I get a lot of emails every week, and while most of them are about debt and how to get out of it, I’ve noticed a growing number of people are trying to figure out how to live on less. Whether they’re retiring on a fraction of the income they had, moving to a single income because they’ve had a baby, forced to simplify because of a job loss, or living in reduced circumstances because of divorce, widowhood or disability, heaps of people are trying to figure out how to make it to the end of the month on a whole lot less money.

There are a few things you need to do to prepare for living on less. The first is to find a way to significantly reduce your housing costs. If you’re headed to retirement, a good goal would be to manage your mortgage down, so that your total housing costs represent 35% or less of your lower income. If your income is falling through no choice of your own, downsizing or moving to a cheaper area or cheaper digs may be your best bet.

Having an emergency fund is extremely important when you have to live on less. Even a small emergency can be devastating to a budget that’s so tight it squeaks.  Make sure you have stash of cash set aside just in case the worst happens so you aren’t forced to use credit and incur interest costs when you can least afford it.

Just as important is ensuring that you know the difference between the things you need (must have to keep body and soul together) and want (would like to have.) I’m amazed at the people who can’t tell the difference: the people who, despite not having the money in the bank, see no problem buying booze, take-out and a new set of threads, putting it all on credit. Wake up! If you’re living on limited resources, putting your must haves at risk for dumb wanna haves is not only short-sighted, it can be very painful because it leads to higher costs and lower cash flow.

If you’re living on reduced income, you can’t do it and keep up with debt repayments. Paying interest is hard when you have a good income. On a limited income, it’s the difference between keeping the lights on or not. It doesn’t matter what you can’t have… what you must do without… don’t go into debt. And if you have debt, you’ve got to find some way of ridding yourself of the burden. So, sure, working three jobs may suck for a while, but since you spent the money, it’s now time to earn it.

While people who don’t make a lot of money love to say that they don’t have enough money to make a budget; that’s just an excuse. At no time is a budget more important than when you’re living on a small income. It’s also a good idea to build up a bit of a “slush” fund when you’re living on a small income. Setting aside your change, or taking $2 a week out of your budget and setting it aside until you’ve accumulated $100 or so means you’ll have money available to take advantage of sales. If chicken goes on for 99¢ a pound, you can stock up.

Learning to barter is another good strategy. What do you have or what can you do in exchange for something else you may need. Offer to weed a neighbour’s vegi garden in exchange for a dozen zucchini. Offer to sit a friend’s kids in exchange for a home-cooked meal. Give a foot rub to an elderly relative in exchange for stuff she no longer needs that you can sell second-hand.

Learning to do for yourself will also save you money. If you can learn to repair what breaks, do your own maintenance, make your own goods, you’ll save gobs of money. While I had neither the tools nor the strength to remove a dead tree from my yard, I did have the skills to cook a lovely meal for the Sub-Hub (substitute husband) who did it for me. Ditto if you learn how to shop second hand and develop other strategies for getting more for less. Find free fun. Learn to love your library. Make friends with people who also live frugally, and take their tips to heart.

You may not be able to live large on a small income, but that doesn’t mean you can’t have a good life. You need to get your priorities straight. And you need to stay focused on what’s really important.