Want to know how to save money fast on a low income or tight budget? I'll give you my #1 tip:
Spend less than you earn.
Yep, that's pretty obvious and not helpful at all when I just say it like that, but that's really all it comes down to.
The real question is, how do you spend less than you earn if you're only making enough money to survive?
Well, it all starts with five steps…
The First Five Steps
1. Get Positive
When money is tight, stress and anxiety are two emotions that will be crowding your brain. Probably some other negative emotions as well.
However, if you want to successfully pull yourself from the depths and start being ahead of your money instead of playing catch up, you need to actually believe you can do it.
That means no more complaining or thinking that you don't have the ability to save more and make more money. No more saying “I don't have time to do this or that” or “I'm going to be broke forever.”
I'm not saying this will be easy, but I do believe mindset plays a big role in getting finances on track.
2. Be Prepared to Sacrifice
This is why staying positive is important.
If you want to do this, you're probably going to have to make some sacrifices. You're going to have to change some things up.
That's probably not what you want to hear and it's not going to be easy, but here's the thing:
Those sacrifices will pay off.
If you follow the tips in this post and you dedicate yourself to getting out of the paycheck to paycheck cycle, one day you'll be able to look back and appreciate the struggles you went through.
Also, if you're serious about getting out of your paycheck to paycheck cycle, you should have no problem sacrificing some things while you work your way up.
We'll get into this some more later on.
3. Set Goals
Why are you here? What made you land on this page?
I'm not meaning to get deep or anything, but those are important questions to answer. If you want something bad enough, you'll find a way to get it.
So, what is it?
Maybe you want to be able to save up for a vacation, pay off debt, or buy a new phone. Maybe you want to donate more to charity. Maybe you just want to be able to have some money in the bank instead of feeling hopeless. Maybe you want to take your S.O. on more dates.
Whatever it is that you want, write it down somewhere and put it somewhere you'll see it every day. Slap it on your fridge, set it as your phone lock screen, put it on your bathroom mirror.
Also, try to come up with some long term goals (1 year+) and short term goals (less than a year). The short term goals will be small rewards and the long term goals will be the big ones.
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4. Budget It Up
Okay “budget it up” sounds pretty lame but I know a lot of people hate budgets so I tried to make it seem more fun. Sorry.
If you want to learn how to save money on a tight BUDGET, you need to HAVE a budget in the first place. Sure, you could try to wing it, but when you need to optimize every dollar you earn that's probably not the best plan.
So what is a budget anyway? Simply put, it's a plan for how you're going to use your money.
There are various different types of budgets but if you're living on a low income the most effective method for you is probably a zero-based budget. This method won't work for everyone, but it's the one I'd recommend trying first.
After you give it a go (a real go) for at least 3 months, then you should decide whether it's right for you.
Take action: Read how to start a zero-based budget and then come back to this post once you're done. You'll need a budget to execute on the tips below.
It could take anywhere from 1-3 hours to set up your budget so set aside some time.
5. Come up with a Debt Payoff Plan
If you have any amount of high-interest debt, it's going to hinder your ability to save. That's why you should focus on paying it off as soon as possible before worrying about making big savings gains.
To do this, you need to come up with a debt payment plan. Once you have one, you'll know exactly how to pay off your debt most effectively, and you'll know how long it will take to become debt-free.
Coming up with a plan is pretty simple too, read about how to get rid of credit card debt fast to learn how to set up an effective payment plan of your own (the guide works for other types of debt too).
Top 5 Fast Ways to Save Money on a Low Income
Once you've finished the starter steps above, the tips below are the five most important things to do to save money fast on a low income.
1. Cut Your Biggest Expenses
The three biggest expenses for most people are:
- Housing
- Transportation; and
- Food
If you can lower those expenses, you'll be able to save quite a bit of money throughout the year.
Housing
Housing is by far the biggest expense and a lot of people spend too much on it. Experts say you should spend about 30% of your monthly income in this category.
To cut costs, consider downsizing, finding a roommate, or renting out a spare room part-time on Airbnb.
If you want to save even more, sacrifice your dignity and move back in with your parents for a bit. This is especially helpful if you're paying off debt. It sucks, but it works.
Transportation
There are multiple ways to cut transportation costs.
First, make sure you're taking care of your car with regular maintenance. This will cost money but fixing a more serious problem because you neglected regular maintenance will cost even more.
Make sure to shop around every once in a while for better insurance rates as well.
