How to Achieve Your Savings Target with Low Income

Savings refers to that part of your income which you set aside for future use.  Given the unlimitedness and competing nature of human wants, saving is one of the lowest-ranking items on many people’s list of preference. It is a list that ranks an individual’s needs and wants in the order of priority. 

Saving becomes even more difficult when you have a small income against a large expense or operating under tight budget.   Despite this difficulty, it is always advisable to set aside part of your income in savings.  Below are strategies you can use to achieve your savings goal with limited income.

Work within Your Budget

Like a traveller relies on a map to know direction, your budget is your financial roadmap that shows how much you plan to spend on each item.  Regardless of your income level , having a budget can be an easy of avoiding  unnecessary payments and save more. 

A good budget needs to define the amount you spend on food, bills, groceries, and personal care among other items.  In addition, your budget should be progressive and futuristic by encouraging more saving and minimizing wasteful consumption.  

When setting your budget, you also need to be realistic and remain within your income limits. This calls for time to study your personal; and family spending habits.  Your budget should then seek to tighten up things a little without suffocating anyone.

Clear High-Interest Loans First

You will need to tackle your debts head on if you are want to increase your savings with low income.  When servicing your debts, you need to give priority to high-interest loans as they can quickly skyrocket into outrageous interest charges and fees. 

You need a flexible and attainable debt payment plan to not only downsize your debt burden, but also free up more money into your saving kitty. As you pay off your debts, avoid taking more high-interest debts and instead work on building a solid financial footing by increasing your savings.

Check on Your House Expenses

A high income may come a bigger house, higher mortgages or rents, and increased consumption all of which drive up your house expenses.   All these come at the expense of your saving plans.  One of the easiest ways to check on your house expenses is to work with a budget. 

Always ensure your budget is as lean as possible in order to free up more money into savings.  You can embrace smart shopping to help strike a balance between the consumption and savings parts of your income. 

Diversify Your Source of Income

If you have cut your costs to the minimum but still want to raise your savings, you can diversify your income by coming up with side hustle.   Having a side hustle alongside your fulltime job can help to raise your income level and create more financial breathing space.

Side hustles are usually flexible and can be done at the comfort of your home and time.  The easiest way to get ideas for side hustles is to explore your hobbies and interests. Flexible and reliable side hustles include graphic design, data entry, and freelance writing.

You can dedicate all the money from your side hustle into savings and free up your full-time job income for other functions. 

Have a Designated Savings Account

For better and faster saving, you need separate your savings from your consumption money. This may call for a designated savings account.  Having a separate savings account minimizes the temptation of using your savings to cover your expenses. 

A designated savings account can help you to stick within your day-to-day budget and cultivate a disciplined. A savings account will also make it easy for you to track your savings records in addition to attracting interest earnings on your deposits. 

Automate your savings

Saving means differing consumption to a later date and is by no means an easy thing to do. Saving may involve taking some punitive measures that enforce compulsory saving and streamlines the wholes saving process. 

Automated savings involves setting up an automated transfer from you spending account to your savings account periodically.

Automating your savings helps minimize the temptation of spending. It helps one not to forget deducting savings and engage in egregious overspending, An automated saving system allows you to set attainable savings targets, helps you track progress, and makes it easier to meet your saving goals. 

Embrace Envelop Budgeting

The envelop budgeting system was devised by Dave Ramsey and it involves getting all your monthly income out of the bank in physical cash at the start of each month and allocating the money in separate envelops.

The individual envelops represent each of your budget items including variable costs like food, clothing, and groceries and fixed costs like utility bills and rent. This method ensures that you stay within certain budget limit for each budget item.

Cut Expenditure on Utility Bills

Utility bills like gas and electric bills make up a large chunk of your monthly fixed costs. Reducing the amount you spend on utility bills can therefore be an easy and quick way to free up more money for saving.

How do you manage your utility bills? Switch your energy provider and ensure you sign up to the cheapest tariffs. Use energy-efficient lighting systems like LED light bulbs which are 75–85% more energy efficient compared to standard bulbs.  Also invest in efficient heating systems like smart thermostat that intelligently adjusts your central lighting and helps to save energy.

Leaking air pipes also means your heaters will consume up more electricity in order to attain a certain level of heating. Sealing such air leaks can help bring your energy bill down.

Cancel Unused Subscriptions

Subscriptions are companies’ online money-making machines.  This is because many customers usually find it hard to cancel the subscription after signing up. Customers are reluctant to cancel subscriptions due to what is commonly referred to as the sunk-cost fallacy.

According to the sunk-cost fallacy, customers usually find it hard to terminate subscriptions because usually they have spent a significant amount in it.  Cancelling the subscription means you render all past payments for the service a waste. 

Final Word

As noted earlier, saving involves differing consumption to a later date and it is not an easy thing for many people.  Saving is even harder if you have several expenses chasing a small income. That said, it is still possible to save even when your income is low.  It works well if you have a clear goal and plan for savings upon which you measure and track your saving progress.