$4000 Monthly Income Budget

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There’s no doubt that a healthy and affordable lifestyle is key to financial security. You don’t have to live in poverty, though—you can get by without too much money. Achievable paths to financial security exist, but it takes some work and dedication. That’s where a $4000 monthly income budget comes in. With this type of budget, you can reach your financial goals without breaking the bank. By following this path, you can become one step closer to a life of peace, contentment, and financial stability.

$4000 Monthly Income Budget

Why Budgeting Is Important?

Even as the national economy was enjoying one of its longest-ever periods of growth in 2018, a survey by Bankrate showed that nearly two-thirds of Americans were limiting their spending each month. And with economic fortunes changing rapidly, that number is only likely to grow.

Stagnant incomes, growing debt burdens and rising housing and medical costs are among the reasons so many Americans have looked to tighten their financial belts in recent years, regardless of what the GDP and employment figures say. But just as it’s difficult to shed pounds when you don’t know how many calories you’re consuming, it’s equally difficult to cut the fat out of your spending and whip your finances into shape without a budget to shine a light on where your money is currently going.

Here are just a few of the reasons that creating a household budget is a wise decision, regardless of your financial circumstances:

  • Simple and effective way of managing or avoiding debt: The reason millions of Americans find themselves weighed down with hefty interest payments on credit card accounts is that they simply spend more each month than they bring in, and hence they are unable to pay off their card balances. A basic principle of budgeting is making sure your monthly spending does not exceed your disposable income.
  • Helps achieve short and long term goals: Say you want to save money for a down payment on a car next year or a home in five years, or that you want to make sure you can spend your golden years in comfort by building up your retirement nest egg. A budget plays a valuable role in determining how much of your income you need to save each month to reach those goals and how to allocate that money accordingly. A budget is a way of forcing you to make sacrifices – be it cutting back on lattes at Starbucks or restaurant meals, scaling back expensive vacations, settling for a cheaper cable TV package, or holding onto that aging car for a few more years. A budge is also a way of helping you anticipate expenses like car expenses, utilities, or phone bills.
  • Can prepare you for a rainy day: The fact so many Americans live paycheck to paycheck, and so few have an emergency fund, cries out for the need for more households to build a cushion they can turn to the next time the car breaks down, the home plumbing springs a leak, or, in a worst case scenario, you lose your job or health insurance.
  • Encourages you to become invested in your own finances: Simply put, the process of budgeting instills individuals with the discipline and motivation to manage their finances more efficiently and responsibly. Research has shown that those who adhere to a budget are more likely to reach their financial goals in part because they become emotionally invested in the process.

6 Tips to Budget Your Money When You Earn $2,000 to $4,000 Per Month

Money budgeting tip #1: Pay yourself first… even if it’s $10 a week

Set an automatic withdrawal into a separate savings account to build your emergency fund or savings account. When you do this, you don’t have to think about setting money aside for savings. It will become a natural habit for you to build up your savings account, meet savings goals, or save towards a larger purchase.

The great news is that many banks offer automatic saving options. For example, Chase offers several options as part of the Chase AUTO-SAVE program:
1) Daily savings: transfer as little as $1 a day.
2) Period savings: for example $10 every monday.
3) Deposit savings: for example save $50 of every deposit over $250
(see image below).

When you deposit that automatic withdrawal into a separate account, you don’t see the pot growing. Then, if an emergency comes up, you will be pleasantly surprised to see how much money you have already set aside!

I recommend that when you first begin budgeting to make this withdrawal amount small enough that you don’t notice it’s absence. While it would be great to set $500 aside each paycheck, for most people making between $2,000-$4,000 per month, this isn’t feasible. Instead set up an automatic withdrawal for between $20-$50 per paycheck.

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Money budgeting tip #2: Break up high-spend categories into smaller categories

Take a look at your expenses and budget to see where you consistently overspend. For most Americans, this category is eating out. If you find yourself eating out and consistently overspending your budget, break up the category into more manageable pieces.

Here is below an image of how you can set a budget for a high spend category (“eat out/fun: $100 budget”) and start tracking your expenses to make sure you don’t go over budget.

For us, we even break up our food budget into weekly increments (Week 1, Week 2, Week 3, and Week 4). That way, we know that if we overspend in a week, we have to slow down the following week to pay back what we overspent). Set a weekly budget target for eating out (for example, $40 per week), so that you know you need to start eating in more regularly when you overspend.

Maybe you have another category that you consistently overspend (like buying new clothes, guilty again!). You can start by setting yourself a monthly goal to stay below $80. Having a monthly number in mind can help you keep your expenses in check.

