How to Save Money on a $12/hour Salary

Budgeting your money may be the last thing on your mind right now but it doesn’t have to be painful! I went from knowing nothing about budgeting to using a monthly and yearly budget that I update regularly, and if you’re anything like me you like to spend money!

The steps below will help you learn how to create a budget manually. You can also sign up to use a digital option to see your finances electronically. I am a visual person so seeing charts and graphs help me better understand my finances.

Step 1: Calculate Your Monthly Income

To begin the process of budgeting you’ll first need to know how much you make each month. Make a list of all your income in your budgeting tool (whether it be in a notebook, or on an excel sheet). Your income is what you’ll subtract your expenses from.

For most people, this step is simple cause you work a regular 9-5 job so you have a set salary. But, if you’re a business owner or freelancer you will have income coming in from multiple sources. If that’s the case try your best to estimate what your monthly income will be for the month. If your income is inconsistent, take the average of the last 3 months income and use that as you income.

Step 2: Add your fixed monthly expenses

Next, add all of your monthly expenses into your budget. First make a list of all fixed expenses such as, car payments, loans, rent, water bill, etc.

If you’re not sure what your expenses are since you haven’t budgeted before, go into your accounts online and look at your statements from the last 1-3 months and use an average number. Depending on how messy your finances are, this task may seem daunting. But it’s really important to use as close to exact numbers as possible, as it will make your budget more accurate.

Step 3: Set financial goals

After factoring in all your fixed expenses for the monthly, you should start to set financial goals. This step may seem premature since you are just starting your budget but it’s important because it will help you plan and prioritize what’s important to you. It will also help break the normal day-to-day spending.

So begin by writing out your financial goals. If you’e never done this before a good place to start is by looking at the vision you have for your financial life. Do you want to be financially successful? Do you want to have wealth? Do you want to be debt free? Do you want to go on a trip this year? Think about what you want in the ideal and think about where you are right now. Then, determine your personal financial goals that you want to set for the short-term (under a year) that you’ll include in your monthly budget.


Get out of debt

Build a 3-6 month emergency fund

Save for a house down payment

Start planning for a baby ( this was my short-term financial goal as we are expecting in June.)

After you have written down your financial goals, begin to think of them as “expenses” and enter them into your budget. By thinking of your goals as expenses, you’ll pay them monthly. This will get you into the habit of saving for your financial goals, which is necessary for financial success.

Step 4: Determine Your Discretionary Expenses

Now that you have added all the essentials and financial goals you can start adding the extra stuff. This comes third on the priority list because it goes to luxury things like entertainment and shopping.

Your discretionary expenses are expenses you currently pay for, but they are not essential. Examples of these expenses are things like dining out, gifts, personal care, and clothes. These are costs that can be adjusted or eliminated all together from your budget.

Step 5: Subtract your Income from Expenses

And finally it’s time to start subtracting your expenses from your income. When you’re finished if you have a positive number that means you make more money the you spend. YAY! Now you can go back to your budget and adjust the numbers accordingly. If you have a surplus of hundreds of dollars you could decide to put more into savings or make a higher debt payment. The point of making a budget is to give every dollar a mission, if every dollar is planned out and has a place to go your budget will be more successful.

If you break even it means you have exactly enough money, with no margin. You may want to give yourself a little margin in the discretionary category, in case something comes up you didn’t plan for.

If you get a negative number, this means you are spending more money than you make. In this case you will need to adjust your budget by decreasing some of your discretionary expenses or find a way to increase your income.  For example, it is unwise to go on a vacation when you don’t even have an emergency fund.

Whatever your number may be, there is power in knowing, and it’s the first step in planning for financial success.

Step 6: Implement, Monitor, and Adjust

Now that you have calculated your monthly income, made goals, determined expenses, and added in the extra stuff it’s time to put the budget into effect! YAY!The first couple of months may be difficult since you’re not used to keep track of your expenses so vigorously but as long as you keep with you’ll keep improving! Try different methods for keeping track like writing it out and putting it on your refrigerator, or keep track of it through your calendar app on your phone so your budget is always with you. Whatever method you find most effective, never get discouraged.

In Conclusion!

Budgeting may make you feel restrictive but it will help you break the paycheck to paycheck cycle and you will start reaching goals you never thought was possible! Whatever your financial status may be at the time you should start a budget now so you can live the life you always wanted to later 🙂

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