Most finance podcasts, books, and blogs provide financial tips to those already earning a decent salary.
But what about the low-income earners?
Approximately 38 million American households spend all their pay because they lack financial advice.
When you’re making a minimum wage, saving becomes a challenge. All the earnings go to bills, unexpected expenses, and emergencies. Luckily, there are a few ways you can manage your finances if you’re a low-income earner. However, you need a high level of self-discipline and creativity to manage your finances. Here are expert financial tips for low-income earners.
1. Create a Budget
Low-income earners think that budgets are for those who make decent earnings. Most of them live paycheck to paycheck, spending every coin of their earnings. With budgeting, it becomes easier to track your expenses, control your spending, and achieve more savings.
Allocating your limited income to various necessities and wants is crucial for financial stability. A budget helps you understand how much money you’re spending. You also know how much you have left for savings or unexpected expenses. If you don’t know how much money you spend each month and where that money goes, then creating a budget is the first thing you should do.
When setting your budget, be realistic and set achievable short-term and long-term goals. Having practical goals motivates you to stick to your budget and save more money. Your net income is the critical aspect of setting your budget because it determines your savings and expenditure.
You should regularly review and adjust your budget to ensure you’re on track. The more detailed your budget is, the better equipped you are to make wise spending decisions that are in line with your financial goals.
2. Pay Your Bills on Time
Everyone has bills to pay regardless of their income levels. Sometimes, it’s essential to pay your bills immediately after getting your salary. Some of the essential bills you should pay in time include rent or mortgage, electricity, water, credit card payments, loans, and more. Once all the bills are settled in full, you should now think of other things to spend your money on.
You should never let these bills go unpaid if you can meet the minimum payment requirement. If you’re having trouble paying your bills because of a lack of cash flow, you may need to cut back on other expenses or borrow money from friends or family until you get back on track financially.
If you’re unable to pay a bill before its due date, contact the company immediately so that they can work with you to come up with a payment plan that fits both your needs and theirs. Also, if you’re prone to forgetting about payments, sign up for automatic bill payment or set reminders on your phone so you don’t miss a payment date—especially if there’s a late fee involved.
3. Cut out Unnecessary Expenses
Cutting out unnecessary expenses is a prominent method for saving your cash or economically using money. Don’t buy anything you don’t need. Instead, learn to differentiate between needs and wants.
Borrowing should only be advocated for basic and emergency needs; otherwise borrowing for luxuries is not a financial tip. If not, look for ways to get it cheaper elsewhere. You can engage in negotiations during your purchasing processes.
Also, consider downsizing to a smaller apartment or relocating to an affordable neighborhood- this will slash your housing costs. Use public transport or walk (over short distances) to reduce transport expenses. Avoid spending money on weekend parties and other fun activities. Instead, find free activities to enjoy your leisure time.
4. Get a Side Hustle
If you’re struggling to keep your income afloat, getting a side hustle can be a great way to diversify your income and make ends meet. Depending on your skills, you might take on freelance or contract work in your field. Maybe you want to drive for Uber or Lyft, deliver food, manage social media accounts, or tutor others.
Other side hustles you can start to include;
· You can consider renting your car to get extra cash for your savings and expenditure.
· If you have a large house with free extra rooms, rent them out to maximize your income.
· You could start a blog to earn passive income, although building a monetized blog takes time and effort
Additionally, you can use your skills and creativity to create and sell products and services. This could range from printables to household items and stationery.
The goal is to choose an opportunity where you can set more hours for working. The more you work now, the less debt you’ll have later, and the sooner it will be to get ahead financially.
5. Negotiate Your Rates
If you think you’re paying too much for something, don’t be afraid to ask for a better rate. Even small savings add up over time and help you build up your emergency fund faster. So, if you’re a low-income earner, you might want to develop excellent negotiation skills.
Be confident but not aggressive since good negotiation is about creating an equal playing field where both parties benefit. You should also be realistic and polite in your approach—nobody wants to negotiate with someone who’s being unreasonable or rude. If the rates you deem reasonable are not acceptable consider negotiating with/moving to another seller.
6. Save 10% of What You Make
It’s challenging to save money when you’re not earning enough. However, you should try to save at least 10% of your income. You can increase or reduce the percentage depending on your income and expenditure. The goal is to put something into your savings account every time you receive a paycheck.
Also, it’s essential to save before settling your bills. Automate your savings account to eliminate the risk of spending all your money. This way, you can automatically save a certain percentage of your paycheck every month, allowing you to achieve your savings goals.
7. Stay out of Debt
Debt can burden your finances, especially considering the interest rates that accrue over time. It’s therefore advisable to stay out of debt by all means. If you have to borrow money, make sure you need it. Also, check the terms and interest rates so that you don’t pay more than you borrowed.
If you’re struggling with debt, Freedom Debt Relief can assess your situation and provide the best debt relief program. The company helps reduce lifetime debt allowing you to resolve debt faster.
It’s Time to Manage Your Finances!
There are tons of ways you can save money without compromising the quality of life—all it takes is a bit of creativity and self-discipline. First, create a budget to monitor and manage your spending. Then, set realistic goals and stick to your budget. Once you get your paycheck, settle your essential bills on time and avoid unnecessary expenses and stay out of debt.
Most importantly, find alternative ways to earn extra income and save at least 10% of your earnings. You could rent your home, become a tutor, or start a blog. Lastly, learn to negotiate your rates. If you’ve been struggling to manage your small paycheck, our financial tips for low-income earners will help you.