7 Steps to Live Well on a Low Income

People often believe that to live well on a small income you need a lot of money. The idea is that a big income equals a happy life but here’s the thing, it’s not all about how much money you make, it’s about making smart choices with the money you have.

That’s where deliberate financial decisions come in making thoughtful choices about how you use your money.  

I want to show you that you don’t need a huge paycheck to live a good life, it’s about understanding that you can be happy and comfortable with tight budget and without a ton of money. 

I’ll share practical tips and simple strategies to help you manage your money wisely. The goal is to help you see that no matter how much you earn you can live a life that feels secure and enjoyable by making careful choices about your finances.

Though there are sacrifices in frugal living, spending wisely and making careful choices with your money comes with some pretty good benefits. 

Before we get started let me just give you a couple of reasons why being mindful of how you spend your money, like on utilities, can help to reduce stress and financial burdens, especially if you can take advantage of schemes like the household support fund. It can take a load off your shoulders. 

Imagine not constantly worrying about bills or feeling stressed about making ends meet. Living frugally means less financial pressure, giving you more peace of mind. 

A simpler and more fulfilling life frugality isn’t just about saving money, it’s about simplifying your life by cutting out unnecessary expenses so you can focus on what truly matters to you.

It’s like decluttering your financial space leaving room for experiences and things that bring you joy. A simpler life often turns out to be a more fulfilling one so let’s get started.

 It’s not about having a fat wallet, it’s about being smart with what you have.

STEP 1: Keeping Bills Down to Sustain Low Income

person counting cash money
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First and foremost, the money you have remaining after everything is taken care of is the result of your income subtracted by your expenses. This means it can increase either if income increases or if expenditure decreases. 

So, let’s talk about keeping those bills as low as possible to match your budget, including energy bills, which can be a significant area of savings for those living on a low income. Here’s how you can do it:

The significance of budgeting:

Budgeting helps you figure out where your cash is going, plan for your energy bills, and potentially claim benefits like universal credit. By setting limits on different spending categories, you can make sure your money is doing what you want it to do. 

You should have a game plan for your finances, or its organization will escape you.

How to create a budget:

Creating a budget is easier than it sounds. Start by listing your income, like the money you make each month. Then jot down your regular expenses, things like rent, utilities, and food shopping. 

After that, decide how much you want to spend on extras like eating out or entertainment. The key is making sure your total spending doesn’t go over your income.

While there is slightly more to it than that, and if you want to get really detailed, I’ll make a full guide at a later date.

For now, you can use the free template on the Disciples’ tier on the Discord.

Within your budget, if you’re a serious person, you should allocate an allowance for investing. Making and following a budget is ordering your money where to go instead of wondering where it went. 

After the fact, talking or wondering where it all goes, that’s where tracking expenses comes in handy. Keep an eye on what you spend; it could be with a fancy app or just a simple notebook. 

When you see where your money is going, you can spot areas where you might be able to save more.

STEP 2: Live Well on a Small Budget (Frugal Living)

Now that you have a budget and are tracking your expenditures, the key thing to do is reduce your expenditure, and that naturally means living below your means. 

Living below your means is a financial approach that involves deliberately structuring your expenditures, like your water bill and cost of living payment, to consistently fall below your income. It’s a purposeful lifestyle strategy that holds various advantages.

Living below your means is essentially a commitment to financial discipline. Instead of spending every single last pound at your disposal, you consciously create a margin between your earnings and expenditures. 

This deliberate gap allows for financial flexibility, fostering a mindset that values long-term stability and ways to save money over immediate gratification.

The significant benefit of this approach becomes evident in the surplus funds it generates. By consistently living below your means, you carve out space for saving money. 

This surplus creates a financial safety net, providing protection against unforeseen expenses or emergencies. The ability to allocate funds to savings not only contributes to financial resilience but also instills a sense of security in managing unexpected financial challenges.

Consider a scenario where unexpected expenses arise, such as a sudden car repair or an unforeseen household bill. Living below your means ensures you have financial resources readily available, hopefully saved in an emergency fund, to address such situations without jeopardizing your overall financial stability. 

It’s a proactive approach that builds financial security by cultivating the habit of responsible budgeting and prudent financial management.

In essence, living below your means is about creating a solid foundation for your financial well-being.

STEP 3: Exercise Caution in Entertainment Spending 

Be careful with shopping and entertainment. Now that you have a budget and are consistently spending less than you earn, this is a solid foundation. But you have to watch out for major traps.

 It’s crucial to recognize and navigate the pitfalls of impulsive spending, a common challenge that can disrupt even the most well-planned budgets.

Impulsive spending often stems from the desire for instant gratification, leading to purchases that might not align with your broader financial goals. To counter the allure of impulsive spending, consider adopting a strategic approach to both shopping and entertainment expenses.