Tip: Try signing up for Trim to get your car insurance negotiated for you automatically.
Next, walk or bike when you can. This is better for the earth, your health, and your wallet. (If you're walking, check out these apps that pay you to walk.) You can also take public transit if walking/biking isn't an option.
Finally, if you have a long commute to work, try finding some fellow employees to carpool with. This will save you a ton of money each year just in gas costs.
If that's not an option, you can try driving for Uber or Lyft on your way to work to make a bit of cash during your commute. Both apps have a feature that lets you do this without going too far from your destination.
Food
Ah, my favorite category. Food is one of those budget categories that I have a hard time not overspending on. The small meals, restaurants, fast food visits, and quick iced coffee runs can add up fast.
One of the best ways to cut back on food costs is to start having home-cooked meals more often. It may seem like a lot of work at first, but if you meal plan, cook food in bulk, and shop based on what's on sale, you can save quite a bit of time and money.
For even easier meal planning, check out the $5 Meal Plan. They'll send you a meal plan every week (it's customizable) along with a grocery list for easy shopping.
Best of all, the average meal from the $5 Meal Plan costs around $2 per person. Learn more about the plan here.
2. Pay Yourself First
Paying yourself first is a classic personal finance tip and that's because it works. When you focus on paying yourself first and paying others later, you're prioritizing saving over spending.
So, what does paying yourself first really mean? It just means that instead of waiting until the end of the month to save whatever's leftover, you take money off your paychecks right away to stick into savings.
The best way to do this is to set up automatic transfers every time you get paid.
Even better, transfer the money to an online banking account like the Wealthsimple Savings Account (that's what I use) so that your savings aren't in the same place as your spending money. You'll also get a better interest rate.
3. Prioritize Your Spending (and Moderate It)
The ideal way to save money fast on a low income would be to go no-spend for months on end. However, that's not very realistic.
Instead, you need to prioritize and moderate your spending so that you can still enjoy your life without going broke.
So first, prioritizing spending. All that means is figuring out what's really important to you. Do you love going to the gym? Seeing movies in theatres? Maybe you can't live without your Netflix subscription.
Then you've got things that maybe aren't so important. If you've got Netflix, do you really need cable? Maybe you have a gym subscription that you never actually use, so get rid of it. You need to find things you're wasting money on and cut them out of your budget completely.
Once you've cut out the stuff you don't need and figured out your priorities, it's time to moderate. This could mean going to the movies less, eating out less, only going to Starbucks on special occasions, etc.
By doing this, you'll still get to enjoy the things you love, you'll just be spending less on them (until you can afford to spend more).
4. Find Free Money
“There ain't nothing free in this life!” Put your hands up if you've been told that before.
Turns out, there actually are some ways to get free money if you know where to look. Take that, world!
One example is 401k (or group RRSP in Canada) matching. If your employer offers this and you're not taking advantage, you're missing out on some very easy free money.
For more ways to get free money, check out this post from Nerdwallet.
5. Start Making More Money
If you're living on a low income and you want to save more money, one of the best ways to do that is to make more money. That's obviously easier said than done, but it can also make the biggest difference in your life if you put in the work (you can only cut costs so much).
The first (and easiest) way to start making more money would be to get a raise or promotion at your current job. Follow Ramit Sethi's guide to learn how to do that.
The next best way to make more money is to start a side hustle. Side hustles give you the freedom to work when you want (you don't have to be somewhere at a specific time) so they're great for people who need more flexibility.
So, what type of side hustle can you start? Well, there are plenty of ways to make extra cash on the side. My favorite way is by starting a blog, but that can take a bit of time to start generating revenue.
Some of my other favorite ways to make easy money are by testing out websites and freelance writing. If you have a service you can offer, that's a great way to make money quickly.
For more ideas, check out these posts:
5 Other Low Income Money Tips
1. Track Your Spending
If you set up a budget in the first steps you should already be doing this but just in case you're not, I'm including it again.
It's important to track your expenses because it will give you an idea of how much you're spending and what you're spending money on. Being more consciously aware of your spending will help your moderate it as we talked about above.
To make tracking your expenses easy as pie, I recommend using an app like Mint or Personal Capital.
2. Learn to Negotiate
Knowing how (and when) to negotiate is a powerful skill that could save you thousands of dollars throughout your life.
A small example of negotiation success is how I bought my car. It was listed for $1,200 on Craigslist which was already extremely cheap but by simply asking, I got the guy to sell it to me for only $900. Easy $300 savings.
