Many of us plan to save money for rainy days, but somehow it never happens. Instead, unexpected expenses creep up, emergencies happen, bills come due, and there goes the money. According to the U.S. Bureau of Economic Analysis, Americans save a meager 10% of their disposable personal income. For most other nations, this figure is at least 20% of their income.

The good news is that it's not too late to start your financial planning and create a comfortable nest egg.

If you have been wondering how to save money on a low income, this guide is for you.

Tips to save money on a low income

1. Save what you can

Saving as a practice is not dependent on how much you earn. All you need to do is to establish the intention to save something, be it 5% or 10% of your earnings. Then, when you get in the habit of saving money, no matter how small, it won't feel unusual when you start earning more.

Whether you're a single parent or a multi-income household, you should shift the focus to saving for yourself and anyone who relies on you as a provider and a role model. Put whatever possible amount you can in a savings account every week and leave it there for an emergency.

2. Save first

Save first, spend later. Keep aside, say, 20% of your income for savings every time you get paid before doing anything else. This way, you'll be saving every month and have a clear idea about how much you'll have by the end of the year.

Even if you have debts to pay, make sure you're saving something for yourself because emergencies always come unexpected. This is crucial for learning how to budget money on a low income because it prioritizes future-forward thinking.

3. Open a savings account

It's a good idea to open a bank account that's dedicated to saving only. No matter how much money you have in your checking account, it can be tempting to spend it as long as it's there. So, keep a separate savings account, transfer a percentage to it as soon as you receive your salary, and don't touch it.

4. Start a budget

No matter your income level, setting a budget is a great way to save. Give yourself a set amount to spend on groceries, bills, personal care, etc., and then make sure you don't exceed it. Be realistic when setting your budget.

First, take the time to study your family's eating and spending habits, and then create a financial plan to tighten things up without suffocating everyone. You can even use accounting software to help you that comes with crucial features such as automatic budget dashboards and expense forecasting. Use these to map out your expenses for a few months so you can design a budget that can help you save moving forward. You can also enlist the advice of an accountant to help you design a feasible budget that allows you to set aside savings for your future endeavors.

5. Settle debt

Credit card debt, student loans, and other debts can hold you back from reaching your financial goals. This is because the interest keeps growing, making it impossible to pay off the entire amount for a very long time. When you make your budget, set aside a small portion each month to pay off existing debts, and make sure that you pay off high-interest debts first.

6. Lower housing expenses

With an increase in earnings often comes a bigger house, higher rents or mortgages, and more upkeep expenses. This habit is detrimental to your savings goals.

Smart shopping can go a long way if you've been struggling with how to save money with a low income. Sometimes living a bit below your means is the best way to build wealth in the future.

7. Lower car expenses

Owning a car is expensive. You spend thousands of dollars a year on insurance, registration fees, car payments, routine maintenance, unexpected repairs, and gas.

So, first be sure if you can afford a car before you start shopping for one. Then if you buy one, go for a more convenient insurance and car pay-off plan. You will save hundreds of dollars by doing a little market research on loans, dealerships, insurance, and more. It’s also often more economical to buy used rather than new.

8. Spend less on food

Food expenses have the potential to eat up all your income - no pun intended. It is too easy to overspend when a few nights out with friends can easily set you back hundreds of dollars in food and drinks. Instead, plan your meals ahead and cook for yourself. It may be unpopular advice, but cutting out alcohol will also save you a ton of money.

9. Prioritize your health

Your health should be your number one priority, even on a budget. Falling sick can make you lose your income if you have to stop working, and you'll have to spend money on treatment as well.

Ensure that you follow up on your preventative care and visit the doctor when needed by getting health insurance that covers the basic costs. Unfortunately, insurance is something a lot of low-income people drop as an “unnecessary” expense. For example, according to recent surveys, only 33% of Canadians with children report having a life insurance policy. But this should never be an area you skimp on when budgeting.

10. Eliminate bad habits

Besides affecting your mental and physical health, bad habits also cost a lot of money. Behaviors like smoking cigarettes, playing the lottery, drinking, making impulse purchases, gambling, etc. are harmful to your financial health. Sure, it's a lot of fun when you do it, but imagine the toll it takes on your health and bank account.

