Surely you want to build wealth and become financially stable so you can confidently plan for your future and provide for your loved ones.
You want to enjoy life by owning your dream car or dream home and traveling to beautiful places in the world. However, the biggest challenge in making these things happen might be a low-wage paycheck.
Based on a report, around 25 million American families are surviving paycheck to paycheck. And when this is the case, saving money seems impossible.
Naturally, you need to allocate budgets for your food, everyday necessities, loans, and other fixed expenses. Hence, saving is not your top priority.
But the question now is this: Is there a way to save money when you are only making minimum wage?
Of course! Keep on reading to learn how you can still save despite a low minimum wage.
1. Start With Your Budget
You can never save money if you do not realize early on the value of budgeting. However, you must also understand what makes a good budget.
When you budget efficiently, you can control your spending habits and determine areas that are not worthy of your money. It can give you financial liberty by helping you manage your money effectively.
You can try one of the many free personal finance apps so you can make a budget and control your money. That way, you can reach a point where you do not have to borrow money for emergencies because you have existing savings allocated for this purpose.
As an overall result, you will learn to know your needs and take care of them. Moreover, you can do away with your wants.
2. Reduce Housing Costs
Since you already have a budget, you get to see clearly where your finances are going. One major expense is your housing.
Based on a study, housing expenses consume the majority of the expenses of every household.
Thus, you can only imagine how favorable it can be if you manage to reduce your housing costs, even if it is only a few dollars every month.
If you accumulate these little savings, you will end up with something bigger at the end of the year and improve your way of life. You can take the following steps to reduce your housing costs.
- Downsize - Choose a small home or apartment to lessen your financial responsibilities.
- New Location - Location is one of the main factors of real estate pricing. If you think you can save money by moving to another place, then do it.
- Consider Having Extra Rooms Rented - If you choose to retain your spacious house and several rooms are not occupied, consider renting them out to outweigh the housing costs.
- Be Observant - You must gauge your current situation and determine what is most suitable for you. It is needless to say that choosing to live in an affordable place can significantly improve your financial status.
3. Pay Off Debt
No matter how much you save, if you have many debts, you will likely end up with no savings at all.
Thus, you must not allow debts to overwhelm you. When you combinine your car loan, mortgage, medical bills, and credit cards, you might end up with huge debts.
To manage your expectations, eliminating debts may not be easy. It demands significant effort and much time.
However, by implementing effective strategies and focusing on your goal, you can get rid of it.
Apply the Debt Snowball Approach
The less you allocate for the payment of your debts each month, the longer it will take to pay them entirely. Likewise, you must seriously consider that interest can aggressively extend the timetable for debt repayment.
You must also know that most of the balances from your debt gain interest charges each month. If you want to manage your debts effectively, you might want to consider taking the debt snowball approach.
This kind of payment approach is when you pay as much as possible every month of the smallest balance. Meanwhile, you can make minimum payments to keep a good standing status in your account for the other debts.
After paying off your smallest debt, you should then tackle your next smallest balance. Then keep going with the process until you finally settle your accounts.
Ask for a Lower Interest Rate
Besides the snowball method, you might find it helpful to know that you can negotiate with your creditor for a lower interest rate.
- Creditors can grant your request depending on your payment history.
- You can search for promotions to see if there is anything that offers lower interest rates. If you consider making a balance transfer to lower interest rates, settle the balance before the expiration of the promotional rate.
4. Check Your Withholdings
Another way to save money with a minimum-wage paycheck is to lessen your taxable income.
You can do this by making a monthly retirement contribution to a 401(k) plan or by getting an all-inclusive spending account. By doing so, you can save extra dollars in your paycheck.
When you use the flexible spending account, you can allocate a portion of your money for childcare expenses or qualified healthcare with pre-tax dollars. Hence, you can save money when you do this.
You are repaid for the incurred expenses after you process a payment for them. Or the company may offer a debit card usable for them. However, you will lose these funds if you fail to use them before the yearly deadline.
Moreover, retirement contributions to a 401(k) plan come before taxes. It means you are not taxed from the contribution of your employer to your account. Thus, you should use this advantage.