Purchases aren't the only thing you can negotiate either. You can negotiate your salary, loan interest rates, bill payments, and more.
Some negotiating can be done for you too if you have the right tools. Two popular robo-negotiators are:
- Trim – Can negotiate your internet bill, phone bill, car insurance, and more. Read my full Trim review to learn more.
- Cushion – Can negotiate any bank fee you throw at it.
Both of the above tools are free to use as well. They only take a small fee when they successfully save you money.
3. Start Earning Cash Back
When you're living on a low income, every dollar matters. If you can find a way to stretch out each dollar you spend, you can save more money more easily.
One of the best ways to get a better bang for your buck is by using different cash back apps and services.
Here are my favorites:
- Rakuten (formerly Ebates) – Cashback at thousands of stores. Make sure to get the browser extension after you sign up.
- Swagbucks – Similar to Rakuten but sometimes has better offers. Make sure to get the browser extension for this as well.
- iBotta – Tons of cash back offers on household products, food, and other groceries.
- Checkout 51 – Just like iBotta but it's available in Canada and the US. Read my full Checkout 51 review to learn more. You could use this and Ibotta together for even more savings.
- Paribus – Get money back whenever prices drop on purchases or hotel bookings, or if your product is delivered late.
Find more apps that pay you to shop.
4. Use a Credit Card (Responsibly)
This is a tough one because it's not for everyone. If you can't treat your credit card like a debit card, just skip this tip.
If you can use a credit card responsibly (pay it off every month in full), you can benefit from rewards like cash back, travel miles, points, or something else.
Using a credit card will also help you build credit which could allow you to secure lower interest loans in the future.
5. Buy Second Hand
This is probably one of the best ways to save money on a low income but many people don't follow it. The reality is, you can find a lot of good stuff second hand.
Do you need to buy everything second hand? Of course not. But, some stuff it's worth at least comparing second hand to brand new before buying.
For example, cars are a great thing to buy second hand. Like I said above I got my car for $900 on Craigslist and besides needing regular maintenance, it's been running great.
Some other things I always consider buying used are electronics, clothes, books, instruments, furniture, things like that.
For more tips, check out these 60 ways to save money and these money-saving hacks.
What to Do After You Start Saving Money
Ok so you've followed the tips above to save money and you're starting to escape the paycheck to paycheck cycle. Now what?
Pay off High-Interest Debt
Ok, now that you know how to save money on a tight budget you can start aggressively paying off your high-interest debt with all the extra money you're saving. This is when the debt payment plan you created in the first five steps comes in handy.
Once you're free from all your high-interest debt, that's when you can start saving even more money and start building passive income with it.
Build an Emergency Fund
You can do this while you're paying off your debt or you can wait. If it were me, I'd probably tackle the debt first but others would argue against that.
Either way, having an emergency fund is one of the most important tools to help you stay out of debt once you're debt-free.
For more info, read my ultimate guide to emergency funds.
Start Tracking Your Net Worth
Your net worth is the value of everything you own minus what you owe. It's the number that basically shows you how you're doing financially.
It's important to track this number as it should be your goal to have it grow every year.
Just as you can use them to track your spending, you can use a personal finance app like Mint or Personal Capital to easily keep track of your net worth too.
Keep Hustling!
If you follow the tips in this post you'll likely build up some good habits like budgeting, side hustling, tracking expenses, cutting unnecessary spending, all that good stuff.
If you want to stay ahead of your finances, keep up with these good habits!
Start Investing
One of the most rewarding parts of building savings is that you can eventually start making your money work for you. How you invest your money is up to you, just make sure to do your research.
If you don't have time to research into investing, try looking into robo-advisors instead. They basically invest your money for you based on your needs and all you have to do is pay a small fee.
I personally use Wealthsimple as my robo-advisor but there are plenty out there to choose from. I also use Mylo for automatic roundups and investing.
Conclusion
As you can see, you don't have to resort to extreme frugality to save money on a low income. Focusing on the big stuff will get you a lot further.
However, remember this:
You could have all the best money-saving tips in the world in front of you but until you actually decide to use them, they're not going to help.
If you really want this, you've got to put in the work to turn things around. It isn't easy.
So tell me:
What's the first thing you're going to do after reading this post? How are you going to escape the paycheck to paycheck cycle?
Write it in the comments below and make it happen!

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