When it comes to budgeting, there are a few essential money saving tips you should always keep in mind. One is to be mindful of your spending and ensure you’re not overspending on anything. In this blog post, you will discover 12 ways to save money on a tight budget and reach your savings goals.
What Does a Tight Budget Mean?
A tight budget generally means that an individual has a relatively small amount of money for recurring expenses. They may have difficulty in terms of monthly payments or services as they must subject themselves to never exceeding a certain threshold. In essence, it refers to specific financial restrictions.
Main Ways to Save Money on a Tight Budget
Being on a tight budget may require you to change the way you handle personal finance and change your spending habits. These 12 ways to save money creatively on a tight budget will help you understand how to manage a dedicated savings account and how to start saving money in general.
1. Set Realistic Goals
When you’re trying to save money, it’s essential to set realistic goals. Start by looking at your regular expenses and seeing where to cut back. For example:
- Cut back on your shopping trips. Instead of buying groceries every week, try couponing or shopping at discount stores.
- Skip the restaurant meals and cook at home instead. You can both save money and eat healthier on a budget with this approach.
- Minimize your use of plastic materials like bags and water bottles. Carry around reusable grocery bags and drink from reusable cups when possible.
- Try carpooling or taking public transportation when possible. These modes of transportation can be cheaper than driving alone. It also helps to reduce emissions for an environmental bonus.
2. Cut Back on Your Spending
Whether that means cutting out unnecessary expenses or finding cheaper alternatives, it’s important to establish healthy and effective saving habits and cut down where possible.
If you’re currently on the most premium Netflix plan with a monthly payment of over $20, you may want to switch to a cheaper alternative that still allows you to watch the movies, but perhaps on fewer devices or in slightly lower quality. This way, if you opt for cheaper (or free) plans on Netflix, Shopify, and YouTube, you can add $50+ to your savings goals every month.
You can also cut back on cable or satellite to free up some cash flow.
3. Live Below Your Means
One of the best ways to slash your expenses is to live below your means. This approach means taking advantage of cheap living arrangements, finding creative ways to economize on transportation, and using coupons and discounts when possible.
Instead of renting an apartment in the city center for thousands of dollars, you can become a roommate in a 4-room apartment in the suburbs for a couple hundred dollars every month. Surely, it’s less convenient and comfortable, but your savings account will see hundreds of dollars added to it every month.
4. Set Up a Budgeting Rule
Setting up a budgeting rule can help you visualize and categorize your spendings. Here are some of the most common and effective budgeting rules:
- The 50/30/20 rule is one of the most popular budgeting rules.
- 50% of your income is allocated to your “needs”. That would be your rent, utilities, food, and essential bills.
- 30% of your income is allocated to your “wants”. That would be eating out, going to the cinema, bowling, shopping, etc.
- 20% of your income is allocated to your savings account and debts. That could be saving for minimum payments on expensive purchases or paying back a high-interest debt.
- The 60/40 rule is best for people with higher incomes.
- 60% goes to necessities such as housing, transportation, utilities, and food.
- 40% is quite flexible. It depends on your financial situation. Some people allocate the entire 40% to a high-yield savings account and pay off debt, others spend all this amount on leisure. Or, you can divide it up to 20/20 for leisure and savings.
- The 40/40/20 rule is mostly used among those who are bent on saving as much as possible.
- 40% goes to essential costs such as rent, utilities, and food.
- Another 40% goes to savings, high-interest debt repayment, or retirement accounts.
- 20% is allocated to leisure.
The most important thing is to select a rule that integrates well with your needs and your lifestyle.
5. Negotiate
Negotiating is a great skill to have in life. Not only will it help you when you really need it, negotiating will also help you way less money while traveling abroad. This is a skill for which your personal finance will forever be grateful.
However, it’s important to understand the context of your situation. You can’t negotiate in a supermarket while buying groceries, but if you find yourself in a farmer’s market or at an event where there are a lot of stalls, make sure to try and get a lower price.
You can start gaining confidence by negotiating a lower price for buying something in bulk and then work your way from there.
6. Make Smart Use of Credit Cards
While credit cards can be helpful in times of emergency or unexpected costs, it’s essential to use them wisely. Try only to spend what you can afford to pay off each month, and always be aware of the interest rates and fees associated with your card.
Credit card debt is extremely easy to stack up and even more difficult to repay. It may look like essentially free money, but it can break your bank if used carelessly.
7. Get Organized
One way to save money on a tight budget is to organize yourself better. There are many ways to do this, as each person has different needs and preferences. Some tips for getting organized on a budget include:
- Creating a budget and sticking to it.
- Sorting your belongings into categories, such as clothes, books, electronics, etc.
- Creating lists of items you need or want, and shop for those items using sales or coupon codes.
8. Shop for Deals
Stores often have clearance racks and temporary discounts that can help you save money. You can also compare the cost of the same item at several stores before purchasing to find the best possible deal.
However, it’s easy to lose yourself in discounts. So make sure that you only buy the things that you need and don’t waste your precious money on secondary or unnecessary purchases.
A popular strategy is to buy bread and other baked goods later in the evening. Many stores have 50%+ discounts on various baked goods since they’d otherwise have to throw them away.
9. Use Coupons
Coupons are a way to save money when operating under a tight budget. Here are five tips on using them:
- Print out your coupon and take it when you shop to save on your purchases.
- Use online couponing services to find deals on products that you might not be able to find in stores.
- Look for sales often marked with special coupon offers.
- Join newsletters or Facebook groups specializing in coupons and discounts to stay up-to-date on the latest deals and discounts.
10. Track Your Spending
This is one of the most efficient ways to reduce spending. If you can track where all your money goes, you’ll be able to see where you can make some cuts without affecting the quality of your life. You can use a simple budgeting app or document in Excel or Google Docs if you want something more permanent.
Categorize your purchases into categories and mark them as “needs”, “wants”, “savings”. This way, you will know exactly how much you spend on the things you need and the ones you don’t.
You can even try the “no-spend challenge” occasionally and see how it goes. It basically means only spending money on the things you need, not the things you want.
11. Automate Your Finances
If you want to save money on a tight budget, you can automate your finances in a few ways. One way is to automatically transfer your paycheck into savings or a specific account each week.
Another way is to create a budget and track your expenses against that amount. Once you know where your money is heading, it’s easier to make cuts where necessary.
12. Take Advantage of Survey Apps
While not necessarily a strategy to save money, having extra cash at the ready can always come in handy. At Pawns.app, you can take part in filling out surveys, sharing your internet bandwidth, or doing affiliate marketing to pool extra money each month.
FAQ
How Much Money Should I Save a Month?
You should set aside at least 20% of your salary exclusively for savings. Another 50% (at most) should go toward covering your necessities, and the remaining 30% is what you can spend on optional products. The 50/30/20 general rule can help you quickly and easily create a budget for your finances.
How to Stick to a Strict Budget?
Track your expenses to the dot. Use budget tracking apps if you find it difficult to record your spendings in a sheet. Avoid impulse purchases and don’t get taken in by hefty discounts on unnecessary things.
How Much of My Salary Should I Save?
A common recommendation is to save around 20% of your salary. However, you should tailor this number to your financial situation. If you cannot afford to save 20% each month, you can reduce this number. The important thing is to save what you can.
