Definition and Example of a Limited Budget
How Does a Limited Budget Work?
Types of Limited Budgets
Definition and Example of a Limited Budget
A limited budget is a budget you create when you have a limited amount of money. It allows you to spend the least amount possible each month. The term limited budget can apply to personal finances and business finances. Discover what a limited budget means, how it works, and what it can mean for your financial life.
How Does a Limited Budget Work?
The idea behind how a limited budget works is that you reduce or significantly shrink discretionary spending to secure high-priority expenses. This usually means skipping restaurants and bars to ensure that you have money to meet basic needs like food, shelter, and transportation.
If your finances are tight, you can create a limited budget by tracking your monthly cash flow and expenses. Then, continuously look for ways to save money and cut expenses to the lowest possible level. You can do this by trying the following:
- Cutting coupons
- Shopping at thrift stores
- Cancelling unused subscriptions
- Carpooling with coworkers
- Getting a roommate
- Searching for cheaper insurance and other services
- Blocking self-shopping
- Reducing the number of times you eat out
- Using the DIY method to fix your home or car
You can also use a limited budget to achieve savings goals. You can implement a temporary limited budget to help you save for a vacation or other future expenses.
Types of Limited Budgets
Limited Budgets for Home Projects
Grocery Limited Budget
Limited Budgets for Startups
Limited Budgets for Home Projects
Working with a limited budget is not something that only happens in low-income households. For example, an upper-middle-class family might want to install a swimming pool in their backyard. The cost of the pool they desire is $60,000. However, they only have enough money to spend $40,000. So when they meet with the contractor, the family tells them that they need to find ways to reduce some costs because they are working with a limited budget.
Grocery Limited Budget
A good rule of thumb for grocery spending on a limited budget is to consider the “Cost of Food at Home” chart published by the U.S. Department of Agriculture (USDA), which provides weekly and monthly expenditure budgets based on age. The chart includes low, moderate, and generous budgets for five age categories: children, men, and women. The USDA’s low-cost month plan can be used as a way to adjust the grocery limited budget.
Limited Budgets for Startups
Limited budgets also occur in business. For example, you might want to start a small business but don’t have much money to do so. Due to the limited budget, you might choose to run the business from home instead of a store, obtain capital from friends and family and crowdfunding, and leverage social media for marketing that you would have had to pay for through a third party.
Summary:
- A limited budget is one that emphasizes minimal spending.
- Working with a limited budget means finding creative ways to stretch every dollar.
- Limited budgets can apply to both businesses and personal finances.
- Limited budgets are about spending, not income.
Source: https://www.thebalancemoney.com/what-is-a-shoestring-budget-5212345
Leave a Reply