Low income is not synonymous with having no savings; this is a common misconception. The key issue is generally not the amount you earn, but rather the actual flow of your money once it has been deposited in your bank account. If you can change the way your money flows, saving for a vacation, building an emergency fund, or purchasing a home in the future becomes achievable.
Yes! It really is possible to save money even with a limited income.
Let’s pause for a moment. The myth of saving money usually involves thinking that it is something that can only be achieved by keeping track of every dime and strict budgeting (which most people are not keen on doing) as well as saying “no” to everything else.
But that isn’t true: what actually happens when you change your mindset and begin treating saving money as something that will happen automatically, without having to make a conscious decision to do so? Saving money becomes a way of living, not a choice.
So let’s backtrack for a second. Saving money is hard; but when you don’t feel that your paycheck is large enough to begin saving, saving becomes even harder to achieve. And while there are ways to save money without needing to suddenly earn more money overnight, you do not need to have a high salary in order to build savings – you need smarter systems for managing your income.
A unique strategy for managing your finances may seem odd but is incredibly effective. Instead of depositing your entire paycheck into your checking account, where it may be spent before you save anything, deposit it into a savings account and transfer only the amount you need to your checking account when you are ready to spend it. This method of saving turns saving into the “default” action and spending into an intentional thought process that is much more challenging to do without thinking about it first.
When you first deposit your paycheck into savings, you must create a plan for the money to go so you do not end up feeling confused about where it all went after you started spending it (i.e., budget, expense plan, etc.). The label matters little; what matters is that you choose, prior to making your purchases, how you will allocate your money. By doing it this way, you will not be wondering where it all went after you spent it.
Now for the uncomfortable discussion – reducing your expenses. Please don’t focus on minuscule dollar savings by reducing your Starbucks coffees once a week. The savings are found in the housing, transportation and food expenses. By making small changes in these areas, you could have hundreds of extra dollars per month! Thus, coupon clipping is insignificant compared to this type of expense management.
Housing consumes the majority of your income, which is why it’s a good starting point for this series of articles. By lowering your rent, getting a roommate, renting out an extra room, and/or bartering for lower housing costs can all positively impact your bottom line significantly more than many other tiny “frugal hacks”.
Transportation also is a large, unseen expense. Between your car payment, your insurance, your gas, and vehicle maintenance, the costs of owning and operating a car can add up quickly. Finding a more affordable vehicle to drive, comparing insurance quotes, and/or carpooling for a while can create significant savings in your budget while still allowing you to enjoy life to the full extent.
Food is even more complicated because food spending does not typically feel like a bill. Instead, it seems to go out of your wallet in small amounts. Planning your meals, setting a dollar limit for grocery shopping, and eliminating random takeout will help prevent this from occurring. By treating your food-related spending as conscious versus subconscious, the food-related expenses will not sneak up on you like they appear to do for most people.
You can change your mindset to save money without changing your pay. Here’s how: By knowing the difference between a want and a need. An electricity bill is a necessity, whereas an iPhone 6 is not. By clearly identifying something for what it truly is, walking away from that item becomes much easier and guilt-free.
Focus on your reason or drive. What is it that will compel you to save? A number alone won’t “move” people’s drive. A goal, however, can make saving worthwhile. “I want to save dollars” will not inspire people to achieve. “I want to save $3000 by July,” gives you your brain an objective, it can help keep you focused on something more tangible.
A goal needs two elements—a figure and a timeframe. When you have both, the saving process is much more than a fading blueprint to be achieved at some point in time. Once you know the objective you are pursuing, you will know how to make wise financial decisions on a daily basis.
Going back, saving on limited income does not mean being perfect but to set up a series of small savings steps that continue to work for you even in situations where you find motivation lacking. Financially managing your funds allows you to make life simpler. You will experience less stress, and your choices for where to spend your money become clearer and more plentiful.
More importantly, saving is not limited to the dollars in your account. By saving you create more options for yourself and others, specifically, peace of mind, flexibility and freedom — now or in the future, no matter how much money you currently earn.
