If you have a low income and sometimes struggle to make ends meet, you are hardly alone. According to a February 2024 MarketWatch Guides survey, as many as 66.2% of Americans currently feel like they’re living paycheck to paycheck, meaning roughly two out of every three people are feeling somewhat strapped.
Factors that can make saving money challenging include inflation (the cost of living has risen sharply in recent years) and heavy debt loads, with the average person carrying $6,000+ on their credit cards. These two forces can quickly eat away income, making it feel impossible to save.
Thankfully, there’s a way forward. What follows are 14 smart tips for how to save money on a low income. They can help boost your financial wellness.
Smart Ways to Save Money with Low Income
1. Finding a Budget Method That Suits You
A budget is a way for you to track your income, help you make good financial decisions, and plan towards goals. It paints a picture of how much money you have coming in and going out and how you are allocating funds, which you can use to identify areas for improvement. A budget can also help you see what resources you have available to cover your living expenses. With it, you can see how to make money stretch further.
There are a wide range of budget methods to choose from. A traditional approach is building a line item budget, which involves tracking your expenses in a spreadsheet. You can build a spreadsheet from scratch, or use a template.
Google Sheets has a free template that’s great for beginners, and you can also create a budget in Excel. If you prefer to simplify the process, you might want to download a budgeting app that can categorize and track your spending for you.
Whatever budgeting style you choose, it’s a good idea to automate the saving process. Once you see how much you can realistically set aside each month, consider setting up an automated recurring transfer from your checking account into a savings account (ideally a high-yield savings account).
2. Watching Money Spent on Food and Drink
If you’re thinking about how to save money with a low income, one wise move can be dining in. That may mean opting for pasta at home instead of the cute Italian place nearby.
Making meals at home is typically cheaper than eating out. And the gap has widened: In recent years, restaurant prices have risen faster than general inflation. Just keep in mind that cooking at home can cut costs as long as your grocery bill is sensible. Look for budget-friendly recipes that are simple and use all the ingredients in your pantry. Search online for affordable recipes, including “recipes under $10.” You’ll likely find many options.
Another way to save money on groceries is to choose more affordable proteins like eggs, beans, chicken, fish, and quinoa over beef and lamb. Also consider saving alcoholic beverages for weekends or special occasions only, and reach for lower-cost drink options like home-made iced tea, flavored seltzers, or good old tap water on the weekdays.
3. Getting Rid of Debt One Step at a Time
Studies show that debt can cause stress and negatively impact mental and even physical health. Paying off debt can be a major motivation to save money. It’s one less bill to pay at the end of the month, and the freedom is empowering.
How to approach debt reduction? Always be sure to pay at least the minimum amount due. Then consider these two techniques that can help you become more financially stable with a low income:
• In the snowball method, you use extra funds to pay off the smallest debt first, giving you a sense of accomplishment for wiping out a balance. Then you move on to the next smallest debt.
• In the avalanche method, you use extra funds to pay off high-interest accounts first, regardless of the balance. That can be a wise move since this is the kind of debt that often keeps people owing money for a long period of time. Credit card debt is a common example of high-interest debt.
You also can combine your debts into one account with a debt consolidation loan. These personal loans typically have a lower annual percentage rate (APR), which can save you considerable money in the long run.
4. Finding Ways to Get Rid of Nonessentials
When creating a budget, it’s a good idea to create two main spending categories — essential and nonessential expenses.
Essential expenses will include housing, groceries, transportation, utility bills, and more. An example of transportation costs might be car payments, car insurance, gas, monthly train passes, and so forth.
Nonessentials usually include wants vs. needs (such as items like clothing you like but don’t require and entertainment). If you’re a sneakerhead or handbag collector, it may be time to pause shopping. But if you need fresh clothes and shoes for work, set a target amount you can afford to spend that month. Make your dollars stretch with sales racks at stores or second-hand steals.
5. Changing to a Cheaper Entertainment Subscription Model
Can’t live without Netflix? What about HBO, Disney, and Hulu? Combined, those streaming services can debit a fair amount of money out of your checking account each month (or, depending on how you pay, year).
While it’s important to unwind, sometimes cutting entertainment is worth the savings. Consider free entertainment on your TV or computer. There are plenty of apps that offer free on-demand and live streaming services. You can also get classic TV antennas that pick up the major networks for free.
Finally, try the library. Most carry more than just books — movies too. You just need a library card.
6. Cutting Back on Larger Expenses
Looking for other ways to save money on a low income? You may also be able to cut some of your large monthly bills. Your biggest expense is likely housing, so you might start there. Several factors affect rent or mortgages, like location and amenities. Consider living in a cheaper neighborhood temporarily. Also, a home with fewer amenities like a patio or pool are typically cheaper.
Other options include getting roommates or, if it’s feasible, even going rent-free. If you have family nearby, it might be worth asking to live with them for a low fee or even rent-free, provided you have a plan to get on your feet or can contribute to the household (say, by cooking or cleaning).
Transportation is another large cost. If your job is a safe and reasonable distance to bike to, try it out. Bikes are generally inexpensive to maintain, plus offer the benefit of staying fit and going green.
Recommended: Determining the Right Spending/Budgeting Categories
7. Saving What You Can
It’s also a good idea to cut smaller costs that, due to frequency or habit, tend to add up. An $8 fancy coffee once a week costs $416 a year. On a smaller income, that can eat away your earnings. If you can save $5 or $10 a week by making one or two minor changes — that’s a good start. It’s better than saving zero dollars. And even small savings can add up to a significant sum over time.
