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 travelling) 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 paycheque to paycheque. 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 not to 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 prioritising 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 it 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 cancelling 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.
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. It’s 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 that 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.