Saving on a small salary is far from simple . But it is nevertheless the reality of many American people.
Life is expensive. There are groceries to pay, rising rent, transport costs, health care… and much more!
If you want to save money to be more financially serene, you often have to be creative with your finances.
Because saving is of course very important, regardless of your current salary.
In this article, I show you how to save money on a small budget without having to deprive yourself of everything.
Change your relationship to money
When looking for ways to save money, we often tend to look for “easy” tips. Hacks with minimal effort, for fast results.
The problem is that these tricks often have very poor results . And if they can be interesting to explore, they are for me secondary to other things that you can put in place to transform your financial situation much more drastically.
In this first part, I’m not going to tell you to stop drinking coke or grow your own tomatoes. Instead, I’m going to show you things to put in place to change your relationship with money and save sustainably .
Define your “why”
There are plenty of tricks or tips to save money. Like apps to find the cheapest gas pump around.
And really, that’s not a bad thing . Why pay full price for something you could pay less for in minutes?
But you will never get far with these kinds of techniques. Especially if you don’t know why you want to save money.
The advice may seem too simple, but I can assure you: the majority of people do not have a clear idea of why they are saving or want to save .
The result, you know it: failure . Why deprive yourself of expenses today just to grow your bank account?
And this is all the more true when you have a small salary, and the last thing you want to do is deprive yourself of everything.
But just hoping to have a big number in your bank account is never the real reason you want to save. You probably have another goal, such as:
- Set aside for your precautionary savings to achieve financial serenity
- Repay your credits and finally live without debt
- Finance projects or life plans, such as buying a house, the vacation of your dreams, school for your children, starting your business, etc. Or prepare for your retirement!
- become financially free
By taking the time to know why you want to save, you will be able to do so much more easily.
And deciding what to buy or not will also be easier (are these boots worth more to you than this or that future project?).
2.Learn to spend consciously
When looking to save with a small salary, every euro is important.
And we can’t afford to “waste” money every month on things that don’t matter to us.
Not only because it holds you back from your savings goals, but also because it’s money you can’t use for the things that are really important to you.
And that’s why learning to spend consciously is essential.
When you want to save on a small budget, you sometimes tend to feel guilty about certain expenses. And then look at our monthly transactions with regret.
The key is to learn how to redirect your money to spending that matters to us . And so that requires creating a conscious spending plan.
That is, to define in advance how much you want to spend each month in each expense category. And especially how much you want to set aside to reach your financial goals by a specific date.
In short, you no longer spend “mindlessly”. For each expense, you ask yourself if it is more important than all the other projects you have.
Strategies to put in place
3.Pay yourself first
It’s one of the most popular concepts in personal finance, and for good reason. This is a particularly important idea for successful saving . Including – or even more so – with a small budget.
“Pay yourself first” means that the first thing you should do with the money you receive is put some of it aside.
Concretely, schedule an automatic transfer at the beginning of each month to your savings accounts , a few days after the date on which you receive your salary.
So the goal is to do the opposite of what most of us do, which is to spend first and save what’s left.
Most people say they don’t put aside simply because they don’t have anything to save. But in a very large part of the cases, by paying yourself first, it is easy to realize that you can actually save, even if it is only small amounts to start with.
4.Try to increase your income
Usually, when you want to save more, you first look for ways to save money .
Largely because it’s often the easiest to do.
And of course, saving money is very important to me. Especially when it comes to learning how to spend consciously and intelligently , as we saw above. Or cut unnecessary expenses that drain your budget every month for little.
But sometimes saving may not be enough.
There are actually two scenarios:
- You spend almost nothing except for your bills and mandatory expenses . In this case, saving will be extremely difficult. You don’t have enough leeway, and if you want to ensure a stable financial situation or realize your projects, you will most certainly have to find ways to increase your income by finding a salary supplement .
- You can pay your bills and obligatory expenses with an extra margin , but you can’t save money because of your excessive lifestyle and the impulsive expenses you make every month – and which you regret. In these cases, you will have to learn to control your expenses before seeking to earn more. Otherwise, there is a good chance that you will not spend any more once your income has increased.
To know which of these two categories you fall into, keeping a monthly budget is extremely important .
I advise against trying to guess yourself. Most of the time, we are completely unaware of what we are really spending.
5.Work on your financial education
In recent years, financial products have multiplied, and have also become more complex. And the consumer society pushes us to always spend more (after all, you have to spend to be happy, right?!) .
Managing your money properly has become more and more complicated . Especially since it’s not at all something we are taught to do in school.
And at the same time, some players like credit companies flood consumers with one goal: to get rich thanks to you .
And who doesn’t dream of financing Cofidis rather than financing their own projects?
Ditto all those companies that promise you quick money by “investing” in Forex or other so-called high-return investments (in which more than 9 out of 10 people actually lose money).
The problem is that without the proper knowledge it is extremely easy to make decisions that can be very expensive.
Working on your financial education is neither more nor less than learning to manage different aspects of your money: credit and debt, savings, investment, or even taxation.
Your financial education will give you the knowledge to make financially responsible decisions – decisions that you will have to make anyway.
There are several ways to work on your financial education. And all of them are far from boring, despite the clichés that we can make of them.
6.Create (& follow) a monthly budget
The budget is sometimes a controversial subject.
However, the majority of personal finance “gurus” who say they are against the budget ultimately offer methods of tracking expenses that come very close to it… even which are sometimes identical but named differently.
In fact, tracking your spending and knowing where your money is going is essential . And it’s very difficult (if not impossible) to know what your money is going to without a budget.
Creating and tracking a monthly budget requires you to take a close look at your spending habits. And often to find that you’re spending money on things you don’t need.
Having a budget also helps you define your long-term goals, and especially to achieve them.
If you have no purpose with your money and just spend whatever takes your fancy at any given time, you will never be able to fund your long-term goals, like your dream trip or buying a new home. ‘a house.
And finally, it also helps you prepare for emergencies and anticipate expenses that you may tend to forget (birthday gifts, car repairs, etc.).
Where I agree with those who are a little less enthusiastic about budgeting is on two things:
- The purpose of the budget is not to define categories and reduce your expenses as much as possible in the majority of them to save, and then have to “fit into boxes”. A good budget is flexible. Its purpose is to help you set your priorities, and understand that saying yes to one thing is saying no to something else . This is one of the reasons why we recommend that you use a zero-based budget .
- For some, budgeting seems too complicated (even if, for example, I dedicate barely 15 minutes a week to it). If this is your case, you don’t have to stick to a budget all your life. The main thing is to do it from time to time to see where you are and correct your expenses frequently.
Here too, automatic savings apps can be a good addition when you are not actively budgeting.
7.Avoid consumer credit
Taking out personal loans and other consumer credit is often one of the worst mistakes you can make with your money .
Taking out consumer credit is no more and no less than paying even more for an item or service that you already couldn’t afford to buy instead.
And the credit organizations do not hesitate to surf on each of our psychological flaws to encourage us to get into debt.
But you have to keep this important point in mind. When you take out consumer credit, you get poorer, and the credit company gets richer . No more no less.
And taking out a loan also means making you vulnerable to any unforeseen events that may happen.
If you have a car to replace, a job loss or inability to work, expensive repairs… and you are unable to repay your loans, you are heading straight for disaster.