Sometimes sh*t happens. We lose jobs, become ill, need to take a pay cut, take maternity leave or require a period of unpaid leave from work. It is easy to become overwhelmed by anxiety about money when things get tight. Maybe, like us, you have chosen to work less and live more frugally. Either way, when you become really aware of your finances and how you spend each penny and pound, it is perfectly possible to live debt free on a small income. Here are some ideas to help you.
1# Be organised with your money
If you want to live debt free on a small income, it is vital to know how much money is coming in and what your outgoings are each month.
Go through your bank statements and write down every form of income to get your total. Then note each fixed bill, from rent or mortgage, to utilities, transport, education, etc.
2# Look for potential savings
As you go through your income and outgoings, certain unnecessary expenses may jump out at you. What can you cut? Can you get a better deal on your utilities? Could you spend less on eating out and take away food? Could you car share to cut back on transport to and from school or work? Do you spend a lot buying lunches and coffees each day?
There are lots of potential ways to save money in this post and also here.
3# Check your entitlement to benefits
Make sure you claim any benefits you are entitled to. If you have a small income, check your entitlement with an organisation like Turn2us or entitledto.co.uk.
In 2023, the Joseph Rowntree Foundation estimated that four in ten households in the poorest fifth of the population do not receive the benefits they are entitled to. There may be millions of pounds worth of benefits going unclaimed.
Also, make sure you are taking advantage of council tax reductions for those living alone and on certain benefits.
4# Track your spending
If you want to live debt free on a small budget, it is important to keep a close eye on your spending. Online banking apps make it easy to track your spending. If you don’t have online banking or prefer a more old-fashioned approach, carrying a small notebook and pen can help you become more aware of where your money is going.
Even small purchases soon add up and you can save a lot of money by cultivating different habits, such as taking a packed lunch to work, carrying a drink and snack or reading your news online rather than buying a newspaper.
5# Make a budget
When you have a limited income, it is really important to set yourself a weekly or monthly budget. Your starting point is the list of income and outgoings we looked at in point one. Then decide what you can afford to spend on everything else, from food, to clothing, to entertainment, etc.
The Money Advice Service has a handy budget planner here.
6# Save an emergency fund
Having an emergency fund has saved me from debt on many occasions. If the car breaks down, the fridge dies in the middle of a heat wave or the boiler decides to conk out in the midst of a snow storm (I have experienced all of these), having money to pay for emergencies brings great peace of mind.
If you are on a limited income, saving your emergency fund can be tricky, but it’s not impossible if you make it a priority. You could sell some unwanted items on Facebook,Vinted or eBay to kick start it, do some overtime or take on a part-time job, depending on your personal circumstances.
Aim for an initial fund of £1000, and don’t use it for anything except crisis spending. This will save you from high interest personal loans or credit card debt.
7# Save for occasions
Once you have your emergency fund in place, make sure you budget for special occasions. Planning ahead for Christmas, birthdays, holidays and any other celebration makes a huge difference to your stress levels.
Personally, I put small amounts of money aside all year, as well as buying gift items on offer whenever I see them.
8# Buy second-hand
You can save so much money by buying pretty much everything second-hand. I have never had a car loan, for example. If I have to drive an old banger that I saved up for, I would rather do that than have a shiny new vehicle on finance.
Most of our furniture is also second hand, even some of the electrical appliances. I like the fact that buying used items saves them from landfill too.
The same with clothing. I find I can buy better quality used items of clothing and footwear than I could if I was buying new. You can read about my second hand life here.
9# Change your mindset
When you first start to scale down your spending, it can be easy to feel hard done by. You see friends spending their money on all sorts of luxuries, and you wish you could do the same.
I always like to remember the people I have come across who appear well off on the surface, but are wracked with worry about huge debts. Maintaining a certain lifestyle when you have a decent steady income can be hard enough, but if there is a sudden downturn in your fortunes you could be left with piles of debt and no way to pay it back.
