Trying to save money can feel like an impossible task when you’re on a low income. After paying for essentials like rent, bills, and groceries, it often seems like there’s nothing left to put aside. This constant financial pressure can be stressful and disheartening, making long-term goals feel out of reach.
However, building savings is not just for high-income earners. With the right strategies and a clear plan, it is possible to gain control over your finances, build a safety net, and work towards a more secure future. It starts with understanding where your money is going and making intentional choices about how you use it.
This guide is designed to provide practical, actionable steps to help you save money, even when your budget is tight. We’ll cover everything from creating a realistic budget and cutting daily expenses to exploring ways to boost your income and accessing support services. These tips will help you find the best way to save money for your unique situation and build a stronger financial foundation.
Understanding Your Income and Expenses
The first step toward saving money is knowing exactly how much is coming in and where it’s all going. Without a clear picture of your financial situation, it’s difficult to make meaningful changes. This process isn’t about judging your past spending; it’s about empowering yourself with knowledge to make better decisions moving forward.
Creating a Detailed Budget
A budget is simply a plan for your money. It helps you prioritise your spending and ensure you have enough for your needs and goals.
- List Your Income: Start by writing down all your sources of income after tax. This includes your regular salary or wages, Centrelink payments, child support, and any income from side jobs. Calculate your total monthly income.
- Identify Fixed Expenses: These are the costs that stay the same each month, such as rent or mortgage payments, insurance premiums, and loan repayments.
- Estimate Variable Expenses: These costs change from month to month. Look at your bank statements and receipts from the last few months to get an average for categories like groceries, petrol, utilities (electricity, gas, water), and phone bills.
- Track Discretionary Spending: This is the money you spend on non-essentials like takeaway coffee, dining out, subscriptions (Netflix, Spotify), and entertainment. This is often the area where you can find the most room to make cuts.
- Calculate the Difference: Subtract your total expenses from your total income. If you have money left over, that’s your starting point for savings. If you’re spending more than you earn, you’ll need to identify areas to cut back.
Tracking Your Spending Habits
To make your budget accurate, you need to track your spending diligently for at least a month. This can be an eye-opening experience. You might be surprised to see how much those small, everyday purchases add up. You can use a dedicated budgeting app (like the ASIC MoneySmart budget planner), a simple spreadsheet, or just a notebook. The key is to record every single purchase, no matter how small.
Identifying Areas for Potential Cuts
Once you have a clear view of your spending, you can start looking for places to save. Go through your list of variable and discretionary expenses. Are there any subscriptions you don’t use? Could you reduce how often you eat out? Even small changes can make a big difference over time. For example, making your coffee at home instead of buying it could save you over $1,000 a year.
Practical Saving Strategies
With a budget in place, you can start actively building your savings. The key is to make saving a habit, not an afterthought.
Automating Your Savings
One of the most effective ways to save is to “pay yourself first.” This means treating savings like any other bill. Set up an automatic transfer from your transaction account to a separate, high-interest savings account on your payday. Even if it’s only $10 or $20 a week, it starts building a savings habit. By moving the money before you have a chance to spend it, you remove the temptation.
Setting Realistic Financial Goals
Having a clear goal can make saving much easier and more motivating. Your goals could be short-term (like saving for a new appliance), medium-term (like building an emergency fund), or long-term (like saving for a house deposit). Make your goals SMART:
- Specific: Know exactly what you’re saving for (e.g., a $1,000 emergency fund).
- Measurable: Track your progress.
- Achievable: Set a realistic target based on your income.
- Relevant: Ensure the goal is important to you.
- Time-bound: Give yourself a deadline.
Seeing yourself get closer to your goal will encourage you to keep going.
Utilising the Envelope Method
If you struggle with overspending on debit or credit cards, the envelope method might be for you. This cash-based system involves withdrawing your budgeted amount for variable expenses each payday and dividing it into labelled envelopes (e.g., “Groceries,” “Petrol,” “Entertainment”). Once the money in an envelope is gone, you can’t spend any more in that category until the next payday. This physical barrier makes you very conscious of your spending and helps you stick to your budget.
Reducing Daily Expenses
Finding ways to cut back on everyday costs can free up a surprising amount of cash.
Cutting Back on Food Costs
Food is one of the biggest variable expenses for most households. Here are some ways to save:
- Meal Plan: Plan your meals for the week before you go shopping. This helps you buy only what you need and reduces food waste.
- Shop with a List: Stick to your shopping list to avoid impulse buys.
- Buy Generic Brands: Home-brand products are often just as good as their big-name counterparts but much cheaper.
- Cook at Home: Takeaway and restaurant meals are expensive. Cooking at home is one of the best ways to save money.
- Buy in Bulk: For non-perishable items you use regularly, buying in bulk can be cheaper.
- Shop at Local Markets: Farmers’ markets can offer cheaper prices for fresh fruit and vegetables, especially near closing time.
Lowering Transportation Expenses
Transport costs can also take a big chunk out of your budget. Consider these options:
- Use Public Transport: If it’s available in your area, public transport is often cheaper than driving and paying for petrol and parking.
