by Finances FYI
Presented by JP Morgan Chase
Living on minimum wage can be challenging, especially when trying to save money. Yet, putting money aside for emergencies and large expenses is one of the most critical pieces of creating financial well-being. A few thousand dollars in savings can protect you from going into debt or other consequences, such as eviction, if a significant expected or unexpected expense comes your way.
Here are practical tips on how to live frugally and save money if you’re making minimum wage.
Create a Budget
Understanding where your money is going is the first step towards saving money, regardless of your income. List all your monthly income sources and categorize your expenses into necessities (rent, utilities, groceries) and discretionary spending (entertainment, dining out). Prioritize your needs and allocate a specific amount to each category, including savings.
Identify Areas for Reducing Spending on Necessities
You need to eat, pay your bills, have transportation, and have a place to live. However, if your current income doesn’t cover these expenses or leaves you with little money left for saving, it may be necessary to make cuts here. Some ideas include:
- Rent. Can you find a less expensive place to live, move in with a relative, or share rent with a roommate while building up your savings?
- Bills. Take a look at your bills for cost-saving opportunities. Turning your A/C up or heat down a few degrees can save money on your utility bills. Switching wireless plans may also lower your bills.
- Groceries. This is often an area where we can cut spending costs. Some tips to save in this area include making a meal plan, only shopping from your list, shopping at lower-priced stores, buying generic brands, utilizing coupons and sales, and avoiding waste.
- Transportation. Consider using public transportation if available instead of owning a car. Car ownership has many expenses like gas, insurance, maintenance, and monthly payments. You can significantly reduce your transportation costs by using public transportation or carpooling.
Cut Unnecessary Expenses
Look closely at your discretionary spending and identify areas to cut back. Try skipping that daily coffee shop visit, cooking at home more often, or canceling unused subscriptions. It is challenging to maintain a budget with no room for fun spending. Practice making wise and conscious choices that prioritize saving and the activities that mean the most to you.
Set Realistic Savings Goals
Setting achievable savings goals is crucial, especially with a limited income. Start small by saving a fixed percentage of your income, say 5 percent, and gradually increase it as your financial situation improves. Having a visual tracker can keep you motivated to stay on track.
- Part-Time Jobs. Taking on a part-time job such as retail, food service, cleaning, or providing childcare or pet sitting in addition to your full-time job is a straightforward way to earn extra income.
- Freelancing. Use skills like writing, graphic design, web development, social media management, or consulting to provide services as a freelancer to people you know or through platforms like Upwork or Fiverr.
- Gig Economy. Offer services like ridesharing (Uber, Lyft) or food delivery (Uber Eats, DoorDash).
- Sell Unused Items. Sell items you no longer need on platforms like eBay, Craigslist, Facebook Marketplace, or through garage sales.
- Rent Out Your Property, Car, or Assets. Consider renting a room in your home as a short or long-term rental. Platforms like Turo allow you to rent out your car, while others like Fat Llama let you rent out equipment, electronics, or other assets.
Saving money while making minimum wage can be challenging, but staying focused and patient is essential. With small, consistent efforts, you can build a safety net over time and create financial stability for the long term.
(Finances FYI is presented by JP Morgan.)