Make your low income a tool for building wealth with this one rule.
Budgeting a Low income is simpler than you imagine. But with so much ease of access online today, it is almost impossible to successfully budget your low income if you do not know this #1 rule. And when you do learn it, it will suddenly seem so obvious. Yet, as someone working in retail, I see many people failing to follow it.
Are you ready for it? The #1 rule for budgeting a low income is to use a cash-only system.
In other words, tuck away all debit and credit cards, turn your paycheck into cash and use that as your only form of spending.
If you must make a payment online, deposit the exact change you need onto the respectful card.
Here is why this is the #1 Rule:
Disclaimer: I am NOT a Financial Advisor, Planner, or Counselor. Hence, the information presented here is NOT professional advice. It is my own opinion and exists only for educational and informational purposes.
1
Credit cards equals borrowing money from others.
When you see your credit card for what it truly is, the desire to use it will begin to fade. Nobody genuinely enjoys borrowing money from others. People don’t even dare to ask their neighbors for salt.
Failure to pay on time can mean having to pay interest.
Using a cash-only budget puts you in a position to stop spending when the money runs out, which is already so much better than spending money that you do not have and isn’t yours to spend.
2
Debit and credit cards have lots of fees attached to using them.
Working behind a register allows me to see first-hand how many people lose money by using a card instead of cash.
There are tons of fees that come with using a card for purchases. You may have:
- Reload fee
- Monthly holding fees
- A fee per transaction on the card provider end
- A fee per transaction on the store end
- Overdraft fees
- A purchase minimum before you can use the card to make a purchase (forcing you to spend more than you desire)
- A charge if you do not hit a specific amount of purchasing transactions each month
Additionally, many stores attach items on sale to cash-only purchases because they also must pay a fee to the companies whose debit/ credit card machines they are using. Therefore, they do this to avoid losing money through both the sale and the charge per transaction.
The companies that provide your debit or credit card are businesses that need to make a profit themselves. Hence, they must charge these fees (but maybe not so many?!).
It is on you to decide whether their product fits into your current financial needs.
3
There is no overdraft using cash.
An overdraft is never good. It either pulls money from an account that you did not want to touch, or the card issuer charges you for covering a part of your payment.
If you are using hard cash to make your purchases, you may find that you struggle to part with all the money at once. Or, you spend only the cash you have because that’s it- it’s all the money you have.
4
It encourages financial creativity.
The beauty of this #1 Rule for budgeting a low income is the fact that you have a limited amount of money and so much to do with it.
You won’t have a choice but to get creative with ways to cut back on spending so that you can get more value for your buck.
You will find yourself saying lots of no to paid options and more yes to Free, homemade, and DIY. All of which are great. Sometimes even more fun than the paid options.
No doubt that sometimes you will feel frustrated. But once you figure it out, you will be so proud of yourself and your newly discovered budgeting skills.
5
You can physically control your spending.
Finally, you get to say what you pay for and how much. You are not spending whatever the bill adds up to when you get to the register. You already know beforehand how much cash you have, and therefore you can pick up only the amount of items that will keep you on budget, no more.
To recap, the #1 rule of budgeting a low income is to have a cash-only budget. It exists to help you cut out the unnecessary and spend your hard-earned money more intentionally. Take a break from all the cards and extra fees and allow yourself to take charge of your finances.
A successful low-income budget starts with cash and ends with you.
Good luck on your financial journey and thank you for reading!
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