12 Ways to Save Money on Low Income

Many Australians are feeling the pinch financially right now. The global pandemic hit many industries hard, forcing thousands of people to change job or industries, and possibly take a pay cut. Now rising inflation rates, fuelled by the war in Ukraine and the impact of climate changes on crops, mean that more people are finding their finances tighter than ever.

But having a low income doesn’t mean you need to put saving money on the backburner.

Indeed, there has never been a more important time to be putting cash into an emergency fund for a rainy day. To achieve this, all you need to do is think smart and be strategic with your money – and you’ll be surprised how far you can stretch your next paycheck.

Here are 11 ways to get you started:
 

1. Check your entitlements

It’s worth checking to see if you are eligible to receive any help from either the state or federal governments. Services Australia offers a useful outline of benefits currently on offer, ranging from benefits for families through to older Australians, people with disabilities, young people and students, plus job seekers. It also covers special circumstance options, supplementary payments (to help with costs like rent or pharmaceuticals) as well as concession cards. 
 

2. Build a budget

It might sound boring, but a budget is an essential foundation block for any savings plan. If you’re not sure where to start, just keep it simple. On a piece of paper write out all of your current sources of income (including any side hustles or benefits) and all of your current expenses, starting with fixed essential ones like rent or mortgage running through to non-essentials like Netflix and incidental costs like buying lunch at work.

Once you have everything written down, go through the numbers and see if you can make any tweaks. You don’t necessarily need to cut back on every treat and pleasure in your life, but it’s worth seeing if there are any expenses you can eliminate without causing too much pain. Maybe you’re paying for a gym membership you’re not actually using? Perhaps you could bring lunch from home three days a week or make a coffee in the office kitchen rather than always buying it at a café?
 

3. Pay yourself first

This tip is a favourite with financial planners and it basically means that you should put a bit of money into your savings as soon as you get your pay check, before going on to pay other expenses. If you leave this until later it becomes tempting to spend it, so if you automatically put a set amount (say 5%) into a dedicated high interest savings account that you can’t easily access, you’ll not even miss it. And the savings will add up quickly.
 

4. Reduce your home expenses

Housing expenses are often the biggest drain on most budgets, so it’s worth looking for as many ways as possible to reduce these when you have a limited income. Downsizing to a smaller house can reduce not just rent or mortgage payments but also energy bills and general maintenance costs. Become vigilant about turning off lights and unused appliances like air conditioners to reduce power consumption whenever possible and try to take shorter cold showers if you’re fond of regularly indulging in a long hot soak. It’s great for your health as well as your wallet.
 

5. Expand your income

You’d be surprised how many ways there are to add to your income when you put your mind to it. Think about what services you have to offer and use social media or a local letter drop to advertise it. You could try activities such as babysitting or dog walking, ironing or washing cars. You could even sell delicious homecooked meals to any time poor neighbours. Renting a spare bedroom out on Airbnb is another good option, as is driving on weekends for Uber. Whatever you do, just don’t forget to keep good records of all of your income and expenses so that it is easy to do your return at tax time.
 

6. Reduce food costs

Restaurant meals and food deliveries are a major drain on any budget. Cutting these costs by half in favour of home cooked food can make a huge difference to your monthly bottom line. But be careful not to overspend when it comes to doing groceries, as a shocking amount of money goes literally into the bin due to widespread food waste. Check your cupboards to see what you have and can use already then make a list for your groceries to avoid panic purchases. Try cooking delicious meals in bulk and freezing portions for future quick meals.  
 

7. Take care of your health

Medical issues can be a huge problem when you’re on a low income. Expenses can quickly mount, from medicines through to specialists, and any down time can impact your income if you don’t have access to sick leave. Do your best to maintain a healthy lifestyle to keep yourself as well as possible and avoid falling sick. Eat fresh food, exercise regularly, avoid smoking and limit alcohol consumption.
 

8. Try a spend-free month

This might sound crazy – but how about setting yourself the challenge of zero expenses for one month, other than basic essential like groceries and utilities? Cook a special meal at home rather than heading out to a restaurant. Host a movie night with friends rather than going to the cinema. Dig out any unused and forgotten clothing in your wardrobe that still fits rather than shopping for a new outfit. You might find yourself developing some new money-saving habits that will continue when the month is over.
 

9. Repair rather than replace

It’s so easy to jump on Amazon and order something new to replace anything in your house that breaks. But how about taking an old school approach and trying to fix it first? You’ll be amazed how many things can be put back into action with a simple repair – and your grandparents would be so proud of you! All you need is a needle and thread to fix holey socks and torn clothing. Simple cheap repair kits can be bought from the hardware to sort out many household appliances. And taking items to an expert repairer (such as a bootmaker to resole good quality shoes) is far more affordable than throwing them out and buying new.
 

10. Embrace freebies and deals

There are so many terrific deals and offers out there if you take the time to look for them. Keep coupons at the supermarket to get discounts down the line. Flick through the sale brochures and emails you receive and see if any of the things you were planning to buy anyway happen to be reduced. Hunt around for good deals online before heading into shops to purchase. Just be careful not to fall into the trap of buying things you don’t need just because they’re on sale. 
 

11. Shift your lifestyle choices

A lot of the expenses in our lives are the result of habits rather than conscious choices, and making some simple healthy tweaks can make a huge difference. Try disconnecting all those streaming services you barely use anyway and embrace cheaper and healthier activities such as hiking, cooking, visiting free museums and borrowing books and magazines from the library. These changes can also be a great opportunity to develop new and positive activities with your partner, friends or children. Maybe you’ll discover something new and interesting that you really love doing together?

12. Understand what Stage 3 tax cuts mean for you

From 1 July 2024, the new stage 3 tax rates will apply, so all employees having tax withheld from their wages by their employer should notice a reduction in the amount being withheld, thus increasing the amount left in their hands. If this extra money is not needed for essentials, some, if not all of it, could be added to your savings account.

Saving money doesn’t have to be a difficult and punishing thing to do – in fact, it could spark the turning point for a major life change. Maybe you’ll discover a new side hustle that you love doing, find ways to clear out your home, improve your health and wellbeing, and develop relationships with your family and friends. And, if you stay focused, you’ll find yourself with a nice nest egg in your savings account ready to use whenever you need it.

FAQs (frequently asked questions)

• How can I save money quickly on low income?

The best way to save money quickly is to cut back on unnecessary expenses. Write out a budget and see what you can tweak, such as taking lunches from home to work or cancelling a gym membership you’re not using.
 

• What are the tips on saving money with low income?

In addition to cutting expenses, it’s a good idea to find ways to increase your income so you have more money to save. Check to see if you’re eligible for any government benefits, then add a new side hustle to your life such as babysitting or put your spare room on Airbnb.
 

• How much should I save every month?

This depends on your income and expenses but a good rule of thumb is to start small and increase it as time goes on and you get better at budgeting. Begin with 5% and put it into a saving account as soon as you get paid. After a couple of months increase it to 10%