Saving & Budgeting on a Low Income

Saving & Budgeting on a Low Income
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Every penny counts when you’re living on a low income. While it is more challenging to maintain financial stability when you have limited funds to cover expenses, it is certainly possible. Closely monitoring your spending habits and always looking for ways to save money can help you to live within your means successfully.

Create a Budget

Track your expenses to determine where your money goes each month. You may realize you’ve been spending more money than you thought in a category such as food, so you can use this information to make necessary cutbacks. Creating a budget allows you to gain control of your money, so you’re only spending what you have. Monitoring your spending closely may also allow you to have a few extra dollars at the end of the month to put in savings.

Seek Out Coupons and Sales

Stretching a low income isn’t easy, so it’s important to take advantage of money saving opportunities. When possible, wait until a store is having a sale before making a purchase. Clip coupons to save extra money on items. This may require some extra planning time, but it will help you to maintain your financial health.

Create an Emergency Fund

While the general rule of thumb says you should have the equivalent of three to six months of your salary in savings, this may not be realistic for you. Instead, start small by saving anything you can. Having extra money in the bank allows you to avoid putting extra money on a credit card if your car breaks down or you incur an unexpected medical bill.

File for the Earned Income Tax Credit

If you earn an income, file for the Earned Income Tax Credit. This is a refundable federal income tax credit for people earning a low-to-moderate income. When the Earned Income Tax Credit is greater than the amount of taxes owed, you receive a tax credit if you qualify. You must meet certain requirements to qualify and you must file a tax return. The IRS estimates that one-fifth of people who qualify for these credits do not claim it.