Saving for the Long-Term on Low-Income

Saving for the Long-Term on Low-Income

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One of the most integral pieces of a healthy financial plan is a sustainable long-term savings. Yet when it comes to spending and saving habits, many individuals put their long-term goals on the back burn, saying “I will save for a house / car / child’s education / retirement  later, when I have more money?”

According to CNN, 25 million Americans are living paycheck to paycheck. When trying to make ends meet, it is often challenging to try and also establish a long-term savings plan. However, minor adjustments to routine spending habits can actually have make a large impact on one’s long-term savings.

Here are 10 ways to save for the long-term with a low-income.


1. Cut down on high-interest debt

Debt. Almost everybody has it and everyone wants to eliminate it. The average American household has about $5,700 in credit card debt. Aim to cut down on high interest debt, or the smallest loan first and as quickly as possible. In the long term, the savings you can accumulate from severing interest rate payments can funnel into a very healthy savings balance. Then, once you have paid off one debt continue increase your payment on the next highest.


2. Reduce, Review, and Redistribute

One of the largest budgetary burdens facing individuals are housing expenses. When facing a rent or mortgage, utilities, and maintenance, it can be cumbersome to also set money aside for emergencies.

Downsizing to a smaller home or apartment can help alleviate some of the costs cutting into your budget. This can reduce your monthly payment amount, in addition to minimizing utility costs. Similarly, reviewing your monthly utility bills can shed light on areas where further savings could be salvaged.

It may seem mundane, but making sure to turn off lights and electronics before leaving for the day, limiting the amount air conditioning and heat are running can help reduce housing expenses astronomically.

Finally, if you are in a position to live with a roommate, this could drastically cut back on living expenses, by diving monthly payments up amongst all tenants.


3. Use Free Money to Your Advantage

Establishing the habit of shuffling any additional money into a savings account can help grow your savings account in the long term. Gifted money at holidays or birthdays can slowly accumulate when routinely directed into a savings account. Overtime, this free money can provide added cushion when you may need it.

If you are low-or moderate-income family, you may qualify for the Earned Income Tax Credit. The EITC is a refundable tax credit that provides a financial boost for families who qualify. According to the IRS, in 2017, almost 27 million taxpayers received over $65 billion due to the EITC.  For more information of EITC, or see if you qualify, visit the EITC Assistant tool provided by the IRS.

Another opportunity to acquire savings is by utilizing your employer’s 401(k) match program. By contributing a set amount from your paycheck into your 401(k) plan, your employer will match a percentage of that contribution- essentially, adding free money to your long-term savings. It is important to understand how your employer’s 401(k) match program works, as policies can vary from company to company. Speak with your HR representative to discuss your specific employer’s plan.


4. Moderation is Key

When it comes to planning for one’s financial future, is important to practice moderation. Finding ways to incorporate your lifestyle and activities into a more cost-efficient plan will truly benefit you and your financial goals in the long run.

This is not to say that you have to completely eliminate dining out and weekend plans with your friends and family. Simply finding alternatives that won’t break the bank and spending money wisely and in moderation can drastically improve the amount you have to save each month. For example, instead of going to a movie theater, rent a movie from Red Box for under $2 or find a local video store for a movie night at home.


5. Maintain a Tight Budget

One of the most challenging aspects of financial planning is remaining focused and diligent about spending and saving habits. It is important to be cognizant of where you are allocating your funds.

Incorporating a Zero-Sum budget into your financial plan can help you to both track where your money is going and keep you on track for your financial goals.

 In essence, this budgeting strategy assigns each of your income dollars a designated role in your financial plan. By allocating all of your dollars to a part of your plan, you can prevent wasteful spending and make the most of your income.

There are plenty of resources available to help you track your spending. Every Dollar is a free mobile app designed to track how much and where you are spending.


6. Diversify Your Income

Having a second source of income can provide additional financial relief. There are plenty of options for finding a secondary source of cash flow- from taking online surveys, to selling items you no longer use, this money could generate additional savings opportunities when budgeted properly.


7. Invest in Your Future

Investments can be a wonderful solution to both drive additional cashflow and leverage a better financial portfolio overall.

Prior to investing, it is paramount that you decide your short-term and long-term savings goals. Knowing when and how much available cash you will need in the years to come can help you better decide how and where you invest your money.

For instance, online savings accounts are best for a short-term investment, whereas if you wanted a 3-10-year investment, a CD (Bank Certificate of Deposit) would be a better option.

When investing, it is best to speak with a trusted financial advisor to review what avenues best suite your financial goals.


8. Automated Savings

Setting up an automated savings plan can help you remain compliant with your budget and avoid temptation of frivolous spending. This forces you to set money aside and work strictly with the remaining portion of your pay. Think of it as out of sight, out of mind.


9. Start a Change Jar

When it comes to saving money, any little bit helps. Though a change jar won’t guarantee big bucks, an extra $10 or $20 dollars going to your savings every now and then can add up over the long haul.


10. Meet with a Financial Advisor

When it comes to your financial future, you want to be sure you are in good hands. Working with a financial advisor can help you set up a plan that fits your lifestyle and financial goals. At Duncan Financial Group, our experienced advisors strive to make all aspects of your financial plan work together for you and your future. Contact Us today for a no-obligation consultation or portfolio review.

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