Having savings or cash set aside gives you more financial security. It provides a backup for emergencies and unexpected events. However, this can be a challenge if you have modest earnings.
About 29 percent of American adults are low-income, meaning they earn less than $39,500 per year. If you are in this group, you can still fulfill your financial goals despite having a tight budget. Here are some tips on how to save money on a low income.
Simple Money-Saving Tips on a Low Budget
1. Make Saving a Priority
No matter where you fall on the economic ladder, saving money won’t be easy if you don’t make a deliberate effort to set aside part of your income.
Make it a habit to separate a fixed amount of money for your savings before paying bills or spending on food, clothing, or discretionary items. It doesn’t need to be much—even a twenty-dollar monthly saving eventually adds up. What’s more important is to take the first step towards your financial goals and go from there. Consider building a budget to help you make wise spending decisions and get your saving habit on track.
2. Eat Out Less
Americans spend an average of $228 on food away from home, a whopping $2,736 annually. Understandably, it might be difficult to resist overspending on eating out with convenience stores and restaurants practically everywhere. Break the habit by tracking how much you actually spend every month on dining out. A visual account of your spending might encourage you to make more meals at home and save money. Tracking your total spending on food could also help you spend less at the grocery store.
3. Adjust Your Entertainment Budget
You don’t need to blow up your budget to have fun. Many entertainment options can work with your income without making you feel deprived. For instance, a streaming service subscription may be a better and lower-cost option than a cable service. Consider these budget-friendly entertainment options if you’re thinking about how to save money on a low income:
- Take a hike instead of a grand vacation.
- Watch a movie at home instead of at the cinema.
- Invite friends to a potluck dinner instead of eating out with them.
- Visit a museum or library for free instead of going to the nightclub.
Whenever you can, take advantage of free or low-cost entertainment that is fun to do with others.
4. Decrease Big Expenses
You may not have to eliminate certain expenses if you can find a way to make decreases. For example, if your rent is eating up a huge chunk of your budget, perhaps you could find a more reasonably priced place that still suits your tastes. The same thing can apply if your car payment is proving to be too costly. This is another reason to have a budget that shows all of your expenses and lets you see which ones you could cut. You may have to make drastic changes, but at least you won’t have to give up something completely.
5. Pay Off Your Debt
As long as a part of your income always goes towards your credit card bills, student loans, medical bill, and other debt, it may be hard—if not impossible—to set aside monthly savings. Keep in mind that debt holds you back from putting your money to better use, like saving for retirement or purchasing a new home. It takes commitment to eliminate debt, but think of the easier life you’ll have if you free up extra money in your budget.
You can accelerate your debt reduction by selling items you don’t need, paying off the most costly debt first, taking advantage of balance transfers, or just stop using your credit card altogether.
6. Get Additional Income
Sometimes, your current situation leaves no opportunity to save money, no matter how much you lower your expenses. In this case, increasing your income may solve your problem of how to save money on a low income. You could generate some extra cash by offering dog-walking services, taking up freelance writing, participating in ridesharing, or doing online selling.
Don’t forget that you can always ask for a raise, since at your current job since it’s a way to earn more money without significantly affecting your social and family life.
Almost anyone can find ways to save money on a low income. The only thing is, you must be willing to put some effort into it and make a lifestyle change. Sometimes, a sacrifice is also necessary. However, these shouldn’t discourage you from taking action because you will be working towards a future you envision.