In a perfect world, budgeting would be easy. You would earn enough net income to cover every need, afford some wants and have a little cash left over to save or invest. But in a not-so-perfect economy, your monetary situation might be a bit more irregular. You could be on a strictly part-time schedule, between jobs, work on a contract or hourly basis or living paycheck to paycheck.
If you find yourself in a low-income situation, it's important to make every dollar count. That means making sure you have enough money to cover your monthly expenses and finding ways to cut back where possible to ensure you don't run out of funds.
Take a look at the following suggestions for how to develop your ideal budget and save money -- even if you're not sure where that money's going to come from every month.
1. Get a handle on fluctuating income.
First determine your average monthly income. Go back over the last few months' pay, and aim for the lowest you've earned to ensure you don't budget for more than you can reasonably afford. By working with your minimum monthly income versus your average earnings, you can build a monetary safety net more conservatively.
2. Tally your monthly expenses.
Add up regular expenses like rent or mortgage, transportation (your car payment, auto insurance and gas costs), utilities, cellphone bill, and credit and debit card transactions. Unlike your minimum income, look for your maximum and anticipate paying that for the near future.
3. Separate the fixed from the variable.
Financial expert Dave Ramsey calls them the "Four Walls:" food, shelter, clothing and transportation. Essentials such as housing and car payments are fixed, which means they'll be the same amount each month; items such as food, clothing and other costs can vary from month to month, depending on your spending habits.
4. See how low you can go.
Avoid overspending (and impulse shopping) on variable expenses -- the ones you can control from month to month, like groceries or clothing. For example, if your monthly income is just $1,400, and your fixed expenses tally up to $1,000, that leaves just $400 left on variable purchases. One solution could be to choose the supermarket house brand over name brands to stretch those dollars further.
5. Take discretion with the discretionary.
How much is that daily Starbucks setting you back? Do you eat out more than you cook in? Can you forgo the landline and keep the cellphone? What about spending on entertainment?
Discretionary purchases can eat up your budget like there's no tomorrow. Just like your fixed expenses, make a list of your wants versus needs, consider the ones you can and can't live without, and see how they fit within your budget. Gather your receipts, add up how much you've spent and decide what spending you can reduce -- or eliminate completely.
6. Control costs with creativity (and coupons).
There are more imaginative, creative ways to have fun and save money than you might think possible. Take a picnic lunch instead of dining out. Opt for brewing coffee at home. Stream movies for free online. Skip the gym membership and exercise outdoors. For the holidays, stock up on gifts when items are on sale. After a few months, your budget will begin to show a better balance, simply from taking a few frugal steps.
It's also helpful to get into the practice of couponing to save money while on a lower budget. The time it takes to print out or cut coupons from the paper is well worth the savings -- and as we all know, time is money.
7. Prepare for the unexpected.
If you're working part time, does your employer offer you health insurance? If not, and your budget is medical expense-prohibitive, consider other ways to slash your major expenses. See if you can downsize to more economical living arrangements. Seek out a roommate to divide the monthly rent. Map out your errands to save gas with fewer trips, and propose carpooling with co-workers.
If these tips give you more financial leeway, think about putting some of the extra cash you saved into a money market or high-yield savings account, and add the interest earnings to your budget.
8. Ramp up your job search.
Continue seeking supplementary and full-time employment. This could mean everything from taking on a part-time job to increasing your hours of freelance work. Boosting your income, through whatever means, will give your budget that much more leeway.
9. Ask for help when needed.
Don't let yourself fall into debt -- and if you are in debt, contact your creditors to see if you can consolidate your debt, obtain a lower interest rate or do anything else to lower your payments.
The bottom line: These tips can be short-term steps toward reaching long-term goals. Remaining smart (and frugal) about your money during a time of reduced income not only helps your budget, but builds better financial discipline.
Paul Sisolak writes for GoBankingRates.com, a source for the interest rates on savings accounts, CDs, mortgages, auto loans and more.
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