If you’re looking for ways to save money on a tight budget, the first thing you need to know is that there’s no magic pill that will immediately change your financial life.
Learning how to save money is a series of conscious decisions no matter how much money you make. It’s a combination of reducing your expenses, eliminating your debt, increasing your income, and changing the way you think about money.
10 Ways to Save Money on a Tight Budget (Change the Way You Spend and Save)
1. Keep your housing costs low
While there are lots of different ways to do it – tiny house, camper, mini-mansion, sailboat – housing is an essential item in most everyone’s budget. And there are a lot of different factors that go into how you budget for housing. Fortunately, that means there are several places you might be able to cut your housing costs.
Downsize or don’t buy more than you really need
A lot of people dream of owning a big house one day, but the reality is that bigger = more money. It’s not just the square footage that costs more -- it’s higher utility bills, more space to paint or fill with furniture, more things to repair, more expensive to upgrade, etc.
Really consider the amount of space you need, and what you’re trading to live in a big house.
My editor, for example, has a family of five and lives in a 900 square foot house. It’s allowed her to quickly pay off her mortgage and spend that extra money on traveling with her family.
Find a better location
There are certain parts of the country that are just more expensive than others – the west and east coast have notoriously high housing prices. But there are probably neighborhoods in your city where you can find lower-priced housing.
Housing costs vary by location in other ways too:
- Personal property taxes
- Schools – are there good public schools in the area?
- HOA costs and regulations
- Distance to work – the can affect the amount you pay in fuel costs and routine car maintenance
Keep up with maintenance so you can avoid expensive repairs
When you do find the best house for your budget, make sure you keep up with regular maintenance so you avoid expensive repairs. One of the best ways to save money on a tight budget is to learn how to do some of the repairs on your own.
Cut down on your utilities
Your dad told you to turn the lights off when you left the room for a reason: it actually does lower your electricity bill. Besides turning the lights off, here are a few more ways to lower your utilities:
- Make sure your windows and doors are airtight
- Don’t keep your house as cool in the summer or as warm in the winter
- Fix leaky ductwork
- Take shorter showers
- Don’t use hot water to wash your clothes
- Switch to LED lightbulbs
- Buy energy-efficient appliances when it’s time to replace them
- Use Trim or Truebill to lower your phone bills or internet service
Learn more at Truebill Review 2020 | Save Money With Less Effort and Trim App Review 2020 | An Easy Way to Save Money on Bills.
Rent out a room in your house
This isn’t feasible for everyone, but if you have space in your house, consider renting it out to a long-term renter or as a vacation rental on Airbnb. If you rent out your space long-term, here are some best practices you’ll want to follow:
- Look at similar listings in your area to determine how much to charge
- Be specific when you advertise the space
- Ask for references and check them
- Run a credit check
- Use a written rental agreement that includes: rent amount, when it’s due, how utilities are to be paid, how you’ll handle common areas, any other relevant concerns
2. Get out of debt
Your first thought is probably how is this one of the ways to save money on a tight budget? But hear me out. Debt is expensive, and the longer you have debt, the more expensive it gets.
Credit card debt is some of the most dangerous because interest rates are much higher (around 19%). And when you use a credit card and don’t pay the balance in full when it’s due, you incur interest charges. Next month when the credit card bill comes and you only make the minimum balance, those interest charges creep up even more.
The faster you pay off debt, the less you pay in interest. For example, let’s look at paying off a $5,000 credit card balance with an interest rate of 19%:
- Paid off in 6 months, you pay $280 in interest charges
- Paid off in 12 months, you pay $529 in interest charges
- Paid off in 18 months, you pay $785 in interest charges
- Paid off in 24 months, you pay $1,049 in interest charges
But many people have other forms of debt too – student loans, car loans, personal loans, a mortgage, etc.. That’s a lot of interest accruing over time.
Because debt is so expensive, it prevents you from saving and planning for retirement. It’s a dangerous cycle.
M$M tip: If you want to learn how to get out of debt, check out How to Pay Off Debt: Step-by-Step Plan (That Actually Works). It’s full of actionable tips to help you pay off your debt quickly so you can start saving more money.
