How a Shoestring Budget Can Transform Your Financial Health

With a shoestring budget, every single dollar has its place. A shoestring budget can help you through tough times when money is tight. And if you commit to it, this budget can even change your financial life.

“A shoestring budget is a lean financial plan where every dollar is allocated with purpose. It focuses on essential expenses and eliminates non-essentials, ensuring that your resources are stretched to their maximum potential,” says Trent Porter, a certified public accountant and certified financial planner at Priority Financial Partners.

Because every dollar is accounted for in a shoestring budget, it can work wonders on your financial health. “By forcing you to scrutinize every expense, a shoestring budget transforms your financial health through heightened awareness and discipline. When you know exactly where your money goes, you can redirect funds to reduce debt and build savings, ultimately strengthening your financial foundation,” Porter says.

How a Shoestring Budget Works

For a shoestring budget to work, you’ll have to monitor all spending closely.

“In practice, a shoestring budget involves meticulously tracking every cent, planning for both regular and unexpected expenses, and making tough choices about discretionary spending. It’s not merely about cutting costs—it’s about making smarter, intentional decisions every day to ensure that each dollar is used effectively,” Porter says.

A shoestring budget is a good financial tool for people needing to get a handle on their financial lives.

“This approach is ideal for anyone looking to take control of their finances. It benefits young professionals starting out, families managing tight incomes, and individuals in transitional phases who need to stabilize their finances,” Porter says.

People who are really struggling financially can benefit from a shoestring budget.

 “It helps break the cycle of living paycheck to paycheck or paying off burdensome debt, giving you a fresh start,” says Kristen Vernace, a certified financial planner at Pathways Financial Planning.

But a shoestring budget isn’t right for everyone. Some people may want to pass on taking on such a strict budget.

“If you’re already meeting your savings targets and on track to meeting your financial goals, adding a restrictive budget is likely unnecessary,” Porter says.

People without financial goals may want to pass on a shoestring budget as well.

‘Without a clear objective in mind, (a shoestring budget) can feel more like a restriction than a strategy, leading to a lack of motivation. This can even result in overspending, as people might justify it by thinking they’ve “been good” and “deserve” to treat themselves by spending,” Vernace says.

How to Get Started

To begin a shoestring budget, you’ll need to examine your finances closely. You’ll want to see where every dollar is going.

“Start by gaining a clear picture of your income and expenses. Begin small by tracking your spending meticulously, and be prepared to adjust your plan as you learn more about your financial habits,” Porter says. “The key is to build discipline over time and ensure that every dollar is working towards your financial goals.”

Look for ways to cut costs. You’ll want to save as much money as you can when you are on a shoestring budget.

“Review each category of your budget to identify areas where you can cut costs. For recurring expenses like cell phone bills, auto insurance, and cable, consider switching providers to find a lower price,” Vernace says. “Pay attention to where you shop for groceries and gas, as different stores can offer significant savings.”

Make sure your shoestring budget includes room for entertainment so you resist the urge to spend impulsively on expensive discretionary items.

“It’s also important to set aside a little money for fun and entertainment, or your shoestring budget may feel too restrictive to maintain,” Vernace says. “Look for deals like discounted gift cards and coupons, and take advantage of happy hours or matinee shows for cheaper options. Above all, stay focused on your savings goal, so you remain motivated and on track toward reaching it.”

The Bottom Line

If you are pursuing an important financial goal, adopting a shoestring budget may be the way to go. You’ll cut costs, track every dollar of your spending, and have more money for whatever goal you are chasing.

People in tough financial straits, such as living paycheck to paycheck or struggling with debt, may use a shoestring budget to turn around their financial lives. A shoestring budget is not for everyone. If you are already comfortably meeting financial goals, you may not need such a challenging budget. But a shoestring budget is a sound choice for people looking to turn around their finances.