Money budgeting tip #3: Identify your triggers

If you’re anything like me, then there are certain places (cough cough Target) that you can’t go into without picking up some things that weren’t on your list. This is especially unavoidable if I have had a hard week or need a pick-me-up. They don’t call it retail therapy for nothing, right? When you can identify your triggers, you can budget for them accordingly.

If you know that you like to buy new lotions when you go to Target, set aside $20 in your budget to spend when you go to Target. If you know that when you have a rough day at work, you like to pick up a chocolate croissant at the local coffee shop, set aside $10 in your budget.

Money budgeting tip #4: Take advantage of any incentives for paying in larger increments.

When you don’t earn a lot of money, it’s harder to take advantage of the discounts offered with pre-payment options. But that’s why it is even more important that you plan for it. You can often save as much as $100, $200 or even $300 by pre-paying instead of paying every month.

For example, our insurance gives us a considerable discount for paying our premiums twice a year as opposed to monthly. By doing this we save around $300 per year, so it’s incredibly important to us to take advantage of that benefit.

Look at your bills and see if there are ways to reduce your bills’ overall cost by paying larger increments. For example, add an extra $25 per month to your automatic monthly withdrawals (see budgeting tip #1) for the purpose of paying your insurance bills twice a year as opposed to monthly.  It has a double benefit, as it also puts the money saved in your savings account to bolster your emergency fund.

Money budgeting tip #5: Give yourself grace

When we were first starting to budget, we fell madly in love with Dave Ramsey’s principles. We attempted to implement them into our lives as much as possible. However, we learned that often times, Dave encourages making sacrifices to make your budget work. These sacrifices mean not eating out, not having date nights, or canceling a costly membership.

We found that when we eliminated all of those things that brought us joy, our quality of life went down too. We could no longer go out to lunch with our friends on the weekend because it wasn’t in the budget. We weren’t taking intentional time together because our date nights had to happen at home. What we know now is that many of these categories need to be reviewed but not necessarily eliminated. Instead of taking away dining out budget, just adjust it so that you can go out to eat twice a month instead of six times per month.

If you enjoy fancy date nights out, plan to have one date night every other month (instead of multiple times per month). When you make these adjustments, you don’t have to sacrifice your joy in the process.

Money Budgeting tip #6: Compare your budget

Compare your budget with the budget of other people with a similar living situation and income. This will probably help you identify areas where you overspend. You can view Christine’s frugal budgets here on how to live on $2,500 per month or how to live on $1,500 per month.

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You might also get some inspiration from Elly and Jessica’s story, who worked on Elly’s personal budget to save an additional $5,000 per year (Household income of $60,000 for two people). You can also view all our Budgeting resources.

How To Budget Money On Low Income

Here are a few tips that can help you on your journey.

1. Create a budget that’s best for you

Some people have an abusive relationship with the word “budget” because they assume it is too technical or stressful. The first rule to budgeting, however, is to create one that works for you!

Your budget is very useful because unplanned money is the easiest to spend. A budget can include all your expenses, as well as your savings goals instead of “winging it” and promising to save “anything that remains” after each month. You can save more on a low income when you take deliberate steps like creating and sticking to a budget.

2. Automate your savings goals

Making the choice to save money can be difficult. In addition, forcing yourself to make that same choice many times each month can be unrealistic. You are more likely to spend all of the money in your checking account.

Unless you move your savings automatically, you risk spending your intended savings and may wind up not having enough money.

With each paycheck, set up an automatic transfer to your savings account. You can create an emergency fund or a sinking fund to help with expenses. And you’ll breathe easy knowing that your savings are safely tucked away.

The automatic savings approach is great if you are thinking of ways how to save money fast on a low income. You’ll be surprised how quickly your money adds up and creates a financial cushion. You definitely won’t regret putting your savings on autopilot.

3. Separate cash for expenses every week

A budget is a tool that will help you live frugally. It allows you to see your numbers clearly and know how much you’re to spend on what. But to make this even more effective, you can use what’s called a “cash envelope system” and I’ll advise you do this weekly instead of monthly.

It’s simple – get an envelope for all major expenses and label them according; Envelope A can be for feeding, Envelope B for transportation, etc. With these, you can see exactly what you spend from each envelope daily and what you have left for the week.

The con here is that it can get stolen if not kept safe. So you might want to do this digitally by keeping tabs on every inflow and outflow as well as how much you have left to spend on each expense weekly.

4. Live frugally

Shop on paper before spending money in real life. To save money on a low income, leaks need to be thoroughly blocked.

