Saving can be difficult for anyone, and it can even feel impossible for those living on a low income. It’s not impossible, though. You’ll thank yourself later for saving, whether you’re trying to build a small monetary safety net or if you’re saving for the long term. While saving on a low income might feel slow at first, it’s still progress. Here are a few useful tips for building savings while having a low income.
Eliminate Debt Now to Increase Your Savings on Low Income
It may seem counterintuitive to send your money to credit card companies and bill collectors when your goal is to keep more money in your account, but you need to think about the long term. Loans and credit cards charge interest based on an APR or annual percentage rate. While APRs can be complicated to calculate, an easy way to think of it is that you’re likely spending over 15% of the amount of your credit card debt at the end of the year in interest over the span of that year. While interest payments might seem like small single- or double-digit amounts as you look at your monthly bills, this adds up to hundreds if not thousands of dollars over the years.
You’ll want to spend most of the money that would be going to your savings each month to pay off these debts. Tackle one debt at a time. However, it’s important to try to keep some extra money in your account for emergencies. Even if it’s just a few hundred dollars extra you can save up in your account while paying off credit-card debt, it could help you if you get into a bind.
Look for Side Gigs to Build Savings
Side gig culture is bigger than ever before. Contract work often allows you to work your own hours, meaning you can make extra money outside of your day job at a time that works for you.
The most common gig work nowadays are jobs such as ridesharing or food delivery, but there are at-home options available, too. Crowdsourcing jobs, blog-writing gigs, digital art for business, audio transcription, and data entry are just a few common ways that people are making extra money to add to their savings while on a low income. Many people start their own small businesses making products or offering services as well. Utilize your skills from your current work, education, hobbies, or work history to find gig work that works for you.
Make a Budget for Saving While on a Low Income
Making a budget while on a low income can feel depressing. You might not want to look at the stressful numbers, but it’s your best and possibly only way to build your savings. Typically, the magic numbers for budgeting are 50/30/20, meaning that you should spend 50% on necessities like rent and groceries, 30% on your personal wants like going out for dinner or making extra purchases, and 20% on savings.
However, these numbers might be impossible whenever you’re on a low income.
Unfortunately, many low-income individuals spend over 50% of their income on necessities, but not all hope is lost. Just take the remainder of your income after necessities and split it 60/40 between your wants and savings. You might feel tempted to put more money into your savings than this, but it’s important to let yourself have some spending money to avoid burnout when it comes to budgeting. The dollar amounts you see going into your savings account might seem small, but you’ll need to trust that they add up over time.
Don’t Punish Yourself for Spending
It’s natural to feel bad after spending money when you know you probably shouldn’t. That being said, it’s important not to hold it against yourself. Do not punish yourself by taking away your future spending money to make up for spending too much now. Punishing yourself just makes you more likely to fall off the track of saving money entirely since you’ll be demotivated when facing your self-assigned punishment.
Simply recognize your spending mistake’s impact on your future savings, forgive yourself, and move on. You’ll get better about it as you practice healthy spending habits going forward.
Conclusion: Building Savings on Low Income is Always Possible
When your income is low, your savings numbers can look very small, and it can feel demotivating. However, even if it’s just an extra $40 going into your savings account each month, that’s $40 added monthly that can make a difference in your future. The best tip for building savings on a low income is to start saving now. Each month you add even a little bit to your savings account, you’ll feel more comfortable regarding your financial situation and future.
