Budgeting on a Fixed Income – Five Tips

With a fixed income, you need to follow an effective budgeting process to relieve stress. Even so, the key to success with budgeting on a fixed income is to avoid temptations. However, rest assured, it is not as difficult as it appears at first. Often we hear that “bigger is better, that more is better,” which drives folks to the fast track for growth–they keep looking for more. However, sometimes more is a curse; it all depends on your attitude.

Mike Tyson, Michael Jackson, Burt Reynolds, Lindsay Lohan, and several celebrities earned millions each but spent even more on unsustainable lifestyles. Their challenge wasn’t a lack of money; it was their lifestyle choices, which pushed expenses beyond their incomes.

Budgeting on a fixed income is feasible
Budgeting on a fixed income is feasible

Lifestyle choices will decide how you spend your income. Oseola McCarty, a poor laundress for almost eighty years, earned a small salary. She lived a modest life and saved nearly $300,000 during her lifetime. She set aside small amounts regularly over a long time. Oseola said her secret was contentment. She was happy with what she had.

Based on my research, these five tips will help you stay out of debt and with the Lord’s help be content with what you have.

Budgeting on a Fixed Income: five tips

1. Accept your income

People will tell you not to accept what you have but to dream big: “Believe in your dream, visualize it, and it will materialize,” they say. Nothing is wrong with a dream; however, folks tend to ignore where they are, and live like the future is now.

Any decision, privately or in business that money drives, will create challenges. Money-driven choices lead to you getting involved in a pyramid, Ponzi, and similar schemes to “make money.” Where there is nothing firm creating funds, schemes crash, and innocent folks lose the little they have; history is replete with examples.

The first step to setting and living in a budget is to accept where you are. Surely, consider building on where you are, but first, you must know and reflect in your lifestyle choices, realities of your present condition.

2. Build Your Budget From Scratch

Ignore the past; it’s not your guide to the future. Start with a fresh slate and look at your lifestyle under main categories such as these: food, clothing, transport, housing, entertainment, personal. Allocate funds to specific money-drivers under each group. Don’t put one amount for clothing, identify the exact item such as a shirt, coat, shoes, and so on. Do the same with entertainment: indicate specific money-drivers, such as internet, cable, eating out, movies.

Go through the budget in detail. The first few attempts will be higher than your income; that’s normal. Look again, and identify spending drivers to exclude based on real needs. Don’t cut money, eliminate items that create spending. Maybe now you can’t afford internet, cable, new clothing, and so on. Be realistic; understand your present season.

3. Think Outside the box

What lifestyle changes might lower costs? Examine all alternatives; don’t eliminate any at the start: the more absurd an option, the more in-depth your analysis. The idea here is to look beyond conventional thinking to what might work, at least, temporarily.

I worked with a young married couple in deep debt who decided to sell everything… everything! The husband loved driving and got a job as a trucker. He and his wife decided to “live” on the truck for a year, repay debt, and in year two, restart a “normal” life. That’s been the most out of the box idea I saw. Initially, they thought it was impossible; however, though I did not know it was feasible, I encouraged them to examine it in detail to see how it could work, instead of why it would not work.

4. Use Envelope Budgeting

Once you balance your budget, allocate cash to envelopes–one envelope for each category. Spend from the envelope; when it’s empty, you must wait for the next budget period. As a student in London, England, in the sixties, I lived on a small budget and used the envelope system extensively.

When you accept your condition, it is incredible how well you handle funds in the envelope.

5. Understand Temptations will Abound and will be Difficult to Resist

Beware-enticing messages will bombard you to “spend to save”! So, cut up your credit cards, and stick with the cash in the envelopes. Do not go “shopping.” When you need an item or items, prepare a list with the article and the price and do not deviate from your list. It’s better to make two separate trips with two lists, than buy items that are not on your list


Oseola McCarty in her book, Simple Wisdom For Rich Living, said, “I have led a simple life, but I let myself enjoy a few things. I have always bought the food I wanted, and I buy pretty things if they are useful.” You don’t have to be like her; however, when you accept it’s your choices that drive spending, by God’s grace, you will be able to live in your fixed income.

© 2014, Michel A. Bell

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Michel A. Bell

Michel A. Bell is a former senior business executive, author of seven books — including his first children's book published in 2022 — speaker, and adjunct professor of business administration at Briercrest College and Seminary. Michel is a Fellow of the Chartered Certified Accountants (UK), holds a Masters of Science in management degree from Massachusetts Institute of Technology and a Doctor of Business Administration honoris causa from Briercrest College and Seminary. He is founder and president of Managing God's Money™ and Stewarding God's Resources.

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