tight on budget

Best Plan for Thriving on a Tight Budget

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Preparing a budget can be boring and hard to stick with. But when we’re constantly stressed about our finances, preparing a budget is among the best solutions to this problem. 

If you start asking why budgeting is important, think about what happened during the pandemic when people who thought they had a steady job found themselves unexpectedly losing theirs. Others had their hours cut, so they weren’t bringing the normal income they’ve come to expect. 

During uncertain times and situations where money is tight, creating a monthly budget can help prevent you from accumulating debt, getting behind on your bills, and help you find the money. You can learn more even if you are running tight on budget; you can make it work. 

Making it Work on a Tight Budget

Few people have a formal budget that they stick to each month. These financial habits have helped countless people reach their goals of becoming debt-free, paying for their children’s higher education, saving for retirement, and purchasing a home. 

Many of these success stories are from those who were tight on budget and slowly worked on cutting expenses to improve their situations. So if you’re tired of living paycheck to paycheck and are an unexpected expense away from financial problems, working on these financial habits should be your focus. 

Think of it this way: When you want to lose weight, you need to start eating healthier and working out regularly. If you want to improve your financial situation, start creating a monthly budget and sticking to it are the measures you need to take. 

We’re going to walk through the steps of creating the 50-20-30 budget rule. This budgeting method is beneficial for those who have debts to repay. It isn’t complicated or overly detailed, making it a simple rule that’s much easier to follow. 

50-20-30 Budget Rule

Harvard bankruptcy expert and US senator Elizabeth Warren came up with this budgeting method with her daughter, Amelia Warren Tyagi. The rule originates from the book “All Your Worth: The Ultimate Lifetime Money Plan,” published in 2005. 

The 50-20-30 rule simplifies budgeting by taking your after-tax income and dividing it into three spending categories – needs, wants, and savings or debts. It’s much easier to stick to a budget when you know how much you can spend in each category.

Fifty percent of your money will go towards your needs. These are all the expenses that you can’t avoid because it would be difficult to live without them. Items included in your needs will include:

  • Rent or mortgage payments
  • Electricity and gas bills
  • Transportation
  • Insurance for healthcare, car, etc.
  • Basic groceries
  • Minimum loan repayments

If these expenses exceed your 50 percent, you should look for ways to spend less in these areas. Cutting expenses could look like renting a cheaper apartment, shopping for lower insurance rates, carpooling or riding the bus, etc. Basic groceries are items like milk, eggs, and bread that are staples in your daily diet. 

Thirty percent of your money is spent on your wants. These are non-essential expenses that you choose to spend money on. These expenses include:

  • Eating out
  • New clothes and shoes
  • Gym memberships
  • Streaming services like Hulu, Netflix, and HBO
  • Groceries that are outside of essential food

When listing out these wants, you may uncover that you’re spending too much on them. Even on a tight budget, it’s not about getting to enjoy fewer things in life. You’re simply finding ways to stop overspending on your budget, which will make your life more enjoyable. 

Think about how you could cut back on these wants. Anything that you can’t live your life without is a need. Everything else is a want. Ask yourself whether you can live without that something if you’re having a hard time deciding if something is a want or need. 

Twenty percent of your money goes toward your savings or debts. It’s up to you whether to put this towards a certain savings goal (invest emergency fund, retirement, down payment, etc.) or with paying back outstanding debts you’ve incurred. You could also do a combination of the two. 

Keep in mind that these debt repayments go beyond the minimum repayments on your debts. These are extra repayments that will reduce your debt and interest. Because having an emergency fund can keep you afloat in unexpected circumstances like a job loss, you should consider making this goal a priority here.

Now let’s put this all together in an example of this budget rule at work. Let’s say you have $4,000 in after-tax income. $2,000 of your income will be allocated towards your needs, $1,200 will go towards your wants, and $800 will go into your savings goal or debt repayments.  

Steps to Create the 50-20-30 Budget

Many people spend too much and aren’t even aware they are doing it. Using the 50-20-30 rule, you can become aware of these spending habits that are affecting your finances. The budgeting method also helps you find money to save for a rainy day. 

To use this budgeting method, follow these four steps:

  1. Add up your monthly income. You should be able to see how much you are earning on each paycheck from your bank account. If you’re self-employed, be sure to reduce your monthly income according to your estimated taxes. 
  2. Calculate your spending for each category. To do this, you’ll multiply your take home-home by 50% for needs, 30% for wants, and 20% for your savings and debt repayments. This represents how much you should be spending in each of these categories.
  3. Budget according to these numbers. Now fill up these three categories into each of the expenses that they fall in. Find these expenses by looking at previous credit cards and bank statements and putting each line item into these categories. If your spending exceeds these categories, look for ways to adjust your expenses. 
  4. Start following your budget. Now it’s time to put everything into practice. Keep track of your expenses and adjust accordingly when necessary. 

