How To Create A Budget When You’re Broke

Estimated reading time: 12 minutes

You don’t need money to create a budget, but you need one to improve your financial situation.

no money budget

She’s Broke And Unsure How To Create A Budget

It’s not unusual for me to read comments about being unable to budget because someone is broke.

When I read this, I felt that the premise of a budget was not being understood correctly.

You see, a budget is not meant to get you out of the debt you put yourself into.

A budget guides you so you make the right decisions to help yourself get back on track and pay off debt.

Often a negative mindset toward budgeting is what holds people back, but once they see the results, they are amazed.

Years ago, I helped Jen and Ken with their monthly budget, which allowed them to understand their financial mistakes.

Whether you have low income or no savings in the bank, a budget is right for you.

The only way up is by putting your numbers to the test and pushing yourself to the limits.

Either you want it, or you don’t.

Let’s have a look at Monica’s story.

I Need To Create A Budget, But I’m Broke

Dear Mr.CBB,

One of the most important tasks I wanted to complete in 2020 was to create a budget.

I’ve never tracked my finances before, which is why I have debt that I’m struggling to pay back.

I know that once I finally create a budget that works for me or find one that does, things will look up.

Feeling lost in a world of numbers is something that I’m used to, and I don’t know where else to turn.

Every month, I net approximately $2300, which is one of the reasons I’m broke most of the time.

In my bank account, I don’t have any savings apart from what I don’t spend or try not to spend.

I’ve been living independently since I was 24, and I’m not 28 years old and want nothing more than to feel free from money stress.

I know I’m young; however, if I don’t get my money problems under control now, I’m afraid I’ll be stuck for the rest of my life.

Growing up in a household where my parents had good jobs meant money wasn’t discussed, just spent.

I didn’t know the value of money until I moved out alone, and it scares me because I’m not my parents.

The only debt I have is my car debt which is $325 a month for the next two years, and then it’s paid off.

I also had a MasterCard credit card with a current balance of $ 1565.3 when I wrote you this email.

Each month I pay the minimum amount on my credit card, although some months, I add more.

My monthly rent is $750 plus utilities, around $200, including my primary cell phone.

On your advice, I got tenant’s insurance last year, which costs me $19.45 a month.

There is no life insurance or retirement savings plan that I pay into yet but I would like to.

I  don’t have a grocery budget now t since I only buy food with any money left to spend.

During the week, I try to eat a balanced diet, but I don’t overindulge as I can’t afford to do so.

Some months are better than others, depending on whether I have extra cash.

Parking and laundry facilities at my building cost around $70 a month, both of which are necessary for me.

I never did go to University or College, so I don’t have any student debt to worry about (just in case you were wondering).

My biggest problem with money is not knowing how much I can spend.

I understand a budget will help me to solve this problem, but I feel overwhelmed with the process.

Right now, I’m broke and would like to find ways to save money while paying off my debt.

Once my debt is gone, I plan on saving as much as possible for my future and potentially a downpayment for a house.

You’re probably wondering where all of my money goes well, to my monthly bills, for starters, and eating on the run.

I have a terrible problem with eating on the go and shopping when I’m bored or want to get out of the house.

With COVID-19, I’ve done online shopping far more than ever. 

This is probably why I feel so overwhelmed because I know I need to stop.

The only way I feel I can do that is by challenging myself with a budget.

How do you even budget when you’re broke?

Sorry if this is too long, but since you always help others, you might help me.

You can email me if you need any other information.


Monica L.

Southwestern, Ontario

Budgeting IS For Every Budget, Even If You’re Broke

Hi Monica,

Thanks for sending me your email, and I’d be glad to run through the process of a primary budget with you.

If you want to create a budget even if you’re broke, it’s no different than anyone else’s budget.

I chose the Canadian Budget Binder Basic Budget for you not ever using a budget before.

You can find this version on my Free Budget Binder Printables page.

I hope you read this as I tried to email you back. However, it may have gone to your junk mail.

My email was to ask you for more numbers that I could plug into the budget for you.

Since I did not get those numbers, you can do them alone.

Creating A Budget When You’re Broke

Basic Budgeting
How To Budget When You’re Broke Infographic

Goals Are Important If You Want Something To Work Towards

Just because you have little money does not mean you can’t budget.

I’ve heard time and time again that it’s impossible to budget when there’s no income.

If you have zero income, you have a bigger problem than trying to create a budget.

When you have any source of income coming in, you can budget net income in vs expenses going out.

Using a basic budget is all you need to track and master your monthly budget.

Before you begin any budget, it’s essential to set goals.

Some of you may think this task is for the fluffy fairies of budgeting, but it does add value.

When you take the time to ask yourself what you want from a budget and set goals, you’re likely to challenge them.

For example, you’d probably do it if I told you I’d give you $1000 if you budgeted with me for one year.

However, if I said I’d give you a certificate for budgeting for one year, you probably wouldn’t.

A piece of paper will never beat out cold hard cash,, although it may be all they need for hard-core budget fans.

For those of you who need the extra push and challenge I do, setting goals is imperative.

I often set short-term budget goals such as;

  1. We will treat ourselves to a dinner out if we reach a savings goal this month.
  2. When our savings account reaches x dollars, we will take a mini-trip or buy something we want instead of need.

