If you’re asking how to save money when you have no money, your financial situation is probably less than ideal, and you’re probably feeling more than a little stress over your lack of funds immediately available in your checking account, let alone some imaginary funds in a dusty savings account.
When unexpected expenses pop up (and they do pop up) you might find yourself wishing you had
We can hash out a plan, and give you some steps to take over the next few months to start setting aside money for your emergency fund, but the standard suggestions are going to take some time to make a real difference, so I’m going to suggest drastic life changes to help you save money when you’re broke.
These changes will be uncomfortable and difficult.
But if you’re in real dire money trouble, I suggest taking some drastic actions to get your financial situation under control as fast as possible remind yourself this is only for a short time.
Once your start looking at the long term changes we can make to work towards our savings goals.
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1) Downsize Your Major Expenses Drastically
This first step is the most painful, but it’s also the step that will provide the single most benefit if done correctly. Downsizing your major expenses is one of the best ways to have much more money without earning any more money.
Major expenses that can be downsized usually include your home and your vehicle, and in some cases, your cell phone bill.
No one wants the hassle of moving, and if you have kids or need to be close to family it might not even feel POSSIBLE to move… but generally, where there’s a will, there’s a way.
Small changes are not going to cut it when you are broke and need to save money, so find a way to downsize your major expenses – even if it’s for a short time.
If that means trading in your new car for a much less nice car (or going without a car – taking public transportation perhaps – which has the benefit of giving up car insurance payments also), or moving out of your 2k/month mortgaged home to a 1200/month rental, so be it. (I’m not saying renting is better than owning, I’m saying if you can’t afford to own right now, that’s what it is. Renting comes with the benefit of not paying for homeowners insurance.)
When you have no money (or not enough money to cover your expenses) your expenses NEED to shrink.
2) Cancel Subscriptions
How many subscriptions do you have?
You might not even think of these because they are automatic deductions. But if you have Spotify and Hulu, you are spending around $200/year just for the basics.
Does you have a gym membership, wholesale club membership, Netflix etc.? Anything else that comes out monthly that’s not a necessity (I’m not suggesting you cancel your life insurance).
Cancel it ALL!
If you regularly don’t have any money left at the end of the month, you can not afford a single subscription service – no matter how much value you think you get from it.
3) Implement a No Spend Month (Starting Today)
Give yourself a chance to get ahead right now by implementing a no-spend month IMMEDIATELY.
Don’t wait for the calendar to roll over to a new month, cut yourself off today. (If you wait for a new month to start, you might find yourself pre-buying things to get you through the no-spend month… which honestly defeats the purpose. Take a drastic step and start NOW.)
This means NO discretionary spending for one month – not a single cup of coffee you didn’t make at home.
(Make a no spend month easier for yourself by unsubscribing from any marketing emails, limiting grocery shopping to a single trip per week and embracing the idea that this is only for a short time, a little bit of sacrifice to meet specific goals!)
Of course, you still have to pay your regular bills / essential expenses, but all the money you spend outside of essential bills should still be sitting in your account at the end of the month.
When you leave the house, don’t even take your debit card with you.
You can be really drastic with this – and incorporate food to some degree – challenge yourself to eat out of your freezer or pantry, to invite yourself to a friends place for dinner etc.
You could also be slightly LESS drastic and give yourself a food allowance during your no spend month… but make every meal at home!
A no spend month will have three massive benefits:
For one thing, it will allow you to start to be aware of impulse purchases. Every time you THINK of buying something – but don’t – write that down. You’ll become painfully aware of your spending habits… and this is a good thing!
You’ll probably discover that a lot of money sneaks out of your wallet, spent on unnecessary items with little thought through out the month.
It will also allow you to start recognizing how much instant gratification we get from shopping – and become comfortable with delayed gratification.
Lastly, you WILL have extra money left over at the end of the month. (That money might still need to go towards credit card debt instead of retirement savings, but so be it.)
4) Track Your Expenses – Every Penny
Knowing what you make is only a small portion of budgeting when you are trying to save money when you’re broke. You must also be accountable for every penny that you spend.
When you take accurate notes on what you spend, you might find you have just a little more than you thought at first.
But I do mean that you must track every penny you spend! Even track your daily 79 cent fountain drink…because that adds up to $205.40 yearly!
If you start this today, at the same time you start your no spend month, it will be much easier to keep track of your spending than it normally is, because there will be fewer transactions to record.
This exercise will help you identify areas where you can cut back or make changes to free up funds for saving.
5) Implement a Budget – And Stick to it
Once you have a clear understanding of your expenses, create a monthly budget that takes into account your income and essential expenses.
Allocate funds for necessary items such as housing, utilities, food, and transportation first, and then consider any discretionary spending.
Sticking to a tight budget is hard when you’ve never done it before – really really hard… but so is being broke and miserable all the time.
If you make budgeting more of a game than a chore, it can even be fun!
Explore ways to reduce spending at the grocery store, learn to comparison shop, become allergic to late fees, but maybe consider allowing yourself a single night out at happy hour once per month – just to keep life fun!
6) Explore Ways to Earn More Money
Just like moving house, no one feels like they have time for another part-time job or new side hustle, but there’s no free money and if you have a low income and high monthly expenses, the only way to meet your future financial goals is to earn more money (at least until you’re out of the hole).
Even earning a small amount of extra income can make a huge difference in your longer term financial outlook.
In 2023, the gig economy is everywhere, and there are endless ways to earn extra money in your free time.
7) Pay Down High Interest Debt
The next step is to put everything you saved during your no spend month towards your high interest debt, and anything extra you can earn. If you get a tax refund, you can put that towards high interest debt also.
High-interest debt can quickly eat away at your income, making it difficult to save money.
Prioritize paying off high-interest debts as quickly as possible, and avoid taking on new debt.
If you can, consolidate your debt to a lower interest rate or negotiate with creditors to reduce your monthly payments.
8) Start Actively Saving
As long as your monthly bills are paid, and you don’t have high interest debt, start saving now.
Open up a separate savings account that does not have fees or an opening minimum–and start saving!
Challenge yourself to put in 25% of the total you saved on your no spend month EACH month.
If you can, set up automatic transfers from your checking account to move small amounts of money (say $10 per week) into your savings account.
It should feel just like any one of those subscriptions you cancelled – you probably won’t even notice it!
If you save $10 per week this way, you’ll have $520 at the end of the year.
That doesn’t sound like a huge amount of money, but it’s way more than 0… and honestly it’s not the $520 that will be the biggest benefit of these drastic life changes. You’ll be learning how to make better financial decisions and over time, your bank account will thank you!