Homesteading is hard enough, but when you realize you need to get on a tight budget, everything changes. Not having enough money to do the things you need or want, on your homestead means you may have to make sacrifices and really refocus your priorities.
In this post, you will learn how to create a tight budget for your homestead.
Creating a Tight Budget
Why You Might Need A Tight Budget
There are a large number of things that can take place to cause you the need to create a tight budget. The most common one’s are a sudden or substantial loss of income and/or when the need to save a large amount of money arises.
A Sudden Loss of Income
Sometimes unfortunate events like the loss of a job or a change in employment status can cause you to have to create a very tight budget. We often get used to a certain level of living and we get comfortable knowing a certain amount of money comes in each week. When there is a change in employment, this means things can change for the worse.
This is one of those times we must create a tight budget in order to make sure we are still living within our means. We may have to cut out some unnecessary expenses and limit our spending.
The Need to Save Arises
Other times our employment may stay consistent but our spending needs to increase suddenly. Having to repair an expensive piece of equipment or needing a new machine on our homestead can cause financial havoc. There may be a medical emergency we need to cover unexpectedly.
Although many homesteaders have savings accounts for emergency situations such as these, not everyone is as prepared. Sometimes our savings just isn’t enough. Again, this is where creating a tight budget comes in.
How To Create a Tight Budget
Creating a tight budget can feel like a daunting task to many homesteaders. However, in reality, there are four main steps in creating a successful budget. See Getting Starting Homesteading: Budgeting for more information.
The four main steps are as follows:
- Address Your Priorities
- Be Realistic With Your Bills and Expenses
- Know Your Income
- Write It Down
Address Your Priorities
The first step in creating a reasonable and smooth running budget is to address your priorities. You must be well-aware of what expenses are most important and/or a priority before setting up a working budget. This is especially true if you have little wiggle room for error.
To address your priorities, start thinking about which expenses MUST be paid. These may include:
- Rent or Mortgage
Make a list of each important expense and how much is supposed to be paid each month. These are your biggest priorities and usually carry amounts that are almost fixed in nature.
Everyone would like to think they can just simply cut down their bill amounts, but in reality, some bills are not negotiable. A rent or mortgage payment would be a good example of a fixed amount. So would a car loan or a personal loan. As with most personal loans for low-income individuals, interest rates fluctuate according to the Federal Reserve. However, you may be able to find one with a fixed rate APR to lock in your interest rate for a set period. This way, you can make smaller monthly payments while paying less interest.
Utilities, however, are variable expenses, and although you can cut done on usage, some things need to be kept in mind. A colder than normal winter may mean higher utility bills.
Another area of your expenses you need to be realistic with is your food. You may think you can cut down on the bill each week or month, but be truthful about what you need to purchase to eat healthy and what you can cut out to save money. Is a case of Pepsi a necessity?
Know Your Income
You must know exactly how much money you bring home each payday. However, be careful about including things like bonuses or perks that are not the regular part of your pay.
Count and depend only on what you know you will definitely make and nothing more. It is always better to receive more than you were expecting than to be panicked because you didn’t receive enough to cover your expenses.
Always Know Your Income!
Write It Down
Once you know your priorities and are aware of the actual amount of income you can count on, it is time to figure out a budget on paper. Gather a pen and paper, an income and expense sheet, or a ledger/budget book and get to work.
List your fixed expenses first with the dates they are due and the minimum payment amounts. Your fixed expenses may include rent or mortgage, car payments, loan payments and so on. Next, write out the variable expenses that must be paid each month. These are bills such as utilities, phone bills, insurance, and credit cards.
Follow this up with a list of money you spend irregularly or that do not have a set date to be paid. These expenses may include school lunches, transportation and gas costs, food, and others.
Lastly, allow for the things you may not consider. These are items like clothing, entertainment, repairs, and miscellaneous items. You can check out The Farm Wife’s Income and Expense Sheet for Homesteaders for a great set up and example. You can also read her post-Homesteading and Small Farm Accounting for a primer on creating your own.
Sticking With It
Anyone can create a budget but sticking to a tight budget can be stressful. It is very easy to make a bad decision one time and be completely off your budget in the blink of an eye. You have to develop a certain discipline to stay on a tight budget.
Before you decide to spend a single penny that is not included in your budget, stop and ask yourself the following questions:
- Do I absolutely need this or can I do without it?
- Will this make me short on paying another bill?
- Can this purchase wait?
- Is there a more affordable way around what I want to spend?
Asking yourself those questions before spending may help keep you looking at things more realistic and of course, in turn, keep you on budget.
Final Thoughts on Creating a Tight Budget for Your Homestead
Gather your expenses, figure out your actual income, and create that tight budget you need to make. Be careful and disciplined and follow through. Before you know it you will be able to successfully budget your money for anything that comes your way!
As a former city financial advisor turned off-grid homesteader, I must say this is good advice for most people – not just homesteaders! Living on a tight budget might seem difficult at first, but it forces you to be creative, self-reliant, and honest with yourself. Three important skills for all of us.
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Thanks! I agree I feel like a budget is a necessity for a homestead and having to make a tight budget is a skill all people should develop.