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8. Separating Money for Yourself From Other Expenses
One simple way to make sure you save is to pay yourself first. That means that before you pay your other bills, you take out a set amount of money and put it into savings as soon as you get paid. Whatever is left over is the money you can spend on everything else. Once the money you set aside for yourself (and your goals) is out of your checking account, you won’t be tempted to spend it.
9. Turning On Alerts for Bill Payments
Setting up reminders for your bills can help you avoid late fees, which can eat up your funds. You can set up alerts using the calendar on your phone, or you can use a budgeting or payment app to keep you on top of upcoming payment due dates.
Even better: Consider setting up autopay for all of your regular bills. This can help ensure you never miss a payment. Just keep in mind that you will need to make sure you have sufficient funds in your account before payments are pulled.
10. Spending Less on Your Car
A car can be expensive. Some tips to make it more affordable:
• Buy a car — don’t lease. You generally get more value paying off a car compared to leasing a car.
• Buy used. Used cars are typically cheaper than new cars. And, because they’re used, the insurance tends to be cheaper as well. Buying a pre-owned car also means it won’t lose value as quickly as a new car. Some estimates say that a new car loses 20% of its value in the first year.
• Aim to get a car that gets great gas mileage. An SUV or truck can easily cost $100 for a full tank. If you’re paying for a gas guzzler, it might be worth downsizing to a car that gets better gas mileage.
11. Finding Ways to Cut Entertainment Costs
Reading, listening to music, and tuning into your favorite program are all free or low-cost ways to relax and have fun.
Instead of booking concert tickets for your favorite band, consider listening to their tunes on free apps (YouTube, for instance). Also check listings and see which local bands are playing; that could be a good way to discover some new favorites.
If you enjoy a good show, check out free TV streaming apps like Tubi or Pluto TV. Both have a great selection of movies and shows on demand or live.
12. Eliminating Your Bad Habits
If you’re looking to improve your financial situation, it’s a good idea to look at your good and bad spending habits.
Do you buy groceries at the gourmet deli instead of a cheaper supermarket? Do you tend to eat out because you didn’t pack a lunch? Do you leave the AC running in your apartment while you’re out all day?
These are all costly habits you can change. Find a cheaper grocery store. You’ll find your dollar can stretch a lot further with cheaper prices. Try meal prepping on weekends so you can pack lunches for work each week. Lastly, run electricity only when you need it — and compare bills. You’ll likely see a difference.
13. Committing to a Month of No Spending
A no-spend challenge can be a fun way to save.
A no spend-challenge means that you avoid discretionary spending altogether for a set period of time, such as 30 days. During that time you only spend on necessities like rent and groceries, and don’t spend money on movie theater tickets, clothes, or even chocolate. You might want to let your friends know you are doing the challenge so they don’t tempt you into spending. They might even join you.
At the end of the challenge, you’ll have likely saved a significant sum of cash. You may also find that you didn’t miss some of the things you stopped spending on and decide to cut them out of your budget or reduce how much you spend on them.
14. Getting Help if You Need It
If you find yourself still living paycheck to paycheck, there’s help.
If you have substantial debt, consider reaching out to the nonprofit National Foundation for Credit Counseling (NFCC)). They offer free and low-cost debt and credit counseling, along with other services.
Also, cities, states, and the federal government provide help in the form of subsidized housing, discounted healthcare, and free groceries. Simply call the 211 network 24/7 to share your situation and get connected to the right people.
You can also use the government’s benefit finder that can match you with the right programs.
15. Automating Your Savings
Once you have a budget in place, it’s easier to know how much you should save a month.
As mentioned above, one way to simplify saving is to try automating transfers, a feature many banks offer that moves money from your checking account to your savings account on a certain date. For example, if you’re paid every Friday, you can set up an automatic transfer of the desired amount to your savings or investment accounts.
If you put away $50 each week, you’ll have $2,600 at the end of the year.
Why Saving Money With a Low Income Is Possible
No matter what your income, it’s tempting to live like a rock star or just try to keep up with your higher-earning friends. Or you might feel like your smaller earnings are not worth saving, and you’ll wait till you make more. But it’s possible to save more than you think even on a lower income.
If you make savings a priority and adjust your lifestyle to your income, it can pay off and help you increase your financial well-being. Simple changes like learning to budget, choosing lower-cost groceries, swapping out driving for cheaper (and greener) forms of transportation, and buying second hand can all help you take control. These moves can also help you pay down any debt you may have, build your rainy-day savings, and achieve longer-term financial goals.
The Takeaway
Whether you earn a lot or a little, living within your means always pays off.
Budgeting is the first step to getting your finances organized. It’ll help you see how much money you have to cover your monthly expenses and how much you have leftover for savings. You’ll also see a clearer picture of your spending habits.
Once you have a sense of your spending habits, you can find ways to spend smarter. That means finding cheaper options for necessities and cutting nonessential spending.
Finally, be sure to set attainable savings goals and put your cash away in a high-yield account to help it grow faster.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
FAQ
Why is saving money so hard?
Saving can often be hard because of our mindset. We don’t focus on creating and sticking to a budget and instead spend feely, in the moment. If you are following a budget but find it hard to free up cash to save, you might take on a side hustle to help bring in more income.
What happens if you don’t save money?
Having money in savings is a safety net for unexpected expenses like a medical bill or job loss. Without one, you may find yourself unable to pay for bills, which could cause you to take on high-interest debt and/or pull you closer towards poverty. It’s wise to have at least three to six months’ worth of living expenses stored away in case of emergency.
How do I get the motivation to save when I do not make much?
With social media in today’s culture, it might seem like everyone has what they want (except you). So it’s important to put on blinders, and focus on your journey. Delete apps that encourage you to overspend, and ask trusted friends or mentors to navigate this territory together. Save whatever amount you can: Don’t get discouraged by comparing yourself to others’ savings plans.
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