Wednesday, February 15, 2012

5 Steps: How to Save Money If You're Poor (Like Me)

Just because you don't make a lot of money, doesn't mean you can't save some. Technically, my income is below the poverty line in Canada, and by 'technically', I mean it is. If you're like me (no special skills, suck at math/ science and socially awkward) you have to go the extra mile and do what others are afraid, scared or mostly embarrassed to do. First, lets be clear, if you don't have a job and don't want to work at all then sorry, I can't help you. You must have at least some motivation and inclination to work.

1. No Debt - If you're poor, and you have debt, or worse, high interest credit card debt, it is virtually impossible to get ahead. Even if you save and are good enough to get a decent return in stocks, the 20% interest on credit card debt effectively cancels out any returns, and you are still in the hole. So pay off your debt, or never go into debt.

2. Set Achievable Goals - If you're poor, the savings process starts off very slow and can be frustrating when your trying hard to save but have very little to show for it. You must start small; save $50-100 per pay check and build up from there. One of my favorite small goals is to not spend more then $5 a day on discretionary items (including food); some days I go way over but if you're trying hard, you will save extra.

3. Think Long Term - Investing is a marathon not a sprint. The money that you save should be put away until you are financially secure. Being a long term investor sounds easy, yet when you wake up one day and all your investments are down and doom and gloom is preached on the television, the easy thing to do is sell. Not to mention, the iPad you always wanted just went on sale. Will you cave and spend? (Wait, iPads never go on sale)

4. Think and Act Independently - I find this the hardest thing to do for most people. Generally, people are slaves to society and what other people deem as normal. In my late teens, early 20s, friends of mine would spend a lot of money partying/ drinking, going shopping or collecting dvds etc. You must create your own path. If you want to get ahead financially, and you're poor (like me), you simply can't afford to do the above things frequently. Otherwise you'll just be like everyone else; broke and in debt.

5. Consolidate Your Expenses - If you're poor, and you just make enough to cover rent, you have to decrease your fixed expenses if you want to get ahead. The easiest way to do this is find roommates to move in with, or downsize your living space. Maybe there's a nice basement apt in a neighbourhood that has some character (ghetto) that will cut your rent bill in half. If you took out a mortgage you can't afford, admit your mistake, sell and downsize. As a renter, my advice is go the roommate route or find a significant other to split rent.

There should be a number 6 - embrace thrift. We don't need 95% of what we buy. If you spend $20 a day on random shit, that's $7300 a yr, a decent amount to begin saving. The more thrifty I get, I realize how society pushes us to consume things we don't need. As a young kid, I use to feel like crap after I bought an expensive pair of shoes because I knew I didn't need them and they wouldn't make me any happier. All that was left was a whole in my wallet and empty feelings. Remember that feeling, because you don't have to feel like that again if you take control and act independently. (see #4)

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  1. I, too, am poor and I find all your advice very practical. I would surely follow those because I want to experience a better life. In any case that you're in financial problem though, I know a good lawyer company that might help you--it's wites & kapetan p.a..

  2. Much thanks for the kind words Maia!

  3. I must say that always check on kijiji for items. Let someone else pay the new price, only to not really use it, and sell it for half price or even less! Its a simple way to make your dollar go farther

  4. Thanks for the addition Jason. I agree, always buy used.

  5. I love to hear how to fix your money saving problem but I will take this experience to hear because I'm poor so I have to stack my paper to