When costs are going up and wages are staying the same, the phrase “save money on a low income” can sound like an oxymoron, a cruel joke that financial experts who have never had to choose between paying a utility bill and buying groceries tell. But what if I told you that you don’t have to be rich to save money? What if I told you that even if you’re on a tight budget, you can not only save money but also start to build a better financial future by using the right strategies, being tough, and being kind to yourself?
As a top blogger who has spent years figuring out the maze of personal finance, I’ve read a lot of articles that give vague, out-of-date advice. They say, “Just stop buying lattes,” as if a daily cup of coffee is the only thing keeping you from being free with your money. This is not one of those articles. This is a long, 4000-word manifesto for anyone who has ever felt the weight of a small paycheck. We are going to look at more than 40 realistic, useful, and, most importantly, doable ways to save money when you don’t have much money. We’ll talk about everything from getting better at sticking to your budget to cutting costs, making more money, and finding hidden resources.
So, get comfortable with a cup of your own coffee (we’ll talk about why that’s important later) and get ready to change the way you think about money. It’s not about taking things away; it’s about giving people power. It’s about getting your money under control and making a life with less stress and more freedom.
The Key to Financial Freedom: Learning How to Manage Your Money
We need to know where our money is going before we can even think about saving. A budget is not a way to tie up your money; it’s a way to get to your goals. It’s the tool that will help you make smart choices about how you spend your money.
Step 1: Keep a close eye on your spending.
For one month, keep track of every penny that you spend. Yes, all of them. one. penny. The dollar for the vending machine, the pack of gum, and the coffee with a friend that you didn’t plan. Write it all down. You can use a simple notebook, a spreadsheet, or a budgeting app like Mint or You Need A Budget (YNAB). This step is not up for discussion. You can’t change things you don’t see.
Step 2: Sort and Look at
At the end of the month, put your spending into groups. Some common groups are
- Housing: Rent or mortgage, property taxes, and insurance
- Utilities: Internet, phone, water, gas, and electricity
- Transportation: Gas, public transportation, car repairs, and insurance
- Food: Buying food and eating out
- Payments on Debt: Credit cards, student loans, and personal loans
- Personal Care: Things like haircuts and toiletries
- Fun: Movies, subscriptions, and hobbies
- Other things: Gifts, things for the house
The picture will become clearer once you have your categories. You might be shocked at how much you’re spending on some things. Now is not the time to judge; now is the time to be aware.
Step 3: Make a budget that makes sense
Now is the time to make a budget. The 50/30/20 budget is a well-liked and useful way to budget. It divides your income after taxes into three groups:
- 50% for Needs: This is for all of your basic needs, such as housing, utilities, transportation, and food.
- 30% for wants: This is for things that aren’t necessary, like going out to eat, hobbies, and entertainment.
- 20% for Savings and Paying Off Debt: This is the best part. This is where you’ll save money for emergencies, pay off debt, and put money away for the future.
This is a suggestion, not a strict rule. You need to change the other categories if your “needs” take up more than half of your income. The most important thing is to be careful with your money.
The Envelope System: A Real Way to Make a Budget
The “envelope system” can help people who have trouble not spending too much money. After you’ve made your budget, take out cash for your variable spending categories, like groceries, gas, and entertainment, and put the right amount in separate envelopes with labels. You can’t spend any more money in that category until the next month if the envelope is empty. This physical barrier can be very helpful in stopping people from making impulse buys.
Cutting Your Costs: Where to Find Savings You Didn’t Know You Had
It’s time to look for places where you can save money now that you have a budget. Keep in mind that every dollar you save is one you can use to reach your financial goals.
Taming the Grocery Beast: Your Guide to Eating Well for Less
Food is often one of the biggest and most flexible areas where you spend money. Here’s how to cut your grocery bill without eating only ramen noodles:
- Plan Your Meals Like a Pro: Before you even think about going to the store, plan out all your meals for the week. This will stop you from buying things you don’t need and make sure you only buy what you need.
- Make a List and Stick to It: Your meal plan will help you make your grocery list. Be disciplined once you’re in the store. Don’t give in to the siren song of the snack aisle.
- Embrace Generic Brands: The only real difference between a brand-name product and its generic version is the packaging and the price. Try store brands; you might be pleasantly surprised.
- Cook from Scratch: Convenience costs money. Vegetables that are already cut, sauces that are already made, and frozen meals are all much more expensive than the whole foods they come from. One of the best ways to save money on food is to cook at home.
- Cut down on food waste: Each year, the average American family throws away food worth thousands of dollars. Learn how to store fruits and vegetables properly, use your leftovers for lunches, and “shop” your pantry before you go to the store.
