How to Start Saving Money on a Smaller Income

No matter what stage you are at in life it’s always a great time to save. And saving money on a tight budget is possible. Setting up good spending habits early on can set you up for future financial success. “It's not your salary that makes you rich, it's your spending habits.” ― Charles A. Jaffe

  • Saving Can Save You in Tough Situations. It can seem like a daunting task to save when you have bills or are living paycheck-to-paycheck because of a tight budget or smaller income, but saving even a little can help you from having to resort to going further into debt in a financial emergency. The first step is to start an emergency fund that covers at least one months’ living expenses. Ask yourself, how much money do I need to pay bills and buy food for a month in case of an emergency? Saving even small amounts adds up over time – if you put away $80 a month for a year, you’ve saved almost $1,000. That’s a great start to an emergency fund, especially when considering that 62% of Americans don’t have $1,000 saved. Additionally, take advantage of the employee match for your retirement if it’s offered by your employer. Whatever stage in life, you don’t want to leave free money on the table.
  • Acknowledge Your Spending. The key to saving is to acknowledge and accept your spending non-judgmentally. What are you overspending on? What can you feasibly cut back on? Another major aspect of saving is to not follow your friends spending habits. When your friends or family are living outside their means, they may be carrying more debt than you realize. With Internet Branch online and mobile banking, you can see all your transactions and track your finances.
  • Save what you can. There are a few tricks that stand above the rest when it comes to saving. One is automatically depositing a portion of your income. If it’s possible, start by saving 3% more than you are currently saving – ideally 5-10% of your paycheck. Put away any unexpected or irregular income like your tax refund, bonus or second job income. Experts recommend the 50/30/20 Rule. 50% of your income goes to mandatory bills (rent, student loans, insurance, utilities), 30% goes to flexible spending (food, vacations, shopping) and 20% towards savings. While it can be hard to allocate savings when you are on a tight budget, keep this rule in your mind. You might surprise yourself with what you can save. Think of it as paying yourself first!
  • Make smart substitutions. Evaluate your regular purchases to see if there are more affordable options out there. Avoid name brands and stick to generic items that offer the same product for a fraction of the cost. See if you qualify for a student or military discount. Many places offer them, you just have to know to ask. If you are buying things with overlapping benefits, like online video streaming services, look to see which give you the most value for your dollar and cut the other option. Try couponing. There are plenty of deal hunting websites that aggregate coupons and deals that can save you money on a small budget.
  • Start a side hustle. 37% of Americans have a side job. Luckily, the gig economy is booming, and there are endless options so you can find a side job that fulfills additional personal needs. If you need extra exercise or to get outdoors, providing a dog walking service to your neighbors is an option. Perhaps you hand-make unique items – consider selling them through online marketplaces. Align your side job with your passion so when you get off work, you still have the drive to hustle on the side. Remember that side hustles are a great way to earn some extra cash but cannot compensate for bad spending habits.
Remember that saving and budgeting all come down to one thing: finding out what works for you and sticking to it. If your current saving method stresses you out or makes your life more difficult, perhaps it’s time to consider a better option. The ultimate goal is to ensure you’ve saved enough to account for any unforeseen circumstances.

Visit our Financial Knowledge Blog to learn more tips on setting up a solid financial future or join us for
Financial Wellness Wednesdays.