How to Save Money When You Don't Make Much

There is quite a lot of financial advice for people who wish to save money, but there seems to be a conundrum associated with that advice. Are the financial writers and advisers assuming that the readers have a lot of money to potentially save, or are the readers assuming that they have to have a lot of money in order to save some?

No matter what someone's financial bracket is, he may find himself struggling to pay the bills each month, no less saving money! The idea to sound financial planning for any income bracket is to understand the financial law of relativity! People with a higher income have higher mortgages, taxes, and credit expenses than those who make less money then they do. The stress isn't necessarily lessened by a higher income; however, economic ideals tend work against those who make less money.

Some Problems People with Low Incomes Face

People with extremely low incomes face economic problems that seem to elude the understanding of the more affluent public at times. Why, couldn't someone just get a college degree, get a good job, then brush themselves off from the slums and emerge in the bright, clean world of the middle, or even upper middle-class? There certainly are enough scholarships and financial aids available to these sorts of folks? Well, here are some of the obstacles that make that slide from the slums of poverty a little less than easy.

-A lot of low income people were born into low income families who were, well, born into low income communities. Many times, these people are working part-time to full-time jobs by the time they are in high-school in order to help support the family. Academics become a second priority when electricity and rent are on the line. Some of these people have to spend their school years helping their parents raise their younger siblings due to the high costs of child-care.

-Child care is indeed expensive!! While a scholarship or financial aid may cover the costs of tuition plus a little extra, it doesn't always cover the costs of rent, electricity, food, clothes, Etc. You might be able to offer a single mother a fully paid college education and be shocked that she would decline your offer. Why on earth would she do that? Well, she'd still have to work full-time if she wanted to afford her life! A two bedroom apartment in many places costs almost as much as a full month of minimum wage pay! Now, on top of that, she'd have to pay for child care, electricity, telephone, and possibly Internet expenses should her curriculum require extensive research, unless she could afford additional child care for when she used the public library.

-It can cost more to be poor! In an article entitled, "From Poverty, Opportunity: Putting the Market to Work for Lower Income Families," Matt Fellowes for the Brookings Instituition, says that "lower income families tend to pay more for the exact same consumer product than families with higher incomes." This higher price tag for lower income families comes from things such as higher interest rates to the inflated prices of smaller quantity or lower quality products. He says that low income families can spend as much as hundreds to thousands of dollars more per year than higher income families.

It's Tough To Be Poor, So How Do We Save Money??

-Know how much money you haveand how much money you're spending. This is the first thing anyone should do to be financially savvy. If you've ever asked yourself, "Where is all my money going?" then you seriously need to evaluate your situation. For one entire month, write down every single dime you spend, whether it's an ATM fee, a soda from a vending machine, a cable bill, or child support. Write it down.

-Assess your situation. In some lovely circumstances, you may find that you have plenty of money to cover bills, necessities and a few entertaining items as well, but due to some superfluous spending habits, haven't managed your money well. In this case, you can count out the things you don't need, plan your money so that you know exactly what you can spend each day, and still live a comfortable, albeit, less than extravagant life. On the other hand, you really may be in need of some help. You could find that, despite your simple lifestyle and modest housing, you are still struggling to pay your bills. In this case, you will need to look into financial assistance programs. If you are one of those people who lives below your means, you will certainly deserve a little bit of help to get you on your feet. Check into you family services centers, debt management (non-profit) organizations, and Etc.

-Pay yourself first. Wealthy people may be able to put a couple hundred or even a couple hundred dollars away into investments or savings each month, but poor folks don't have that luxury. Don't fret, though, your cost of living is much lower than theirs anyway, so you shouldn't need to save as much as they do. Write down ALL your expenses and subtract them from your income. Many people find that they have some sort of surplus, which usually comes as a surprise to most of them. From that money, put about 90% of it into savings each month, even if it is only $10.

-Don't cheat yourself when it comes to taxes!! Most people think it's best to pay more in taxes throughout the year so that they get a nice chunk of change at the end of the year. No. If you saved that money on your own, you'd at least make interest on it. Find out how much money you are paying in taxes and adjust your tax claim to most accurately reflect your situation, then make it a point to put that extra little bit of weekly earnings into your savings account. If you do get some money back at the end of the year, put it into savings. Period. That's money you were living without anyway, so you can afford and need to build up your savings account.