5. Boost Your Income
If the other sections cannot help you save, you may need to boost your income.
Even if your paycheck is just enough for your daily needs or you have a small reserve in the bank, it is best to have extra income.
It is challenging to keep going if you are not financially stable. Hence, you must find other options out there and dedicate yourself to finding resources to pay off your fixed expenses or debts.
If you are in a predicament and you must get extra income this month, there are some things that you can try to shift the situation. However, you must allocate enough time when trying them.
You should be able to augment your income significantly if you can do these things effectively.
- Sell things online - You should use popular online selling platforms when selling your used items. However, since several of them have a name in the industry, you must know what the best platform for your item is. Find your old cell phones and find the best place to sell them online. You can even sell your artwork if you have the skills to make art. Or you can sell your used clothes, shoes, bags, and other household items.
- Organize a side hustle business - You may have noticed a lot of side hustles coming up nowadays. These are types of businesses that you can easily set up on the side even if you are currently in a full-time job. Some side hustle businesses only need minimal time and attention, while others may demand more time. Hence, you should start thinking about a possible side hustle business that you can set up. You can do SEO work, web development, or graphic design. There are plenty of selections available depending on your skill sets. However, if you do not have adequate skills yet, you may consider investing time and a bit of money to learn them. You may want to register for an online course to help educate yourself.
- Follow tutorials on video streaming websites - If you can’t afford classes, you can likely learn the basics of most skills online. Video streaming websites like Youtube have tutorials for almost any topic you can think of. It’s a great way to discover if something is a good fit for you. You can get insider knowledge from people who already do the work you’re looking to do.
6. Bank at Credit Unions
Do not let your efforts go to waste by not joining a community that has the same financial goals. Thus, you should join a credit union.
Nowadays, a lot of people use banks to secure their savings. Although there are advantages when you choose to transact with big banks for your savings goals, their corporate locations are mostly not favorable.
It is wiser if you bank at credit unions. You will be happier working with them.
Credit Unions are more:
- Community-focused
- Personalized
- affordable for individuals like you who seriously want to start saving
Based on the average savings account's corresponding data, the interest rate for April 2020 is only 0.07%. This should be enough for you to maximize the benefits of a credit union's adaptability when saving money and earning interest.
Moreover, they have continuously modernized their technology to give similar online services and products as national banks. Often, they can even provide a better experience than the big banks.
When you join credit unions, you can also achieve your savings goal because of the following reasons.
Credit Union Membership
Perhaps the most significant distinction between a traditional bank and a credit union is the membership concept. The latter uses a membership business structure that forwards savings to members and includes the rest of the individuals who joined a credit union for savings.
- They require membership depending on specific criteria, such as union, industry, place of employment, or region.
- Members also feel a sense of belongingness, as members are involved in managing the credit union.
- They stand for the members, as they give financial products with the lowest fees and rates and with favorable terms. As you learn more about how credit unions can help with your savings goals, you should understand that these favorable terms are made possible because of a credit union business structure.
Higher Yield
Also, they commonly provide higher interest rates when you join for savings. This can lead to more promising outputs every year for members owning an account.
The majority of them also offer a checking account you can use to earn interest while you enjoy the benefits of high-earning savings accounts. These high-yielding savings are insured federally. Hence, they get higher rates compared to the national average.
The Key Takeaway
With the current trends, you see that almost everything on the market has increased their prices. If you only get paid the minimum wage, you might find it hard to buy things you need. It will be challenging, but it is possible to save money even when you are earning low income.
With the effective tips shared in this article and your willingness to execute correctly, you can achieve your savings goals. Bear in mind the reason why you want to save.
You want to become financially stable and experience a better way of living. When you become financially stable, you help yourself and the people who depend on you.
Being a part of 121 Financial Credit Union is easy and straightforward. You are free to join us if you live, attend school, or work in Northeast Florida.
When you become a credit union member, you can enjoy our broad selection of affordable and accessible financial services and products to help you with your priorities. You are not alone on this journey; we are here to help you save despite what you are earning.