There are plenty of ways to save money on a tight budget. Even if you have an extremely low income, you can start piling up money in the bank. I only know because I’ve done it!
My husband and I were once in over $120,000 of debt and living on one income. Yet, we still managed to start an emergency fund, get rid of our debt and create massive savings accounts for our kids’ college, retirement and even a fund to start real estate investing.
In the current era finance is the heart of all economic activities, as it aids in attaining and maintaining a healthy financial requirement for an organization more help here. Finance is thus said to be vital as the craft of handling different types of financial resources.
This post is comprehensive and will give you a lot of things to do to save money on a tight budget, so be sure to bookmark it if you can’t get through every task right away. These tips will help you save the money you’ve always wanted to but could never seem to.
Why should you save money even when you have a tight budget?
Saving money can help you reach financial goals like getting out of debt or putting away money for a rainy day. Others may want to start a business or retire early. Some people just want to escape paycheck to paycheck living.
No matter what your ultimate financial goal is, developing a habit of saving money will help you reach your financial goals sooner than later.
Can I really save money on a low income?
As the old saying goes, “It’s not what you earn, it’s what you save.”
Case in point — I’m a stay-at-home mom and my husband delivers packages for a living. If we can save money and start paying cash for things like cars, houses and long, tropical vacations, anyone can.
People think we live very extravagantly but our little secret is that we’ve never earned a lot of money compared to our peers. In fact, we tend to do better than our friends who are high earners simply because we’ve learned to save money.
Again, I want to reiterate that anyone can become a super saver, no matter how much money they make.
How can I save money on a tight budget?
The simplest answer is, “You must commit to the process of saving and building a regular savings habit.” Once you are committed to the process, you’ll get excited about finding ways to save up more and more money.
Once you are resolved to become a saver, it’s time for execution.
Each tip below is a specific tactic designed to increase the amount of money you can put in your savings accounts. Once you are successful with each step, rinse and repeat until you reach your financial goals.
1) Make a budget
One of the most important things you can do to save money on a low income is create a spending plan. This spending plan is also known as a budget.
You want to give a purpose to each dollar that comes into your possession. This is called zero-based budgeting because you allocate each dollar until you have nothing left.
This doesn’t mean you spend all your money. It just means each dollar will be designated for a purpose. One purpose can be saving money, for example.
Now, you might be thinking, “How do I manage money that I don’t even have?” You still need to make a budget because it can help you figure out the root of your money problems.
Your budget will serve two purposes:
- Help you figure out where your money is going each month
- Diagnose your REAL financial problem
In all honesty, many people think they have a low income when the real problem is that they have high expenses compared to their income. For example, it’s not uncommon to hear about people making six-figures yet still living paycheck to paycheck. These people may need to reduce their expenses.
Then, there are people who really do have a low income even when they are spending very little each month. However, you can’t fully know the problem until you create a budget.
2) Stick to your budget
Many people create a budget and fail to stick to it. They may simply connect their bank account to an app to get a report of their spending from last month and count that as a budget.
This report is technically not a budget. It’s a spending report. Spending reports are a great way set baseline amounts for your budget, however.
Here are some free apps that can create helpful spending reports to base your budget on:
These reports are good to start but you need to go a step further. In other words, your budget should be created, by you, to plan your spending for the upcoming week, two weeks or month (depending on how often you get paid.)
Once your spending plan is in place, you have to stick to it.
For example, if your budget says to spend $150 on groceries next week, you need to stick to that. If you have a need that comes up before the week is over, try to be creative and fill that need outside of spending money.
Here are two ways you can stick to your budget after you create it:
- Put the cash you alotted for each category into envelopes (cash gone = no more spending)
- Put the amount you dedicate to each category into a separate bank account
With both these methods, you are putting a cap on your spending. With the cash method, you know that you have reached your limit on your spending plan when the cash is gone from the envelope.
With the bank account method, you will know you’ve reached your spending limit when the account reaches $0.
When the money is gone, you stop spending!
Here are some online banks that will allow you to create several free bank accounts and add labels to them for your budgeting purposes:
- CapitalOne 360
- Discover Online Savings
3) Find extra money in your budget
Once you’ve got your budget in place, look for ways to cut down or even eliminate some expenses. For example, if you are setting aside $150 each month to eat out, consider cutting that down to $50 each month.
Here are other ways to find extra money in your budget:
- Split WiFi with a neighbor
- Do your own taxes yourself with an app like TurboTax
- Get free clothes
- Travel for free
- Reduce your housing costs (i.e. get a roommate or move someplace cheaper)
- Get a cheaper cell phone plan
- Call your insurance to get a cheaper rate
- Refinance your student loans with a company like Splash or SoFi
- Use a service like Bill Cutterz to decrease your monthly bills
4) Get an online bank account to guard your savings
Once you make the cuts to your spending, you will take the extra money you are now have and put it into a savings account. This savings account should not be easy to access and separate from the account where you do your regular spending.
I like online banks because they don’t often have ATMs nearby and it might take 2-3 days to transfer money which means you will not try to access it as much or out of impulse.
5) Automate your savings
Don’t depend on discipline to save up money on a low income! You should automate the process of saving as much as you can.
There are many ways you can do this. The simplest way is to set up a direct deposit from your regular paycheck to your designated savings account.
Related resource: Get $50 to open a Chime online bank account
6) Use compound interest to your advantage
One of the easiest ways to save up more money on a low income is to use compound interest to increase your savings balance. Instead of saving your money places where you will earn less than a percent on your balance, you need to look for ways to grow your money in higher-yield accounts.
Types of higher-yield savings options might include:
- High-yield savings accounts (like CIT bank)
- Investments like your 401k account (get the employer match and make sure you are in the best 401k funds possible.)
Again, use higher yield accounts along with automatic transfers (or deposits) to make your balances grow bigger and more quickly.
Note: investment accounts are not FDIC insured and your initial investment is not guaranteed. If you decide to invest, use money that you don’t need immediate access to for 3-5 years.
7) Get free money
This sounds weird but there are ways to get free money from apps and websites. Many companies will pay you to sign up for their services or refer other people to their services. For example, you can get $5 to sign up for an Acorns account or $10 to open a Stash investing account.
8) Get rid of debt
Having debt can eat into your ability to save money. For one, the actual payments prevent you from saving as much as you want to. Then, the interest means you tend to owe even more money to your debtors — leaving you less money to put in savings!
It’s a vicious cycle that will always keep you from saving money. We paid off over $120,000 of debt because we didn’t want to hinder our ability to save up money.
Once you get rid of debt, find more ways to save money on a tight budget. If you need help getting out of debt, here are some resources to help:
Get Your Free eBook, Get out of Debt Now
We climbed out of over $120K in debt. Now, I am teaching people like you to do the same. Grab your copy of Get out of Debt Now today!
9) Increase your income
This is one of my most favorite methods of boosting your savings rate. In fact, it was our focus on increasing income helped us get us out of debt and substantially increased our savings rate.
You will need to explore different ways of increasing income that will work for you. Here are a few resources on flexible side-hustles you can do to increase your income. your finances together in general? Check out my free guide, Money Hacks 101: 50+ Ways to Find, Save and Earn More Money.
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