Saving money for the future can be difficult especially when you have a low income. Many households in America live pay check to pay check and putting money away into savings can seem out of the question for households like these.
Although, it’s not out of the question! Even if you’re currently only making minimum wages you can still put money away. It’s also essential that you put money away in order to get ahead in the long run.
Start by following these steps:
1. Eliminate Debt
It’s hard to save with debt hanging over your head, begin by eliminating high-interest debt first. For many high-interest debt comes from credit cards or personal loans because they charge insane interest rates and fees.
Take a look at all the debt you owe and prioritize debt by paying off the higher interest debt first. Set up your own plan for paying these loans and set dates for when you plan to have a loan paid off.
Lastly, avoid going into more debt even if that means cutting back your current spending.
2. Spend Less
Take time to look at your current expenses to determine where it’s possible cut back on your spending. What are you currently spending money on that you don’t need? As a rule of thumb: If you don’t need it, don’t buy it.
Many individuals with debt who are living pay check to pay check say they’re unable to cut back. Although these individuals pay for cable, buy a daily cup of coffee every morning, eat out often, drive a newer vehicle paid for with a loan, etc. By eliminating small items like a cable bill and buying a daily cup of coffee you could actually save you hundreds of dollars a month.
Then there’s the bigger items like renting an apartment or owning a home. If you’re currently renting, consider moving in with a few roommates. If you own a home with a mortgage consider refinancing that mortgage at a lower rate.
3. Take Advantage of a Larger Tax Refund
When tax time comes around there are tax credits available to low income households. One in particular is the earned income tax credit or EITC which you may qualify for. Before doing your taxes check out the IRS’s website http://www.irs.gov/ to see if you qualify for any particular tax credits.
4. Employer Contributions
Go to your employer to find out if they offer a 401k retirement plan and ask if they match a percentage of your contributions. This is a great way to save for the future since both you and your employer are putting money into a particular 401k plan. Also money in a 401k is harder to take out before retirement so you won’t be tempted to spend it.
5. Get a Part-Time Job
Getting a part-time job in addition to your current job is a great way to supplement your current income. A part-time job could be used to increase your savings or to help pay off current debt.