At first glance, the idea of budgeting on minimum wage may seem ludicrous.
After all, people earning significantly more often have trouble getting ahead in North America. Surely there’s no hope for achieving anything but a hand-to-mouth existence on minimum wage, right?
Sure, you won’t be buying a Lamborghini on minimum wage no matter how well you budget. You can certainly live more comfortably and even start building wealth, though.
Keep reading for some tips.
What is the minimum wage?
In America, states set their own minimum wages. However, the Fair Labor Standards Act keeps this from dipping below $7.25 hourly for most professions.
In Canada, there is no federal minimum wage. Provinces set their own.
Hover over each region on the maps below to see its minimum wage.
Minimum wage by American state
See table (expand)
|District of Columbia||$15.00|
Minimum wage by Canadian province
See table (expand)
|Newfoundland and Labrador||$12.15|
|Prince Edward Island||$12.85|
14 tips for budgeting on minimum wage
1. Take budgeting guidelines with a grain of salt
Many conventional budgeting guidelines simply don’t make practical sense when you’re on minimum wage.
Take the 50/20/30 rule, for example. It suggests allocating your income like so:
- 50% for needs
- 30% for wants
- 20% for savings and investments
It sounds great in theory. Let’s look at the numbers, though.
Either amount is more than some people earn monthly on minimum wage. It certainly exceeds the 50% mark for most.
How should you approach budgeting in this situation, then?
Well, for starters, take conventional guidelines with a grain of salt. By all means, work towards them. Don’t beat yourself up for falling short, though. As long as you have a plan (which this list will help you with) and are working towards it, stay positive.
2. Save whatever you can every payday
If you’re earning minimum wage, saving may seem like a pointless endeavor.
It’s understandable. As I demonstrated in the previous tip, rent on its own is likely stretching you thin. Throw in food plus transportation and things aren’t looking so good.
You should still aim to save something, though, even if it seems negligible.
In my opinion, this is largely about building habits.
You see, while it may seem laughable to anyone on minimum wage, your attitude towards money doesn’t automatically change as you earn more. It simply scales.
If you make sacrifices for the sake of saving on minimum wage, you’ll do the same in higher income brackets. The amounts will just get larger. If you put off saving, though, that behavior will likely continue no matter how much money you make.
Saving is also about building a financial lifeline. If you have no emergency fund because it isn’t part of your budget, you’ll likely need to take on debt when faced with an unexpected expense.
This is a terrible position to be in. Loans you would qualify for as a minimum wage earner likely carry substantial interest rates. Consequently, you’d have a very hard time digging your way out.
Even if you’re only able to save $50 per month, it can help you avoid – or at least mitigate – this situation.
3. Identify specific reasons for saving
As much as I love saving for the sake of it, most people can’t stick with that. They quit as soon as life gives them an excuse. Low income certainly fits the bill.
Therefore, when budgeting on minimum wage, it’s very important to establish specific goals and reasons for saving.
If you don’t have an emergency fund, building one should be your primary motivator in this regard.
This is acclaimed personal finance author Dave Ramsey’s first baby step. He recommends establishing a $1,000 emergency fund before switching your focus to eliminating debt. Once you’ve done that, add to your emergency fund until it’s capable of covering your expenses for three to six months.
It’s only then that he recommends saving towards other goals such as retirement.
Now, I don’t like everything Dave Ramsey says. I really like this approach, though. It provides a simple framework you can use to save confidently.
4. Analyze your spending regularly
When budgeting on minimum wage, there isn’t much room for mistakes. Even a stray $30 expense can gobble up much of your paycheck.
That’s why I recommend analyzing your expenses regularly. You’ll have a much easier time keeping everything in check.
I use Mint for my expense tracking. It syncs all of your bank accounts and credit cards, essentially serving as a dashboard for your entire financial picture.
You can also receive weekly reports on your spending in various categories. Use these reports to gauge your progress throughout the month. If you’re veering off course, take swift corrective action.
In my article on organizing your finances, I provide a detailed guide to getting set up with Mint. It’s not complicated at all. In fact, the entire process of creating your account and monitoring transactions is so simple you’ll have no excuse for being clueless about your spending again.
