When you have a low income, it can be disheartening to think of saving money. However, you don’t need to be putting away hundreds of dollars per month to start saving. Nor do you need to make major lifestyle changes. All it takes is some planning ahead, adjusting to suit your income and actually starting. Here are some ways to start adding to your piggy bank.
Track spending and create a budget
Tracking your spending habits is a great place to begin. Try writing down your purchases in a notebook, creating a spreadsheet on your computer or using an app. After the first few months, you can review your expenses (and income) to see where you can make changes. Divide your expenses into specific categories, such as groceries and eating out. This will allow you to pinpoint what you are spending money on. For example, maybe you didn’t realize you were spending $5 per weekday on a fancy latte. That’s $25 per week! What could you do differently to reduce that amount?
Once you have an idea of how much you make and how much you spend, it’s time to create a budget. Take your total income for the duration of your budget and divide that amount into your specific categories. Limit yourself to those amounts and avoid spending more than that. Don’t forget to treat your deposits into savings as an expense! The money you want to put into savings should also be a category in your budget. Adjust all the amounts as needed in the next budget. For example, maybe you want to reduce your restaurant spending and put that money towards groceries or savings.
When you pay with a debit or credit card, it can be easy to lose track of how much you are spending. The easiest way to handle this is to have a fixed amount that you can spend over a given period. For example, withdraw the amount you have available to spend after paying your necessary monthly expenses (rent and bills). This is your spending money for non-essential monthly expenses. You can then divide the amount into weekly amounts or spending categories (travel, clothing, leisure, etc.).
Round to the nearest dollar
The concept is simple: if your coffee costs $2.75, that means you should put $0.25 into savings. If you have been using cash, this will be easy. When you get your change back, put anything less than a dollar in a separate place. This spare change will then go to savings. Do you mostly ay with a card? Keep your receipts and do a daily, weekly or monthly addition of the amount to put away in savings. Other variations of this include saving all your quarters or loonies or rounding up to the nearest multiple of five.
Savings account(s), automatic transfers and pre-authorized payments
Take advantage of the many possibilities your bank offers. Keeping your savings in a separate account is the best way to ensure you aren’t spending it! You may want to consider opening several savings accounts. You can then use each one to save for different things (ex. a house or vacation). Furthermore, setting up automatic transfers from your chequing account to your savings account is a great way to unconsciously save. By transferring even a small amount to your savings each week, you will see those precious dollars grow! Similarly, pre-authorized bill payments ensure you are always paying your bills on time and avoiding late fees. Automating these two things means you don’t have to worry about forgetting or simply not doing them.