Ways to Save Money When Things Are Tight

With a tight budget, saving money is very important. So finding ways to save a little money here and there can help! It’s actually much easier to do this than it sounds like too. With a little effort, you could start saving money quickly. Here are some tips on ways to save below.

Shop for Less on Groceries

The grocery store is where many of us find ourselves spending more than we planned on. Make sure you avoid a trip to the grocery store on an empty stomach. You’ll be more likely to pick up things that “sounded good” at the time.

Always make a list of what food items you plan to buy. Don’t deviate from this list. Take the extra step to plan out the family meals for the week. That way, your list is representative of your week’s grocery expenses. Check for specials and coupons that you can use for weekly meal planning. 

Opt for store or generic brands that are typically much cheaper without trading off quality. It might be a good idea to switch grocery stores. Places like Aldi have good quality food for lower prices. 

Change Your Cell Phone Plan

The cell phone companies are competing hard for customers, so you might as well take advantage of it. Check out the latest cell phone deals that offer what you need for less. 

Costco, Best Buy, and other retailers that sell on behalf of phone carriers may also have deals that differ when you also need a new phone. Talk to your service provider and find out how you could reduce your cell phone plan without losing the features that you need. Some may offer a special retention offer to keep your business if you discuss cancelation.

Cancel Subscriptions

The subscription model goes far beyond the gym industry. Which by the way, if you barely make it out to your gym, you should cancel your membership. There’s also a lot of fitness programs that you can do at home with little or no equipment. 

Subscribing to several streaming services adds up to costs that start to rival cable. Cancel streaming services that you don’t use or choose one to at a time to subscribe to. 

Use Cash Instead

You can’t pay your mortgage or insurance in cash, but many other expenses use cash. Using cash has been tied to spending less money because of the physical aspect of using it on a purchase. Swiping our credit cards doesn’t have this effect. 

Becoming more aware of your choices will make you rethink what you’re spending on that lunch out with your co-workers or putting the snacks back when at the movie theater. 

Pay off Debt Faster

Getting rid of debt frees up your funds that can be used in other areas of your budget. High-interest debt like the ones found on credit cards can make repayment longer. 

Work on paying down your high-interest debts as quickly as possible to save on these interest charges. If it’s an option, consider transferring these balances to a credit card that offers a 0 percent introductory rate. 

Make sure that you check out how long the intro period is and do the math to figure out if you can pay it off in that timeframe. The interest rate after this intro period typically jumps to double digits. 

Find the Ways to Make Extra Money

Saving money on your expenses is a great way to create space in your income. But sometimes, you just need to make extra money to pay for things and put towards your goals (i.e., invest emergency fund or downpayment savings for a new house). Here are some ideas on ways to increase the cash flow in your budget by making more money:

Drive for a Ride-Sharing Company

Uber and Lyft are among the most popular ride-sharing services out there. You need a car in good working condition and must pass a background check and review of your driving record. But this process takes less than a week. 

What’s great about driving passengers around using these platforms is that you can choose when to work. If you want to spend a few hours after work driving people around or stick to weekends, it’s up to you. Make sure that you account for gas and maintenance costs when becoming a driver.

Work Seasonal Jobs

If you need a little spare cash for a few months or during the holidays, get a seasonal job. Working as a lifeguard or as a helper at a retailer during the holidays are possibilities. Since these jobs are only during these busy seasons, you’ll want to be looking for them a month or two beforehand. 


Watching children is a flexible way to earn extra money that can be enjoyable too. Ask around your friends and family to find out if they know anyone who’s looking for help. You could also post your availability on Facebook groups or the Nextdoor app. 

Deliver Groceries or Food

Instacart is a grocery delivery service that uses gig workers to help people get their groceries. You can get started quickly and will enjoy the freedom to work as little or as much as you want. The hourly wage on these services does tend to cap out soon. 

Another option is delivering people’s food orders from restaurants. If you live nearby several restaurants, this could be a nice side hustle. People can also tip, which you typically get to keep all of. 

Become an Online Tutor

Another job you can choose the hours you work is by becoming an online tutor. The additional bonus is that you don’t have to leave your home to become one. You’ll need to have a desire to help others learn different subjects to be successful. 

Learning English is a popular subject among international audiences. As long as you’re a native speaker and have a college degree, you could quickly get started on this type of tutor.

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