The Simplest Budgeting System for When Money Is Tight

Have you ever met a banker who works with millions every day but barely has any money to pay her bills?

That was me in 2010 when I had all the knowledge of how money should work but zero idea of the systems that make money work.

With rent, loans, bills, university fees, food to pay for, and family members who had no consistent monthly income, it was my shoulders that had to take on the weight of making every penny work the way it should.

I didn’t go anywhere with friends, just because I had to save every single penny for food or a bill. It was a tough time, and I was wondering how it was possible to work in a bank and not have money. How was it possible to manage other people’s money but not mine? It didn’t make any sense.

It took me years to find a way to budget my money that actually made sense. My system works for any type of income, but those with a lower income would benefit the most.

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Why the 50/20/30 Budget Rule Doesn’t Work for Everyone

You’ve probably heard about the 50-20-30 rule for successful budgeting. It says that 50% of your income should go to living expenses such as rent, petrol, groceries, etc. 20% has to go to loans, credit cards, mortgages and all other debts you’ve got. The last 30% is for the things you don’t need, but you want to buy — holidays, treats, all of it. They’re flexible every month.

But honestly — to get to the point where 50-20-30 is your way of living, I’d call that successful family budgeting already. You don’t need me or any other advice if you can do that.

But …what if you don’t have 30% of spending on things “you don’t need, but you want”? What if your loans, credit cards and all other debts are threatening to go not only over 20%, but closer to 50%? What if you scrape your accounts for coins to make it until payday?

There are millions of people in this situation. They put money aside and month or two later need them back in their current account, just because life is that unpredictable and income is that low. They don’t have a wish list that gets covered every month.

You also may not have the luxury of wanting something you don’t need. I’ve already been that person a few times in my life.

The 50/30/20 budget won’t help you, it just isn’t realistic enough for your situation.

So, let’s see what can help you get out of that situation.

The Money Organiser Bundle

I built my own system years ago, back when I was the one figuring this out from scratch, with no spare money and no one to teach me. I call it the Money Organiser Bundle — The MOB, for short.

Its base lies on a few simple steps and more than a few tricks. Here’s all about them.

Step 1: Budget For 5 Categories Only

I divide every outgoing into five categories that are very logical and easy to remember.

Household Outgoings — the mortgage (or rent), the monthly utility bills, home and car insurances, transportation. They all go into the same category. The main thing about this category is that the payments are almost the same every month and don’t have an end date.

Ready-Steady-Go — this is the money I like to call “runners.” They come into your account only for a while, then run away to fill your loans, credit cards and every other debt you may have. You don’t benefit from that money anymore — you did benefit when you got the loan and spent it on a car or a holiday, but not anymore. This category is for the monthly payments you’d love to get rid of.

Keep Us Alive — groceries, money spent on your health, health insurance, and everything else you pay monthly or yearly that really keeps you alive.

Keep Us Happy — TV services, fitness memberships, phone bills, internet, Netflix — everything you could technically live without, but just don’t want to. Clothes go here too. You know why.

Sweet Temptations — this is the category that will surprise you the most, in just a month’s time. Everything that doesn’t fit in the categories above, everything you didn’t plan to buy but did. Impulsive shopping, a drink at the pub at the last moment. Your keyword is “impulsive” — you didn’t plan to spend the money, but you did.

Step 2: Pay Off The Debt

Your monthly payments are just about enough to pay your debt off… but you will pay it off in the amount of time the bank told you to pay it off. What if you could pay it off earlier?

I used to do two things when paying off debt fast felt almost impossible:

• pay a little more than the required monthly payment;
• at the end of the month, transfer whatever was left in my account into the credit card before my salary came in.

Using only those two habits, I paid off at least six personal or product loans — most of them in half the time I was originally given to repay them.

Note: when I say “a little more” and “whatever was left” I mean it this way: If I had £100 or £1, I would treat it the same way. I would zero my current account no matter how much I had left there. Every time my salary arrived it would be a new pot of money to work with.

Step 3: Know Your Spendings in Advance

You know that you will spend money around summer holidays, Christmas, birthdays and any other upcoming events.

But do you know how much you will spend?

I bet you don’t.

But until you put your foot down and have a number for each event-type of expense, you will always be behind on money. And while many people out there spend “as much as they need to”, you are on a low income. You don’t have the luxury to go with the flow. Not now, my friend.

Keep it together for just a while and your time to not worry about it too much will come as well.

Here’s how to budget for most events:

• Christmas: make a list of who expects a gift from you. Opposite each name write the amount you’re willing to spend on them. See opportunities to bundle things for couples, go heavy on stocking fillers for the kids and see if something can be purchased in advance, on Black Friday or Amazon Prime Day.
• Birthdays: make a list with the names of the people you know you will need to get gifts for. Again, estimate the amount you would spend for each person. Include those in the “Keep Us Happy” category and plan in advance.
• Summer Holidays: Estimate travel price and daily allowances. Get to some sort of total amount needed. The last thing you want is to know that amount after you’ve spent the money. Your holiday might come with a bit of sour taste once you have that number, but you’ll prefer it this way, and you might find ways to cut a few expenses here and there.

Step 4: Stay Smart About Money

There are many good money habits you will need to learn and apply. Most of them you know already, but never actually applied them. Here are just a few of them, and I have a list of 20 money habits right here for you.

Cut something off

It might hurt to say it this way, but if your income doesn’t change, your spending should change. There is no other way around it. Is it a fitness membership? You can exercise at home for 6 months. Is it Disney+ or Netflix subscription? You might think you need them, but in reality, you just want them, and you can be without them for a few months. Promise yourself to sign back up for those subscriptions the same day you pay off the first debt.

Find what can be cut from your spending and do it. It hurts your soul? You’ll be fine.

Meal plan

Spend smartly on your groceries. They aren’t your biggest expense, but they are the most variable one. Stick to ingredients, leave the gourmet type of foods, the processed ones and the pricy “wants” for another time. Eat plenty of veg and fruits, meat (if you eat meat, of course), prepare the sweets at home, and only shop after you had a big meal.

Avoid shopping

Make it a challenge. Go for a no-spend week and a no-spend month. Watch videos of people doing it, follow people online that promote no-spend lifestyle. Get obsessed with not shopping, feel smart about it, boast about it. Do whatever works for you as long as you can keep those precious coins in your account. They can do so much better if you transfer them into a credit card.

Make money

Back in 2010, and especially in my home country, it was very hard to make extra income. One summer, I was writing blog posts for a website to make some cash for my summer holiday, but that was it.

Nowadays, we can make extra money from countless different places. The ideas are nearly endless: sell on FB Marketplace, sell on Vinted, flip furniture, learn a small skill you can sell online, consult people on a topic you’re an expert at, become a social media influencer and earn from ads and affiliate marketing, start a blog, start a YouTube channel… and more.

Your income won’t change if you don’t make it change. Any pound or dollar counts, and sometimes that is all we need to make it to the end of the week, the month, or simply to stay motivated with the budget.