Skip to Content

How To Budget and Save Money on a Small Income

*This post may have affiliate links, which means I may receive commissions if you choose to purchase through links I provide (at no extra cost to you). As an Amazon Associate I earn from qualifying purchases. Please read my disclaimer for additional details. Thank you for supporting the work I put into this site!

It may seem like earning a high income is the answer to saving money. While it is true that earning more would make it easier to save more, how do you save money on a small income? If you have relatively low income, then saving money becomes even more important. Smaller incomes are less able to deal with unexpected items that come up. We all need to save money to be able to build wealth for the future. This post will give you some ideas on how to budget and save money on a small income.

If your income is relatively low, it may feel challenging to save, but it is very possible. There are a variety of different tools you can employ even when you are working with a low budget, to be able to attain your financial and life goals.

1. Start extinguishing high-interest rates debt!

To be able to save more you need to tackle your debt. All debt accrues interest at some point or another so you can’t truly start saving until you pay off your debt.

There are different ways to approach debt payoff. The debt snowball method and debt avalanche method are two popular tactics. With the debt snowball method, you start paying off your debt from smallest to largest. The debt avalanche method starts with the high-interest ones like personal loans, credit card debt as they make you pay outrageous interest and fees.

Regardless, paying off debt will free additional funds to enable you to do constructive things with your money. At one point in my life I was accruing more in interest than what my minimum debt payments paid off. It is a viscous cycle.

But, be reasonable when targeting your debt. Make challenging yet practical targets and make sure that you attain them. Set goals and make a budget to help ensure your success.

Above all else, don’t incur any new debt. As you start paying off debt the worse thing you can do is accrue more.

audit of expenses

2. Cut Your Expenses

I know this is a no-brainer but sometimes, having the obvious pointed out really helps you get motivated. If you are on a low income, saving money will seem to be a difficult task. Cutting down expenditure even by a dollar may look impossible. But it is an unavoidable step to be able to create wealth.

Remember, anytime you choose to keep an item or expense, you are saying “this item is more important than paying off debt,” or “this item is more important than my financial freedom.” Which items truly hold that value for you?

You can do many things:

Cut Food Costs

  • Start cooking your meals at home.
  • Avoid eating outside.
  • Take your lunch to work.
  • Plan meals and snacks. Something as simple as keeping a granola bar in your pocket can give you a quick boost when you are out and about and thinking of stopping through the drive through.
  • Make your own coffee at home.

Cut Housing Costs

  • If you are living on rent, shift to a smaller or suburban home with lower rent.
  • If you are staying alone, move to live with roommates.
  • If you have room to spare, rent it out or try registering with sites as Airbnb.
  • Sell your home / downsize into a smaller home.
  • If you are servicing a mortgage, try refinancing it with lower costs. But, before you try this, get yourself acquainted with all the terms of the refinancing deal.
    • Sometimes, mortgage brokers reduce your monthly payment, but they increase the duration of payment. It does more harm than good as your total interest over the term of the loan actually increases.
calculating house costs

Day-to-Day Expenses

  • If you have school going kids, try public schools rather than costly private schools. Also, choose a good school close to home so that the commuting costs are minimized.
  • Wear homemade or local clothes. Look into ways to up-cycle your clothing and shop for values at big box stores rather than department stores.
  • Recycle things as much as possible.
  • Sell or donate (for a tax-deduction) the clutter in your home that may be of some use to others.
  • Walk or cycle more. It is great for your health also.
  • Watch movies on Netflix / Amazon Prime after six months instead of going for the first day first show.
  • Cut cable.
  • Etc.

The list of expenses you can cut can be endless.

Take full control of all your expenditure categories. Select the groups where you want to indulge and, for the rest try, to keep the minimum budget. You will have to make sacrifices, but the long-term results will justify the efforts.

If you have trouble adjusting to drastic changes in your lifestyle, start small. Change or cut one expense at a time. Gradually work your way up to cutting more and more expenses.

3. Take Advantage of Free Money

Company Match Retirement Plans

If your company has a retirement plan like 401 K where they are contributing a sum against your contribution, go for it. The company contribution is almost like free money, and it is also not taxed in your name. So, a double benefit.

At my company, for example, I participate in the company match. I am surprised at how many don’t participate. It’s a 3% match for me. As soon as you become eligible, that is like an immediate 3% raise. Of course, initially you have to learn to live on 3% less but having that money grow month after month is more than worth it in my opinion.

Tax Breaks

If you qualify for the unique tax benefits in your country (customarily given to families with low income), make sure your accountant makes full use of them as it can save to good money that gets lost as income tax.

Getting Free Money

There are so many other places you can get truly “free” money. While nothing is ever “free”, it can be simple. Think of sites like swagbucks where you can earn $10 pretty quickly.

swagbucks signon bonus

Then there are sites like ibotta where you just snap a picture of your receipt when you shop at supported retailers and they’ll give you cash back from your purchases.

4. Shop for Online Discounts

Buying online is better as you end up saving the establishment costs that are part of the price in physical stores. Most of the brands give good discounts online. The products get delivered to your home and replacement is also easy. There are also good deals from various banks when you are paying through net-banking or money wallets.

In addition to online sales and coupon codes, think about stuff you normally “walk-in” to. Are you due for a dental cleaning? Search online to see if there is a discount available. Sites like Groupon are awesome for this kind of thing. Everything from haircuts, nail appointments, dental offices, and more use Groupon to attract new clients. Take advantage of the specials they offer to cut costs in your budget!

One thing to remember when shopping online is moderation. Even if something is a great deal, you need to have the self-control to determine if buying that item is necessary. Does that purchase align with your budget and financial goals?

side hustle

5. Start a Side Business!

If you are on a regular 9 to 5 job, creating 1 or 2 parallel income streams can really help you save money. There are lots of great side hustle ideas out there like giving lessons, creating blogs, working on online platforms as a content writer, selling home cooked food, making chocolates/ cakes/ pastries, making paintings, etc. The list is again endless.

Find something you have a natural talent for and go for it. True story, at one time I turned my love for chickens into an egg / chick selling side hustle that often netted me $300 per month or more profit.

This will not only give you additional income but will reduce your dependence on single money stream thereby increasing your financial safety.

This post has some great side hustle ideas:


When money is tight, earn it wisely, spend it wisely and save it wisely. Make every penny count, and you will see that you will attain financial freedom much earlier than anticipated. It will be your passport to live life on your terms.

budget and save money on a small income