- Walk or Cycle: For short trips, walking or cycling is free and great for your health.
- Carpool: Share rides with colleagues or friends to split the cost of petrol.
- Compare Fuel Prices: Use apps like PetrolSpy to find the cheapest petrol in your area.
Finding Affordable Entertainment Options
You don’t have to spend a lot of money to have fun. Look for free or low-cost entertainment options:
- Utilise Public Libraries: Borrow books, movies, and music for free. Many libraries also run free events and workshops.
- Explore Parks and Beaches: Pack a picnic and enjoy the outdoors.
- Look for Free Community Events: Check your local council’s website for free festivals, concerts, and movie screenings.
- Host a Potluck: Instead of going out for dinner with friends, invite them over and have everyone bring a dish.
Maximising Your Income
While cutting expenses is important, there’s a limit to how much you can cut. Increasing your income, even by a small amount, can significantly accelerate your savings.
Exploring Side Hustles
A side hustle can provide a valuable extra stream of income. Think about the skills you have. Could you offer services like babysitting, pet-sitting, gardening, or cleaning? Platforms like Airtasker can connect you with people looking for help with small jobs. If you have a car, you could consider food delivery services like Uber Eats or DoorDash.
Negotiating a Raise
If you’ve been in your job for a while and have a good track record, it might be time to ask for a pay rise. Research the average salary for your role and prepare a list of your accomplishments. Present a clear, professional case to your manager explaining why you deserve an increase. The worst they can say is no.
Selling Unused Items
Go through your home and identify things you no longer need. You can sell clothes, furniture, electronics, and other items on platforms like Facebook Marketplace, Gumtree, or eBay. It’s a great way to declutter and make some extra cash at the same time.
Government Assistance and Community Resources
Don’t be afraid to seek help. There are many government programs and community organisations designed to support people on low incomes.
Identifying Eligible Programs
The Australian government offers a range of payments and services. Use the Centrelink Payment and Service Finder on the Services Australia website to see what you might be eligible for. This could include family tax benefits, rent assistance, or healthcare concessions.
Utilising Local Food Banks
If you’re struggling to afford groceries, food banks and community pantries can provide essential food items for free or at a very low cost. Organisations like Foodbank, OzHarvest, and The Salvation Army operate across the country.
Seeking Free Financial Counselling
Financial counsellors provide free, confidential advice to help you manage your debt and budget effectively. They can negotiate with creditors on your behalf and help you get your finances back on track. You can find a financial counsellor near you by calling the National Debt Helpline.
Long-Term Financial Planning
Saving money is not just about managing day-to-day expenses; it’s also about building a secure future.
Building an Emergency Fund
An emergency fund is money set aside for unexpected expenses, like a car repair, a medical bill, or a sudden job loss. Having this safety net can prevent you from going into debt when things go wrong. Aim to save at least three to six months’ worth of living expenses. Start small and build it up over time.
Paying Off Debt
High-interest debt, like credit card debt or payday loans, can be a major barrier to saving. Prioritise paying off your most expensive debt first while making minimum payments on others (this is known as the “debt avalanche” method). Once a debt is paid off, roll that payment amount onto the next one.
Investing for the Future
Once you have a solid emergency fund and are managing your debt, you can start thinking about investing to grow your wealth over the long term. You don’t need a lot of money to start. Micro-investing apps like Raiz or Spaceship allow you to invest small amounts regularly. Consider speaking to a financial adviser to discuss the best options for your situation.
Your Path to Financial Stability
Saving money on a low income requires discipline, planning, and persistence. It won’t always be easy, but by taking control of your finances, you are investing in a more stable and less stressful future for yourself.
Start by creating a budget and tracking your spending to understand where your money is going. Automate your savings, set clear goals, and look for ways to reduce your daily expenses. Don’t hesitate to seek support from government and community services if you need it.
Remember that every small step you take makes a difference. The best way to save money is to start today, no matter how small the amount. Your future self will thank you for it.
FAQ
1. How can I start saving money if my income is very low?
Begin by tracking your expenses to identify areas where you can cut back. Create a simple budget, prioritize essential expenses, and set aside even a small amount regularly. Over time, these habits will help you build your savings.
2. What are some realistic ways to reduce my monthly expenses?
You can save money by limiting non-essential purchases, meal planning to avoid eating out, cutting back on subscriptions, and using public transport instead of owning a car. Comparing utility providers for better rates can also help reduce bills.
3. How can I save money while raising a family on a low income?
Focus on essential spending, buy in bulk, shop for sales, and explore second-hand options for clothes and toys. You can also take advantage of free community services, such as libraries, parks, and other family-friendly resources.
4. Is it possible to save money without giving up things I enjoy?
Yes, you can still enjoy yourself by finding affordable alternatives. For example, look for free events in your community, cook at home instead of dining out, or explore hobbies that don’t require significant spending.
5. Are there government programs that can help me save money?
Many governments offer support like rent assistance, healthcare subsidies, or discounted utility programs for low-income households. Research local or federal programs available in your area and take advantage of them to ease financial pressures.
