How to Save Money on a Small Salary

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Saving money is one of the first habits to learn when it comes to wealth creation, but what if you don’t earn so much right now? It can seem like you can’t “afford” to save money on a low income but never underestimate the power of starting small. The most important thing is to choose progress over perfection.

Key Takeaways

  • Create a budget
  • Save unexpected cash gifts
  • Live frugally
  • Sell items you no longer use
  • Use the 25% monthly income rule
  • Have other sources of income
  • Start saving now no matter how little

Let’s delve into the tips in more detail.

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1. Create a budget that’s best for you

Some people have an abusive relationship with the word “budget” because they assume it is too technical or stressful. The first rule to budgeting, however, is to create one that works for you!

Your budget is very useful because unplanned money is the easiest to spend. A budget can include all your expenses, as well as your savings goals instead of “winging it” and promising to save “anything that remains” after each month. You can save more on a low income when you take deliberate steps like creating and sticking to a budget.

We explained this in full here on How to Create a Budget.

2. Separate cash for expenses every week

A budget is a tool that will help you live frugally. It allows you to see your numbers clearly and know how much you’ve to spend on what. But to make this even more effective, you can use a “cash envelope system” and I’ll advise you to do this weekly instead of monthly.

It’s simple – get an envelope for all major expenses and label them according; Envelope A can be for feeding, Envelope B for transportation, etc. With these, you can see exactly what you spend from each envelope daily and what you have left for the week.

The con here is that it can get stolen if not kept safe. 😩 So you might want to do this digitally by keeping tabs on every inflow and outflow as well as how much you have left to spend on each expense weekly.

3. Save unexpected cash gifts

I know it can be tempting to spend unexpected cash gifts, but putting this aside as savings will help you hit your savings target faster. This isn’t to say you shouldn’t spend unexpected money on something fun because at the end of it – YOLO (You only live once). But spending everything is also not good behaviour. 🌚

Instead, use it to start your Emergency Funds or add it to an existing savings plan of yours. You already survive on your current income so you can act like you did not receive any extras. Also, if you have any debts, you can use all or some of this to pay up as this will improve your overall financial status.

To help you “enjoy life” while still staying disciplined, you can commit beforehand to saving at least 50% of any unexpected funds you receive.

4. Live frugally

Shop on paper before spending money in real life. To save money on a low income, leaks need to be thoroughly blocked. ❌

To avoid temptations, always make a list of all you need as well as their estimated price. This can help you stay in check while shopping. Also, focus on buying things that really matter and avoid spending money impulsively. It may hurt to let go of wants right now, but if you’ve created a plan and are following it, then better days are ahead.

5. Enjoy life

This might seem out of place in a guide about how to save money on a small income but let’s talk about YOLO again. It’s important to live a balanced life and stressing over money can affect your mental health. So as you put a financial plan in place, also incorporate affordable entertainment or leisure.

Find out about places you can visit that do not require you to break the bank. This will help you find time to deliberately relax and enjoy life, even on a small budget.

6. Use the 25% monthly income rule

Evaluate your housing cost and make adjustments where necessary. A simple way to test if you are overspending on your housing is to divide your annual rent by 12 and then ensure the cost of your rent per month isn’t more than 25% of your income. For example, if your rent is N500,000 per year and you earn N120,000 per month. Divide your rent by 12, that’s about N41,666 per month. Based on these figures and the 25% “rule” I mentioned earlier, your rent should not exceed N30,000 per month (that’s 25% of N120,000 and it means your annual rent should not exceed N360,000).

If your monthly rent takes more than 25% of your monthly income, you need to make a decision: move to a cheaper apartment or increase what you earn per month. 

Another option is to live in a shared space till you’re able to afford more. Say you don’t want to move from an apartment that costs N500,000 a year, you can get a housemate who will split the rent with you. This means you begin paying N250,000 per year which is N20,833 per month. Instead of exceeding your 25% monthly budget for rent, you’re able to stay way below it and can do more with your money.

If you’ve been wondering how to save more from a small salary, this can help you keep more so you can ultimately save more from the little you make.

7. Set financial goals for yourself.

Having a financial goal is the most important thing when it comes to saving money. Think of what you need 3 to 5 years from now and break the financial commitments into weekly or monthly plans. Those goals are easier to achieve when looked at from the ground up. You can then build your way to those goals one saving habit at a time.

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8. Sell items you no longer use

These days, people are happy to buy outfits and pre-used items that still look/work well. They are even called “pre-loved” items now. Truth is, most people have more than enough clothes. Look through your closet for items you no longer wear often and organize a clearance sale. It does not have to be anything serious, you can use your existing social media to spread the word and it will definitely bring in some income.

Watch out though, this income is not to be spent.🌚 You already ‘survive’ on your current one so you should save whatever you make from this. You can then invest what you’ve saved so that your money can make you more money. 😉

9. Get a side gig

You can get extra income to complement your regular paycheck through legitimate side gigs that don’t conflict with your current job commitment. To eventually save more, you should earn more and side-gigs can help.

Also, side gigs don’t have to be farfetched. Do you enjoy cooking? You can make meals in bulk for busy professionals.

Do you enjoy writing? You can create a weekly content calendar and help a small business create content for social media.

10. Start now, no matter how little

Building wealth is a long-term commitment. Even if money is tight, you should commit to a disciplined approach to saving over a long period of time. You can save money on a low income by starting with a small percentage every month.

Some say they will wait till they earn more so they “can save” but sticking to this will deliver remarkable results over time. If you wait till later, you may struggle to stick to this plan because you haven’t imbibed the habit of saving consistently.

In Conclusion

Saving should be non-negotiable. To ensure you don’t default, stick to paying yourself on every payday, just like you would pay for any other bill. You can set up an automated savings plan on Cowrywise on your payday every month. That way, you wouldn’t “forget”.

Even if money seems tight now, you can still start your journey to financial stability. Don’t delay.

Watch this video on how to save and invest from your salary:


10 Psychological Tricks To Save Money

How Can A Low-Income Earner Invest?


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