Charles H. Miller
Changing one’s habits is not easy even with a six-figure income. In order to save money, one needs to tweak his/her habits so that at the end of the day, he/she can be a bit more comfortable when an emergency strikes. And when retirement comes.
In this article, we share money saving tips for those living on a low income. We have read it all — searching around the internet for the very best advice — so you don’t have to. And here’s what experts suggest…
1. Keep housing costs under control
Generally speaking housing costs are the biggest expense a person or family has. It’s not just mortgage or rent that goes into the equation — housing costs also include utilities, repairs and upkeep. While you can’t avoid many of these costs, your goal is to lower them, and if possible put them below 35 percent of your take-home pay.
Renters could find a more affordable housing, and perhaps talk with their landlord to trade some work on the property for a reduction in rent.
On the other hand, homeowners could maintain their house/apartment in good condition to avoid costly repairs, and consider renting a room or space in a garage to cut down on their monthly expenses. Also they could explore the option of refinancing their mortgage to benefit from lower monthly payments.
Additionally, both renters and homeowners could save on electricity, reduce water waste and be more frugal with their thermostat usage.
Also read: 5 Ways to Save on Your Monthly Expenses
2. Get and stay out of debt
Easier said than done, but you gotta try it if you want to save. Heck, before putting a single penny into your savings account, you should first clear out all of your debts except for the mortgage. You will have to be super frugal, cause getting out of debt is like saving money — except that you won’t be putting the extra cash to the jar, but to repay your debt(s).
Probably the best way is to call your lenders and ask them for help. What you may want from them is a debt reprogram — if it’s a credit card debt, see if you can turn it into a loan or get one of those cards with a period of 0% APR. On the other hand, if we’re talking about a student debt, see if you can come up with a manageable plan to pay it off. Additionally, you will also want an option to pay more when you can, so that you can get out of debt sooner (rather than later).
Once you come up with a plan, it is a must that you stop borrowing. Period. Your next focus is to start saving.
Also read: 5-Step Process for Getting Out of Debt
3. Set budget for everything
You don’t have to dine out 3 times per week nor do you have to watch every single blockbuster. That being said, you do want some entertainment — you will just have to budget it. For instance, you can set aside $100 per month on entertainment, and then — the most important part — stick to it.
And the same goes for all other expenses that can be cut, including groceries, gas, coffee, clothing and everything else — set budget for all those categories.
After you reach the budget for the month, try other stuff that are either free or more affordable:
- Prepare a dinner at home instead of eating out
- Walk more instead of driving all the time (it is also better for your health)
- Have movie nights at home rather going to a theater
- Reduce food waste by buying the stuff you will actually eat
- Invite your friends for a beer instead of hanging out in bars
Pretty much every out-of-home activity has its home equivalent that is either free or at least much more affordable. You’ll have to think it through and do some extra work in order to save money.
4. Buy smart
Let’s say you need some item, see if you can get it second hand or if that doesn’t make sense — see if you can find a deal or a coupon for that product/service. There are many mobile apps that will help you with this.
Also, these days you can find pretty much any product second hand. Check out Craigslist, eBay and local garage/yard sales. Or if you need it new, visit comparison shopping sites like NexTag, PriceGrabber and Shopzilla. Also see if you can find a coupon — just type “ITEM_NAME coupon” in Google and see what comes up.
But again, rethink your needs and whether you *really* need to buy something. Temptations are all around us, and you’ll have to force yourself not to (over)spend to save money.
Also read: 8 Things You Should Buy Used to Save Money
5. Use a shopping list
Related to the previous point — before visiting a supermarket, prepare a shopping list. And — the hardest part — stick to it.
Supermarkets are notorious for their abilities to get the very last penny out of our pockets. They want us to make impulsive purchases, which easily add up, prompting us to spend much more than planned. You should be aware that entire teams of marketers and researchers are working their asses off to squeeze an extra dollar from today’s consumers like you and me. Don’t let them fool you — use a shopping list and again, stick to it.
6. Create an emergency fund
Once you have paid off your debts, your first savings should go to the emergency fund which, as its name says, is used *only* in case of emergencies. Period.
It is best to put at least $1,000 in this fund so you can act when an emergency strikes. Whether it is an urgent emergency room bill or car repair, you will want to pay it with cash rather than swiping your credit card (which again pulls you to the debt spiral).
Your emergency fund should be easily accessible so when you need the money, you can get it quickly. This, however, doesn’t mean you should use it for other purposes — cause you’ll return to where you’ve started.
Also read: 7 Frequently Asked Questions About Emergency Funds
7. Automate savings
This is the easiest way to keep your savings on track. With automation in place, a certain amount of money will be deposited to a specific account without you ever looking at it.
By taking this route, you will avoid temptations and live with the rest of the money. At first, you may have to squeeze a bit, but later on you’ll get used to it.
You can do this by opening a savings account with your bank, and from a web-based interface set things up; heck most of today’s banks let you do this from your phone or tablet, as well.
8. Save even more
And perhaps more importantly — earn more. You can try some of the many gigs we list on this page, many of which don’t require special skills and education. Bookmark that page and try them one by one to find those that work for you.
By making more money, you will be able to put more on the side. Then, when you start to easily hit your automated savings targets, you may want to try some money savings challenge.
One of them, the Mondays to Sundays Challenge, prompts you to leave $1 on Mondays, $2 on Tuesdays, $3 on Wednesdays, $4 on Thursdays, $5 on Fridays, $6 on Saturdays and $7 on Sundays. As you repeat this throughout the year, you’ll save $1,456 after 52 weeks!
Or the popular 52 Weeks Challenge that requires putting $1 in a jar on Monday of week #1, and then up it by another dollar each consecutive week. So, for week #1 it’s $1, then week #2 – $2, then week number 3 it’s $3, and on and on until you reach the 52nd week. At the end of the year, you’ll net $1,378!
Also read: 5 Easy Money Saving Challenges
Conclusion
Saving money on a low income is hard, but not impossible. You will have to make some sacrifices but at the end of the road is — the financial freedom. And that’s a goal worth striving to achieve.
Read and re-read this article, and if you have something to add — hit us a comment below. Or join us on Facebook. We would like to get your two cents. Good luck! 😉
