How to live on a very tight budget


I talk a lot about various ways to get your financial life in line. This isn’t because I think that money is the most important thing, or that we should spend a lot of time on it in our lives. Quite the opposite; a little bit of planning and intention with money, and you leave space in your life to thrive in all other areas which are the most important.

But some strategies might seem a little out of reach when you’re working with a very tough situation. “How can I even think about float,” one might ask, “when things are so tight?

So perhaps, given that this is the holiday season, when the stress of being poor (or feeling poor, which is sort of the same thing) tends to be exacerbated, that it would be a good idea to talk about living “bare bones.”

Living without wiggle

When I say “bare bones,” I’m talking about a situation where you make just enough to cover your necessities, with little to no wiggle room. Let’s also say that you have some credit card debt and little or no savings. Let’s also say that you’re working with something near the minimum wage. This isn’t all that uncommon, as this infographic explains.

Your biggest priorities first

So what do you do if you’re in this situation? First, you will need to get very good at prioritizing. Take care of what is critical first, before everything else.

But not everything is critical, and not everything is equally critical. There are things you need that must be taken care of before anything else. What are these things?

  1. Food
  2. Shelter
  3. Utilities
  4. Transportation

Two things to note: The above list is in an order. For example, a roof over your head is good, but it’s more important to eat. Also, everything else isn’t as important as what’s in the above list. (Credit card bills are not on this list.) There are borderline necessities like clothes, that I considered putting in the above list, but these are really the most important four. If you have these four, then you have the potential to succeed.

Your other priorities next

You’ve probably tackled much of your income with these four things. Your next step is to prioritize everything else.

Put it all in order. You’ve got bills to pay, so pay them next. Most important, then second-most important, and then on down the list. If you have to pick which bills to pay for whatever reason, I recommend paying secured debts first before unsecured debts. That is to say, pay for the things they can take away before you pay for things that they can’t. You should see why.

Continue on in this way. When you run out of money to allocate, you’re done.

Sell out

Can you sell anything? I bet you could. Look around your place and get rid of some stuff. Go for a hundred bucks, and throw it in your checking account. That’s your float. Keep it there, despite your desire to use it for bills. Float is important; you have enough to do without worrying about whether you have $2.35 in you checking account.

Going back to the original point about not having enough float, I disagree that living bare bones implies no float. I’d argue that float is even more important, because of how critical things are. One small misstep could cause big problems. Float will help with this.

Also, if you can make even more, maybe a few hundred dollars from selling something, then set it aside to use for emergencies. Having a few hundred dollars set aside for emergencies might be the single most important thing you can do to prevent problems.

Think smaller than monthly intervals

You might also want to break things up into pay periods. I talk about budgeting on a month-to-month basis, since most bills are due monthly, but if things are super tight, then perhaps budget on a smaller scale.

For example, if you get paid twice a month, you could pay your rent/mortgage (and half your food) with your first paycheck, and then your other bills (and the other half of your food) with your second paycheck. Your expenses can be spread throughout the month as well.

A little traction

I also think it’s important to feel like you’re at least making some kind of traction. For me, living in NYC and subsisting on hummus and carrots and frozen foods that I would easily never touch today, that meant putting away a really small amount of money each month. Can you find any amount, to put in a jar each month? If you do, then you’re showing yourself that you’re making progress, and that will feel good. Even $20 is okay. But only after you’re current with your bills.

This will work (if you do)

Regardless of whatever tactic you choose, one thing you can’t do is abdicate your responsibility. Every dollar counts for you, even more than for other people who are living a bit more comfortably. You don’t have the luxury of not knowing where your money is going.

The good news is that you can do this. It might take a little extra work, but once you have this system up and running, you’ll stabilitize your situation. That will lead to more comfort, and even some breathing room. And then you will start paying off your debts, giving you more money to live on. You will feel better over time when you see that this works. Your bones might be bare, but they are enough to stand on.

But enough about me. How do you handle living on a tight budget?


  1. michelle

    Hey, thanks for this post! It’s definitely applicable to my situation right now. Question for you- could you give me examples of secured and unsecured debt? I’m not totally clear on the definitions of those terms.

    • Mike

      Hi Michelle. Thanks for writing in!

      Secured debts are tied to something tangible, that have “collateral” associated with them. For example, if you took out a loan for a car, and then don’t pay it, the creditor can repossess (“repo”) the car. A mortgage falls into this same category; a foreclosure is nothing more than a “house repo.”

      Conversely, student loan debts are unsecured debts, as there’s no collateral associated with them. The creditor can’t reach into your head and pull out what you know! This explains why student loans are basically impossible to get rid of (even bankruptcy doesn’t discharge them).

      Another type of unsecured debt is credit card debt. Even though you may have bought things with the credit card, that does not mean they can be repossessed.

      It’s never a good idea to be delinquent on any debts, but if you’re in a situation where you are truly unable to pay everyone (and I hope you’re not at that point), you should err on the side of paying secured debts first. That way, you’ll at least not be in danger of losing things you own. Does that make sense?

Comments are closed.