Start by creating a shopping list before hitting the shops, ensuring that your purchases align with genuine needs rather than temporary desires. When it comes to entertainment, explore cost-effective alternatives like streaming services, community events, or even free activities. 

These can help with the cost of living and allow you to contribute more to your savings account. By prioritizing experiences over material possessions, you can make the most of your entertainment budget.

A practical tip to curb impulsive buying is the implementation of the 24-hour rule. Before making a non-essential purchase, give yourself a full day to reflect. This brief waiting period may help you save as it allows emotions to settle, providing a clearer perspective on whether the purchase is a genuine necessity or just a fleeting impulse. 

The 24-hour rule is a simple yet effective tool to instill discipline in your spending habits, ensuring that each purchase aligns with your budgetary priorities.

A variation of this is the Frozen credit card method, which you may be able to get, which could save you from overspending. Though it’s a little extreme, essentially, what you have to do is put your credit cards in water and then freeze them into a block of ice in your freezer. If you want to make a purchase, you have to wait for them to defrost before they become usable.

By addressing impulsive spending tendencies and incorporating thoughtful strategies into your shopping and entertainment decisions, you can optimize the value of your expenditures while maintaining financial discipline. 

These practices contribute to a more intentional approach to spending, allowing you to make choices that align with your overall financial well-being.

STEP 4: Research before making purchases 

person holding blue ballpoint pen on white notebook
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When it comes to purchasing decisions, the significance of well-informed choices cannot be overstated. The practice of researching before making a purchase is a crucial aspect of ensuring your money is spent wisely. 

Informed decision-making involves delving into the details of a product, understanding its features, quality, and pricing before committing to the transaction. 

This approach empowers you to align your purchases with your specific needs, preferences, and budget, contributing to a more satisfying and economically prudent shopping experience.

Think about the last time you bought some electronics, such as a laptop or phone, without proper research. 

The allure of flashy options may lead you to a purchase that, in reality, lacks the essential features you require. 

This could mean you’re spending much more than you need to simply because you didn’t find the product that best fits your needs.

On the flip side, thorough research enables you to identify products that strike the optimal balance between quality and price.

 Reading reviews, comparing specifications, and seeking recommendations become invaluable steps in ensuring your purchase not only meets your immediate needs but also provides lasting value for your money.

In essence, the act of researching before making a purchase is an investment in the quality of your acquisitions. It’s a proactive step that helps you make decisions based on sound information, thereby avoiding buyer’s remorse and securing the best possible value for your hard-earned cash. 

This commitment to informed decision-making stands as a cornerstone in the journey towards financial prudence and satisfaction in your purchases.

STEP 5: Manage Your Money by Preserving Your Belongings

Preserving your belongings is the next step now that you’ve organized your finances and only buying things that actually give you utility.

 Let’s examine the practice of maintaining your belongings, a proactive approach that extends beyond mere ownership to encompass a thoughtful strategy for long-term savings.

The essence of preventative maintenance lies in the concept of giving your possessions a little extra care, contributing significantly to their lifespan over time. Preventative maintenance is essentially about staying ahead of potential issues by addressing them before they spiral into more significant problems. 

It involves regular checkups, routine cleaning, and prompt attention to minor repairs. This approach fosters the longevity and optimal functioning of your possessions, whether it’s a vehicle, household appliances, or other valuable items.

Take, for example, car maintenance. Regularly servicing your vehicle by changing the oil, checking the brakes, and addressing minor issues not only ensures its smooth operation but also prevents more substantial and costly problems from emerging in the future. 

The same principle applies to household appliances; routine care such as cleaning filters or checking for leaks can significantly extend their lifespan and avert the need for expensive replacements.

There is a saying that basically sums this up: “An ounce of prevention is worth a pound of cure,” and importantly, this applies to your health too. Think about your teeth, for example, and the costs associated with their upkeep. 

Regular check-ups and cleaning can help you save on dental expenses in the long run. It’s very expensive to get a root canal surgery compared to brushing regularly, cutting down on sugar, and getting checkups with your dentist.

In essence, preventative maintenance becomes a proactive investment in preserving the value of your belongings. By dedicating time to regular care, you’re not only extending the life of your possessions but also mitigating the risk of significant repair or replacement costs down the line, an excellent way to save money.

STEP 6: Spending on things that actually matter

woman shopping online
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This step sounds similar to the previous ones but requires some introspection or looking within yourself. Delving into the art of spending money wisely involves deliberate consideration of where your financial resources are directed. 

It’s not just about the act of spending; it’s about making choices that resonate with your values and priorities.The crux lies in recognizing the distinction between fleeting desires and enduring fulfillment. 

