30/20 rule. This rule recommends putting 50% of your income toward necessities (rent, food and utilities), 30% toward wants (entertainment and dining out) and the remaining 20% towards your savings goals (contributions toward retirement accounts and an emergency fund).


To make sure you stay on track, you may want to consider using a low-income budget planner. A low-income budget planner can track your spending habits and ensure you’re making progress toward your goals.

Monitor Your Credit Score

In addition to creating a solid low-income budget, it’s essential you monitor your credit score. To make the most of your money, you need to have a good credit score. Having a higher credit score allows you to get a better interest rate. Ultimately, a good interest rate will reduce what you spend on debts like a mortgage.


In addition to saving money on interest, having a good credit score can help you obtain better terms on loan products. It will also allow you to access better credit cards, receive insurance discounts and expand your housing options. Even if you have less-than-ideal credit right now, you can work on improving your score over time. Using a credit monitoring tool is a great way to watch and improve your score.


If you don’t know where to start, use the Rocket HQSM Credit Monitoring tool to guide you. Using this will enable you to discover how your credit score and finances can work together to ensure you make the best decisions possible.

Prioritize Your Financial Goals

Now that you know where you want your money to go, you can begin prioritizing your goals. Living on a low-income budget can make it a little more challenging to achieve your financial goals all at once. You don’t want to splurge on an item only to discover you no longer have funds for groceries this month. That’s why prioritizing your goals is important. Doing so will allow you to prosper while living on a tight budget.


Make a list of your financial goals. Then prioritize them and budget accordingly. For example, if your car is 15 years old and you’re considering purchasing a new one, buying a new car may be at the top of your priority list.


Another thing to consider is establishing an emergency fund. According to the Federal Reserve, almost 40% of Americans would have to either borrow or sell items to be able to afford a $400 emergency expense. Having an emergency fund set aside will give you peace of mind and stop you from going into debt over an emergency expense. If you don’t already have funds set aside for these types of expenses, you should prioritize this financial goal.

Minimize Expenses

After you set your financial goals, you can begin reviewing your budget. Take this opportunity to review areas where you can cut back on your spending habits and expenses. Here are a few suggestions for minimizing your expenses:

  1. Lower or cancel your cable bill. Many consumers are cutting the cable cord and using a streaming alternative. If you find cable isn’t a necessity, it may be time to cancel your subscription. If you’re not ready to go without cable, you may be able to contact your service provider to lower your cost or service.
  2. Carpool to work. If you live close to a coworker who’s willing to carpool to work, you could save money on your car maintenance expenses and gas. Not only will you save money, you may also build a relationship that didn’t exist before.
  3. Request service fee reduction. Many service providers are willing to reduce your service bill if you’ve been a loyal customer. For example, you may want to contact your cell phone service provider to see if they have options that are less expensive than your current plan. The number of companies willing to lower your bill is surprising.
  4. Reduce your energy bill costs. Reducing your energy bill is easier than you think. There are plenty of ways to reduce your energy costs. All you have to do is get creative. You can do this by installing CFL or LED lights around your home or installing a programmable thermostat. Keep in mind that little adjustments go a long way.
  5. Cancel subscription services you no longer use. Do you have a Spotify and Pandora subscription? If you don’t think you need both, it may be wise to cancel one. Review all your subscriptions and cancel any that you haven’t used in a month or longer.
  6. Cook most of your meals at home. Cooking your meals at home not only saves you money but it also helps you maintain a healthy lifestyle. The more you plan, the better you can budget for your grocery bill.

Create Positive Spending Habits

Creating positive spending habits can help you survive on a low-income budget. When you spend your money wisely, your money can go a lot further. Breaking your bad spending habits will help you prosper even if you don’t make that much money. For example, if you eat out 5 days a week and spend $10 on every lunch, you'll spend $2,600 a year minimum on eating out. If you’re living on a low income, eating out will take a hefty chunk out of your budget.


Instead, you may want to consider packing your lunches. This will save you money while maintaining a healthy lifestyle. Here are some other spending habits you may want to adopt:


  1. Remove your credit card information from your favorite retail sites. Retailers save your payment information so it’s easier for you to check out and spend money. Removing your information will give you time to contemplate each purchase before you overspend.
  2. Utilize the 24 or 48-hour rule. Try waiting at least a day or two before you make an unplanned purchase. Most of the time you’ll decide you don’t even want the item.
  3. Compare item prices before you make a purchase. With the abundance of comparison sites available, it’s wise to compare item prices before you buy anything. Comparing prices will find you the best deal for the item you’re seeking.
  4. Avoid shopping out of boredom. Some consumers shop because they’re bored. Instead, try going for a walk, reading a book or catching up with an old friend.
  5. Use shopping apps to find coupons and deals. Using apps like Ibotta and SnipSnap can save you money on the items you buy on a regular basis. After all, who doesn’t want to save more while putting in minimal effort?


Living on a tight budget doesn’t have to feel restrictive. Adopting positive spending habits can let you live a life of financial freedom and maximize the money you have at your fingertips.

Additional Tips For Living On A Tight Budget

While living on a tight budget isn’t easy, there are plenty of additional ways you can thrive while living on a low income. Here are a few other tips and tricks for surviving on a low income: 
  • Look for free activities. Spending time with your friends and family doesn’t have to cost an arm and a leg. Look for free activities in your community that you can do with your loved ones.
  • Ask for a raise. While asking for a raise may be stressful, it can boost your income over time. If you want to learn how to ask for a raise.
  • Start a side hustle. While you’re trying to cut back on your spending, you may want to also consider launching a side hustle if you have a hidden passion or talent. For example, you may choose to tutor on the side for extra cash if you enjoy working with kids.
  • Replace costly habits with inexpensive ones. Living on a tight budget doesn’t mean sacrificing the things you love. There are ways to indulge without overspending. If you enjoy getting your nails done, take the time to learn how to do them yourself. If you like to travel, plan day trips that fit within your budget. Allow yourself to still participate in your favorite habits in ways that meet your fiscal goals.
  • Plan sequenced reward opportunities. While long-term goals are important, don’t forget to set short-term goals too. When you’ve achieved a short-term goal, allow yourself to celebrate your victory in a responsible manner. Then, return to working toward your next goal. These small milestones will make the stretch between your larger achievements seem smaller and more achievable.
  • Create accountability. It’s more than likely you’re not the only member of your friend group who’s in need of some budget resurrection. Talk to your friends about your goals and the ways you hope to achieve them. Ask them to keep you accountable or join you in your quest for financial security. When you have a strong support system, it’ll allow you to persevere through tough times.
  • Seek out low-cost alternatives to your hobbies. If you love to read, consider visiting your local library instead of purchasing the latest edition. If you’re a member of a gym, look into your local government’s recreation facilities and compare prices. Much like replacing costly habits, finding ways to participate in your hobbies inexpensively is a great way to thrive while reducing your spending.

The Takeaway

It’s not easy to live on a tight budget. It requires individuals to make sacrifices, forgo opportunities and keep long-term goals in mind at all times. Seeking outside help and following the above tips for living on a tight budget will provide you with great reward –living comfortably in retirement.


There’s nothing you should prioritize more than providing a secure future for you and your family. The stress, worry and heartache you’ll save yourself will be worth it. Choose what you needlong term as opposed to what you wantshort term and reap the benefits of a low-income lifestyle in exchange for a secure future.

Andrew Dehan

Andrew Dehan is a professional writer who writes about real estate and homeownership. He is also a published poet, musician and nature-lover. He lives in metro Detroit with his wife, daughter and dogs.