In this post, I’ll share how I budget on a low income.
I haven’t always taken budgeting seriously. I’ve always been more of a ‘yo-yo budgeter’. I’d go through phases where I’d either stick to a strict budget, or not bother with one at all.
There were times where I’d have my own spreadsheet and I’d track my spending to the exact penny. However, I’d eventually get fed up and delete my spreadsheets, leaving me with no budget at all.
Due to my autism and ADHD, I have never been able to stick with anything for too long. So it was inevitable that I’d get fed up with keeping to a budget and go completely off the rails with it.
I needed something that was more automated where I could take a less hands-on approach, and just make tweaks here or there.
That’s why I started using my current budgeting system. I’ve been using this method for years and it has helped me stay afloat, apart from some stupid financial decisions I’ve made fairly recently.
So without further ado, here’s how I budget on a low income.
The Basics
This setup has been the key to making budgeting work for me. If you’re wondering how to budget on a low income without using spreadsheets or apps, this is how I do it.
I use two separate current accounts:
- Main account – This is where my income goes. It’s my spending account, whatever is left in here after everything else is done is mine.
- Bills account – This is where all my essential expenses get paid from. I don’t touch this money once it’s there.
Splitting my money like this helps me to stop mixing my wants with my needs. As soon as I stopped keeping everything in one account, things started to come together a bit more.
Step 1: Know Your Outgoings
Before I set anything up, I had to figure out what my monthly expenses actually were. That meant sitting down and listing every recurring bill and outgoing.
You should do this every time your circumstances change. For example, if your rent goes up, you upgrade your phone contract, or if your essential expenses change.
These were the expenses I listed the last time I did this. Yours might be different, I’m just sharing mine for demonstration purposes:
- Rent (£390 per month)
- Gas/Electricity (£35-40 per month, I pay my share of the bill with two housemates)
- Bus Fare (£20-30 per month)
- Phone bill (£16.02 per month)
- Spotify premium (£11.99 per month)
- Disney Plus (£8.99 per month)
- Shopping (£150 per month)
There are certain expenses (bus fare, gas/electricity) where I’ve put down ranges. These aren’t fixed amounts, and are dependent on usage, but usually range between these amounts. To be safe, I use the higher amounts for my budget.
With my shopping, I usually spend around £30 per week, so I put down £150 in my budget to account for any five-week months. For any four-week months, I’ll have a bit extra as a buffer.
My Total Monthly Expenses: £647 per month.
Once I added everything up, I had my fixed monthly total. This number is crucial to remember for future steps.
Step 2: Pay Myself First (10% Rule)
One of the biggest lessons I took from reading The Richest Man in Babylon was the idea of paying yourself first and saving 10% of your income before you do anything else with it.
It’s one of those principles that sounds simple, but it can be life-changing if you stick with it.
So now, on payday, the first thing I do is move 10% of my income into savings. Even though I’m on a low income and still in debt, I’ve committed to this because it’s about building the habit. Once I get used to living on 90% of what I earn, I won’t miss the rest.
I treat that 10% like a non-negotiable bill. I don’t wait to see what’s left at the end of the month, because most of the time, there will be nothing left.
Right now, I’m splitting that 10% between paying off my credit card and building an emergency fund. I will probably split it on a 50/50 basis, so I’m building security and reducing my debt at the same time.
Step 3: Standing Order to the Bills Account
Before I did anything else, I made sure that all of my direct debits and standing orders are paid from my bills account.
I then set up a standing order from my main account to my bills account. That standing order matches the amount that I figured out in step 1.
Once the transfer is made, I know my essentials are covered. That money is out of sight and protected from any temptation, because I don’t use the debit card that’s linked with that account.
In fact, the card is hidden and I don’t even know the PIN for it. The account exists solely to make payments and nothing else.
It’s comforting knowing that I don’t have to think about my bills every month, it’s mostly automated.
Step 4: Credit Card and Debt Payments on Payday
Payday is also when I take care of my debt. I don’t try to be clever with it, I just pay a fixed, affordable amount on my credit card. It’s a bit more than the minimum, but it still leaves me enough breathing room for the month.
While I’ve still got a balance on my Very account, I pay something towards that too.
The key here is consistency. I’m not trying to clear everything overnight. I’m just trying to make progress with it every month without it being detrimental to my budget.
Step 5: Shopping With a Credit Card (Wait, What?)
This part might seem weird, but it works for me.
When I do my food shopping, I use my American Express credit card. Shopping is the only thing I use the card for these days. I avoid using the debit card connected to my bills account because I know I’ll be tempted to dip into it for non-essentials.
And I don’t spend on shopping from my main account, because the whole idea is to keep my wants and needs separate.
Using my credit card means:
- I stick to using one card for shopping
- I track exactly how much I’ve spent
- I can then go into my bills account and pay off that amount straight away (or set up a monthly direct debit from the bills account)
- I also receive cashback from my credit card
It’s almost like creating a barrier between me and the money I’ll use for the essentials. I’m not touching my bills account directly, which removes a lot of temptation.
When I am actually shopping, I’ll make sure I only spend within my £30 weekly budget. This often means adding up the prices on my phone’s calculator as I go around the shop.
I’m not really sacrificing anything. I only need to buy food for myself, so I rarely go over £30 per week anyway.
If you struggle to stay disciplined or have bad credit and can’t get a card, try using a third current account just for shopping. Just transfer your shopping budget there instead of your bills account, as it still keeps essentials and spending money separate. The credit card isn’t something I rely on; it’s just a tool to create that separation without touching my main account or bills account directly.
Step 6: What’s Left is Mine
Once my bills and debt payments are sorted, whatever is left in my main account is mine to spend however I like.
That could mean treating myself to a takeaway, going to a gig, or even going on a date night with my girlfriend. I could even save the leftovers.
If I’ve done well that month and have some surplus, I’ll usually do one of two things:
- Pay extra on my credit card
- Add a bit to my savings
It might sound strange, but my goal is to make my main account hit zero by the end of each month. It’s not a case of spending for the sake of spending, I just think it’s good to have that reset every month.
Why This System Works for Me
Here’s why I think this system is working for me right now:
- It creates boundaries. Splitting my money means I’m not constantly second-guessing what’s ‘safe’ to spend.
- It forces me to prioritise. Bills first, debts second, then whatever is left is mine to spend, guilt-free.
- It removes temptation. Not using the debit card for my bills account is a game-changer.
- It simplifies things. I don’t need to track every penny, I just need to make sure things are running smoothly.
- It’s flexible enough to evolve. As my income changes or I pay off my debt, I can adjust things.
Final Thoughts
This system might seem a bit long-winded and complicated for some, but it works for me. Once you know the numbers and it’s all set up, it’s not as intimidating as you might think.
I’m able to use this setup to budget on a low income. With just two bank accounts and a few automated payments, I have control over my budget.
I’m still over £2,000 in debt, and I’m not building wealth at this point. But I’m able to manage what I do have, instead of letting it manage me.
And thanks to the 10% saving rule I picked up from The Richest Man in Babylon, I’m finally learning to pay myself first – even if it’s just a small amount.
Sometimes, the simplest things can make the biggest difference.