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How to Live on a Small Income

March 24, 2019

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How to Live on a Small Income

Not everyone has the luxury of a well-paying job and some of us don’t through personal choice. Whatever your situation, it is completely possible to live on a small income.
After maternity leave, I returned to work on a part-time basis, which saw my salary drop massively. At the same time, my husband left his job to return to full time education (he is training to be a paramedic). As a result, we are currently living on the lowest income we ever have. Oh, and we now have a one year old to provide for too.

Is it really possible to live on a small income? Absolutely. My colleague bluntly asked me the other day, “but how do you pay your mortgage?” and it got me to thinking. So I thought I would share how we squeeze as much as possible out of our small income, and how you can make your own money go further too.

Before looking to improve your finances, you need to sit down and take control of them. To do this you need to create a budget and be honest about how much comes in, goes out and what you are spending. I wrote a series of posts on How to Create a Budget from Scratch, which you can find here: Part One | Part Two | Part Three

Once you know exactly what your current situation looks like, you can begin to make positive changes to improve it.

If you are living beyond your means (i.e. spending more than you make) then there are two main things you can focus on: cutting costs and upping the money you have got coming in.

Reducing Fixed Expenses

Once you have created your budget, go through each expense line by line and see if you can make any savings. We regularly review our budget to make sure that we are not spending more than we need to be, so this is something you should do periodically – not just one time.

Mortgage

Are you on the best rate? Could you save money by remortgaging? This article at MoneySavingExpert is really helpful if you’re wondering whether remortgaging is a possibility for you.
Our fixed deal has just ended but due to the change in our circumstances, we are not looking for a new deal. When we’re both back in full time employment it’ll be first on the agenda.

Council Tax

Have you checked if you are entitled to a discount on your council tax? Head to the gov website, put your postcode in and see what is available.
We currently receive a 1/3 off our bill due to Luke being a full time student, which reduced our monthly payment from £120 to £80.

Water Rates

If you are on a low income, receiving certain benefits or have a health condition requiring excessive use of water – you might be entitled to a discount on your water bill with a scheme called WaterSure. This article from CitizensAdvice explains how it works and how to apply.

Gas & Electricity

Get a bill from your current gas and electricity suppliers and head to USwitch. You just input your details (including current supplier, contract and usage) and USwitch will calculate if you could save money by switching suppliers.

We recently joined Bulb, which saw our monthly payment reduce from £149 to £118.31. If Bulb can save you money too, join using my referral and we will both receive £50! The switch was easy – I didn’t have to do anything as Bulb handled it and even better – they’ll pay any exit fees to your current supplier.

You might also enjoy… Reduce Your Energy Bills with These Top Tips

TV/Phone/Broadband

The first thing to do when reviewing your TV package is assess what you actually use – there is no point paying for movies or sports if you only watch them once in a blue moon. Go online and log in to your supplier’s account and downgrade the package as a starting point.

If you’re already on a basic package but this is still too much money, consider calling them (or live chat online) and haggling for a better deal.

Our package was with Sky and we were paying £53.50 a month for the basic TV package, broadband and phone which is obscene money when all you watch is Netflix and Cbeebies. I called Sky and told them it was too much money and I wanted to cancel my contract and they offered me a measly £6 discount IF I would change my mobile plan to them(!!).

Clearly, this was not a tempting enough offer for me so I left and joined Talk Talk after doing a comparison using this tool. We decided to completely cancel our TV subscription and just have broadband. We now have double the speed for £8 less per month and we completely save £23.50 a month for the TV.

TV Licence

If you don’t watch live TV at all, you could cancel your subscription and consider whether you need your TV licence at all. Check out this page and see if you need a TV licence. For example, if you only watch Netflix, you do not need a TV licence. And you don’t need a TV licence just because you own a TV – it entirely depends on how you are using it.

Other Subscriptions

We have lots of subscriptions for various things these days. Assess how much you actually use yours, and if you could get the same services for free. Personally, I will never give up Netflix – we love it and use it all the time so it is more than worth the monthly fee.

However, do you really need Prime, NowTV and Netflix? If you do – why not haggle with them? I completed a free trial with NowTV as part of an Ohmydosh! offer and when I went to cancel, they offered me several discounts to try to retain my business.

Is your Kindle subscription good value for money, or could you use your local library?

Likewise with Audible and Magazine subscriptions – are they worthwhile? You can often access both audiobooks and magazines at the library too.

Insurance

Always, always, always shop around when your renewal comes up. Insurers do not reward loyal customers and chances are there is a better deal to be had.
I always head straight to price comparison websites and make sure I am getting the best deal.

