As the saying goes, if you take care of the pennies, the dollars will take care of themselves. Having a budget in place can help; even if you are managing mere pennies.

When thinking about our finances, most of us have careless spending habits that are often not monitored. Many of you don’t think you have the funds to do the things you desire due to your other financial commitments. However, if you have limited funds and you need to operate on a shoestring budget, there are ways that you can slip into budgeting pretty easily. Want to learn more? Then continue reading. Below we not only talk about what a shoestring budget is, but we also talk about the importance of budgeting. Whether you have a lot of money or you’re just barely getting by.

What Is a Shoestring Budget?

You may be asking yourself, “What is a shoestring budget?” Well, budgeting, in general, is allocating financial resources to be designated for a specific purpose. A shoestring budget would then mean that you have just enough funds to allocate to a specific purpose.

From a budgeting perspective, shoestring implies that there is very little money available to cover a specific task or item. So basically, you’ve got to use the little funds that you have and allocate it as best you can. This can seem difficult. That’s why it’s important to learn how to set up a budget and develop better spending habits in general.

Some people have challenges with budgeting in general, such as budgeting their time, allocating and budgeting human resources and other resources. But a money budget tends to be the most challenging for a lot of people. Below is some information about the different types of budgets that will help you organize the various types of budgets.

Types Of Shoestring Budgets

When setting up a budget, it is important to realize that there are three main types of budgets that basically cover a wide variety of financial situations. All of them will make it easier for you to transition into the shoestring budget lifestyle. They include:

• The planning budget, which is great for those who need to save up for something in particular.

• The problem-solving budget. It helps people who tend to overspend in a particular area, and

• The comprehensive budget, which basically involves slicing your excessive spending in half and learning to be as frugal as possible.

As you begin to live or run your business on a tight budget, you should consider using one of the three main types of budgets above.

How To Create a Shoestring Budget

There are a few steps involved in the budgeting process. It mostly involves gathering information, getting organized, and prioritizing your financial obligations. If followed, it will be easy for you to slip into and make living on a shoestring budget a part of your everyday life. But you need to have a few things in place before you can create a realistic budget that you can operate within. For example, you need to know exactly how much money you’re working with. In other words, you need to determine how much income you have coming in each month.

After you’ve determined how much income is coming in, then you need to determine how much money is needed for various purposes. For example, you need to determine how much money is needed to run your household or your business. In addition to that, you also need to determine how much you spend each month. That way you’ll know exactly where your money is going; particularly if you have limited funds that you are working with.

Going through this process will help you come up with a very simple budget, plus better determine whether you are spending your money frugally.

Have a Reasonable Goal in Mind

When setting up your budget, you should have a reasonable goal in mind beforehand. Your budget should be based on what you can realistically afford to spend.

You may also find that there is multiple budget categories that you may need to set up. This can streamline and help you better manage your overall spending in each area.

Below is some information about the various budget categories that you may need to set up:

Choose a Budget Category

When creating a budget, there are a wide variety of categories that you can use to create a budget. They include a:

• Household Budget

• Business Operating Budget

• Annual Operating Budget

• Project-Based Budget

• Vacation Budget

• Christmas Budget

 Each of these budget categories is useful for different purposes and are explained in more detail below:

Working Within a Tight Budget

Sometimes it’s very challenging to work within a tight budget when you have limited resources. You may find that you need to stretch the budget just a bit to cover some unforeseen expenses and that you need more resources than you thought to sustain your budget. During times such as this, you may have to find other ways to control your spending and identify other ways that you may be overspending unnecessarily as described below.

Controlling Your Spending

When you write out all of your expenses and make a list of where all of your money is going, this process will also allow you to determine if there are expenses that you are paying for that you don’t really need. For example, many people sign up for various memberships on a trial basis, but never use the service. However, they are billed on a monthly basis. This is an expense that could be eliminated. When doing do, it will increase your remaining cash at the end of the month.

