Want to learn how to save low-income money fast? This is not only possible, but also quite easy.
Saving money is never easy. It’s even harder if you work on a low income. Although it may seem too demanding, it should not hinder your savings goals. Nothing should hold you back, whether you’re saving for a house, education, vacation, or even retirement. Not even that modest income.
Fortunately, there are an unlimited number of ways to save low-income money quickly. That’s right! You have more than enough opportunities if you are just a little creative.
If you thought this was impossible, the following tips will make you completely reconsider.
The best tips on how to save low-income money quickly
1. Create a budget
Having a budget that suits you is one of the best steps to spending responsibly. It may seem like a lot of trouble, but it will help a lot change your consumer culture and saving habits.
Without a budget, save what’s left after spending. However, save with a budget before you start spending. This means that your savings are planned, not wrong.
Fortunately, you don’t even have to be a professional at budget planning. You can attend a simple free budget course online and you’re ready to go. In addition, there are a number of simple budget planning tools that can help you with this.
How to plan money for low income
Regardless of your income level, budget is the key to successful savings and even investment. This is because you plan your expenses, savings, and investments based on what you do each month. If you’re just starting out with a budget, you can try the famous 50/30/20 rule.
The rule suggests that you spend 50% of your income on necessities, 30% on wishes, and about 20% on savings and debt repayment.
Needs include things like housing, food, transportation, basic utilities, minimum loan payments, insurance, and so on. Wishes, on the other hand, include things like fun, gym membership, vacations, and so on.
How to plan a budget with irregular income
Sometimes your income is not only low but also irregular. Now, how do you plan a budget with fluctuating incomes? These simple tips make your job easier:
- Determine your average monthly income and expenses: You can do this by calculating your total income and expenses for six months and dividing them by six.
- Use budget without sum: This includes categorizing your savings goals as part of your expenses. That way, your income and expenses are steady at the end of the month. When you have more money, you put it somewhere. When income is lower, use that extra money to fill the gap.
- Separate spending and saving money: Unlike the zero-sum method, here you physically separate your costs from your savings. This means that even if you run out of money for expenses, you can’t use your savings.
- Emergency Fund: The Emergency Fund is the best way to survive in low-income seasons. You should have enough money to cover at least three months of your total expenses, hidden somewhere.
How to create a flexible budget
To maximize your savings, you need to learn not only how to create, but also how to calculate a flexible budget. A flexible budget allows you to adjust both spending and savings to actual life events.
When creating a flexible budget, you need to:
- Create categories: for example, shopping, entertainment, daily expenses, etc.
- Organize as needed: In these categories, identify the things you can do without and the ones you can’t do without. For example electricity, internet and heating. Those you can give up include having fun, gym membership, and so on.
- Give preference: even in these categories, some spending will be more important in some months than in others. For example, heating is preferable in winter to summer. So, know what is important in a particular month.
For the best budget planning tools, you can try Mint, YNAB, or Quicken.
2. Reduce your costs
In addition to budget planning, reducing your costs is another effective way to increase your savings capacity. However, this is easier said than done. Try these tips to reduce your costs.
Do you know exactly what costs consume what amount of your income? If not, monitoring your spending may be the best way to reduce costs and increase savings.
The truth is, you may be spending a lot of money on unnecessary items, subscriptions, or memberships. For this reason, list all your expenses, classify them into needs or wants, and decide if what you spent on them is worth it.
After that, you can decide what needs to be adjusted and what doesn’t.
Housing costs make up a significant portion of your income. In fact, various studies show that most people with an annual income of less than $ 50,000 spend about 36.6% of their income on housing.
However, financial experts recommend that you should spend only up to 28% of your pre-tax income on housing. Because of this, you need to learn how to save money on rent and other housing costs and channel that money into savings.
For tenants, you can lower your housing costs with simple actions such as getting a roommate, moving to a cheaper house, avoiding paid parking spaces, and so on. For homeowners, you can give up private mortgage insurance, sell your house, and rent a cheap apartment. , renting part of your home, etc.
Consolidate your debt for lower interest rates
Consolidating your debts is another amazing way to save low-income money quickly. This option allows you to combine all your debts into one monthly payment. This way you can lower your monthly interest rate and still be able to repay the debt.
In addition, you can settle debts faster.
3. Adopt better spending habits
By changing some of your bad consumer habits, you can significantly increase the money available for savings.
Something good consumer habits you can adopt include:
Understand certain triggers of consumption and avoid
Sometimes learning how to save low-income money quickly depends on how you spend it. Emotional and physiological triggers of consumption play an important role in this.
What do you want to spend it on?
If you understand what triggers your spending, and avoid it, you can easily achieve your savings even at such a low income. Some of these triggers include peer pressure, mood, environment, and so on.
Replace credit cards with cash
Instead of using a credit card for each transaction, you can try to use cash more often. This way you can avoid the interest and temptation of overspending.
However, if you can’t avoid credit cards, choose at least those with favorable terms and interest rates.
Set specific financial objectives (short-term and long-term)
With no financial goals, you can spend to the last cent without worry. However, financial goals will prevent you from spending money unnecessarily when trying to achieve your goals.
As already mentioned, budget planning ensures that every dollar is taken into account and nothing is wasted. It also prevents you from making spontaneous spending decisions.
4. Avoid common financial mistakes
Some simple financial mistakes that can be avoided can make saving quite difficult. And if you want to understand how to save low-income money quickly, here are some mistakes you need to avoid.
Excessive or unnecessary consumption
Although some spending may seem normal, it may cost you a lot of money – money that could be used to offset another major expense or bill. For example, just $ 30 a week for dinner means about $ 1,560 a year. If your income isn’t that high, why not spend that money on other expenses like automatic payment or credit card payment?
Even if you are into fashion, you need to learn how to look expensive with a limited budget. This way you can avoid spending too much money on fashion while still looking luxurious without overdoing it.
Too many recurring payments
Do you need this expensive gym membership? Or even this cable TV? If you have too many payments each month, you may not have anything to save. Therefore, ensure that these payments are as necessary as possible.
Pay for Essentials with Credit
Although this has become the rule, financial advisors advise against it. Using your credit card to pay for groceries, gasoline and other basic necessities destroys you finance. The reason is that for every purchase you make, there is a set interest rate that increases the cost of that product.
If you can, avoid this. Also, try joining money back apps like Ibotta to ensure the best prices for products and refund.
5. Investing while saving
In addition to cutting costs and budgeting, there is a better way to save low-income money quickly. A combination of saving and investing! That’s right.
There are various savings tools and platforms that allow you to invest and save at the same time. These include:
With savings accounts, you earn interest if you don’t spend your money. Some high-yield savings accounts offer interest rates that allow you to increase your income. You can check your savings accounts from CIT bank or Discover. They offer attractive interest rates.
These are similar to savings accounts that allow you to earn interest on your money. Money market accounts pay higher interest rates, though not always. Check CIT bank or Discover for the best opportunities.
Instead of saving on accounts that can only offer certain interest rates, Robo-advisors help you invest even when you don’t know how. Use platforms like Personal capital, Wealthfront or Betterment to automate your investment.
For example, Acorns requires that you include your debit or credit card in the app. From here, each of your purchases is rounded to the next full number. The difference is invested in low-cost ETFs.
You can also opt for regular deposits to be made.