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Are you struggling with how to save money with a low income? Saving money is something that everyone seemingly wants to do, but often has much difficulty accomplishing.
According to a recent census report, 11.8% of Americans were living below the poverty line in 2018.
When I look back at every one I’ve worked with, I see that income itself has very little to do with savings rates. In fact, I’ve said many times
It doesn’t matter if you make $50,000 or $150,000 a year unless you generate a monthly surplus, you won’t get ahead
-Rick Orford
When working with someone who might have a low income, I’d start to focus on the “basic needs”. You have to focus on those things like rent, food, etc. As such, making a budget will be key to saving money with a low income. Everything that is absolutely essential. Stop spending on everything else – including things like cable TV, eating out, clothes shopping, and so on. This will generate a surplus. If it doesn’t, your needs are too expensive – so you’ll need to consider moving to a lower-cost home, or get a higher paying job, or a side hustle.
If you have predatory debt (i.e. payday loans, credit cards, etc), focus on paying them down ASAP. I like the “debt snowball” method – in that you start by paying off the creditor with the lowest balance first. Then you use that payment to pay off the next creditor and so on.
Soon, a healthy monthly surplus will be generated which should be used to generate an emergency fund, consisting of 6 months of “needs”. Once that’s done, pat yourself on the back. Feel free to start introducing back some “wants” and consider investing the rest for retirement.
-Rick
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Previously published thefinanciallyindependentmillennial.com
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