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This could be a very pressing worry especially when you are on a low income. Not to worry yet, this post answers those pressing concerns.
Building savings is very important when you are on a low income and still struggling financially.
You need savings to offset lots of bills and live relatively free of financial hazards.
Intentionally building your savings can help you stay out of debt/payoff debt, fund a passion and stop being broke.
Let’s move ahead.
Here are 8 Brutal and Smart Ways to Build Savings On a Low Income
1. Open a high-interest online savings account
You don’t have to settle for cents of interest that you may get from a traditional brick-and-mortar bank’s regular savings account. Many online banks offer high-yield savings accounts with good rates and without monthly fees.
Keeping $10,000 in an account that earns 0.50% annual percentage yield, which is the interest rate when factoring compounding, can earn you a little over $50 in one year.
Compare that with less than $10 you would get from a regular savings account earning the national average rate of 0.06% APY.
2. Start saving your change
Use a piggy bank to save up all your regular change from everyday small spending.
It is a much easier way to save money each month and can also help you cut the emotional struggle with spending money every day.
3. Start a budget that works for you
Budgeting on a very low income is all about saving hard and making sure that every single dollar is spent wisely. I mean, no room, no chances for unnecessary expenses.
In this case, you can just assume that there are no budgeting rules to follow. You are out to follow what works for you and the income that you earn.
As long as you are determined and you know exactly what you want and what you want to change, then assume that there are no budgeting rules.
It will save you time searching, failing, starting over and then finally getting tired of budgeting.
In simple words, just go straight to the point! Pick your pen and your paper, put down numbers and be sure you are crafting a budget that will help you live below your means.
4. Cut Spending on Entertainment
Entertainment is one expense that can always be reduced though very difficult. That doesn’t mean you have to give up fun or live a destitute life. There are plenty of free and low-cost ways for you and your family to have fun.
Here are some entertainment options you can enjoy without spending much:
- Have a free story night
- Host potluck dinners instead of going out to dinner with friends
- Make cheap evening cocktails for you and everyone else.
- Get outside and walk, hike, or ride your bike
- Visit your local library
- Stay home and have movie night or game night
- Explore a museum
- Take a stroll through a park
- Pack a lunch and have a picnic
- Play one or two free games
You can also scan your local websites and newspapers to find free and cheap things to do that are available for the said duration.
5. Cut Down Your Expenses
If you spend all your salary before your next paycheck, then you must be prepared to cut out of your monthly expenditures to get back to living within your means.
Some expenses are easy to slash. Restaurant meals and snacks can be cut out in favor of cooking at home. Insurance costs can be made more manageable by raising your deductibles.
Services you don’t use—like that gym membership or the extra data plan on your phone—should also be easy to slash.
But don’t forget about cutting costs in basic areas too. You can lower your utility payments by making sure you turn off lights, unplug appliances, and use energy-draining electronics sparingly.
6. Automate your savings
Making the choice to save money is very difficult. Forcing yourself to also save money each month can be almost unrealistic.
You are more likely to spend all of the money in your checking account if don’t find a way to save without making it a painful, conscious effort.
With each paycheck, set up an automatic transfer to your savings account to make the process seamless. You’ll be able to save realistically knowing your savings are safely tucked away and counting without your direct effort.
7. Lower your housing costs
According to a study conducted by the U.S. Bureau of Labor Statistics, housing expenses can be one of your biggest expenses.
Imagine if you could cut down your housing expenses by a few hundred dollars each month. That money could make a huge difference in the size of your savings and overall quality of life.
Here are a few ways to cut your housing costs including:
- Downsizing Consider a small apartment or home as a way to slash costs.
- Shift to a New location. Location is a key detail in real estate pricing. You will save money by moving up your location. For example, moving from downtown to the suburbs could be cost-effective in some areas and you get to spend less on housing.
- Rent out the extra rooms. If you have extra space in your home, you could rent them out to offset your housing costs. Consider long-term tenants or short-term rentals through a platform such as Airbnb.
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