Hi readers! This guest post is brought to you by Jacob from Dollar Diligence. He’s put together a list of simple tips to improve your financial life. These tips apply to everyone, including people on a shoestring budget. So don’t expect tips about skipping your morning latte. These are real, actionable tips that can help you get ahead.
By Jacob, the voice over at @DollarDiligence.
Let’s face it, a lot of financial advice about saving is geared toward folks who actually have some money to save. Of course there are a ton of obvious financial life hacks such as opening new bank accounts just for saving that can work for most people. But what do you do when you just can’t find the extra money to put in there?
Here are 6 personal finance tips for people that have small budgets but are still trying to get ahead.
Know where your money goes. This is the biggest one. Before you can see where you can pinch pennies, you have to take a long hard look at your finances. If you have to sneak in a glass of wine first, go for it, but you really need to take an honest look.
If you’re not sure where to get started, there are budget tracking apps such as Personal Capital, or Good Budget, or Mint that automatically organize your purchases based on where the money was spent. If you want to go old school, save all your receipts for a month to see where you’re spending the most.
Use CASH not your debit card. Once you know where your money goes, you can start budgeting based on that. Say for instance your average money spent on groceries is about $50 a week. Rather than use your debit card when you go to the grocery store, pull out cash and spend that instead.
When you’re using cash, you actually spend less. For some reason, it feels so much more real when you hold those bills in your hand. Not only that, but you won’t slip in those extra snacks when all you have is the cash to spend.
Negotiate for better deals. Before you cancel all of those extra services, give the service providers a call and see if there are some better deals out there. I know every time I call my cable provider, I manage to get three free months of HBO!
Usually there is some kind of deal they can offer to basically keep you using their services. If the service is important to you, negotiating is a good option to get lower rates, even temporarily. While you’re on the phone with the service provider, you can inquire about the details of your plan. Sometimes you can find yourself paying for a service you don’t even need!
Reduce the cost of current debt. Regardless of if you’ve been paying your loans diligently or you’ve been deferring them because of monetary issues, you can look at refinancing credit cards and student loans. I believe in paying down debt as quick as possible.
Refinancing higher interest debt to lower interest rates can expedite your payoff timeline. Credit cards can be consolidated, but also if you have been regularly paying your credit cards, you can look at lowering the interest rates or the monthly payments. When it comes to student loans, all types can be consolidated and refinanced together.
When you refinance, you can adjust your term length, and if possible, pay down your student loans faster. But more importantly, a lower interest rate can equal significant savings for the average graduate who is leaving campus with about $28k in debt.
Set a modest and attainable savings goal. Finally it’s time for saving! At this point, you should have a little extra cash flow you freed up. This should start going into savings. When it comes to saving, you can do it two ways.
You can save as much as possible, keeping your budget tight but being able to save a lot more per month, or you can just save a little and just have extra money in your bank account.
Either method works, but if you’re a person that finds it difficult to hang on to money, you’re better off saving as much as you can from the front end. There are even savings goal calculators to help you figure it out!
Treat yourself sometimes! Keeping good finances is like eating healthy. You can eat healthy every day of the week, but sometimes you just need to have a cupcake. When you’re taking care of your finances, it’s absolutely okay to treat yourself sometimes!
Do something that makes the money spent definitely worthwhile, but keep it as an exclusive treat! A cupcake a day is not an acceptable diet plan, just like sneaking in extra purchases regularly isn’t good for your finances.
All of these tips can really help those with modest incomes take control and finally get some money socked away for a rainy day. You may have been putting personal finance off because it’s too depressing to contemplate how broke you are, but things like making a budget and putting away money can also give you a sense of control over your finances and your life.
Aside from his full-time job as a high school teacher, you can find Jacob blogging about personal finance, reading books about history, and figuring out which kind of puppy to get next. Follow him on Twitter to keep up with him!
12 thoughts on “6 Tips to Life Hack Personal Finances for Small Budgets”
We’ve been doing a budget experiment in our household all this month. We’re doing cash-only for groceries and personal spending, and we set the limits really low ($30 and $50 per week, respectively). The idea isn’t to do this all the time, but to understand if/how we could function should we ever want to save up for a particular splurge. It’s been surprisingly easy, especially the groceries. I’ve been writing up weekly summaries over at thiswholethirty.wordpress.com.
Hey yo I disagree on the cash thing nahmsayin. A lot of those credit cards be givin you 3% back for usin em. If you got some discipline y’all can save a lotta money usin them cash back cards.
Thanks for your comment! I firmly believe cash is best and credit cards are a very slippery slope.
as with @hoodfinancial I also believe that credit cards are the way to go, as long as you have the financial discipline to manage them correctly. We have never paid a late fee or any interest as we only buy what we have the funds to pay for. It can definitely be a slippery slope but if you are committed to improving your finances, credit cards are a great way to go. They allow you to build your credit which can potentially save you hundreds of thousands of dollars over your lifetime as you have access to significantly lower interest rates. Then there is the associated bonuses/ rewards: we opened a personal and business credit card with Southwest two months ago and after spending just $2000 on each card (money that would have been spent anyway) we received $1300 in Amazon giftcards which will be great for Christmas shopping. We also achieved companion status so that when my husband and I travel on Southwest before December 31st 2018, one of us always flies for free. Discipline is the key.
Thanks for your input and for reading 🙂
Great post. I love the reference to treating spending like a diet. Treat items that aren’t necessities as “junk food”, that should only be consumed on rare occasions. In my opinion, the best way to save, even for a small budget, is to “pay yourself first”. Start by setting a percentage of your take-home pay aside immediately in a savings or 401k the instant you get paid, even if it is 1%, people can be surprised that they can live on even less than they already do by saving this way.
Thanks for your tips and for reading!
Love it- Really great read! Don’t forget about getting an emergency fund set up for those rainy days. Having a good three to six months of expenses set aside has saved our bacon quite a few times.
Thanks for writing!
Absolutely! I follow the Dave Ramsey plan so we have a $1000 emergency fund until our debt is paid off, then we’re going to build the six month fund.
Caitlin, definitely stick with the Dave Ramsey plan. It is the most common sense approach out there and it simply works through your own hard work and diligence. My family busted our behinds to pay off $54,000 in 10 months working his baby steps and learned a lot in the process beyond the stuff he teaches. Right on about avoiding credit cards. Studies show we spend more when we use them making any “cash back” and “rewards points” a moot point. Good luck and God bless you.
I love the DR plan! Recent changes in life have led to me taking a little break from BS2, but I will be back on track soon!
Life happens! It is nice to have more wiggle room and a plan to navigate it. Good luck to you and God bless!