How to Save on a Small Income, Part 2

Last month I had a reader ask how he could save on a small income and I posted it for Free Money Finance readers to answer -- and boy did they! I got some GREAT responses that I just HAD to share with you all. Here's part two of those responses -- starting with a simple but effective money saving tip:

If you can, live with a roommate, or even roommates. By splitting bills and rent, you can effectively reduce your living costs by almost a third. It also means that you don't have to bear the entire brunt of furnishing your home when you're first starting out.

This is what I did for the first two years out of school. Then I lived a couple years on my own, then got married. Guess I've had a roommate most of my life! ;-)

Here's a thought on how to increase his income:

Like bk said, find some side work or freelance and put that money straight to savings. A friend of mine is an illustrator for a newspaper, and he can get between $1k and $3k for a freelance project depending upon how many weeks it takes him. He rarely works on something in his spare time for more than a month, and usually gets (I imagine, I'm not sure) somewhere between an extra $8k and $12k per year, I would think. Just be sure to track your income/expenses and save half of it for taxes so that you are prepared for the bill.

And here's another thought from the "start early and you'll be set" camp:

At 22 years young, this person has a long time horizon. I think getting into the habit of saving is much more important that the actual amount. If he/she can commit to saving 10% of gross income, that could go a long way. $2000 a year is nothing to sneeze at.

Maintaining a goal of 10% savings will force you to budget and arrange your standard of living to meet it. That is a great long-term habit to develop.

And another perspective:

If you're to be paid every two weeks, put yourself on a monthly budget. For employees earning bi-weekly paychecks, there are two months out of the year in which the employee will receive three paychecks. For each of these "extra" paychecks, along with any tax refund and other bonuses/windfalls, dedicate 100% of these funds to retirement.

Also, I agree with everyone about earning more money now. The first few years are crucial. We all know the story about the twins, one puts $2000 away a year for 6 years and at the 7th year, its sibling starts putting $2000 away a year for life. Well, even if you can't get a second job in your field, keep waiting tables or bartend or work in a store you love to frequent (one that you know you're not going to stay away from no matter how little you make) so that you can get the discounts! Put 100% of this extra money in retirement. Then when you just can't work all those hours anymore and you'll therefore be contributing less, at least you'll have a good foundation.

While you're at your extra job, you won't be out spending money. And if you can find a job where there are people your own age or in a field that's your hobby, there are many positive aspects that will keep your psyche healthy and not make you feel like you're "missing out."

See what I mean? This isn't rocket science, but it is good, basic financial information that anyone can use to improve their net worth. Thanks, Free Money Finance readers, for some great thoughts!

Comments

[Joel Renner]

FMF, thank you for your ideas on making a little extra money to invest I found it truly insightful

[Dani]

Here's what single parents can do or people who get a tax refund. Take your monthly utilities and multiply them by a year. Take your tax return $ and pay twelve months worth of utilities. You are then ahead of the game for the year and you can stash the $ you would normally spend on utilities into a savings account. I have done this for years and we are not rich but we live off of very little and have extra money to spare.

[Kevin]

Dani - why not save the tax refund instead of prepaying the utilities? You'll earn a little extra interest by having the money in savings all year, plus the peace of mind of having money accessible in case of emergency.