Peace of mind – for me anyway – has more value than luxury holidays, a big house, a shiny new car or endless stuff. Buying less means that I can work for myself and do fewer hours too, which adds a different sort of value to my lifestyle.
It is important, though, to build in the odd treat, even when you are on a low income. A regular take-away, a visit to the pub or whatever floats your boat can stop any sense of deprivation.
I have some ideas to help you develop a frugal mindset in this post.
10# Save money on food
Saving money on groceries can be a great way into a money saving mindset and help you to live debt-free on a small income.
By meal planning, making a shopping list, reducing food waste and cooking yourself, you can usually make immediate savings.
On top of that, by searching out yellow sticker bargains in the supermarkets, changing to one of the discount supermarkets such as Aldi or Lidl, and growing some of your own fruit and veg, you can considerably reduce your food bill.
11# Fun on a budget
You don’t have to spend a fortune to have fun, and some activities cost nothing at all. This post suggests free and fun things to do either by yourself or as a family, there are some ideas for cheap and eco-friendly activities for children here.
12# Cut down on unnecessary products
Our homes tend to be rammed full of products that are rarely if ever used, or bought on a whim. Cleaning products are one of the major culprits for many of us, along with toiletries.
There are teams of highly-paid marketing professionals who work their butts off to make us think we need the products they develop and sell. As I said in this post, Don’t Believe the Hype, if we can find a way to shield ourselves with a healthy dose of cynicism, we won’t be tempted to buy as much crap!
Make yourself use up all of your cleaning products before you buy any more. Don’t believe that you need a different branded product for every cleaning job either. I prefer to use cheaper products like white vinegar, citric acid and bicarbonate of soda to do the cleaning – far fewer chemicals too. It is easy to do eco-friendly cleaning on a budget.
The same with toiletries. Train yourself and your family to use every scrap of shampoo, toothpaste, etc, before they start the next one. Do you all need to use something different?
Be ruthless with your makeup as well. How many lipsticks/foundations/eye shadows can one person use? Make up goes off, too, so it is pointless buying more than you can feasibly use before it gets that rancid oil aroma.
14# Learn basic DIY and repairs
Before you chuck anything away, think about whether it is worth repairing. You can buy glue-on heels for footwear, for example, if taking them for a professional repair is too expensive.
A simple sewing kit can enable you to turn up a hem and sew on a button, prolonging the life of your clothing.
A coat of paint on an old cupboard or chair, a throw over a shabby sofa, or a rug on a worn out piece of carpet can all prolong the life of your possessions and save you splashing out on new items.
Whilst I would happily get someone in to do the decorating, I would rather save my money and spend it on a holiday. Learning a few DIY skills can save you literally thousands.
15# Be cautious about borrowing
Sometimes you need to get hold of cash quickly, but be careful. Rather than taking out expensive pay day loans or, worse still, borrowing from doorstep lenders, consider joining a credit union. These can be better ways for people with a poor financial history to access extra money when it is needed. Money Helper has a guide on credit unions here.
16# Getting help with debt
If you are in debt and need advice, Step Change is a great organisation. You could start by looking at their debt calculator here. You can also check out the following:
www.tools.nationaldebtline.org/dat-reg
It is important not to put your head in the sand if you have debts. Get some expert advice to help you manage.
I hope these ideas to live debt-free on a small income are helpful to you. Please feel free to add your own suggestions to the comments.
Moira Sutherland says
I just want to say that this is very good advice. We always had good incomes but my husband was made redundant during Margaret Thatcher ‘s time and we had to move continents to secure work.
Now we are retired with still enough but not as good if we had been able to stay in the UK. The only debt we had was the house which we paid off early.
We still keep note of every penny we spend , this enables us to have lots of holidays two cruises a year. Our friends think we are loaded but we are not We are just careful.
shoestringjane@outlook.com says
Love that! This is what I aim for