Saving money when your income is low might be a challenge, but it’s not impossible if you have the right strategy in place. In fact, the best thing you can do to stop living paycheck-to-paycheck is to slowly start creating more financial security – even if you do it £5 at a time.
Our best tips how to save money for low income households
1. Set up a plan of action
If you don’t know where you’re starting, it’s harder to plan the road ahead. Budgets often get a bad reputation – they’re boring, they’re confusing, they’re time consuming– but the truth is that without one you’ll never get a clear picture of where the money leaks are and how much you could possibly save.
Once you understand what’s going on with your money, you’re in a better position to create a realistic savings goal. The key to learning how to save money for low-income earners is to give up the notion that you can’t start saving until you have more money. If all you can afford is £5 a week, then start with that – but pick a number and stick to it, rather than telling yourself “I’ll just save something.”
2. Be mindful about your spending
When it comes to saving money, cutting down your biggest expenses has to come first. Remember all that expense tracking you just went through? Now it’s time to start trimming the excesses.
Food is often the biggest budget breaker, especially if you’re used to eating out, buying prepared food or failing to plan your meals. In fact, the average UK household spends over £1,600 a year on restaurant meals, according to data from the Office of National Statistics. Even if you’re not big on takeaway food or restaurant outings, there might be ways to cut down on your food budget by simply looking up easy recipes you can make with ingredients already in your pantry.
The same rules apply if you need to trim your entertainment budget. Rather than going to the movies, host a movie night at home, take the dogs (or the kids) hiking, and look up frugal or free entertainment options in your area.
If you manage to make changes that save you money, funnel those extra funds into your savings account.
3. Increase your income
If you’ve gone through your budget over and over and there isn’t any room to stretch it any more, it’s time to earn more. The easiest way to do this is to sell some belongings – anything that’s taking space in your home and you no longer use can be sold. This can include anything from gardening tools and sports equipment to electronics, kids’ toys and even furniture.
Any side hustle – from dog walking to tutoring over Skype to cleaning houses on weekends– can also be a good way to generate earnings. These things are not meant to replace your day job and you might not earn as much as you’d like at first – but an extra $10 or $20 here and there will help grow your savings.
4. Pay and stay out of debt
How can you save money if you have low income and debt? Credit card debt especially can seriously hinder your chances of savings and moving forward financially.
If you’re struggling to pay your debts, it might be time to call your lender and see if you can negotiate more favorable terms. Call before you’re in trouble – don’t wait until you skipped a payment and late fees have started to accumulate. Make sure you know what you want before you call. Would a lower interest rate help you? Or maybe reducing your minimum monthly payment is a better option? If you have enough money saved up, you can even discuss a lump-sum settlement.
If that doesn’t work and you’re still struggling to keep up, consider looking into transferring your debt into a better credit card with zero interest rate.
5. Automate your savings goals
Out of sight, out of mind works very well when it comes to savings. Rather than trying to remember to move money into your savings account every week or every month, automate the whole process. Set up an automatic transfer so the day you get paid, a fixed amount is automatically transferred to a high-interest savings account. Putting the process on autopilot makes it easier to save money and chances are you won’t even feel it, even if you’re low income – just remember to stick to a realistic number so you don’t have to dig into it later in the month.
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