5. Take any help you can get
Thriving on minimum wage in North America is a challenge, particularly if you have children. There’s absolutely no shame in accepting help when it’s available.
Help often comes from family and community members.
For example, are you able to move in with a family member? Doing so could free up a massive chunk of your income.
On the community side, does a local church offer meals for those in need? If accepting that help improves your financial flexibility, do it.
There are also government programs you can utilize when budgeting on minimum wage.
Be sure to make good use of any money these programs help you save. Put it in a savings account, pay off debt, or do whatever else moves you forward. It’s only right that you use the opportunity to build a financial foundation. In doing so, you’ll eventually outgrow your need for assistance and make room for the next person.
6. Avoid new consumer debt
In the modern world, income isn’t much of a practical constraint on your capacity to spend. If you’re creative enough, you can find a way to finance just about any consumer item.
This is incredibly unwise when you’re on minimum wage, though.
For one, as I mentioned earlier, any loan you’d qualify for would likely come with an exorbitant interest rate. The minimum payments alone could put your spending outlandishly at odds with any sensible guideline.
There’s also that pesky issue of habits. If you’re able to justify spending money you don’t have now, what do you think will happen when your income increases? I’ll tell you. You’ll say, “oh nice, I can take on even more debt now,.”
There’s absolutely no excuse for letting discretionary spending balloon into excessive consumer debt when you’re on minimum wage. Avoid it or you’ll suffer tremendously.
7. Eliminate existing consumer debt
Any consumer debt you can’t pay off immediately should concern you as a minimum wage earner. Your budget’s lack of wiggle room means even a $20 monthly payment might prove challenging.
As part of his second baby step, Dave Ramsey recommends eliminating non-mortgage debt using the snowball method. This involves eliminating your debts as aggressively as possible in order of smallest to largest.
For example, let’s say you have the following:
- $100 on credit card “A”
- $250 on credit card “B”
- $320 on credit card “C”
Using the snowball method, you’d make minimum payments on credit cards “B” and “C” every month. You’d make the minimum payment on credit card “A” but also throw as much extra money as possible towards the balance.
Once you finished paying off credit card “A” you’d take its minimum monthly payment along with those excess funds and add them to the funds directed at credit card “B.”
That’s where the “snowball” part of the equation comes in. As you pay off loans, you end up with more to throw at the larger balances.
This generates a sense of momentum, which is incredibly valuable when you’re on minimum wage.
Once you’ve successfully eliminated consumer debt using this method, remember my fifth tip. Avoid taking on new high-interest debt. Instead, focus on living below your means. Consider saving the money you no longer have to spend on monthly loan payments or using it to make your other expenses more manageable.
8. Maintain a good credit score
This may seem like a strange tip considering I just told you to stay away from consumer credit.
However, maintaining a good credit score is important. It will help you achieve favorable terms during financial negotiations. This can save you money on a monthly basis, which is obviously very helpful when you’re on minimum wage.
For example, many landlords conduct credit checks. A great credit score gives you room to negotiate the rent. You see, landlords love tenants with a track record of making payments on time, which is what a good credit score demonstrates. They may be willing to accept less money in exchange for a worry-free tenancy.
A good credit score will also help you secure loans at favorable interest rates. While you should limit your exposure to debt on minimum wage, it’s still good to maintain flexibility (more on this shortly).
Perhaps most important, though, is the fact that maintaining a good credit score requires responsible behavior that will benefit you in other ways as well.
According to Experian, credit-building behaviors include:
- paying bills on time
- keeping debt balances low
- only applying for loans you actually need
- monitoring your credit report and disputing inaccuracies
You’ll notice “using your credit card regularly” isn’t on the list. That’s because, contrary to popular belief, racking up a balance doesn’t actually improve your score. Using your available credit sparingly (or even not at all) is what does the trick. Keep this in mind.
9. Plan for non-monthly expenses in advance
One challenge with budgeting is that many expenses don’t recur on a monthly basis. Take dental appointments, for example. You might only book them twice per year.
Don’t make the mistake of scrambling to cover such an expense right as it comes due, though. Plan ahead.
If you see the dentist twice each year, you have six months to save for each appointment. Divide the cost by six and set that money aside every month.
Take a similar approach to budgeting for any other non-monthly expense. You’ll find these things suddenly seem much more affordable.
