Important Tips on How to Budget Money on Low Income

Are you unable to save money because of your worthless entry level job?

Guess what; the low-wage job is only partially responsible for your inability to save money at the end of the month. The biggest reason you are failing to save is that your finances are unorganized and you are not managing a budget.

And there’s more. Single people need to have different budgeting skills than people in domestic partnerships.

Curious how you can save money even with low income? Keep reading.

Money Saving Tips

Pay bills on time

A lot of people have this bad habit of paying bills late. Not only it lowers your monthly saving but also hurts your FICO score. Never miss bill pay dates and make it a habit to pay bills on time. Wondering how it can help you save money? When you pay the bills earlier, you avoid interest and late payment fees that chip away at your next month’s earning.

To be on the safe, pay your bills way earlier than the due date. This way, you can avoid late charges and interest fees and better plan your monthly expenditure. Deduct the amount earlier in the month which is to be paid for bill payment and save from the rest of the amount.

Follow the 50/30/20 rule

Those who follow this rule report increased saving at the end of every calendar month. Senator Elizabeth Warren, in her 2005 book “All Your Worth: The Ultimate Lifetime Money Plan,” first proposed the 50/30/20 rule. According to this rule, the earner must divide after-tax income into three categories. The categories are “needs,” “wants” and “saving.” As such, one should spend 50% of the tax-deducted income to meet their needs, 30% should go for meeting the “wants.” The remaining 20% is the month’s savings.

Some people, who are not too fond of spending, tweak this rule a bit and spend 50% to meet their needs, 30% for saving and only 20% for the leisurely activities. Some, who have the reputation of being spendthrift go overboard with this rule and save almost half of their tax-deducted income. If this sounds a little extreme, stick to the original 50/30/20 rule and see it ballooning your savings.

Rent payment or mortgage

This one is a bit tricky. Making a choice between mortgage and rented apartments could be hard. A mortgage apartment epitomizes the American dream; the white picket fence lifestyle. A rented apartment, on the other hand, offers a hassle-free and comfortable stay and financial convenience.

A well-furnished condo apartment in the city center is going to cost a huge amount compared to a rundown looking apartment in a shoddy neighborhood. Yes, the same principle applies to mortgage properties, but rented apartments have an advantage which is flexibility. You can leave the apartment any time you want and move to a less-expensive one. You can leave the apartment any time you want and move to a more affordable apartment. But with mortgage property, you don’t have the option of leaving before finding a buyer. Rented apartments, therefore, offer more freedom compared to mortgage properties.

Don’t incur new debt

When the cumulative national debt has already exceeded the $20 trillion mark, incurring new debt is not something that an intelligent person would do. Incurring new debt means unable to save money in the future. First off, you’d be paying interest for a very long time. Secondly, paying off the debt in due time only increases the odds of getting more debt in the future, which is not really anything to celebrate if saving is your priority. I advise you to pick up habits that stop you from incurring any new debt, such as, using liquid cash for transactions instead of digital transactions, not maxing out your credit card, etc.

Invest in appreciating assets

Some people think saving and investment are different. Investment, they believe, involves a significant amount of risk whereas saving is not risky at all. Nothing can be further from the truth. Today’s investment can turn into tomorrow’s saving.

When investing, you are strongly recommended to not invest in any depreciating asset and only in appreciating asset class. To clarify, the value of appreciating assets increases with time while that of depreciating assets goes down. A car is a depreciating asset whereas land is appreciating asset.

Investing in appreciating assets secures your future, but I advise you to exercise caution. Investing in appreciating assets may cause problems. For example, you can invest in land but investing in land means tying up your hard-earned money in an asset that is hard to sell off and convert to liquid cash.

Concluding remarks

Before you blame your job or any other external factor for not being able to save money, change your perspective. Saving money is just like growing a tree. The more you water the tree, the more you take care of it, the faster and longer it will grow. Remember that and put the tips given here to practice. I promise you will start noticing the changes.