To avoid temptations, always make a list of all you need as well as their estimated price. This can help you stay in check while shopping. Also, focus on buying things that really matter and avoid spending money impulsively. It may hurt to let go of wants right now, but if you’ve created a plan and are following it, then better days are ahead.

5. Save unexpected cash gifts

I know it can be tempting to spend unexpected cash gifts, but putting this aside as savings will help you hit your savings target faster. This isn’t to say you shouldn’t spend unexpected money on something fun because at the end of it – YOLO (You only live once). But spending everything is also not good behaviour. 🌚

Instead, use it to start your Emergency Funds or add it to an existing savings plan of yours. You already survive on your current income so you can act like you did not receive any extras. Also, if you have any debts, you can use all or some of this to pay up as this will improve your overall financial status.

To help you “enjoy life” while still staying disciplined, you can commit beforehand to saving at least 50% of any unexpected funds you receive.

6. Set financial goals for yourself.

Having a financial goal is the most important thing when it comes to saving money. Think of what you need 3 to 5 years from now and break the financial commitments into weekly or monthly plans. Those goals are easier to achieve when looked at from the ground up. You can then build your way to those goals one saving habit at a time.

7. Use the 25% monthly income rule

Evaluate your housing cost and make adjustments where necessary. A simple way to test if you are overspending on your housing is to divide your annual rent by 12 and then ensure the cost of your rent per month isn’t more than 25% of your income. For example, if your rent is N500,000 per year and you earn N120,000 per month. Divide your rent by 12, that’s about N41,666 per month. Based on these figures and the 25% “rule” I mentioned earlier, your rent should not exceed N30,000 per month (that’s 25% of N120,000 and it means your annual rent should not exceed N360,000).

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If your monthly rent takes more than 25% of your monthly income, you need to make a decision: move to a cheaper apartment or increase what you earn per month. 

Another option is to live in a shared space till you’re able to afford more. Say you don’t want to move from the apartment that costs N500,000 a year, you can get a housemate who will split the rent with you. This means you begin paying N250,000 per year which is N20,833 per month. Instead of exceeding your 25% monthly budget for rent, you’re able to stay way below it and can do more with your money.

If you’ve been wondering how to save more from a small salary, this can help you keep more so you can ultimately save more from the little you make.

8. Increase your income

So you’ve learned how to budget money on a low income. But at some point, you might not be able to squeeze any more pennies out of your wallet. Or you might want to create some more breathing room in your finances.

If you feel that there is no room to create savings in your current situation, then it might be time to increase your income.

Although it’s not as simple as it sounds, increasing your income is completely doable. For example, one way to increase your income is through a side hustle. It could be the perfect way for you to earn more money without taking a leap from your day job.

How to Set a Monthly Income Budget

A monthly income budget is a plan that outlines how much money you will need to live comfortably each month. This plan can be tailored to your specific needs and lifestyle, and it can help you achieve financial security.

What are the Key Factors to Consider When Setting a Monthly Income Budget

The first step in setting a monthly income budget is to determine what type of income you want to target. You may want to focus on a fixed monthly income or aim for a higher monthly salary than you currently earn. Once you have this information, you can begin to identify the key expenses that will need to be covered each month.

The Benefits of Setting a Monthly Income Budget

Once you have determined your monthly income goal, the next step is to create a budget that meets that goal. This budget should include all of your ongoing expenses, as well as any new expenses that may become necessary while pursuing your monthly income goal. By following this budget system, you’ll be able to track your progress and make adjustments as needed so that you maintain financial security while traveling.

Tips for Creating a Monthly Income Budget.

One way to create a monthly income budget is by creating a list of possible monthly expenditures. This will help you to plan your spending based on your annual income. You can then subtract expenses from your monthly income in order to arrive at your monthly budget amount.

Estimate the Value of Your Monthly Income

To calculate the value of your monthly income, you need to first estimate its worth. This can be done using a number converter or by using an online calculator. Subsection 3.3 Calculate Your Monthly Income by multiplying Your Daily Income by 24.

This will give you a more accurate estimate of how much money you have each month and help you to make informed decisions about what to spend it on. By estimating your monthly income and making smart spending choices, you can start building financial security for yourself and YOUR family!

Conclusion

Creating a monthly income budget is a crucial part of any business. By knowing what you can and cannot spend each month, you can develop a plan that works best for your business. Additionally, by setting a savings goal, you can make sure that you have enough money to cover your expenses in case of an unexpected downturn. Finally, tips for creating a monthly income budget are excellent resources for helpfully planning your monthly income. By following these tips, you will be able to set up a healthy monthly budget that meets your needs and allows for growth.

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