3. Keep an eye on your grocery bill
Like housing, food is another essential item, and if you’re not careful, it’s easy to go overboard on food spending. Fortunately, when it comes to food, there are a number of ways to save money on a tight budget.
Start making a meal plan
A meal plan is when you sit down and plan out all of your meals for the week. It helps you save money because you don’t have to run back for ingredients, you have less food waste, and you’re less likely to eat out.
Try some meatless meals
I don’t think I could ever be a vegetarian, but I realize that meat is an expensive source of protein compared to beans or eggs. You can easily lower your grocery bill by doing at least one or two meatless meals each week.
Splurge on dinner in instead of going out
My wife and I have gotten into a new habit of making fancy dinners at home instead of going out to eat. We take time planning out our meal, prep it, and cook it together. It’s like a date night at home, and I know it costs less than going out.
My personal favorite is a cheese platter, nice steak, and a bottle of red wine.
Make a grocery list
Number one rule of grocery shopping: make a list and stick to it. This prevents impulse purchases, helps you avoid going back for things you forgot, and keeps you mindful of what you buy.
Buy generic
Most generic brands are the exact same as the name brand products. Lots of them are even manufactured in the same facility! The only real difference is that generic brands usually cost much less.
Plan around sales
When you make your weekly meal plan, check the sales flyer at your local store to see what’s on sale. Then plan your meals around what’s on sale that week.
Make your own cleaning products
We’ve recently started making our own cleaning spray, and it’s way easier than I expected. It’s basically water, vinegar, and a few drops of essential oil. It’s cheap and works really well for everyday cleaning.
4. Buy used when possible
I have long believed that buying a used car over a new one is one of the best ways to save money on a tight budget. See, cars are depreciating assets – they start losing value the minute you drive them off the lot. Financing charges, taxes, and insurance every month add up to a serious amount of money that loses value every time you drive it.
But there are other things you can buy used to save money – furniture, electronics, appliances, clothes, home goods, and more. It’s a safe bet to research larger purchases like electronics and appliances to know what brands and models do well over time.
5. Find cheaper forms of entertainment
Even when you’re trying to save money, it’s still important to plan for fun. It’s a good break from work, and it motivates you to keep saving. Here are a few ways to have fun while sticking to your budget:
- Go out for lunch instead of dinner
- Take advantage of free birthday meals
- Find a less expensive alternative to cable
- Invite friends over instead of going out to eat
- Check out outdoor concerts in your area
- Go for hikes, bike rides, or walks
- Use daily deal websites like Groupon and LivingSocial
- See a matinee instead of a late-night movie
- Borrow from the library – some libraries also lend out museum passes, cameras, telescopes, and sporting gear
- Find out which days are free or discounted at your local zoo or museums
6. Learn how to budget money on a low income
Even though a budget is a powerful tool you can use to save money, only 1 in 3 U.S. families keep one. It can be hard to create and follow a budget if you don’t have much, to begin with, so the first thing you want to start by prioritizing your expense.
Identify “must pay” expenses first. These are things like food, shelter, basic transportation, clothing, and debt. Then go through and see which ones you can reduce.
Debt is a must pay expense because, like we’ve already talked about, it can balloon if you’re not actively paying it off. But debt is also important because missing payments can lower your credit score – which can lead to higher interest rates and being denied loans in the future. Some employers even do a credit check before hiring.
After dealing with debt, I highly recommend budgeting for an emergency fund if you don’t have one yet. Emergency funds help you pay for unexpected expenses, like major car repairs, medical expenses, home repairs, and more. An emergency fund prevents you from needing to take on more debt.
Discretionary expenses – beyond basic clothing or food, entertainment, vacation spending – are the last things you should budget for.
For more information on budgeting, check out:
- Start Sticking to a Budget | 29 Tips for Smarter Spending and More Savings
- 19 Budgeting Tips to Help You Take Control of Your Money
- Zero-Based Budgeting Explained: How it Works, Creating a Budget, and App Alternatives – if you want to know what’s the best way to budget on a low income, check out zero-based budgeting
7. Learn how to save money
Whenever I talk to people who are on a tight budget, one of the top questions I get is, “How can I save money with a low income?”
