"Low Budget" was recorded in January 1979. It describes a man giving up his "expensive tastes" in order to save money. Like many of the tracks on Low Budget, it applies to the economic troubles occurring during the time that the album was released, such as strikes in Great Britain. However, AllMusic's Richard Gilliam claimed that the track's theme could "easily apply to just about any modern recession".

Although "Low Budget" refers to economic problems of the times in general, it also refers to some of Ray Davies' own personal concerns. In the song, Davies mocks his own fear of not having money and his frugality. The song also references Davies' vanity. The singer describes himself as once being well dressed and able to afford cigars, but now has to buy discount clothes and chew mints. He describes himself as "a cut-price person in a low-budget land." But despite being reduced to poverty, the singer expresses pride in his hair and his teeth. Author Thomas Kitts notes that even the title, used in the refrain "I'm on a low budget" could refer to Davies keeping himself on a tight budget.

When asked which guitar performance he was most proud of, The Kinks' guitarist Dave Davies noted "Low Budget," as well as "You Really Got Me," as a favorite. He said of this:

I like “Low Budget” [1979]. It’s wild. I like that kind of, almost country-style playing. It’s like a shape; I don’t even worry about what notes I play as I’m doing it. And if you catch a few open strings, you might get lucky with a weird clunk or a harmonic or something. I think all the best stuff is the stuff that happens before you’ve even realized what you’ve done. So “Low Budget” and, obviously, “You Really Got Me.”

When it was released as the B-side of "(Wish I Could Fly Like) Superman," Trouser Press described "Low Budget" as being "rauchier" than its A-side, going on to comment on the rawness of Ray Davies' vocal and stating that "Ray's never been funnier nor Dave's guitar tougher sounding." Music critic Robert Christgau describes the song as a "sloppy burlesque." Critic Johnny Rogan praises its self-deprecating humor, calling the line "Don't think I'm tight if I don't buy a round" one of the best of Davies' career. According to Davies, hearing the song on the radio in early 1979 helped inspire him to finish writing the rest of the songs for the Low Budget album. The song also appeared on the compilation albums Come Dancing with The Kinks and Picture Book.

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