-Build up your credit! Yes, credit cards are not evil unless you misuse them. The saying goes, "Don't put anything on credit unless you can afford it." Well, one might ask, "What's the point of having credit if you can afford it anyway??" There are, of course, exceptions to that rule. Cars, houses and school loans are all examples of things you can and should put on credit, but not until you establish a great credit history (well, cars and houses anyway). Get a credit card and put something necessary but small on it, then leave the card alone. Make payments on the card that are above the minimum payment requirement. For example, if you can pay your electric bill using a credit card but usually don't, you can pay your bill with the credit card, but pay it off with the money you already have set aside for the bill. In short, you already have the money. DO NOT put ANYTHING on credit that you would never buy or could never afford if you didn't have credit. If you pay your credit card regularly and pay it off regularly, your interest rates will be low, thus...ba da ba dum, you will have more money to save.

-Do not worry about those metaphorical Jones'. If you need reliable transportation to get back and forth to work, getting a loan on a spiffy, top of the line SUV is quite self-defeating when it will only transport you to your minimum wage, or slightly higher than minimum wage job. Also, why waste money to rent nice furniture when you can save your money, build up your credit, and be able to afford your very own in a couple of years? True friends and family won't judge you for your thrift-store finds and great used car bargains. In fact, even your more well-to-do friends might envy you for your thrifty finds.

-As with the tip you just read (if you're following this in sequence), do live within your means. There is a chance that the neighborhood you are living in is simply too expensive for you. If you are living in a beat-up two bedroom apartment for $700/month and you are making $8/hour as an electrician, and your job is one of the highest paying ones you can find in a 30 mile radius, you might need to consider relocating, despite the hardship it might impose (only temporarily) on your children. A simple move might earn you MUCH more income and MUCH less expense, thus...ba da ba dum, you will have more money to save.

Basic Saving 101

-Try to save up three months of wages for an emergency fund.
-After that, you can put money aside for specific goals such as a car, down payment for a house, Etc.
-Aside from the three months pay and your goal money, you should keep a reserve fund for yearly expenses, such as property taxes, holiday expenses, Etc.
-You should definately think about a retirement account. Talk to your employer about 401(k)'s or get information from your bank about retirement plans and accounts. You won't be able to work forever, unfortunately (or fortunately, if you've planned well enough!).

After reviewing some of the savings accounts available (more than what is listed in this article), determine which type of savings account should be best for your specific goal.

1. Budget your money so you can save!
2. Know your income and assets (things that grow in value or give you a monetary return) and know your expenses.
3. Minimize and control your debt. If you earn an interest on you savings, more than likely, your credit debt will cost you a higher interest. Not good.
4. Invest your money!! Anyone can eventually invest their money into something that will make them money! You don't have to be rich to do this, but you will need to be determined, persistent, and knowledgeable. You'll definitely have to get some help with this one. After all, you've managed to save up some money, and you kept your credit score pretty high, all on a low income. Now, you can get a loan for something, or put you money into something that will benefit you big time.

Three type of savings accounts:

A regular savings account: You can earn a little interest this way, and you can easily transfer money from one account to another with little to no limitations. This is a great way to get started, especially if you don't have a whole lot of money to put into anything just yet. The flexibility of a regular savings account will make it easy for you to put your money into a different type of account once it has accumulate. Also, it's easy to access your money if you have an emergency, rather than having to resort to going into debt.

A money market savings account: You can usually earn a little more interest with this type of account than with a regular savings account. You will have access to this account, but you will have to maintain a minimum balance, which is great because it forces you to keep at least a certain amount of money in some type of account.

A certificate of deposit (CD): You will have to leave your money in a CD for a specific amount of time, IE. three months, two years, Etc. CD's can earn you a considerably higher interest than a regular savings account.

In Short...

Don't think that just because you don't make a lot of money that you cannot save money. You can indeed! Keep a positive attitude, adhere to your goal no matter what obstacles invade your bracket, and simply save. Remember, it may take you a while to get to your overall goal, but it will be well worth it for you.