It’s a valid question. Because when you’re already stretched tight, where do magically pull out money for savings?
The first thing you want to do is start a budget, like I mentioned in the last step. It will help you keep track of how much money you’re making and what you’re spending it on.
But what’s the best way to save money? You need to start paying yourself first. One of the biggest reasons people aren’t saving money is because it isn’t a priority, to begin with. Your savings needs to be treated like a bill you pay every single month.
Too many people make the mistake of putting savings off until the end of the month, and only if they have anything leftover.
You can make your savings a bill that you pay at the first of the month, and it’s really easy if you set up an automatic deposit from your paycheck. The reality is that you probably won’t notice that the money is gone.
You can start by setting up an automatic transfer for a smaller amount of money. Think about one extra you’d like to cut out, and make that amount your savings goal to begin with. It could be as little as $50 or $100 for the month.
If you didn’t miss that money, then up your savings goal for next month. As you start paying off your debts and reducing your expenses, you have more to save each month. There’s almost a snowball effect to it.
Finding ways to make more money is an effective way to start saving money because increasing your income gives you more room in your budget. Read more at 22 Best 2020 Side Hustle Ideas (Make $1,000+ Per Month!).
8. Save as you spend
Even when you’re trying to save more money, you still have to spend some of it on essentials. So why not make some money back on your spending? This is one of the most practical ways to save money on a tight budget.
There are lots of easy-to-use, legit apps that will help you make money back on everyday purchases. Here are two of my top picks:
- Ibotta gives you multiple ways to earn cashback as you shop: by connecting your store’s loyalty program to the app, adding offers and submitting your receipt, and paying with the Ibotta app. Learn more at Ibotta Review 2020: Is It Worth it?
- Swagbucks pays you points that you can redeem for cash or gift cards. You can earn points from shopping, but you can also earn points with surveys, by watching videos, searching the web, and referring your friends. Learn more in my Swagbucks 2020 Review.
9. Control impulse spending with the 30 day rule
As you’re learning how to change the way you spend and save, there will be times when it’s really freaking hard to say no to something. This is where the 30 day rule comes in.
What is the 30 day rule? If you’re about to make an unplanned purchase, you stick the money in your savings account for 30 days. If you still want to buy the item after the 30 days are up, then go for it. If not, you’ve avoided spending and saved money instead.
Another alternative is waiting 24-48 hours before giving in to your impulses. You will be surprised at how often you change your mind.
10. Focus on the big picture
Do you remember the latte argument that came up a couple of years ago? The advice was that all millennials (or anyone) needed to do to get ahead in life was to cut out their lattes. Some in the financial world grabbed onto that idea and preached it hard.
But here’s the deal: cutting your lattes won’t change your financial life. This has been debunked time and time again for a number of reasons...math being one of them.
$5 a day per latte equals $1,825. That’s well below the amount you need to save each year for retirement.
Yes, it’s important to trim your budget where you can and small amounts of money add up, but occasionally and responsibly spending money on yourself is important too. It makes all of your hard work feel worthwhile.
But the main reason for cutting your lattes isn’t a realistic way to change your life is because it doesn’t focus on the big picture. It’s only one tiny component.
You need to rethink how you spend money, how you save money, how you make money, all of it. Your financial life is a multi-faceted thing. Don’t just follow one piece of advice in this article, follow several.
The final word on ways to save money on a tight budget
People who have paid off lots of debt, retired early, or live comfortably have all practiced more than one of the tips on this list.
Rethink how you’re spending your money, and find ways to reduce that amount. Learn how to increase your income and use the extra to pay off debt or start saving.
Remember, your financial life is multi-faceted and one action isn’t enough to really get ahead.
About Millennial Money Man
Bobby Hoyt is a former band director who paid off $40,000 of student loan debt in 18 months on his teaching salary and then left his job to run Millennial Money Man full-time. He helps other Millennials earn more through side hustles, save more through budgeting tools and apps, and pay off debt. He is a personal finance expert who has been seen on Forbes, Reuters, MarketWatch, CNBC, International Business Times, Business Insider, US News, Yahoo Finance, and many other personal finance and entrepreneurship media outlets.
