How to Budget When You're Broke

When times are tough as they are right now, budgeting is vital to keeping your financial head above water. We’ll show you how to budget when you’re broke so that you can minimize expenses and keep more money in your pocket.

The money-saving ideas we’re listing here can help you save hundreds or thousands of dollars every single month.

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How to Budget When Money is Tight

Budgeting under normal circumstances is different than creating a special budget when you’re broke. Your “broke” budget has to find a way to cover all your needs without leaving you in the red.

Here are some tips for making a budget when you’re short on cash.

1. Challenge. Every. Expense.

Yes, I said every expense. If you’ve already got a great budget in place, you can use that as a starting base.

If you don’t have a budget in place already, you can use our free monthly budget printable to make your first budget. Our free Budget Binder Organizer can help you get seriously organized as you make or modify your budget.

So, after you’ve got your list of expenses within your budget, it’s time to go through that list one by one.

As you go through the list, I want you to work to reduce or eliminate every single number on that list.

How Can I Reduce My Expenses?

It probably feels like all of your expenses are expenses you need. But if you look closely, you can usually find a way to eliminate some of your expenses–or at least reduce them.

Work to Get Lower Insurance Rates

For example, you can call around and get quotes for auto and home insurance to see if you can find a better rate. I called GEICO and saved over $450 per year on our insurance.

Money savings: $37.50 per month

Cancel the Gym Membership

What about expenses you are simply used to having but really don’t need. How about cancelling your gym membership and working out at home or outside? I did this last year.

Now I run, walk, hike and bike outside. I do inside exercises at home, such as strength training (use your body as resistance, such as with push-ups), yoga, pilates and stretching.

Money savings: $65 per month

Reduce Salon Expenses

Salon expenses can be a big part of a budget, especially if you’re a woman. Here are some ways to potentially reduce salon expenses.

learn how to do DIY manicures and pedicures
find a cheaper salon
go to the salon less often
choose less costly services: i.e get a partial foil instead of a full foil
do at-home facial and exfoliating services
start with a professional eyebrow wax and then maintain by following the esthetician’s lines
clean up your diet and eat more whole foods to enhance your natural beauty

I live in the Midwest where salon services are less expensive than on the East or West coasts, but I still save a lot of money by using the tips above.

Money savings: $75 per month or more

Cool it on Utility Usage

If you’re paying for electric, natural gas, water, and trash expenses, you can cut costs in those areas rather quickly.

Start by shopping around for cheaper trash service or seeing if you can get by with smaller bins, which typically cost less.

Second, put a household rule in place that all members are to cool it on electricity, natural gas and water usage. Adopt a scarcity mindset and pretend that your access to these utilities are limited.

For instance, only use lights and other electricity when you absolutely have to. Turn water on lower when brushing teeth and doing dishes.

Wash all of your clothes in cold water and hang dry more items.

Money savings: $80 per month

Reduce Transportation Costs

Now it’s time to tackle transportation costs. Here are some ideas.

You can start by trading in or selling your newer vehicle for an older one you can pay for in cash. Now, this might take some time. After all, you want to find a vehicle that’s in decent shape.

You also want to ensure you’ve got $1,000 or so set aside for repairs to the used vehicle you purchase. That way if you find unexpected issues, you’ve got the cash to pay for it.

Hypermiling/Combining Trips

Now that you’ve got a cheaper car and have reduced or eliminated your car payment, it’s time to reduce your gas costs.

Hypermiling is driving in a way that maximizes your car’s gasoline consumption. And when you combine trips so that you’re using your car less, you’ll save money on gas too.

Carpooling with friends or taking public transportation to work will help cut down on transportation costs as well. Walk or bike to work if it’s a reasonable and safe option.

Money savings: $200 per month or more

Now that you’ve challenged some of your typical monthly expenses, let’s look at some other ways to save money on your budget.

2. Reign in Discretionary Spending

Budget line items such as groceries, personal items, and entertainment costs are fluid expenses that typically vary every month. But you can find ways to cut down spending in those areas too.

There are money-saving hacks that you can use to save money on almost all fluid expenses. Here are some ideas.

When dealing with discretionary expenses, it can be helpful to use a cash envelope budgeting system.

Basically, how that works is that you decide your monthly budget for the specific area. Then you take that amount out in cash.

So, if your grocery budget for the month is $500, then you take $500 out of your checking account. If your entertainment budget is $100 a month, you take $100 out in cash.

You put each category’s cash in its coordinating envelope. Then, when you need to spend money in that area, you take the cash out of the envelope.

When your money in a given category envelope is gone, you’re done spending in this area.

For this reason, it’s important to be very disciplined as you spend. After all, you don’t want to run out of groceries halfway through the month because you went crazy at the warehouse club one weekend.

Spend Less on Groceries

In order to help you spend less from your grocery envelope, follow these tips:

make a weekly menu plan
only buy what you need
only buy what you’ll use
avoid food waste by exercising portion control when you cook
plan your menu around the sales
try to minimize purchases processed foods
make homemade foods where you can and buy fruits and veggies as snacks

Knowing which stores have the lowest prices is important. In our area, shopping at Walmart and Aldi helps us save money on food expenses.

The key: buy unprocessed food at low prices, make a (cheapish) meal plan and stick to it. This will help you avoid take out meals and restaurant runs.

It’ll also help you avoid an out-of-control grocery budget. Another tip? Make your favorite restaurant meals at home.

Money savings: $100-$500 per month or more

Opt for Cheap or Free Entertainment Activities

Another area that will really kill your budget is entertainment expenses. You know the deal: movie nights, restaurant meals, bar nights, and all of the other “play time” expenses we manage to spend money on.

Dump them. You’re broke: now’s the time to focus on how you can avoid spending money at all costs.

Instead, opt for free or cheap entertainment activities. Here are some ideas:

have a movie night at home
go for a walk, hike or bike
look through old photos and videos
play board games, card games or other games
have a potluck dinner or picnic with friends
go to a local beach
sled at a local park in the winter
go visit a friend or family member
visit a free local museum or historical site
do a search on your state’s tourism website for free options

The point: There’s lots of stuff to do even if you don’t have money to spend. Your entertainment life might not be as exciting as you’re used to, but you’ll be a lot more excited when you’re finding an improved financial situation.

Money savings: $200 a month or more

Go on a New Clothing Fast

If you’re short on cash, it’s helpful to choose not to buy any new clothing unless absolutely necessary. Stick with the clothes you have–even if they’re not exactly the latest fashions.

If you absolutely have to buy a new outfit, check online sites like Poshmark and check your local thrift store.

Otherwise, work with what you have, borrow back and forth with friends and find new ways to wear some of your current clothing choices.

You need clothes, but you don’t need to spend a lot to have them.

Money savings: $100 a month or more

Summary

If you’re broke or on a really tight budget, there are things you can do to save money and minimize expenses.

After all, you don’t want to come out of this tight money situation with an extra burden of consumer debt.

Instead, challenge every line item on your budget by trying to reduce or eliminate it. You’ll be surprised at how much money you can save!

How to Budget When You’re Broke