When you channel your financial resources towards things that genuinely matter, whether they involve experiences, investments in personal growth, or contributions to long-term goals, you cultivate a profound sense of purpose and satisfaction in your spending.

To navigate this terrain wisely, start by identifying your core values and long-term objectives. Consider what actually brings you lasting joy and fulfillment, recognizing these as areas deserving a significant portion of your budget. 

Whether it’s investing in education, experiences, or activities contributing to your well-being, allocating resources to these meaningful pursuits ensures your spending aligns with your true priorities.

An essential strategy for spending money wisely involves prioritizing quality over quantity. Opt for items or experiences that resonate with your values, steering clear of impulsive or trendy purchases that may provide momentary satisfaction but lack enduring value. 

Embrace a mindset of intentional consumption, focusing on the value derived from your expenditures rather than the mere accumulation of possessions.

In essence, spending money on things that truly matter creates a symbiotic relationship between your financial decisions and your overall well-being. 

This intentional and strategic approach not only ensures your spending aligns with your values but also contributes to a more fulfilling and purpose-driven life, helping you get the most out of living on a low income.

STEP 7: Learning to compromise and lower your cost of living

We’ve reached the last step, and this is probably the hardest step of all. The fact is, despite what your parents or school teachers might have told you, you can’t do everything you want. Navigating life involves a delicate dance of compromises—a universal truth that extends beyond income brackets. 

Regardless of financial standing, everyone grapples with the nuanced decisions that demand a give-and-take approach. By controlling your living costs, you could save a significant amount.

Understanding the art of compromise becomes a potent tool for enhancing both financial and personal well-being. On the financial front, it means making thoughtful trade-offs and aligning spending with priorities to ensure that resources are directed towards what truly matters. 

It’s about recognizing that every financial decision involves a degree of compromise—a nuanced navigation between immediate desires and long-term goals.

On an individual level, the ability to compromise fosters adaptability and resilience, enabling people to navigate life’s complexities with a sense of balance and contentment. 

Here’s an example of compromise: consider the choice between indulging in a luxurious vacation and saving for a future goal—a compromise that reflects the balance between immediate gratification and long-term financial security.

In relationships, compromise is the cornerstone of harmony, involving concessions on preferences, schedules, and joint decisions. Even in the pursuit of career goals, compromise may manifest as a delicate juggling act, balancing financial aspirations with professional responsibilities.

Learning to compromise, which includes being conscious of ways to live below your means, far from being a sign of limitation, emerges as a skill that empowers individuals to make intentional choices.

Bonus Step: The Biggest Step That Changed My Own Life

Here’s the thing: income doesn’t matter as long as the costs are relative. When I first started teaching overseas, my first salary was around £700 a month. I’m pretty sure this sum of money wouldn’t be able to pay for rent in London these days. But if you change your surroundings, then your income can stretch much further.

Geographic arbitrage is a money-saving plan that involves moving to a cheaper area to make the most of your finances. This means deciding to live in a place where the cost of living is more in line with what you can afford. 

The good things about geographic arbitrage are pretty attractive—living in a place where living is cheaper can make your money go further, leading to saving more money, having better financial security, and therefore, an overall better life.

A classic example is the Silicon Valley tech worker moving to the Midwest to work remotely for incredible cost savings while keeping effectively the same job and salary.

 But these advantages do come with challenges—moving to a new place means making adjustments, dealing with changes in job opportunities, and handling the emotions of starting over.

If you’re thinking about geographic arbitrage, it’s important to be careful and informed. For instance, consider areas where you could get the best deal on the cost of living, including lower gas and electricity expenses. 

Start by doing thorough research on potential places to move, considering important things like housing costs, daily living expenses, and job opportunities. 

It’s not just about money; think about the lifestyle and things that the new place offers, making sure they match what you like and need. A great website for this is Numbeo.

Looking at the example of comparing London with Hanoi, Vietnam:

So, you’d need around £1,780 to live the same standard of life you can live with £6,100 in London. When you think about making the important move, it’s really important to save up some extra money to handle the time when things are changing and unexpected problems might come up. 

In simple terms, you’ll need a larger emergency fund because there are a lot of unknown variables that you haven’t accounted for that can affect you.

Deciding to go for geographic arbitrage is a big change, and you have to plan and research carefully to make sure it fits well with your money goals for the short term and long term. 

It’s a careful step to change how you manage your money for a better and more sustainable way of life, especially when living on a low income. 

I’m not recommending it necessarily; however, I would personally be way behind my current trajectory if I hadn’t gone down this path.

In essence, this serves as a guide to navigate your financial journey, emphasizing that it’s not about the size of your wallet or your income, but about making smart choices with the resources you have. 

The key takeaway is that financial security and a better quality of life are achievable through thoughtful financial decisions irrespective of income level. 

Which step are you on?