If you’re looking for practical ways to save money on a tight budget, then you’re in the right place.
When you’re on a tight budget, it is essential to incorporate the most impactful saving strategies wherever possible. Taking advantage of these methods can add up to a substantial amount of savings, and more money left in your pockets!
Without further ado, here’s a list of some of the best tips and tricks on how to save up more of your hard-earned money while on a tight budget.
1. Put Your Savings Into A High-Interest Savings Account
Are your savings sitting in an account that’s earning you next to no money? Or even worse, costing you in the form of transactional or monthly fees?
Say no more as there are now better options out there to park your money.
With a high-interest savings account, you can earn a respectable amount of money passively through monthly interest payments. There is no work required on your end after the money is deposited.
My go-to high interest savings account is EQ Bank. They consistently offer one of the highest savings account interest rates in Canada. Currently, you can earn 1.25%* interest on your savings in their Savings Plus Account. You can also open up a TFSA savings account and earn high interest completely tax-free.
As an example, I used EQ Bank to earn $1,000+ interest in 2020 while saving for a down payment. The interest received directly contributed to the home purchase when it came time to buy the house!
* Interest is calculated daily on the total closing balance and paid monthly. Rates are per annum and subject to change without notice.
2. Pay Off All Your High-Interest Debt
Using a credit card to to take advantage of cash-back and other sweet offers while making purchases? Great idea as long as you pay your card in full every single month.
Carrying any sort of balance on your credit card month over month? That’s a big no-no!
You never want to be in a position where you are paying credit card interest payments. Credit card companies charge a truly exorbitant amount in interest, typically around the 20-25% range. While that might not seem like much at first, paying such a high interest will have a drastically negative impact on your financial health over the long term. This really cannot be understated.
Before you focus on anything else, it’s imperative that you formulate a plan to pay off your entire balance if you have outstanding credit card debt. Whether it may reallocating your budget or consolidating your debt to lower interest rate options, erasing your credit card debt is one of the best things you could ever do to save money, especially when you’re on a tight budget.
3. Take Advantage Of “House Hacking”
If there was ever an important saving tip to be aware of, it would probably be a way to reduce the biggest expense that most of us have to pay – housing expenses.
Housing expenses are typically the largest expense that most people incur, generally accounting for 30-40% of one’s budget. Renters pay rent and homeowners need to pay a slew of household expenses, including but not limited to mortgage payments, utilities, property taxes, home insurance, and repairs & maintenance.
If you’re planning to buy a new house soon, I urge you to consider “house hacking”. House hacking is when you buy a multi-family property such as a duplex or triplex, live in one unit, and rent out the other units. You can even rent out unused rooms or living spaces in your house using a platform like Airbnb.
If you’re wiling to learn how to manage some tenants, this is a great way to save huge by having other people pay off your mortgage for you.
4. Create A Budget
When you need to save money, it’s important to be deliberate about where every dollar goes. This involves creating a budget in which you allocate a set amount of how much to spend on each expense category.
Personally, I have been using Mint for the past few years and am finding it to be a great resource for tracking and budgeting specific expense categories. Mint keeps the data updated automatically by linking my bank accounts, and I can export payment line items into a spreadsheet for further analysis.
5. Audit Your Budget And Track Your Progress
How many times have you set out to create a habit, just to lose sight of it a few weeks later?
Creating a budget is only half the battle – it’s also necessary to track how your actual spending varies from your planned budget.
If you’re not constantly keeping track of how well you’re sticking to your budget, sooner or later it will fall apart. By consistently monitoring your spending, you leave no room for nasty surprises, are able keep a close eye on your progress, and can modify as necessary.
Bottom line: Don’t let your expenses get away from you by not tracking where your money is going. Even worse, don’t turn a blind eye just because you don’t want to face the reality of how much you’re actually spending (Admittedly I have first-hand experience with that!).
6. Create A System To Pay Yourself First
If you’re on a tight budget, this could be because you don’t have enough savings to begin with.
The best thing you can do for your financial health is to save a portion of your take-home pay every single time you receive your paycheck.
And I mean do this every. Single. Time. Hence the saying “pay yourself first.”
In order to save diligently, you should develop the systematic habit of depositing money into your savings account before paying for anything else at all. This could be a fixed dollar amount of every paycheck, or a percentage of your take-home pay to allow for appropriate scaling when your income increases.
7. Avoid Lifestyle Creep
Did you recently receive a nice raise or bonus at work and all of a sudden have more money to spare?
Naturally, the first instinct that people have is to use all of that cash surplus to buy something nice for themselves. The problem is that with a higher paycheck, it’s quite easy to give in to lifestyle inflation and say, “I can afford to buy this now since I make more.”
But was there really anything wrong with your old budget to begin with?
Instead of using that extra money to splurge on things that you don’t necessarily need, consider instead keeping your spending budget the same and allocating that extra income towards savings. You’d be surprised how much quicker you will grow your savings by keeping your pay raise in your pockets.
8. Negotiate Or Find Cheaper Alternatives With Your Monthly Expenses
When it comes time to pay for recurring bills such as Internet service or your phone plan, you may be surprised to learn that these bills are not set in stone. In fact, often times you can call your service provider to negotiate a lower payment.
If you provide them a compelling and logical reason to lower your rate or even pressure them by claiming to switch to a competitor’s service, more often than not they’re bound to offer you a compromise in the form of a lower rate.
