Managing your money is difficult enough on its own, let alone when you only have enough to cover your bills. And, with inflation threatening to squeeze even more of your earnings, you’re wondering how you can make the most of a tight budget?
Below are some clever ways to work with a limited amount to spend and stretch it.
1. Find the Right Budgeting Method for You
The first step towards maximizing your budget is to plan where every dollar goes. There are several budgeting methods to help you track your income and expenses. One of the most popular is the 50/30/20 rule: you set aside 50% of your income for needs like groceries, housing, utilities, and loan payments, 30% towards wants or non-essentials, and 20% for savings or other financial goals.
A budget is a tool to guide you, not restrict you from enjoying something fun or treating yourself once in a while. Sometimes, your essentials may exceed the 50% threshold, and that’s fine. Consider using an app to monitor your spending if you’re tech-savvy; otherwise, a spreadsheet will do.
2. Automate Savings
Trying to save is difficult when you always have little left, so do the reverse and set aside funds for your savings first. Ask your employer if they can deposit a portion of your earnings into a separate account, preferably an account with high-yielding interest. Also, set up automatic contributions if your company has an employer-sponsored retirement plan.
By automating your savings, you put away money effortlessly. Plus, you likely won’t miss what you don’t see.
3. Review Spending & Reduce Where Possible
If you wonder how you can make the most of a tight budget but feel overwhelmed, start by looking closer at your spending. Then, figure out areas where you can save money by removing unnecessary expenses, switching to a less expensive option, or changing your habits.
For instance, consider canceling your cable subscription for a more affordable but diverse video streaming service. How about opting for a prepaid phone plan instead of a recurring monthly plan when you’ve cut back on usage?
As for your food expenses, try cooking your meals more often instead of opting for take-outs and deliveries. Also, switch to canned fruits and vegetables since fresh, organic produce costs more.
If your utility bills are high, you may be wasteful in your electricity usage. However, little changes like adjusting the thermostat, cutting back on laundry days, or running full loads on your dishwasher can slowly add up to reducing energy consumption and your monthly bill.
4. Compare Insurance Rates
Learning how you can make the most of a tight budget doesn’t mean skimping on essentials like insurance. It may be tempting to decrease coverage or increase deductibles to lower your premiums. While you save a few dollars doing so, you may not feel the same way if something happens to your home or car that disrupts your finances.
Instead, it’s more financially savvy to shop around for competitive rates on your auto and homeowner’s insurance. If you plan to stay with your current carrier, ask for discounts you may be entitled to, such as discounts for being accident-free or bundling your auto and homeowner’s coverage. Otherwise, you may be better off switching to another company.
5. Work on Paying Off Debt
Many people carry balances on their credit cards, and while that isn’t a bad thing, not paying in full and on time every month eventually takes its toll on their finances. Instead, avoid high interest and late fees that could’ve been saved or used for other essentials by paying off your balances as quickly as possible.
If that sounds impossible at this time, consider restructuring your credit card debt into a more manageable repayment scheme. Ask your provider for available options or look into balance transfer programs—you may have to pay additional interest for the entire balance. Still, doing so will put less strain on your budget.
The same can be said if you have an existing mortgage. When mortgage rates are low, it’s best to refinance your loan to save thousands of dollars over its remaining term. Even though the new transaction will have closing costs, the opportunity to pay lower amortization still outweighs the added expense.
A Tight Budget Doesn’t Have to Be Limiting
Once you learn how you can make the most of a tight budget with the above tips, you will find it liberating instead of limiting. Remember that money management is a life-long practice. But if you fall short of funds, you can always seek help from Power Finance Texas.