11. Cut entertainment expenses

Sorry, but that Netflix subscription is not an essential expense. If you’re big on leisure and entertainment activities, it's time to cut back and use free and low-cost ways to have fun. For instance, visit your local library, go for a walk or hike, or have a movie or game night at home.

12. No Spend month

If you've been wanting to know how to save money fast on a low income, this one's for you. Plan for at least one month a year when you do not spend on anything other than necessities.This effort will help you see the kind of expenses you can live without and save a lot in the meanwhile.

With this aggressive saving strategy, you can save a large chunk of money in just one month. It will also create a habit that you can do on your own or with others to hold yourself accountable.

13. DIY what you can

You will always have things to replace or repair, and these repairs can be a burden when you're living on a low income. It won't be affordable for you to immediately replace everything that breaks or needs fixing.

So, learning how to DIY those repairs and replacements can save you a lot of money because you won't have to pay for someone to do that for you. Just go to YouTube or a dedicated website and learn to do it on your own.

14. Switch banks

All banks have different policies and unique ways to entice their customers. Do your research and switch to a bank that offers more perks than your current one. The perks could include no maintenance costs, no ATM fees, no overdraft fees, and high interest on savings accounts, to name a few.

15. Get freebies, coupons, and deals

Need a haircut? Go to the local beauty school where they'll do it for free. Need to work out? Check out the coupons from Groupon, Living Social, or Yipit for bargain workout classes. You can look after your health and have fun for free or almost-free.

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16. Take shorter, cooler showers

You are paying for every drop of water you're using, so why waste? Taking a cool shower will help you get out of the shower quickly, especially when it's freezing outside. This way, you will be saving water and electricity.

17. Automate savings and bill pay

Some people are in the habit of not paying their bills and credit card payments until the due date. By then, they have spent most of their money on things that don't matter. If that sounds like you, it's time to set up a direct deposit for all necessary expenses so your bank can pay on time automatically from your account. You can similarly automate investing if you are to that point in your financial planning.

18. Reduce heating and cooling expenses

Use a programmable thermostat that automatically sets the room temperature. This can help you save around $200 annually that you would've otherwise spent on heating and cooling. Also, invest in a standing fan instead of running the AC all the time in the summer.

19. Unplug appliances

Even when you're not using your appliances, they'd still be consuming some energy if they're plugged in. Some heavy appliances that could be causing an increase in your bills are computers, television, phone charger, stereo, microwave, coffee maker, etc. Unplug them when not in use to save on your electricity bill each month.

20. Stick to your list

Build a shopping list and stick to it. Always shop on a full stomach so you don't end up buying junk food. Try the 30-day rule to control the impulse to purchase unnecessary items so you can always shop with a plan.

21. Avoid falling for coupon impulse-buying

Coupons can be offering you incredible deals that you might fall for instantly. However, you need to hold back and make sure you don't buy anything just out of the temptation to use the coupon. Budget first and decide on an expense, then do your research to get a deal - not the other way around.

22. Pack your lunch

Buying lunch every day is expensive, so pack food for the office and for the kids to take to school. Sure, you'll have to buy more groceries this way, but the cumulative effect would still help you save a considerable amount of money every month.

Besides, homemade food is healthier and will benefit you and your family in the long run.

23. Save on transport

Transportation is a huge expense, so walk or ride a bike wherever you can. If you live near a coworker, consider car-pooling so you can both save money on gas. Extra perk: it’s more eco-friendly.

24. Discount clothes shopping

Shopping for clothes at full price can be expensive. Plus, you’ll rarely be so desperate for a certain clothing item that you can’t wait and shop around. Wait for sales, so that you can buy the same clothes at a much lower cost and save money. For example, at the end of summer, unsold seasonal items like bathing suits usually get majorly discounted.

25. Bank any extra

Since you’ve been setting aside savings first, it can be tempting to think of anything left over as spending money. It’s okay to give yourself freedom every now and then, but if you really want to save more quickly, any extra should be considered savings too.

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Conclusion

Living with a low income doesn't have to discourage good money habits. No matter how little you earn, you can always make room for some savings. You may have to start small, but something is better than nothing. This is how you will eventually reach your income goals and be more financially stable in the future.

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