Most of us want to save money so we can build wealth and plan for the future. We have goals we want to reach (like traveling) or things we want to buy (like a dream home). However, this can seem impossible when you’re surviving on low income.
According to CNN, 25 million American households are living paycheck to paycheck. When money is tight, saving any amount can be the last priority on your list. You’re just trying to get by.
So how do you save more money when you’re making minimum wage? How can you reach your financial goals on a low income?
When it comes to finances, it’s important to not only think about the now but also the future. Even if you’re earning a minimum wage, you can still save little by little. Here’s how:
Tackle High-Interest Debt First
In order to start saving more, you have to tackle your debt head-on. Specifically high-interest rate from personal loans, or credit cards, because they force you to pay outrageous fees and interest charges.
When paying off debt, you need an attainable, yet challenging plan to pay it off. Start by prioritizing your debt so you’re paying off the ones with highest interest first.
Then, as you go forward, avoid accumulating any more high interest debt, especially credit cards.
Cut Down Your Biggest Expenses
Trying to save money when you have low income can be very difficult. Sometimes it feels impossible to cut down even a dollar or two every month.
Aside from the usual money-saving ideas, like cooking meals at home and canceling your cable bill, what more you can do? Instead of trying to cut back your small expenses, focus on the larger ones so you can make more of a significant impact.
For most people, housing costs tend to be biggest part of their expenses. If you’re renting, consider downsizing to a smaller home or living with roommates.
If you own your home, take at look at whether or not refinancing your mortgage for a lower rate would be beneficial. You can also rent out a room or parking spot for additional income.
David’s Note: Make sure to understand the terms of a refinance though. What generally happens is that along with a reduced monthly payment, a refinance also extends the loan term. Be comfortable with the fact that it will take you longer to pay the loan off if this is the option you choose. Also remember to shop around for the best deal, because there are a ton of people willing to help you get a refinance and some will charge less than others for their services.
And I know Connie just said to work on the big stuff, but I argue that you need to cut out the small stuff too, especially if the costs are recurring like a cable TV bill. Do you absolutely need to pay for it? There are many ways to reduce the TV subscription costs, and it only takes minimal effort for a sizable benefit.
Take Advantage of Free Money
Take advantage of “free money” when you can. As a family with low income, you may qualify for the earned income tax credit (EITC). According to the IRS website, the EITC, can be a large refund on your taxes, helping you keep more of what you earned. Sometimes even as much as a few thousand dollars.
You should also look into a 401K at work and see if your company matches up to a certain percentage of your contribution.
If they do, you should take advantage of it and start saving as much as possible. The company match is basically free money that will help you save towards retirement.
Keep Your Budget Lean
To save more, you have to take control of how much you spend. Choose the categories you want to indulge in, and keep the rest of your budget as lean as possible. You’ll have to make sacrifices but it’s not impossible.
Just learn to spend in moderation. For instance; cut back on how often you dine out. You can still enjoy a nice meal at a restaurant, just not multiple times a week.
Start a Side Hustle
If you can’t cut costs anymore than you already have, consider diversifying your income by starting a side hustle to earn extra money. Aside from your full-time job, you can get a job on the side to provide another income source.
Many side hustles can be done right from your own home in your spare time. Think about what you’re good at doing, what kind of hobbies can earn money, or what you already enjoy that can be turned into a side job.
Popular side hustles include freelance writing, data entry, and graphic design.
Saving money when you make minimum wage is certainly hard but can be done. It’s important to understand what your priorities are, and create a values-based spending and saving plan.
Once you do, you’ll be smarter and savvier with how you spend money and ultimately, be able to save more.
What’s another way to save more money while earning minimum wage? What are some tactics you’ve tried in the past when your income was low?
Editor’s Note: I’ve begun tracking my assets through Personal Capital. I’m only using the free service so far and I no longer have to log into all the different accounts just to pull the numbers. And with a single screen showing all my assets, it’s much easier to figure out when I need to rebalance or where I stand on the path to financial independence.
They developed this pretty nifty 401K Fee Analyzer that will show you whether you are paying too much in fees, as well as an Investment Checkup tool to help determine whether your asset allocation fits your risk profile. The platform literally takes a few minutes to sign up and it’s free to use by following this link here. For those trying to build wealth, Personal Capital is worth a look.
Editor’s Note: Did you know about the service called $5 meal plans? For $5 a month, they send you recipes of delicious, healthy, yet cheap food that costs just $5 a meal.
Several of my friends signed up and they are able to eat at home more because the instructions are easy to follow, making everything convenient. The deal also comes with grocery shopping lists, which saves them so much time. Check it out yourself by clicking here and you too may be able to save more and become healthier at the same time.