Other expenses that add up unnecessarily are bank fees. You may be charged additional fees because of the way you do your banking. For example, if you keep a minimum amount of money in your bank account, the fees could be waived. However, if your bank balance drops lower than the required threshold, you’re charged a fee. Monitoring your bank’s account policies could help you keep more of your money in your pocket.

It’s much easier to operate on a tight budget when you eliminate cost and expense items that you simply don’t need. When you do, then you can stretch your budget a bit.

Stretching Your Budget

It’s one thing to operate on a shoestring budget to better manage your finances, but it’s completely different when you’re forced to operate on a tight budget because you don’t have a choice. What this means is that you simply don’t have any extra financial resources available beyond what’s been budgeted. In cases such as this, in addition to controlling your spending, there are other things that you can do to make sure you stay within your budget. You can find ways to stretch your budget. What I mean by this is that you can find ways to reduce the cost of things that you have to spend money on anyway. Basically, on the things that are already included in your budget.

For example, if it cost you $100 a week to drive to and from work, which covers gas and parking, but the cost is only $25 a week to take the train, then you could save yourself $75 a week or roughly $300 a month.

Another example would be cutting back on eating out at fast-food restaurants. For example, if you spent roughly $7.50 per meal each morning before you headed off to work, you could save money by eating at home before leaving for work. These kinds of cutbacks also make it easier for you to slip into operating on a shoestring budget on a regular basis. However, finding ways to stretch your budget and be more efficient shouldn’t be confused with cutting corners. If you operate a business, you’ll need to put some thought into how you make such cutbacks. Take the example in an article by Entrepreneurs.com. It provided a sample about a business owner that hired their niece to manage their social media accounts and then paying the price for that decision later when they had to do brand - rep damage control.

Business owners should never sacrifice quality for low priced services. It will cost them more in the long run. But when they can find other more efficient ways to stretch their budget they certainly should.

Dealing With Surprises And Unexpected Budget Items

Sometimes, despite all of our efforts, there are things that come up unexpectedly that causes us to overspend. Sometimes it could be a broken appliance that may occur in the home, a medical emergency or an unexpected automobile repair. If you operate a business you’re at an even greater risk. You could run into unexpected financial emergencies due to a wide array of other unforeseen issues; from the loss of data, to theft or property damage. Whatever kind of business you operate, you can expect some setbacks at some point. Remember, things break down and systems fail. Having emergency funds set aside in advance will reduce the impact of these sudden unforeseen incidents.

Open a Savings Account for Emergency Funds

The best way to plan for these unforeseen setbacks is to have a budget set aside in advance. Although it may be difficult to put an actual dollar amount on things that have yet to take place, you can identify some risks associated with losses and plan to set a budget accordingly.

You can either set a goal to save up a certain amount of money, such a $500 to $5,000 for personal emergencies or up to $10,000 to $50,000 for emergencies that could occur at your business. Having a separate emergency savings account will make it easier for you to set aside money for emergencies.

Monitoring And Managing Your Budget

The best way to easily slip into living or running your business on a tight budget is to know what’s going on with your money at all times. You should basically learn how to manage your money. You should know where all of your money is coming from, including money that you earn from your job, from side businesses, dividend payments, interest and so forth. You also need to know where your money is going as well - all of it. That includes credit card and bank fees, interest on loans, rents and other expenditures. Not only do you need to know where your money is being spent, but you also need to know why you’re paying for various items; especially if it’s something that you can control. Here’s what I mean. Some items require that you maintain various thresholds to avoid different bank fees. At other times you may need to pay your bills on time to avoid late fees.

When you are living or operating on a shoestring budget every penny counts. What this means is that it’s your job to stay on top of all aspects of your finances. If you need help setting up and maintaining a budget, continue reading. We provide some budgeting tools that you can use to get started.

Sample Budgeting Tools

If you need help setting up and maintaining a budget, continue reading. We provide some budgeting tools that can be helpful to you.

Final Thoughts

Many of us want to stay on top of our finances but find it very difficult. It takes discipline and a big commitment. If you’d like to learn more about how to easily manage your finances on a shoestring budget, then contact us to learn more today.