- Embrace “Boring” Foods: Oats, rice, beans, lentils, and potatoes are very cheap and can be used in many ways. To make your money go further, plan your meals around these staples.
- Shop Seasonally and Locally: Fruits and vegetables that are in season are usually cheaper and fresher. Visit your local farmers’ market to find great deals.
Getting Rid of High Utility Bills
Utility bills can seem like a set cost, but there are many ways to lower them:
- Kill Energy Vampires: Unplug electronics when you’re not using them. Even when they’re off, a lot of devices, like TVs and coffee makers, still use “phantom power.”
- Change the temperature on your thermostat. In the winter, wear a sweater and turn the temperature down a few degrees. During the summer, turn it up a few degrees and use fans. You can set a programmable thermostat to make these changes for you.
- Seal Air Leaks: Look for drafts around doors and windows. Seal any holes with weatherstripping or caulk. This is a small amount of money that could save you a lot of money.
- Wash Clothes in Cold Water: A washing machine uses about 90% of its energy to heat the water. If you wash your clothes in cold water, you can save a lot of money on your energy bill.
- Negotiate Your Bills: You might be surprised to learn that you can often negotiate a lower rate on your cable, internet, and phone bills. Call your providers, tell them you’re thinking about switching to a competitor, and ask if they have any deals going on. For a fee, services like BillShark can even negotiate for you.
Getting Around on a Tight Budget
Many families also have to pay a lot for transportation. To keep more of your money, do this:
- Use Public Transportation: If your city has a good public transportation system, use it. Most of the time, it costs less than owning and taking care of a car.
- Carpool to Work: Find someone who works with you and lives near you and take turns driving. This will cut your gas and upkeep costs in half.
- Walk or Bike for Short Trips: You’ll save money on gas and get some exercise at the same time.
- Take Care of Your Car: Changing the oil, rotating the tires, and tuning it up on a regular basis will make it use less gas and keep it from needing expensive repairs in the future.
- Look for Better Rates on Car Insurance: Don’t just renew your policy without looking for better rates. At least once a year, get quotes from more than one company.
Fun things to do that don’t cost a lot of money
You don’t have to spend a lot of money to have fun. Here are some fun things to do that don’t cost much or are free:
- Go to Your Local Library: Libraries are full of free things to do. You can borrow books, movies, and music from libraries. Many also offer free classes, workshops, and events.
- Get out into nature: go for a hike, have a picnic in the park, or spend the day at the beach. Nature is free and a great way to relax.
- Have a Potluck or Game Night: Instead of going out to eat or drink, have friends over for a potluck dinner or a game night. It’s a fun and cheap way to meet new people.
- Take Advantage of Free Museum Days: Some museums let people in for free on certain days of the week or month. For more information, visit their websites.
- Find Free Community Events: Look at your community calendar for free concerts, festivals, and other events.
The Other Side of the Savings Equation: Making More Money
It’s important to cut costs, but you can only cut so much. At some point, you need to focus on making more money.
The strength of the side hustle
A side job is a flexible way to make extra money on top of your regular job. There are many things you can do, but here are a few to get you started:
- The Gig Economy: You can drive for a ridesharing service like Uber or Lyft, deliver food with DoorDash or Grubhub, or do small jobs on websites like TaskRabbit.
- Freelance Your Skills: Are you a good writer, graphic designer, or social media manager? You can offer your services on sites like Upwork or Fiverr.
- Get Rid of Your Stuff: Get rid of the things you don’t want and sell them on Facebook Marketplace, Craigslist, or at a consignment shop.
- Walk Dogs or Pet Sit: This can be a fun and easy way to make extra money if you love animals.
- Rent Out a Spare Room: If you have an extra room in your house, you might want to rent it out on Airbnb.
Ask for a Raise at Your Current Job
Don’t think less of yourself. It’s time to ask for a raise if you’ve been a good worker and taken on more work. Do your homework, find out what the going rate is for your job, and be ready to make a strong case for why you should get more money.
Put Money into Yourself
Investing in new skills can sometimes be the best way to make more money. Think about getting a certification or taking a class in a field that is in high demand. You might have to spend some money up front, but it could pay off in the long run with a better job.
Finding Hidden Resources: There Is Help
When you can’t make ends meet, it can feel like you’re the only one. But there are a lot of government programs and community resources that can help you.
Help from the Government
It’s okay to ask for help. There is a reason these programs are around. Take a look at these:
- Supplemental Nutrition Assistance Program (SNAP): SNAP, which is also called food stamps, gives low-income people and families who qualify money each month to buy food. Your state’s social services agency can help you find out if you qualify and help you apply. Learn more at USA.gov.
