As a financial advisor, I regularly speak to fellow young Australians on how to save money, and how to do it fast, even on a low income. In this article, I will share with you my method to save at least $500 a month, every single month, saving you at least six grand a year.
At the age of 18, I had saved up enough to move out of my parents’ place, and be independent. I will explain exactly how I did it, and what my lifestyle looked like so that you can replicate my process and do the same thing for yourself.
Now, before I get started showing you how to save money, I want you to think about what your life would be like if you had $10,000 in your bank account, within two years. Imagine what that would be like. How would you feel? I guarantee that you will feel a sense of security and freedom. Freedom from things that were holding you back before.
Freedom from everything that you felt limited you. Freedom from the stress that came with working a low paying job and not be not knowing for sure whether you could afford to pay the bills. Freedom to know that even if you work a shitty job that doesn’t pay very well with a mean boss that’s counting every second of your bathroom break that doesn’t give you any benefits; no sick pay, no holiday and no flexible time for you to even come in a bit late one day.
Freedom to know that you don’t have to work a job like that that you have options in life. Okay? That’s what I want you to know. Two years from now! $10,000! Freedom fund!
Here’s my thoughts on how to save money
So let’s get started. First things first housing. Housing is the most expensive thing you will pay for every month and chances are if you are low-income you are a renter.
Choose housing carefully
If you are still young enough if you still live in the same city as your parents and if your parents are okay with it, move back in with your parents. There’s absolutely no shame in living with your parents. Apparently 30% of adults under 30 years old are still living with their parents. So this is considered normal. No shame whatsoever.
However, I don’t want you to move back in just so that you could have more spending money for yourself. What you should be doing is paying your parents a reasonable amount of money in rent. It depends on where you live and the cost of living in that area. Okay?
Make your parents feel like they’re at least getting some money for the fact that you are living under their roof again. Therefore you’re using up some utilities. You’re using up some of their food if they’re cooking for you. Things like that, so pay them a bit of money, however in the meantime while living with your parents save up the money.
Save up your money so that you can move out and become a financially free adult and so that you don’t have to rely on your parents anymore. Don’t just use the extra money that you have to spend on whatever. Set all that money aside. Set like 50% of your income aside.
This is actually what I did in my first full-time job. I was being paid a salary of $320 a week in cash. And if you did the math I made like $13 an hour.
So what I did was I was living with my parents however I saved $500 every month into a savings account – my freedom fund – and then the other $500 I think I spent less than $100 of it toward my public transportation and I spent some money on food. I would pay for my own lunch ingredients and I paid for my own phone bill and then the rest of that was spending money for myself.
Plan your next move
Make sure if you’re living with your parents to have a game plan to move out. Have a game plan. Have a target date and work toward it. Now if you don’t have that luxury of living with your parents and you are a low wage earner you can still do it. You can live in an apartment with roommates. You can rent out a single room. If possible, you can even have a roommate in your room so that you can split the rent for that room in half. It depends on where you live though because I think in some cities, landlords are a bit more strict.
As long as you pay the rent on time it’s okay. So if you’re young enough to still do this, have a roommate to share your apartment. Another thing to consider is to rent the cheapest apartment or room possible.
Yeah I know like… what? however you can’t afford it. Okay you’re a low wage earner. You can’t afford to have a fancy apartment. You can’t afford to have a gigantic room. Chances are the cheapest room is going to be the smallest room however that’s okay because that will also encourage you to buy less stuff. If you have a small room you don’t have that much room to put your stuff right?
Chances are you’re not going to spend money on stuff anymore. In regards to housing I want you to let go. Let go and release the idea that you deserve to have more that you deserve to have more privacy from people and you deserve to have your own space. Probably because you’re thinking well I’m 25 already. By now I should have my own my own place.
Or I’m 40 I shouldn’t be having roommates anymore. Let go of the idea. Or even I’m married… I shouldn’t be having roommates anymore. You could be married and could still have a roommate. It’s completely okay. In fact next year my significant other and I are thinking about buying a 2 bedroom apartment, and we plan to rent out the other bedroom so I could get help paying my mortgage.
There is no shame regardless of your circumstance in having a roommate. I think one time I was at the station waiting for the train to come and I was overhearing this conversation between two teachers and they’re both Millennials and one of the teachers said “Oh my God I feel like it’s so hard to keep up. I pay like 50% of my income in rent.”
