How to Save Money When You have a Low Income

Are you struggling with how to save money with a low income? Saving money is something that everyone seemingly wants to do, but often have much difficulty accomplishing.

According to a recent census report, 11.8% of Americans are living below the poverty line in 2018.

When I look back at every one I’ve worked with, I see that income itself has very little do with savings rates.  In fact, I’ve said many times “It doesn’t matter if you make $50,000 or $150,000 a year unless you generate a monthly surplus, you won’t get ahead” -Rick Orford

When working with someone who might have a low income, I’d start to focus on the “basic needs”.  You have to focus on those things like rent, food, etc.  As such, making a budget will be key to saving money with a low income. Everything that is absolutely essential.  Stop spending on everything else – including things like cable TV, eating out, clothes shopping, and so on.  This will generate a surplus.  If it doesn’t, your needs are too expensive – so you’ll need to consider moving to a lower-cost home, or get a higher paying job, or a side hustle.

If you have predatory debt (i.e. payday loans, credit cards, etc), focus on paying them down ASAP.  I like the “debt snowball” method – in that you start by paying off the creditor with the lowest balance first.  Then you use that payment to pay off the next creditor and so on.

Soon, a healthy monthly surplus will be generated which should be used to generate an emergency fund, consisting of 6 months of “needs”.  Once that’s done, pat yourself on the back.  Feel free to start introducing back some “wants” and consider investing the rest for retirement.

-Rick 

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