This year however, we combined our insurance and now have two cars and home insurance in one policy. This has saved us roughly £20 a month, which almost covers what my car insurance policy on its own was costing.

Mobile Phones

Mobile Phones are another example of how you can haggle to reduce your bill. When my contract with o2 ended, I shopped around and found a bargain rolling contract deal with another supplier. I contacted o2 to cancel my contract and they eventually agreed to match the new deal – so I didn’t have to do anything and shaved over £30 a month off my direct debit.

Reducing Variable Expenses

Variable expenses can easily get out of hand if you don’t have a budget. But there are a few simple ways you can cut your spending.

Cash Envelopes

Set a budget for each variable expense category (e.g. Food, Fuel, Socialising, Misc) and withdraw the money for the week for each category in cash. Having only cash available to spend makes you more conscious of what you are spending and more self-aware of your spending habits.

There is something psychological about handing over physical cash that makes it feel more ‘real’ than simply swiping your card. And once it’s gone it’s gone, so you definitely think more carefully about how you use it.

You might also enjoy…Money Habits You Need to Adopt Today

Groceries

There are a plethora of ways to save money on your food shop which I wrote about in detail in this post: 10 Ways To Save Money On Your Food Shop.

From meal planning to cashback apps – you should be able to find a way that suits you.

Eating Out/Entertainment

I have a Tastecard through my bank which allows me access to 2-4-1 discounts in certain restaurants and up to 40% off at the cinema. You can purchase a 60 day trial for £1 here (just remember to cancel as it renews at £39.99)

An alternative to Tastecard is Meerkat Meals/Movies which also gives you 2-4-1 on certain restaurants and also a code for 2-4-1 cinema tickets once a week. You don’t have to have bought your car/home insurance policy through comparethemarket to get this benefit either! There’s a nifty little hack which will secure you access for a year.

Head to Compare the Market and purchase a cheap travel insurance policy (I did a daytrip to Manchester) – you should be able to buy one for £1-2. Once you’ve bought a policy, download the app and enter your policy number!

Petrol

Petrol is one of our biggest expenses. Unfortunately, there is not a great deal we can do about it right now. But it is possible to shop smarter.
Ensure that you have loyalty cards on your keyring to swipe when you purchase petrol at supermarket petrol stations to gain points which can later be converted to vouchers.

Shell garages have their own rewards scheme – Shell Drivers Club where you collect points which can be converted to money off fuel coupons.

And finally ensure that you’re buying the cheapest petrol in your area by signing up to Petrol Prices to receive weekly emails which tell you where fuel is cheapest.

Increase Your Income

If like me, you’re not in the market for a new job and asking for a payrise isn’t on the agenda – there are still other ways you can increase your income.

Check Your Tax Code

If you wear a uniform you may be entitled to a Uniform Tax Refund which can be backdated and your tax code can be adjusted to give you tax relief.

If you’re married and your spouse earns less than the personal allowance (£11,850), they can apply for Marriage Allowance to transfer £1,190 to you which also reduces your tax bill and effectively increases your net pay.

Check Your Benefits Entitlement

If you are on a low income, you might be entitled to benefits.

Fill in your details on the Entitled To Benefits Calculator and see if you could receive anything.

Sell Your Belongings

The average home apparently has £3000 worth of unused belongings. Have a clear out – sell it on ebay, gumtree, Facebook, Schpock.

Clear some space, regain control of your home and add some money back into the bank in the process.

You might also enjoy… 10 Tips For Selling Clothes on Ebay

Matched Betting

By far my most fruitful side hustle. Although it can be a lot to get your head around at first, do lots of reading and research and you’ll soon be reaping the benefits.

There is £100s to made from new account sign up offers but even when these dry up, you can still make good money dependent on the time and effort you dedicate to it.

I would highly recommend signing up to Oddsmonkey*. Membership costs £17.99pm but this is more than worthwhile given the money you can earn.

You might also enjoy… Matched Betting – Pros and Cons

Surveys

Not a get rich quick scheme by any means, but an easy way to earn a few extra pounds.

My favourite is by far Prolific– they pay well and I cash out between £30-60 a month depending on how regularly I check for studies.

Check out this post for a complete list of survey sites I use: The Ultimate Guide To Survey Sites

You might also enjoy… How to Make an Extra £100 this Month

So that’s how we pay our mortgage! We squeeze the most out of our budget by monitoring and reviewing our fixed expenses, reining in our spending and upping our income. If you want to see more of my side hustling, follow me on Instagram @katiesaves

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Hi! I'm Katie

I started Katie Saves while on Maternity Leave to document our adjustment to living on less. Now back in work - I blog about making extra money, saving money, getting my life organised and being a new mum. Join me!