Then the other one said “Oh my God I just moved in with my boyfriend and I just got into a ton of credit card debt because I wasn’t ready for the amount of money that was about to spend.”
Listen, ideally your housing expense should be less than 25% of your gross income. And if you have to go up a bit maximum 30%. 50% and you’re pushing it. I went up to that teacher and ask him Why are you spending 50% of your income in rent?” And he said “Well I really want my own place. I don’t want to have roommates. I really like my privacy.”
This guy was willing to spend a small fortune for a one bedroom apartment, so that he could live alone instead of renting out a room-for-rent and then saving the difference for his future.
Reduce cost of utilities
The next thing that you have to save money on is utilities. Utilities… you’re always going to have to pay for it. You don’t have to hate paying utilities. I meet a lot of people and they hate paying their bills. Even when I was low-income I loved to pay my utilities.
You know why? Because I made sure my utilities were so low, that it’s guaranteed that I can definitely afford to pay on time every month. I love to pay my bills. So how can you lower your bills? I think the biggest way to lower your bills is to control the heating and cooling in your apartment. In the winter, set the heat to like 20 degrees, and keep it around the same in the summer.
And you might be complaining to me… “Oh my God. That is way too cold for the winter. And that is way too hot for the summer.” however you know honestly if you’re trying to learn how to save money, then you are going to have to make it your goal, and there are sacrifices to make. So what you have to do is you have to find other ways to keep warm in the winter and find other ways to keep cool in the summer.
You might not even stay in your apartment during the summer. You might choose to go out everyday choose to hang out at the library or the cafe rather than staying at home. It could mean in the winter you’re going to have to bundle up. You have to wear socks. You’ve got to wear your scarf. You’ve got to put on your hoodie so you can keep your head warm.
One easy method I use to keep my heating and cooling bills low every month is in the winter I cover up my windows with window insulation because I read that 10% of the heat in your home escapes through the windows and through your doors. So if you could keep that properly insulated, then you could save a lot of money. I also installed door sweeps on the bottom of my doors to make sure that wind doesn’t come in from under the door.
Because that also contributes to how cold my apartment will feel. And in the summer I like to keep my curtains closed during the peak sunlight hours because it’s the sun that comes into the apartment that really adds to just how hot it feels. So if you could block out as much sunlight as possible then it definitely helps.
And then for electricity another way to save money is to switch out your light bulbs. If you have those old incandescent light bulbs what you could do is you could buy CFL or LED light bulbs because they’re more energy efficient. So this is an upfront cost however in the long run it’s going to save you more money. And when you leave the room please make sure that you turn off the lights.
Even if you’re out of the room for just a minute every minute that you do not have to turn on the lights definitely adds up and you will have more money in your savings.
And lastly to save money on electricity. I like to turn off my electronics when I’m not using them. And on top of that not just turn them off however also unplug them because even when an electronic is not in use it’s still sucking phantom energy. Now if you find it too inconvenient to do that every day then what you could do is you could buy a power strip and then when it’s nighttime and you’re not using your computer anymore yada yada your TV then what you could do is you could just flip the switch. And then in the morning flip the switch back on.
Be smart with your mobile phone
Next up is your mobile phone bills. Did you know that the average adult pays $80 a month for their mobile phone bill? Wow that’s a lot of money. I have never had a mobile phone bill that was more than $30 a month in my life. When I was a teenager, I used prepaid mobile phone plans. Right now today my mobile phone bill is only $25 a month.
How do I manage to do that? Well I’ve never gone with the traditional big players, like Optus, Telstra, etc. They’re very expensive and they lock you into this two-year contract that you’re gonna overpay for. I always go with a prepaid plan.
I’ve told people to switch to a prepaid plan to save money however some people are resistant to this idea because they’re afraid that the reliability of the service isn’t as good and that their calls are going to drop however come on guys it’s like 2020.
Probably your calls would have dropped back in 2009, nowadays there’s so many mobile phone towers and service is very reliable with prepaid plans. So you might want to consider that. And I also love the idea of prepaid plans because if I find a better deal I’m not locked into a contract right now. I’m free to switch to another plan with another provider next month if I’m not happy with the price I’m paying.
Reduce internet costs
Next up is internet how to save money on internet. Look at all the plans that are available and get the best plan for you. You have the option of looking at the different NBN providers and plans and getting the cheapest one. That’s what we did. We pay $50 a month for our internet bill and it is definitely enough for what we need.
