“How can I save if I have low income?” it is a question that many of us have asked ourselves. Here are five small practical tricks to trigger positive habits and easily enter the virtuous circle of savings.
Let’s not fool ourselves, when the revenues are scarce you can certainly not save a lot of money. The important thing is to start saving as a percentage of your income, putting aside commensurate figures and not giving up just because at the moment you do not have the saving capacity of Warren Buffett.
Let’s not waste any more time and immediately see 5 practical tips to save money on a low income, but if you’re in bad shape – like me when I was 30 – first read “Financial crisis and debt: 5 tips to make a change“: if you don’t reduce your exits, your losses, saving is impossible (bonus tip).
Watch out for low cost expenses
The first step is to restructure your concept of economic necessity, that is to stop wasting money on things that seem small but are not: coffee at the cafe every morning, subscription to streaming services, food delivery several times a week, installment monthly iPhone, a pack of cigarettes a day. All small things, of course, but that put together make a nice nest egg (ok, I listed these small things from my point of view of Italian, I know that “coffee at the cafe every morning” is a typically Italian habit: contextualize them for your case).
The rule to be applied is only one: be wary of all low-cost expenses that seem sustainable but that concern unnecessary consumption. Mathematics is always a faithful ally. A dinner out of 30 euros/dollars seems acceptable until you calculate the number of home cooked meals that can be made for the same amount.
“So you don’t enjoy life”: I remind you that you have low income, otherwise you wouldn’t be reading this article.
Beware of downtime
Yes, let’s talk about purchases made out of boredom. For example, where the coronavirus quarantine was implemented, many had more free time and this led to an unprecedented increase in online shopping.
The data are clear: according to a Payback analysis, in Italy during the first month of quarantine there was a net increase in online purchases (+ 70% compared to the same period last year), driven by the food & wine categories (+ 227%) and entertainment (+ 112%), followed by technology (+ 64%), fashion and home (+ 29%) and finally personal care & well-being (+ 9%).
This is to say that if you have low income, to save money you have to be careful not to spend just to pass the time: idleness is the father of vices.
Make a note of the expenses
Let’s move on to more practical tips to save money: keeping track of your weekly or monthly expenses can help you identify areas where you can learn to keep your budget. To do this, you need great attention to detail: better focus your attention on smaller purchases, which often go unnoticed.
Just get in the habit of recording all expenses and keep your receipts. There are many allies available and suitable for every need: notebooks, computer software or smartphone applications, which can analyze and categorize expenses independently. Many will be surprised to find out which expenses have the most impact on their budget.
In recent years the myth of “ownership” has been slowly losing ground and the so-called sharing economy has taken hold.
There are so many alternatives: car sharing for short and long distances, bicycles and scooters to reach the office in a flash, holiday home, shared babysitter and even books that change owners after turning the last page. Here, all these solutions are invaluable in minimizing the waste of money and accumulating some extra savings.
Alongside our savings there will always be the most powerful force in the universe: compound interest, that is, the result of reinvesting the interests that are obtained from investments to generate other interests.
For those who have never invested and do not know where to start, a little initial research is essential to find the tools that adapt to your needs. It is never too early or too late to start, even in small numbers. As Warren Buffett teaches “There is someone sitting in the shade today because someone else planted a tree a long time ago.”