Everyone wants to save money regardless of how much they earn so that they can accumulate wealth. Unfortunately, for people with low incomes, it can be a little bit hard to save money for future needs. The budget is always tight for low-income earners, and most of them only manage to pay for basic needs, and in extreme cases, some will struggle to pay for these needs too. The big question is, is it possible to save even if your income is small? The answer is yes. You can do a few things that will help you to save some money, even with small incomes. This is, however, possible with those who are willing to be diligent and offer their commitment to the saving process. That said, here are some of the ways you can follow to be able to save money on a low income.
A budget is a very useful tool that has been helping many people to control their expenditure. You will need this tool so that you can start spending your money in moderation. If you have never used a budget before, you will need to list all your incomes and current expenses so that you can understand how much you earn and how you have been using it. Prepare a budget, and your main focus here is to have more money to save than to spend. Therefore you must be willing to cut those expenses that you can do without. For instance, if you have been dining out a lot, buying new jewelry every month or buying expensive clothes, among others, then it is time to sacrifice those treats for money saving.
You may wonder how someone who earns little can afford all these things, but the fact is that they do as long as they have some money remaining in the wallet. Some are even willing to pay for these things on credit, which adds another burden on the budget. Only buy things when it is deemed necessary and start saving even if it means starting small. Observe your budget religiously despite being tempted to your previous spending habits because having a budget that you are not following is fairly useless.
2. Pay Off Your Debts
Before you can start saving, you will need to pay off your debts first, especially those debts that accumulate high interests. The best way to pay your debts would be focusing on paying one debt in full before focusing on another. This means you pay a large chunk of money towards it every month while paying the minimum balance for other loans to avoid attracting penalties. Once you are done with one, pick another one and another one until all are settled. For this to be possible, you will need to have committed to your budget so as to get enough money to settle your debts without applying for new ones. The worst part is that different types of loans are readily available today, and they are also easily accessible. This is the reason why we said that you have to be diligently ready to commit to the process to avoid being tempted towards the wrong direction.
3. Go For That Free Money
IRS can also be kind to citizens whereby they offer earned income tax credit (EITC), and as a low-income earner, you should take advantage of such free money. Through EITC, a person gets a large refund on taxes, and this will help such a person to keep more money from what he earned. Once you qualify for this credit, it means you are getting more money than before and therefore can save more. Another way you can take advantage of free money is when your company contributes towards your 401K plan. If the company has been matching up towards this contribution, start saving more money since the company is saving towards your retirement.
4. Automate Your Savings
Some people may think that it is their incomes that do not allow them to save but apparently, it’s their inability to. If you know that you can’t trust your commitment to saving money, automate the saving so that the money you get at the end of your earning period is less the savings you intended for that period. Having a budget will help you decide the right amount to save and still have money to spend and live a comfortable life. When you save your money before touching or seeing it, you will have to automatically adjust to receiving less without having to struggle to save. This is an act of pushing yourself towards achieving your goals, and with time, you will feel normal living on less money.
5. Find Something New To Bring More Income
Some people may not be saving any money today because they genuinely do not have enough to spend and save. It may be difficult for such people to cut any cost because their money is only spent on basic needs and from that, it’s finished. This does not mean that it is over for them, or they can never save money. No! They can start a side hustle and earn extra cash. Everyone who wants to save money can do this. It can be new employment, working extra hours, or starting a business that requires little or no capital such as freelance writing or data entry. There are different online jobs that one can do, and all is required is a computer, basic computer skills, and internet connection.
6. Re-Think About Your Housing Cost
Housing cost is one of the expenses that take a huge amount from your income. Financial experts say that your housing costs should not go beyond 25 percent of your income and if it is possible, to keep it lower. Some areas seem to be quite expensive when it comes to housing costs, and therefore, it might be difficult to pay anything below 25 percent of your income, especially if you are a low-income earner. However, in those same areas, you can find some housing or rent deals that will favor your pocket. You biggest homework is to do thorough research and look around intensively to make sure you land a pocket-friendly housing deal. If you live alone and the house can accommodate more people, you can consider having a roommate and share the housing costs. By reducing your housing cost, you are freeing some money to help you save.
7. Buy Second-Hand Items
Saving means making a sacrifice, but it doesn’t mean you stop spending on things you want entirely. You may not afford some stuff because your budget is tight and now it’s tighter because your main focus is on saving. Start buying second-hand stuff to continue living a good life but at a cheaper cost and you will save more. It can be used electronics, clothing, furniture, or even a car, among other things and as long as they can still serve the purpose intended, then you are good to go. You would be surprised about the great deals you can get with every purchase. Some people sell their items not because they are too old or are not operating well but because they want to upgrade or they are relocating or are in dire need for that cash. Therefore, do not be afraid to buy anything used.
8. Stay Away From Credit Cards
As a low-income earner, credit cards will only help you to remain poor and never save. According to different studies, it has been concluded that credit card increases expenditure for many people by more than 10 percent on average. The only explanation is that it gives you more power to spend rather than to save. Do not forget that apart from the increased expenditure you are also paying the interests that come with it and fees charged if you do not settle the minimum balance. Therefore, if you do not earn much, and you want to save more, avoid credit cards, go cash only, and stick to your budget.
Being able to save money means that you can make a sacrifice here and there. Use these tips, and within a few months, your savings will start growing gradually. Other common tips include cooking more at home, taking advantage of coupons, and sometimes walking to save on that gas.