If you’ve been with the same plan for a while now, you can also try to shop around for better deals. Shopping around and comparing between rates usually helps you find lower rates than what you’re currently paying. Companies also sometimes provide onboarding bonuses that you can take advantage of to entice you to switch to their plans.
When it comes to your car insurance payments, your insurance provider may be able to give you a better rate on your car insurance if some time has passed and there have been no claims or accidents on your record.
With cable television, nowadays there are cheaper alternatives in the form of online subscription-based streaming services such as Netflix that offer a wide selection of viewing options.
9. Take Advantage Of Cash Back Apps, Coupons, Discounts, and Price Matching
Whether you’re shopping for the groceries or buying something online from Amazon, it’s safe to say you want to get the best bang for your buck.
Cash back also comes in the form of cash back credit cards, such as the Tangerine Money-Back Credit Card which gives up to 2% cashback in up to 3 select categories and 0.5% on all other purchases. I personally use this as my main credit card because I’m able to get cash back on everything I buy!
If you’re shopping for something online, there’s also a popular browser extension called Honey which scours the web for coupon codes. Honey automatically tries any coupon that it finds while you’re checking out to see if you’re eligible for a coupon or discount.
Some retail stores offer price matching. This means that they will match the price if there is another store that sells the same product at a lower price. Shopping around always has its benefits because even if there is no price matching, you can always just buy the product from the cheaper store instead.
One more thing you can do is that if you don’t need the item right away, you can simply wait until it goes on discount. For example, many products on Amazon periodically go on sale during the holidays or every so often. A great tool you can use that charts the historical price of an Amazon product is CamelCamelCamel, which can be added as a browser extension.
10. Cut Back On Non-Essential Spending
When you’re on a tight budget, the most sensible area of your budget to cut back on is your spending on items that would be considered wants, rather than needs.
Think shopping for clothes at the mall, alcohol, entertainment, ordering takeout, subscription services, etc.
When it comes down to it, it will serve you better in the long run to instead save that extra money now and reap the rewards of your savings habit later down the road.
If you do insist having some leisure spending in your budget, focus on the activities that matter most to you and cut back spending on the material purchases which only provide temporary pleasure. Spend instead on experiences that will create lasting memories.
11. Cook Your Own Food Instead Of Eating Out
Cooking instead of ordering takeout or eating out is one of the best ways to reduce your expenses, since food is one of the big ticket expenses on a budget.
Ordering takeout or eating out typically costs $10-20 per meal, and over time this amount can really rack up and impact your budget capacity.
If you frequently find yourself ordering or eating out, then picking up cooking is a sure-fire way to save a considerable amount of money.
If you don’t know how to cook, you may benefit from investing in a cookbook or researching online for recipes that you will enjoy.
If you don’t have too much time to spend on cooking, you can prepare multiple meals at once (meal planning) or stretch your meals by leaving leftovers instead of needing to cook every time you eat.
12. Switch To A Checking Account With No Monthly Fees
Picture this: your hard-earned paycheck finally comes in for the month, only to see a portion of it wiped out by your monthly checking account fees.
If you’re tired of paying for a checking account like I was, consider moving to an online bank. Online banks provide most of the functionality of your traditional bank, but pass the cost savings associated with not having brick-and-mortar branches directly to us, the customers.
For checking account purposes, I personally started using Tangerine a few years ago and have not looked back. Their website interface is easy-to-use and best of all, the account is free of monthly fees.
13. Sell Items That You No Longer Need
When it comes time to update a piece of furniture or dispose of used items, consider selling it on an online classifieds such as Kijiji or Craigslist instead of just leaving it on the curb.
You’d be surprised with what you can sell, especially if it’s a functioning appliance such as an old microwave or stove. As the saying goes, one person’s trash is another person’s treasure.
If you also happen to have a lot of stuff lying around that you don’t use all too often, consider whether you really need it at the end of the day, or if it would make more sense to just sell the item instead. Decluttering and living with a minimalist lifestyle is something I highly recommend you to consider.
14. Increasing Your Credit Score
When it comes time to apply for loans such as your home mortgage or a line of credit, lenders will look at your credit score to gauge your creditworthiness and risk of default. Your credit score is the primary factor that determines the interest that rate you will be paying on the loan.
The to easiest ways to increase your credit score are to pay every single payment on time and to maintain a low credit utilization.
Contrary to what you may think, checking your credit score is free and does not affect your score. You can check your credit score online using Credit Karma, Borrowell, or Mogo. Borrowell and Mogo provide you with your Equifax credit score, and Credit Karma provides you with your TransUnion credit score.
15. Create A Side Hustle
A side hustle is anything that creates additional income for you aside from your main source of income. The great thing about side hustles is that there are many different opportunities to choose from depending on your preferences and time available time spend. It can be as flexible of an income source as you want it to be.
Side hustles can range from something a simple weekend gig such as shoveling snow and mowing grass for others during your free time, to creating an online business and a growing a whole new stream of consistent income.
Online businesses are great for those on a tight budget, as the startup costs are far less than opening a brick and mortar business.
There you have it – 15 practical ways to save money on a tight budget.
I hope you’ve learned something that you can apply to your every day life. At the end of the day, we all want to keep more of our well-deserved money!
Got your own money-saving tips that you’d like to share? Let us know in the comments below.