If you want to be even more extreme, you might even consider not paying for internet at all. I’ve read some stories. Some people are very extreme. So what people do instead is they go to the library or they go to a cafe for Internet. You know nowadays especially if you live in a big city there’s Internet available everywhere. You don’t necessarily need to have internet at home.
Find cheaper transport
The next thing you have to do is keep your transportation expenses as low as possible. Here’s the deal. If you’re working a low-wage job that pays little, then why work so far away? I know some people who make $15 an hour and they work a job that has a one hour commute each way. Why?
If you’re going to be paid like that you might as well work or start looking for a company that’s much closer to home, and that pays you the same. I know you probably enjoy your job, however if you’re in this kind of situation I would just try to find a job that’s closer because you’re not getting paid to drive all that time.
Instead of taking a train to get home after work, I would walk home or I would ride my bicycle to get home because both were free. If you’re not lucky enough to live in a city or town that has good reliable public transportation and it’s just also not pedestrian-friendly not bike-friendly then you live in a car city and you just have to own a car, however you don’t have to buy a new car. You don’t have to buy the most expensive car.
And you don’t have to lease your car. You don’t have to buy a fancy one. Instead you could buy a cheap used car that’s been maintained well throughout its lifetime and it’s also fuel efficient. And I recommend you buy this car with cash outright.
If you really don’t have the funds to buy a car with cash then you’re going to have to finance. Otherwise how else are you going to get to work? Try to get the best interest rate possible and try to negotiate the price of the car down as much as possible too.
Rarely eat out
Lastly, you’ve got to save money on food because you need to eat food in order to live. Here’s the thing. If you’re on a low income, you honestly cannot afford to eat out, ever! When I was making very little money I think the most I ever ate out was once a month. It was like a special date with me and my boyfriend and expensive to me was $25 for a meal.
Because honestly when you’re making that little and you do the math you’re just thinking to yourself “Oh my God it took me three hours of work just to make this money so that I could eat this lunch. It’s not worth it.”
So what you could do instead is cook every meal and cook every meal from scratch because that’s cheaper than buying processed, packaged, or frozen foods. It really is. If you buy all the ingredients whole and you chop them up and you cook them yourself you’re going to save so much money. Another way to save money is by eating mostly fruit and vegetables.
A vegetarian diet is much cheaper. I think a lot of people claim that eating vegetarian is too expensive however honestly if you look at the math the price per kilogram for vegetables is much cheaper.
It’s much cheaper. So when I was low income I mostly ate vegetarian. I think in a given week I eat about half a kilogram of beef and half a kilogram of salmon and that’s it. Think of how much money you could save if you stopped eating so much meat. I know it’s a very controversial opinion, however if saving money were so important to you that you were willing to change your diet for it please give it a try.
What else did I do? Well I didn’t buy anything. I lived like I was broke because I really couldn’t afford to buy anything. And if I had to buy something everything I bought was either used from Gumtree or eBay.
All the clothes I bought were secondhand. All the furniture I got was secondhand. Almost everything I owned was secondhand. And I didn’t even own that much stuff. I think all my stuff at that time in my life could fit into two suitcases. Rather than spending money on stuff I made sure to have cheap hobbies.
Whenever I wanted to hang out with my friends I would have to find either free or cheap events that we could go to and we would have to eat at cheap restaurants.
Summary on how to save money
Honestly if I had to do everything all over again I would do it exactly the same way. I have no regrets in living this very cheap frugal lifestyle. And after a while it actually felt very comfortable because I got used to it.
The human psychology is very interesting because regardless of the situation you’re in it can help you by adapting to a certain form of lifestyle. And you know after a few weeks you get used to it and actually ends up being very comfortable and you learn to be grateful and content with everything that you have.
This is why when people progressively earn more money throughout their career they tend to buy more stuff and they adapt. Their brain adapt to this new lifestyle and all of a sudden eating out for lunch every day becomes a norm. It’s because your brain adapts to whatever situation and environment you’re put in. So there you go.
That is how I saved $500 a month every month on a low income. What is one thing that you can cut back on this month?
About the writer
Lucy Symmonds is a Melbourne based financial advisor, who enjoys eating at home and live music. Lucy currently works at a large financial institution.