- Low Income Home Energy Assistance Program (LIHEAP): LIHEAP helps people with low incomes pay their heating and cooling bills. Find your local LIHEAP office here.
- Medicaid and the Children’s Health Insurance Program (CHIP): These programs give low-income adults, children, pregnant women, and people with disabilities free or low-cost health insurance. Find out more at Healthcare.gov.
- Housing Choice Voucher Program (Section 8): This program helps low-income families, the elderly, and the disabled pay for decent, safe, and clean housing in the private market. For more information, get in touch with your local Public Housing Agency (PHA).
Resources in the Community
Your community can also help you a lot:
- Food Banks and Pantries: A local food bank can help you if you’re having trouble putting food on the table by giving you a box of groceries. Feeding America has a network of food banks all over the country.
If you’re in a lot of debt, a nonprofit credit counseling agency can help you make a plan to pay it off and talk to your creditors. The National Foundation for Credit Counseling (NFCC) is a great place to begin. - 211: This is a free, private helpline and website that connects people to important health and human services. 24 hours a day, seven days a week. Just call 211 from any phone to speak with a trained professional in your area.
Your Emergency Fund: Building a Financial Safety Net
A stash of cash set aside for emergencies, like a car repair, a medical bill, or losing your job, is called an emergency fund. It’s the thing that keeps you from going from a small problem to a full-blown financial crisis.
How Much Should You Save?
Most financial experts say that you should save enough money to cover three to six months’ worth of basic living costs. But if you don’t have a lot of money, that can seem like an impossible goal. Begin with small things. Try to save $500. Then $1,000. Every little bit helps.
Where to Store Your Emergency Fund
Put your emergency fund in a separate savings account that pays a lot of interest. This will protect it from impulse buying and let it earn a little interest. Most of the time, online banks have the best interest rates.
How to Save for an Emergency on a Low Income
- Automate Your Savings: Every payday, set up an automatic transfer from your checking account to your savings account. Over time, even $5 or $10 a week can add up.
- Save Your Windfalls: Put any extra money you get, like a tax refund, a bonus at work, or a cash gift, right into your emergency fund.
- Try a “no-spend” challenge: for a week or a month, see if you can only buy things you really need. Put the money you save in your emergency fund.
The Psychology of Saving: How to Get Past Mental Blocks
Sometimes, the biggest thing that keeps us from saving money is how we think about it.
Change Your Mindset from Scarcity to Abundance
It’s easy to think that you don’t have enough money when you’re always worried about it. This can make you feel like there’s no hope and make it hard to see ways to make more money. Instead, think about all the good things you have in your life, like your health, your relationships, or your skills. This change in how you see things can give you more power over your money.
Celebrate Small Wins
Saving money is a long-term goal, not a short-term one. You should celebrate your progress along the way. Recognize your success when you reach a savings goal, no matter how small it is. This will keep you motivated and help you make progress.
Figure Out Your “Why”
What makes you want to save money? Do you want to buy a house, start a business, or just have less stress about money? Keep your “why” in mind no matter what. Put it down on paper and keep it where you’ll see it every day. Your “why” will help you remember what you’re working toward when you want to spend too much.
Long-Term Financial Planning: More Than Just Saving
The first step is to save money, but that’s not the end goal. The main goal is to make money and have financial security in the long run.
Dealing with Debt with High Interest Rates
Debt with high interest rates, such as credit card debt, can make it hard to move forward financially. Paying off this debt as soon as possible should be your top priority. The “debt snowball” and “debt avalanche” are two well-known ways to pay off debt.
- Debt Snowball: This method says to pay off your smallest debt first, no matter what the interest rate is. This can help you stay motivated and give you a quick win.
- Debt Avalanche: This method has you pay off your debt with the highest interest rate first. Over time, this will save you the most money on interest.
Stick with the method that works best for you.
Even if you only have a little money, start investing.
Investing can be scary, but it’s one of the best ways to make money. You don’t need a lot of cash to start. You can invest with as little as $5 using micro-investing apps like Acorns and Stash.
The Last Word: You Can Do This
It’s not easy to live on a low income. It takes a lot of sacrifice, discipline, and strength to do it. But you don’t have to live with money problems for the rest of your life. Using the tips in this guide, you can start to save money, build a financial safety net, and make your and your family’s future better.
Don’t forget to be patient and nice to yourself. It’s okay to make mistakes along the way. The most important thing is to keep learning, keep working toward your financial goals, and never give up. You can change the way your money story goes. Now, get out there and do it.