10. Keep transportation costs low
According to the Bureau of Transportation Statistics, American households spend an average of more than $10,000 annually on getting around. Vehicles and related purchases consume the lion’s share at an average total of more than $7,000.
I probably don’t need to tell you these numbers are absurd for any household attempting to survive on minimum wage. Even if you cut those expenses in half, they’d still represent a very significant chunk of any minimum wage-earning household’s annual income.
Thankfully, there are a few ways to keep your transportation costs low.
Consider ditching your car in favor of public transportation. If you occasionally need a vehicle, rent it by the hour through a program like Zipcar.
If you must own a car, choose something reliable. Unexpected repairs can absolutely devastate a minimum wage budget. Make sure you also shop around for deals on insurance and other costs.
11. Minimize housing costs
As I mentioned earlier in this article, housing presents a major challenge for anyone budgeting on minimum wage.
Even modest dwellings around North America command rents that leave little to no room in a minimum wage earner’s budget for anything else.
While you don’t have the option of simply forgoing shelter as you would a car, there are many ways to reduce associated costs, including:
- living with roommates
- renting a single room in a house
- relocating to an area with cheaper rents (i.e. the suburbs)
- moving in with family
- applying for housing assistance programs like Section 8 in the United States
Do what it takes to reduce your housing costs while maintaining a safe living environment.
12. Get food spending under control
Food is another expense category that can easily overwhelm minimum wage earners.
Unlike with housing and transportation, it’s very easy to spend impulsively on food. Grocery stores are essentially designed to facilitate this – and it works. Consumers typically spend hundreds of dollars on grocery store impulse buys every month, according to research.
Most people can’t afford to burn money like this – especially not those on minimum wage.
Thankfully, there are some relatively straightforward strategies you can use to avoid destructive impulse spending at the grocery store, including:
- paying with cash and only carrying the exact amount you’ve allocated for that trip
- creating and following very specific shopping lists
- making a conscious effort to avoid being lured into buying snacks at the checkout
Other general tips for saving money on groceries include:
- looking for coupons
- making meal plans based on seasonal produce
- avoiding snack purchases, which offer very little value
- buying store-brand products
- only buying produce you plan to use immediately
13. Create a plan to earn more
There’s no escaping it. Budgeting on minimum wage is extremely difficult.
My point? To really get ahead, you need to earn more.
One approach is to pick up a side hustle. The internet has made this incredibly straightforward with ideas such as:
- freelancing (i.e. writing and graphic design)
- selling handmade items on Etsy
- virtual tutoring
- completing odd jobs you find in your local classifieds
- opening a dropshipping store
- completing tasks on Mechanical Turk
Don’t ignore real world side hustles, though, such as:
- dog walking
- landscaping (i.e. shoveling snow or cutting grass)
- renting out your driveway (yes, this is a thing – just check local regulations first)
- a regular old part-time job
You can also just aim to find better-paying full-time work. This doesn’t necessarily mean going back to school, which would cost money you don’t have. High-paying skills you can learn online include:
- web development (I’m working through the totally free Odin Project myself)
- content marketing
- IT support (check out Google’s free certificate)
- data science
How to leverage these ideas into a well-paying career
If you’re like most people, the previous section probably felt like information overload. There are so many different opportunities out there to choose from!
I recommend picking one that interests you then researching what it will take to ultimately earn a living with it.
If you’re still motivated after your research, create a roadmap. Consider what actions you need to take (i.e. completing a course) and fit them into your daily schedule.
If research turns you off an idea, that’s fine. Just choose another one to explore – and don’t stop until you find something. It’s a big world with plenty of options.
14. Avoid lifestyle creep
Once you start making more money, be very careful about what you do with it.
Specifically, avoid lifestyle creep. This is the practice of using raises to upgrade your lifestyle rather than saving more every month.
Let raises help your budget fall in line with the 50/30/20 rule of thumb. This means holding steady with your spending in each category (essentials, wants, and saving) until it falls well below the allocated percentage.
I know this can be incredibly challenging when your new income could easily buy you a nicer apartment or vehicle. While you should absolutely strive to obtain those things, only do so if you can afford to keep them. Otherwise, you’ll never escape a paycheck-to-paycheck existence.