Saving on a Tight Budget
How can those who currently aren’t saving afford to save money? And how can those saving only a little save more? Here are our top ten tips for saving money when budgets are tight.
Cut Spending Painlessly
Tip 1: To find small savings that add up to big savings over time, keep a careful record of all (and we mean all) of your expenditures for a month. You may be surprised to learn how much you are spending on such things as a daily latte or restaurant meals.
Tip 2: For necessary purchases — such as food and transportation and insurance— comparison shop to find the lowest prices. Also, take a list with you to the grocery store and stick to it. This will help you from buying items you don’t need.
Tip 3: Limit spending for birthdays and holidays, especially Christmas. A few well chosen gifts are likely to be more appreciated than a more costly pile of gifts chosen thoughtlessly in a shopping mall spree.
Save for Emergencies
Tip 4: Build an emergency fund to avoid having to take loans to pay for unexpected purchases. Emergency savings are usually best kept in a savings or share account, despite the low interest rates these accounts pay. Remember, keep a high enough balance in the account to avoid monthly fees. Here is more information on how to save for emergencies.
Tip 5: Ask your bank or credit union to automatically transfer funds each month from your checking to your savings account. Even as little as $10 or$15 a month helps. After all, that’s $120 or $180 a year.
Tip 6: Put all your loose change in this savings account. For many people, that could add up to well over $100 a year.
Reduce High-Cost Debt
Tip 7: Avoid using high-interest credit card and payday loans. Payday loans typically charge interest rates of 500 percent, and the interest rate on credit card debts can run 25 percent. You can save hundreds, perhaps thousands, of dollars a year by paying off these high-cost debts.
- Learn more about how to get out of debt.
Take Free Money and Save It
Tip 8: Low- and moderate-income workers qualify, each year, for an Earned Income Tax Credit that can be over $1,000, and often more than $2,000. IRS Publication 596 explains how to apply, or you can contact your local tax payer assistance center for in-person help. Then pay down debt and save with at least half of the money you receive from this credit.
Tip 9: Participate in a local Investment Development Account (IDA) program. In return for attending financial education sessions and agreeing to save for a home, education, or business, you typically receive $2 for every $1 you save through an IDA program. So, saving $25 each month could end up as $900 at the end of a year.
Find an IDA program near you.
Tip 10: If your employer matches retirement savings contributions, be sure to take advantage of that. Some employers match up to 100 percent of your contributions.
Here are over 50 additional tips for reducing spending and increasing savings.