How to Save Money on a Low Income


We all have to start out somewhere, and most of us find ourselves short of money at some time in our lives. Whether you are just starting your career, are between jobs, or are dealing with a personal or family emergency, there are likely going to be times when money will be tight. 

When you are living from paycheck to paycheck or find that your income dropped for some reason, it’s hard to think about putting money aside, but everyone should know how to save money on a low income.

You Can Always Save

No matter how little you have, there are always ways to save. For example, everyone should maintain an emergency fund, especially when they have little money. Economists differ on how much you should save, but plan to have at least three months of savings to cover basic living expenses such as rent, utilities, and groceries.

Finding ways to save when you have little income will also help you start to build wealth for later on, and it will likely improve your credit. If you can minimize your debt and manage to save, you can maintain a good credit score, which can help if you need to borrow money.

Being able to save money and break the cycle of struggling to pay your monthly bills also provides a sense of personal security. Worrying about money is debilitating, creating a level of added stress that can impact your life in a number of ways, including your ability to think effectively. Having savings can help eliminate that stress.

How to Save Money on a Low Income

Of course, it’s easy to talk about saving when you don’t have any extra money available, but how do you do it? Saving when there is little coming in is challenging, but it’s not impossible. Here are some ways you can save, even with a low income:

Maximize payrolls savings 

Many employers offer a percent match on your yearly 401k contributions, up to a maximum percent of your annual income. For instance, an employer may match 100 percent of your yearly 401k contributions, up to a maximum of 4 percent of your annual income. If you earn $55,000 annually, you must contribute $2,200 (4 percent of your annual salary) to your 401k to maximize your employer’s 401k matching benefit. In this example, you and your employer would both contribute $2,200 to your 401k for a total of $4,400 in contributions for the year. If your company offers 401k matching and you aren’t taking advantage of it, you’re missing out on free money. 

If your employer doesn’t offer a 401k plan or 401k matching, consider the paying yourself first option to help you build savings over time. The idea is that you allocate money for retirement and pay into your savings before you pay other bills. Set aside additional money in an individual retirement account (IRA) to supplement your retirement savings.

Related: Download the Budgeting Checklist for a list of income and expenses to  include when planning out your household budget.

Create a budget 

Before you can start building your savings, you need a household budget that outlines all your expenses, including savings. You want to be sure to make a list of all of your monthly expenses and be realistic about what you need to pay your bills. 

You might consider using a zero-sum budget, in which you track every dollar coming in and account for every dollar going out, including savings, so you use every dollar for a specific expense. Once you have a household budget, you can see where it might be possible to cut expenses so you can increase your savings.

Cut your housing costs 

Housing is typically the biggest fixed monthly expense, so it’s a logical place to start looking to save money. The easiest way to save on housing is to downsize. 

Consider renting a smaller apartment or moving to a less expensive neighborhood. Try talking to your landlord about reducing rent in exchange for repairs or part-time work. You can also cut back on housing expenses such as utilities, cable television, and so on. You might even think about taking in a roommate to share expenses.

Cut your grocery bill 

Groceries tend to be the biggest variable expense, but you can reduce your food bill with a little planning. Make a meal plan for the week so you know what you need and don’t overshop. Cut out snacks and junk food, and when you make a grocery list, stick to it—no impulse buying. 

Another way to save is to use coupons and grocery store memberships that offer special deals. You can also try to prepare less expensive meals at home rather than buying pricier prepared foods or eating out.

Eliminate your debt 

You are going to have to build payments for long-term debt such as student loans and car loans into your monthly budget, but see if there are ways to reduce or eliminate other debt. For example, can you refinance your student loans so you owe less each month? 

You should also avoid carrying debt on your credit cards. Pay off your credit card balances each month, and if you find your credit card debt getting out of hand, start using cash instead.

Automate your savings 

Of course, to build your savings, you need a savings account. You can automate your savings by scheduling regular transfers from your checking to your savings account. 

You should also look for special deals or programs that help you build your savings, such as the iQ Credit Union Easy Saver, which rounds up debit card transactions to the nearest dollar and deposits the balance into your savings account. Anything you can add to your savings helps. 

Saving Is Just the First Step

Developing a savings strategy is part of a lifelong financial strategy that should help you plan for a comfortable retirement. Building your savings is the first step in accumulating wealth, but you will also need to consider ways to invest your savings so they can grow, whether that’s in a retirement fund or a new home. As part of your savings strategy, it pays to get expert advice.

iQ Credit Union has been partnering with members while offering personal savings and wealth management strategies for decades. As a member of a credit union, you have access to a variety of no-fee banking services and savings accounts, as well as educational tools that can help you manage your money. We also have financial advisors on staff who can answer your questions and help you find the right type of account for your money.

Even when money is tight, you can plan for a successful financial future. Let the experts at iQ Credit Union show you how. To get started, use our Budgeting Checklist to see where you can find extra cash so you can start saving.


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