Over the past 6 months, I’ve been jobless and quarantined, leading me to research about how to save money fast on a low income.
And I’m not alone. Many of us have found ourselves in this position in 2020. Living a pretty stable, normal life one minute, to suddenly being laid off. It’s a stressful situation. Losing an income, a routine, a purpose each day; it can feel like you’ve lost control over your life.
Even though you look around and see millions of others in a similar situation, it’s still lonely, mentally and physically isolating.
The key to breaking down these isolating barriers is to get to grips with the things you can actually control, in a time when absolutely everything feels out of your control.
And one of those things is your finances.
Diving into your finances when losing your biggest (and likely only) source of income is scary. Ignorance can be bliss when it comes to looking at your cash flow. But being ignorant about your finances is also incredibly detrimental to your past, present and future self.
There are some simple steps you can follow today that will reduce your spending, help you start saving, and help you gain control over your finances.
Here’s how to save money fast on a low income.
1. Analyse Your Bank Statements
Print off your last few months’ bank statements and grab 2 different colored highlighters. Use one color to highlight the essential, non-negotiable transactions — rent, groceries, utility bills, insurance etc. Use the other color to highlight non-essential transactions.
Having a visual medium in front of you will make it easier for you to understand your spending habits. You may think you have a good idea of where your money goes, but this exercise will often surprise you.
We cannot trust our brains to remember our spending habits accurately. We make so many financial transactions a month without thinking that we forget how it all adds up. And the lower the price tag, the more easily forgotten.
This is not an exercise in making yourself feel ashamed. There is zero shame in understanding your spending habits.
Analyze it, accept it and then work to improve it.
2. Cut, Cut, Cut
Now that you’re familiar with where each of your dollars is going, it’s time to cut, starting with the non-essentials.
There are transactions like Uber Eats, dining out and buying takeaway coffee.
But I also challenge you to dig deeper.
You’ve likely got some subscription services on there. Can you consolidate them down to one? Can you go back to any free versions?
I went back to using free Spotify because I wasn’t commuting; therefore, I wasn’t listening to as much music. Being stuck at home, I didn’t need offline access. I’m also a designer and can get 2 months free on my Adobe Creative Cloud subscription by simply going online and looking through the subscription options.
Constantly question your expenses, don’t just accept them.
Can you switch phone providers to get a cheaper phone plan? Can you change to a less expensive car insurance provider? Do you need to get 3 different streaming services? (answer: no, you do not).
You don’t need to get cut out everything. But there is always a cheaper or even free version of a product if you’re willing to research.
It takes time and effort, but every little bit helps. And it works.
3. Create A Realistic Budget
Great, so you’ve analyzed your bank statements and identified where you could reduce spending, now you can create a realistic budget that works for you.
It doesn’t matter how you do this. Use an app, a notebook, the back of a napkin — whatever works. I use Google Sheets as there is a monthly budget template already available that I can work off of.
Split your spending into categories and set a realistic amount for each category — based on your analysis and new spending cuts from the previous 2 steps.
I put this step 3rd and not 1st because it’s impossible to make a budget if you don’t understand your own spending first. One person’s budget will never translate perfectly to another persons budget and lifestyle.
If you create a budget that you will never stick to, you’ll come out the other side defeated and unempowered. And with all the other stresses 2020 is throwing at us, this is not a helpful solution.
4. Change Your Mindset About Income
Until now, we’ve focused on the money going out. If you want to learn how to save money fast on a low income, we need to consider the money coming in as well.
Obviously, losing a job, you’ve lost a big chunk of your income. And frankly, this sucks. But it’s not all doom and gloom.
Just like we did with your bank statements — analyze your belongings. Are there some items you own that no longer serve you? Using platforms like OfferUp and Craigslist is a great way to sell anything you may not need anymore.
There are so many articles out there about how to create a money-making side hustle. I fully support any additional ways to make an income. But what I also think is important is the mindset you bring to this. Don’t think of additional sources of income at this time as a way to support your Uber Eats deliveries.
Instead, think about it like this:
Let’s say you can sell an old bedside table for $10. It doesn’t seem like much, but that’s now $10 you didn’t have. Great. If you also managed to cancel your Spotify premium subscription, which is $10 a month, that’s now $20 you didn’t have last month. Put this $20 you now have towards your grocery bill, and that can be a week’s worth of dinners for one person.
Remember that any money you save is money you didn’t previously have.
5. Declutter Those Bank Accounts
Often, we lose track of our spending when we have to keep on top of a bunch of different bank accounts when we don’t even understand their purpose. While at one point a particular account may have been important, do you still need it?
Having bank account clutter has the same effect as clutter in your personal environment. It can add stress and be incredibly overwhelming.
While I had the time during quarantine, I closed my accounts that were essentially dormant and consolidated my savings into a High Yield Savings Account. I also recently switched my previous checking account to one that offers cashback. It’s not much, but it’s better than what I had before.
Again, don’t just settle for what you know. Research other banks. See what other options your bank has. Take some time to educate yourself on how to get the best offer available.
You won’t know until you try.
Losing your job is challenging, and anyone who tells you otherwise is lying. But I hope this article helps you realize that there are ways to take back the control you feel you may have lost.
Being financially literate is empowering. And feeling empowered in 2020 is crucial for not letting whatever is yet to come (because more will come — it’s 2020 after all) overwhelm you.
That’s how to save money fast on a low income.