Mike
The phrase “I don’t make enough to save” is arguably one of the most common reasons why people won’t even try saving. While sometimes that is true, in other cases people just don’t want to do it because it sounds too hard.
There are many ways to save money when your income isn’t that high, today I’ll introduce you to the most basic ones.
1. “The devil lies in the details”
And by that I mean that small day-to-day expenses tend to pile up if left unchecked. Sure, that coffee you buy at the local coffee shop may not seem as much. But by the end of the month it will turn into quite a hefty sum. Same goes for that sandwich you buy at work every day.
Think about it. Let’s say that the to-go coffee costs you 100 pesos and the Sandwich goes for 20 pesos. If you buy coffee three times a week and a sandwich every day, that’s 300 pesos for coffee and 100 pesos for sandwiches, a total of 400 pesos weekly that you can use a lot more effectively. Making your own coffee and packing your lunch at work will save you at least half of that sum. And it will probably taste better, too!
These are just two basic examples. I’m sure that if you look around your life and get creative, you’ll find a lot of things you can cut costs on. You always have data left at the end of the month? Think about switching to a cheaper cell phone plan. Do you live close to work? Consider biking or walking, instead of driving or taking the bus. If you have a lot of errands around the city, try to make as many as possible in one go to save on gas money or bus fare. Imagine how much you can save when you sacrifice the little unnecessary things.
2. Buy used stuff. No, seriously!
I know how pleasant it is to buy something new and knowing you’re the first, and only owner. It’s yours and yours only.
And before you say it, yes some used items can be quite difficult to be found in a good condition. I know it feel outright sketchy to buy certain stuff knowing someone else owned it once.
But consider how much money you’d be saving. Thrift shops generally sell clothes in good condition, varying from decent to brand new. You can find shoes and jackets, that still have the tag on them for half the price. You’re not only saving money, but can potentially find higher quality goods at a smaller price.
Need a laptop? A fridge? A microwave? A car? Look for something that came out two or three years ago. A 2013 Macbook can still perform all the tasks it has to, at a decent level. A 2014 car has most of the stuff you’d have in a new car, for half price. Even more so, you can get a high spec laptop or car for less money than it’d cost you to buy a new one in a basic spec.
Another trick is to search for refurbished goods. These were sent back to the manufacturer, inspected, fixed, tested and sent back to the stores. You’re getting a basically new/ slightly used item at a much smaller price.
3. Track your expenses
You will never truly know how much money you’re spending or saving if you don’t diligently track it.
It sounds like it’s a lot of trouble and pretty hard, but tracking your expenses is the basis of Personal Financial Management. Without expense tracking you won’t know in which area you’re overspending, which area actually needs more funds and which expenses can be cut altogether.
There is a variety of methods to do that. The simplest one is to save all your receipts and write down all your expenses in a notebook. You can try to use Microsoft Excel or Google Sheets, as an alternative. But the most effective and easy-to-understand method are Personal Finance Apps. An example of such a program is our Fentury. You can add your transactions manually if you use cash. If you prefer cards, connect your bank accounts, then the app will automatically add your expenses and categorize it. This way you’ll always know exactly how much you spent on any given thing. Which brings me to the next subject…
4. Create a budget. Like, yesterday!
You need to budget if you want to keep your financial life in check. Simply tracking your expenses might stop some “financial bleedings” you have, but that won’t fix the picture as a whole.
After tracking your finances for about 4 to 6 weeks, you get a rough idea of where the bulk of your money goes. Based on this data you can create budget for the main spending categories you have like: housing, bills, groceries, transportation, taxes etc.
Once you have a budget, don’t forget to keep checking and adjusting it, if necessary. The key is to create and economically accurate budget that you can live with, but also saves you money. Remember if you put 6000 pesos for groceries, but you actually need 7,000 pesos – that won’t change the fact you’ll spend 7,000 pesos. You’ll simply take money from other categories and the whole thing will stop working. Assign real, manageable amounts, while trying to leave a little extra for savings.
Yes, savings. It doesn’t matter how little you make, you should always have an emergency fund. Ideally, it should have at least 6 months’ worth of expenses. I understand that it is really difficult, when you’re basically living paycheck to paycheck. But having a safety net like that can make all the difference in the world, in case something in your life goes wrong. Try to manage at least 3 months.
And finally…
5. Get out of debt.
When you have a working budget, that is suitable for you and you’ve created a suitable emergency fund. The next step would be to get rid of your debt. Your wealth can’t grow if you ignore your debt.
At some point you must consider living frugally for a year or two, so you can put every free cash towards your debt. The interest amount will keep growing, for as long as you put it off. In case you have multiple debts, start with the smallest and easiest ones. Getting those out of way should increase credit score. Which in turn may grant you the possibility to refinance your bigger loans on much better terms. Thus, giving you more financial freedom.
When you don’t have credit card debt, loans, car and house mortgage – that is when you have financial freedom. You can make your money work for you, by investing. Or start saving for retirement. Whatever you want really – that’s what financial freedom gives you.
As I mentioned at the beginning, these are just 5 ways in which you can tackle saving when you have a low income. There are countless more. I hope you found them interesting and useful and if you did, share them with your friends!
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