Low-income households have the hardest time saving money of any other group of people. In most cases, the cost of living is barely lower than a person’s monthly income, and every penny seems to be spent before it’s earned. Living paycheck to paycheck like this is stressful, and any unforeseen expenses can have disastrous consequences because the low-income person has no safety cushion. Something as simple as a flat tire can lead to a spiral of debt as the person makes late payments, takes out short-term loans or misses work in order to fix the problem.

Fortunately, it is possible for people at even the lowest income brackets to put aside money. It’s not easy, and it requires a commitment to a full lifestyle change, but it is possible to begin building a small security fund by setting aside small amounts of money every week. Over time, this will help build a cushion that can help make life a little easier and may even improve the individual’s overall financial well-being.

Cutting Costs on Household Expenses

Simplifying your lifestyle is the first step toward financial freedom. Although it can be easy to be seduced by consumerism, it’s vital to live within your means and embrace frugality. By making thoughtful purchases and focusing on activities and experiences rather than possessions, you can help streamline your expenses:


At low incomes, one of the largest expenses is housing. Many low-income families rent homes or apartments, and rent can easily cost 50% or more of a household’s income. Although it may not be possible to move right away, you can consider looking into more affordable housing situations for the future; you might opt to share a town home, take on a roommate or choose a smaller apartment.

In cases where this is impossible, look for other ways to reduce your housing costs. Cut down on your utility bills wherever you can by reducing your electricity, gas and water consumption. Make an effort to always pay rent on time so you avoid late fees; if you’ve lived somewhere for a long time with an excellent rental history, you might be able to negotiate a lower rent.


Meals are another large expense for low-income households. While the average American family spends about 13% of their income on food, people at the poverty line may pay closer to 25% or more. This is because food costs are largely fixed; poor people eat the same food as rich people, but the cost accounts for a larger percentage of their budget.

You can reduce the price of food by cooking more meals at home, reducing your meat consumption and focusing heavily on grains and legumes. You can also take advantage of sales and coupons whenever they become available, plan meals carefully and comparison shop for good deals.


Low-income households struggle with debt. Although they may not carry as much debt as middle class families, people at the poverty line have a harder time paying off the debts they do have. Because low-income families often have poor credit, they also tend to have higher interest rates, which in turn leads to more toxic debt and worse credit.

The best way to improve your debt situation is to avoid ever having it. Of course, emergencies do crop up, and they sometimes necessitate credit cards or short-term loans. In these cases, paying off your debts should be your main priority. If you have to, cut up your credit card so that you’re not tempted to spend the balance as you pay it off.

Saving Tips for Low-Income Households

— Collect all of your loose change and keep it in a jar that’s sealed shut. Break it open at the end of the year and deposit it in the bank.

— Keep your savings account in a separate bank from your checking account, and see if your employer will deposit a portion of your check into each account. If not, pay your savings first before you make any other purchases or pay any other bills

— Carry cash with you. Leave your debit card at home and pre-plan exactly how much you can spend so that you’re always carrying exactly enough cash.

— Whenever you pay off a credit card or other debt, put aside whatever you had been paying toward the debt into your savings account.

— Strive to pay all of your bills on time to avoid late payments

The most important part about saving money at low income brackets is to set aside your money instead of spending it. This is more difficult than it sounds because most people at the poverty level live in a constant state of crisis. A feast or famine lifestyle leads to financial binging: As soon as you get a few extra dollars, you find a way to spend it because you feel that you deserve it.

Undoubtedly, you do deserve to have fun and own nice things. Your future is more important than any discretionary purchase you can make, however, and you have to keep your long-term goals in mind. Every penny that you save through cutting your costs and paying off debts needs to be set aside so that you can build your emergency fund. Having money available to cover unforeseen expenses will help you reduce your reliance on debt and ultimately lower the cost of living as you will not risk late fees, overdraft charges and other expenses. It’s hard, but certainly worthwhile.

Alan Dunn

Written by Alan Dunn – one of our highly talented and underpaid writers. For more information on Alan follow him on Twitter or Google Plus

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