At any time in your life, you may find yourself living on very little, perhaps as little as $1,000 a month—or less. You may be on unemployment, public support, or part-time work. Credit cards might not be available, and you might not have savings to hold you over. When this happens, your priorities for your money will have to shift quickly. A standard budgeting tool may be too broad and complex in this case. So, whether or not you are in a low-income situation right now, it is important to understand what it means to budget for essential expenses.
How to Start
Budgeting can be understood according to multiple tiers, for example:
- Survival, where you must meet the most basic expenses and stabilize risks.
- Stability, where you are able to build a financial foundation to reduce vulnerability.
- Growth, where you can start to build wealth and meet your larger financial goals.
In this article, we will focus on survival. The guiding principle in this tier is to focus on what is needed to keep you afloat. In other words, bare necessities over “wants.” It’s not about getting ahead, but rather not falling behind. This stage is often temporary, and planning can help you transition to stability.
Identify Your Income
Start by identifying all your income so you know how much you are budgeting with. This includes income from your job, any self-employment or side gig income, and earnings from investments. You’ll also want to identify any monetary aid you get. This can include disability pay, Supplementary Security Income (SSI), Supplemental Nutrition Assistance Program (SNAP) aid, other government assistance programs such as housing aid or electricity aid, money from other people, etc.
Identify Your Essential Spending
Next, identify what is most essential. Most of us know intuitively what these necessities are. For most, the list is something like this:
- Shelter (rent or mortgage)
- Food
- Utilities
- Medical
- Transportation (optional for some)
Besides paying only for necessities, the survival tier often also involves avoiding any new unnecessary debt. If you can, try to stay current on your minimum debt payments.
You’ll also want to identify any “financial bleeds”—unnecessary fees and other expenses. If you have anything left over after all this, consider building a tiny emergency fund or let yourself enjoy just a bit of luxury.
Construct Your Budget
Let’s look at how to make a budget for essential expenses. As you may have guessed, it’s simpler than most other budgets because it contains fewer expenses. A guiding principle when making a budget is to assign an expense to every dollar you earn so that it goes where it needs to. Here’s an example of a budget:
| Income | Amount ($) |
|---|---|
| Job income (part-time) | $750 |
| SNAP cash equivalent support | $150 |
| Help from family | $100 |
| TOTAL INCOME | $1,000 |
| Expenses | Amount ($) |
|---|---|
| Rent (shared apartment) | $600 |
| Electricity | $70 |
| Phone | $30 |
| Groceries | $160 |
| Bus | $70 |
| Medical expenses | $50 |
| Credit card minimum payment | $20 |
| TOTAL ESSENTIAL EXPENSES | $1,000 |
What You Can Do if Your Income Does Not Cover Your Expenses
It can be hard to get the two in sync. Raising your income is the preferred method here, but it’s not always possible. In some cases, state programs may offer support—such as housing assistance, help with heating costs, or shut-off protection for utilities. Many states also have local health clinics that provide free or sliding-scale services, and Medicaid may be an option for health coverage.
Helpful resources:
- U.S. Department of Housing and Urban Development state information
- Low Income Home Energy Assistance Program (LIHEAP)
- Utility Shut-Off Protection
- Medicaid Health Coverage
The other option is to reduce your expenses. Can you take on another roommate? Sell some things? Cut out extras, deliveries, or subscriptions? You could buy groceries using low-cost staples such as beans and frozen vegetables. Searching online for cost-cutting ideas can provide additional strategies.
Negotiating with creditors for reduced payments or applying for hardship exemptions may also be available for certain debts, including student loans.
Looking Forward
A period of low income rarely lasts forever. When your earnings begin to recover, and you have more flexibility in your spending, you can shift out of survival mode and start building a stronger financial foundation—one that helps reduce future vulnerability.
