If you are on a tight budget, then you need to learn how live within your means. By so doing, you can save, invest and avoid getting into debt. To live on a shoestring budget, you need to be very frugal about your spending.
When you have the money, it can be hard to manage it. But when you have a tight budget, you don’t have an option but to manage it well. If you have a small income, this article will help you get in control of your wallet and make the best use of it. Let’s dive in.
What is a Shoestring Budget?
You probably have heard the term shoestring budget in the streets. Then you could be wondering, what is the meaning of a shoestring budget? A shoestring budget means to do with a limited amount of money for your spending. This normally happens when you have an inadequate amount of money to fund the intended purpose.
Ways to Live on a Tight Budget
If you have a shoestring budget, then you need to figure out how you can live within your means. The following are some tips:
1. Come Up with a Budget
One of the best ways to survive on a shoestring budget is to create a budget. A budget helps you use your money sparingly and wisely. First, you need to figure out your income. then calculate your average expenses and subtract them from your income. Identify needs and wants and strive to spend on needs only. Then set aside some money as savings.
A budget will help you avoid impulse purchases. It will also help you organize your finances and only spend your limited money on essentials only. As such, if you have to live on a shoestring, first make sure you have a budget.
Read more: Why is budgeting important in life?
2. Develop Good Money Habits
The other way to live on a shoestring budget is to create good money spending habits. You need to avoid using credit cards to avoid high-interest rates. Also, keep a calendar of all your bills so that you pay on time to help you avoid penalties.
Other ways that can help you live on a tight budget are minimizing water and energy consumption in your home. This can save you lots of costs. Also, check out for discounts and coupons before shopping. You can also consider buying second-hand products instead of new products to save on costs.
3. Find Ways to Cut on Your Expenses
You need to look at your spending habits. Identify those expenses that take up much of your income. Ask yourself if they are needs or wants. If they are wants, drop them immediately. If they are needs, ask yourself if there is a way you can minimize how much you spend on them.
For instance, if you have a gym membership fee, you can drop it until such a time you are financially stable. You can then redirect such expenses to cater to needs only. This way, you can comfortably live on a tight budget.
4. Build an Emergency Fund
One of the reasons why you could be living on a shoestring budget is because you don’t have an emergency fund. An emergency fund is important and can help you in case of unprecedented life curvatures such as loss of a job or emergency medical bills.
An emergency fund cushions you against unexpected financial requirements. A good emergency fund should cover your living expenses for at least six months. Note an emergency fund is different from savings.
5. Avoid Consumer Debts
You also need to avoid debts if you want to live on a shoestring budget. It is because debts come with hefty interest rates that you may not be in a position to cope up with. Besides, consumer debts can make you slide into a debt trap; taking up new loans to repay existing debts.
Some of these debts may include car loans, student loans, or credit card loans. When you have many debts, the lesser your income is. With many loans, you will be getting a very small income that may not meet your expenses.
6. Find a Side Hustle
Finally, to live on a shoestring budget, you need to find some other source of income. You don’t have to rely on your income alone. This can complement your income and meet some of your expenses. Some of the side hustles you should consider include freelancing, blogging, or starting a YouTube channel.
There are many online jobs that can help you get an extra coin. If you don't have the skills, and you are interested, you can take an online course, most of which are free.
How to Save Money on a Shoestring Budget
If you are on a shoestring budget, it is still possible to save. You just need to come up with a budget, list all your expenses, and then set aside 20% of your income for savings. Make sure to stick to your budget and avoid impulse purchases.
Also, taking up side hustles can raise your income so that you have enough to save. Avoid debts like credit card debts and make sure to spend on needs only. Redirect funds you would have otherwise spent on unnecessary wants to savings.
Read more: Why is saving money important in life?
How to Invest Money on a Shoestring Budget
You can also invest while on a shoestring budget. Investments help you grow your wealth and create a residual income. You can use a percentage of your savings or income to invest. There are several low costs investments you can consider like robo-investing and 401(k) retirement accounts. You can also invest in shares and stocks.
Summary of Shoestring Budget
Living on a tight budget can be stressful. But, with careful planning, you can live on a shoestring budget, save and invest. You need to look at how you spend your money, how to cut on unnecessary costs, and set aside some money for savings. You can then use your savings to invest. Living on a shoestring can teach you excellent money habits that can help you achieve financial freedom.