Shoestring Budget: What it Means, How it Works

What Is a Shoestring?

The slang term "shoestring" often describes a small amount of money which may be an inadequate amount to fund the intended purpose of its use in full. The budgeting process is where the term will most frequently appear, as in a "shoestring budget" or alternately as "on a shoestring."

Examples of the idiom in use may include:

• The company financed the renovation project on a shoestring.
• River and Chris are living in a small studio apartment because they are on a shoestring budget.

Understanding a Shoestring

While a shoestring budget is considered inadequate, it may be just enough when stretched. Much like a shoelace that breaks and must stretch to accomplish the tying task or leave part of the shoe unclosed, the same applies to money that must stretch to achieve the bare minimum. The practice may refer to an individual, family, or business spending. When an entity is living or operating on a shoestring budget, they usually have limited access to additional funding.

According to Quora, the Oxford English Dictionary (OED) lists the first occurrence of the word in print as being from an 1882 issue of The Century Magazine. The magazine used the term as it described a card player saying, "[He] could draw to a shoe-string, as the saying went, and obtain a tan-yard!"

Merriam-Webster further describes the connection of the term shoestring and its link to a small amount of money to the custom of early, itinerate peddlers. The wandering peddlers would sell or trade small items such as needles, pots, and shoelaces—which was the most popular item. These traveling trinket sellers made a meager income as they charged little for their wares. Some believe this is the origin of the connection of the term "shoestring" to a small amount of money. Further, Merriam-Webster found the first use of the word as an adjective in 1859.

How to Save Money on a Shoestring Budget

It is possible to save with careful planning. First, create a household budget and figure out where you can cut back on your bills, from groceries to the Internet. Finding areas in your budget to scale back on your spending may help you free up some cash to save. Take any money you can trim from areas of your budget and deposit the money into a high-yield savings account. Even savings of $10 a week from your paycheck will add up to $2,080 a year. Invest that money, and it could grow each year.

Other ways to save money on a shoestring budget include picking up side gigs to earn (and then save) more money, pay down high-interest credit cards first, and then move the former payments into a savings receptacle like a certificate of deposit or money market account.

How to Invest Money on a Shoestring Budget

Besides savings, you can even invest money on a shoestring budget. First, if your employer offers a 401(k) retirement account, make sure to set aside some of your pretax dollars for it, especially if your employer will match your contribution. Consider using any tax returns or bonuses to invest in ETFs or mutual funds.

Many financial institutions offer low-fee robo-advisors to customers with limited funds, and there are literally hundreds of mutual funds that allow investors to use a smallish (around $500) deposit.

How to Start a Business on a Shoestring Budget

It is possible to start your own business on a shoestring budget, but like investing and saving on a shoestring, it takes organization and ingenuity. Creating a budget that spans at least half of the year according to the amount of your seed money plus any potential revenue. Keep your employee roster lean, and if you can run the business alone and put off paying yourself while it gets up and running, even better.

Home-run businesses often cost less than renting an office, and if you are planning on selling products, bear in mind that the upfront costs of inventory are usually high. Shipping directly from wholesalers after you receive payments from customers may likely be less expensive. If you decide to open an "online" story for products, make sure to budget a high-speed internet service, plus a domain name and an affordable platform to host your business.

Marketing a business doesn't have to be expensive. You can begin by utilizing social media sites and creating free accounts strictly for your business. Another way to gain customers is to put up online ads using pay-for-click advertising methods. Or consider starting an email list of potential clients. In your email, send them a well-written pitch in a blog style with helpful content related to your business.

If your business is personal services, like legal or financial, or patient-based, if you are a therapist or nutritionist, ask your clients to pay for your services at the time rendered rather than bill them.

Shoestring Budget FAQs

How Do You Live on a Tight Budget?

Tens of millions of Americans live on a tight budget. In fact, as of 2020, one-third of Americans reported living in the U.S. were struggling to cover usual expenses. Living on a tight budget can be done by carefully watching where your money goes and trimming away extra overhead and expenses. For example, buying groceries on sale, clipping coupons, and buying in bulk may save you money on food. If you have high-interest credit cards, work on paying them off and use cash instead of credit to avoid going into debt.

Look for free events for entertainment and check to see if your children qualify for reduced or free meals at their school. By living frugally, you should be able to stretch a tight budget and still pay for necessities.

What Is a Shoestring Approach?

A shoestring approach may mean starting a business with limited funds or capital investments, or it may mean living a slim budget to save money.