These types of goals motivate us, and it’s something I often share with my readers.

Collecting Your Bills

Being unorganized is a key attribute of many people who are in debt and don’t know where their money is going.

It’s often easier to throw bills in a pile, never to be seen again on the kitchen table or in a box hidden in the bedroom.

I’ll admit that before I started budgeting, I was horrible like this, but I made sure my bills were paid on time each month.

These days all of our receipts and bills go into our budget binder so we know where our money is going or will be.

This is a great time to clean out the drawers, toss away old bills, and start fresh with current documents.

If most of your bills are paid automatically or arrive electronically, start a folder in your email for each bill.

The idea is to put each email from the company you owe money to into the folder once the bill is paid.

Tracking your bill payments is another great task just for that added protection of knowing.

One of our faults was not having enough money in our chequing account when money was automatically debited.

Track, monitor, and make sure money is always ready for those bills to be paid, especially when automated.

Tracking Your Expenses

I want to mention that when you begin using a budget and are broke, don’t focus on savings so much.

The idea is to crush your debt first and then save as much money as possible.

However, an emergency savings fund is something you don’t want to pass by even when you’re broke.

This is where tracking your expenses becomes critical to the success of your budget.

Tracking your expenses for a month or even two should be sufficient enough for you to see where your money is going.

Before beginning with a budget, find out where the money goes.

The overall picture will allow you to create budget categories that fit your needs and distribute money to each.

For example: By tracking the grocery expenses you’ve found that you spend $300 a month on food at the grocery store.

If that number is too high for your budget because you need more money to pay your fixed bills, i.e., rent and utilities, lower the budget expenses.

Now you know you can safely spend $200 monthly on groceries as your other bills are covered.

However, if you want to crush your debt faster and feel you can lower your variable expenses, go for it.

Add the money you would have spent in one budget category to your debt principle.

This is how we could pay our mortgage off quickly, along with a yearly lump sum payment.

The idea is to save as much as possible where you have control and allocate the funds to another area of your budget.

Simple enough, but that matters even if you can’t, as long as you are budgeting.

In time you will see the benefits of your hard work, just don’t expect it immediately.

Improving Your Budget

low-income budget

For Monica, I used my unreleased Basic Budget (an older version here) and plugged in the data I was given.

Although her net income is $2300 a month, using the figures I was given, there’s $935.55 left to spend.

I’m unsure where that money is going, but I can assume a few things.

  1. Debt Repayment
  2. Gas for her car
  3. Insurance for her car
  4. Eating Out
  5. Shopping
  6. Health and Beauty
  7. Telecommunications

Given that she has such a small credit card debt, I’d first work on getting rid of that 100%.

Moving forward with your budget, you should only use the credit card if you plan to pay it off in full.

Since you don’t have an emergency savings fund, so be it if an emergency comes up and you must use your card.

Once you plug in the rest of your figures, see what you have left and areas you can improve.

Any money you have left over, put at least 3-6 months of emergency savings towards the building and killing debt.

Your car payment is only for another 2 years; however, keep in mind the state your vehicle is in.

  • Will you need a new car in two years?
  • How will you start saving for a new car?
  • Will you take out another loan for a car when needed?
  • How will you fund any repairs? (emergency savings, projected expenses)

Retirement Savings

Consider talking to a financial advisor once your credit card debt is paid and you save for emergencies.

He/she can help you make the right decisions based on your budget and any extra cash you have for retirement savings.

Your current notice of assessment for 2019 will tell you how much room you have for your registered retirement savings.

Call the Canada Revenu Agency or log in to your My Account.

Tax-Free Savings Account

You will have the maximum allowable contribution room if you haven’t invested in a Tax-Free Savings Account.

Your TFSA contribution room information can be found by using one of the following services:

Life Insurance

You’ll also want to consider term and critical life insurance if you don’t already have that.

There are many factors to consider with finances, and many people miss all the simple stuff and pay the price.

Ask yourself many questions about your budget and find the answers if you don’t have them.

Don’t be afraid to make phone calls and talk to your banker, as they most likely will advise you.

Ideas To Decrease Expenses And Increase Income

  • No-Spend Challenge, where you spend nothing apart from monthly bills for a month.
  • Eat-In Often, Meal plan and stop buying food on the go, which adds up quickly.
  • Avoid Online Shopping if you struggle with not being able to say no. Just don’t do it.
  • Sell anything you no longer need so you can bring in some extra cash.
  • Find a part-time job again to add extra money to your cash flow to help pay the debt off faster.
  • Eliminate any unnecessary expenses (ex: television, cell phone, home phone, internet)
  • Call your credit card company and try to negotiate your interest rate.

At the end of the day, Monica, the most important thing you can do is to stay positive.

I know budgeting can be tough when you begin, but it will get easier as you go along.

Plan for those unexpected expenses that pop up throughout the year by budgeting projected expenses into your budget.

It’s a simple process where you save a certain amount each month to have the money when the bill comes due.

A negative mindset only allows people to stay where they are financially and not move forward.

Don’t let this be you.

If you read this and have any other questions, please message me.

Discussion: What other tips would you give Monica to help her create a budget?

Leave your comments below.

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