12 Ways To Save Money on a Tight Budget

Are you looking for ways to save money on a tight budget?

It may seem impossible for the 54% of Americans who live paycheck-to-paycheck or the nearly 40% of people earning $100,000 per year who are also similarly strained. There is no shame in living this way, but we believe you can fix your situation. By making some changes and thinking out of the box, you can have breathing room and reduce your stress.

It may be more challenging to save money when working with stretched resources, but you’ll likely have greater motivation to save money.  Many people have been where you are now and have transitioned to better ground.

Saving money is easier when you have a purpose, like setting money goals. You may need motivation, determination, and perseverance to tackle any bad habits or mistakes you want to correct.

It may be challenging to make changes, but it is pretty satisfying to discover that there are manageable costs to cut out of your budget. That’s the low-hanging fruit you can grab.  Having breathing room and being less financially stressed will feel good.

You can have more financial flexibility to take care of your current needs and plan for your future by saving money. That starts when you look at your current financial situation and realize you can start saving more money.

Here are 12 ways to save money on a tight budget.

12 Ways To Save Money on a Tight Budget

1. Start With the Budget and Examine Your Categories

If you don’t have a monthly budget yet, you need to create a budget using a type that fits your lifestyle. The 50/30/20 budget rule is often a rule of thumb to divide your after-tax income (i.e., take-home pay) into three broad spending categories:

  • 50% go toward necessities.
  • 30% for your wants or discretionary spending.
  • 20% is for savings you can allocate to pay down debt, emergency funds, investing, and retirement.

However, it is a good idea to review all significant budget categories periodically. Looking at your incoming cashflows coming into your household (i.e., your total income) minus the monthly recurring bills reflects the basic living costs you need to pay.

Typically, housing, food (i.e., groceries and eating out), and transportation are our highest costs,  accounting for 63% of total household expenditures.   However, looking at all spending categories, you may find cutting small amounts that provide you with meaningful savings.

If a 50/30/20 budget doesn’t sound like a good fit, try these other budgeting methods.

Related: 11 Best Apps To Make Money Fast

2. Cancel Unused Subscription Services

For example, you may be splurging on entertainment, especially streaming services, without realizing it. Your Netflix bill doesn’t seem much when you review your monthly bills, but we tend to tolerate higher provider costs.

JD Power’s latest study showed that the average household had increased the number of streaming services used to 4.5  with a monthly spend of $55 (compared to $39 just a year ago). Despite more competition, these providers have not been shy to raise their prices, given the higher demand for more services. It may be time for us to limit some of these services, especially if you still have traditional cable services. There are many cable alternatives out there, but limiting how many you subscribe to is an easy way to reduce your monthly expenditures.

It is not just your streaming services but all of your subscriptions that you should review. Look closely at your phone data plans, cloud storage, Apple,  Peleton, and other gym memberships, yoga, meditation, and such.

Cancel any paid subscriptions you are no longer using at home. Many trials we sign up for automatically convert into a paid subscription, and we miss the opportunity to decline the service.

3. Build an Emergency Fund

Having savings in an emergency fund for unforeseen events may seem counterintuitive in a tight-budget household that finds it challenging to save money. Yet, almost 40% of Americans can’t pay for a $400 emergency.

However, when emergencies arise, and you don’t have the funds, you will likely reach for your credit card to pay for that car repair bill. That means you will find it difficult to pay that card bill in full and add to your growing balance in what becomes a vicious debt cycle. Building your emergency fund, however small, will help shield you from getting further into this cycle.

Start small and work your way up to $1,000 saved. Then, over time, build your emergency fund to an ample amount that can cover six months of your basic living expenses.

4. Pay Yourself First

Make savings a priority by paying yourself first. Paying yourself first requires you to allocate money to savings as soon as you get paid before you have a chance to spend it on something else. One of the best ways to do this is to automate transfers to separate accounts, such as a portion of your paycheck to a high-yield savings account.

You may find it hard to allocate a large percentage of your take-home pay to savings. You can start with a smaller portion, like 5%. Making savings a more significant amount will help you fulfill financial goals for buying a house, a car, going on vacation, and investing in your future.

5. Automate Your Savings

As mentioned above, one of the best ways to save money is to make it automatic. By automating your savings, you can allocate a certain percentage of your paycheck to a savings account or tax-advantaged accounts like retirement savings or a 529 college savings plan.

When you use pretax savings options for your 401K retirement, health savings (HSAs), and 529 accounts, you’ll be making these savings work for you, especially if you earn your employer’s 401K match contribution. Sign up for Acorns or other Roundup apps so that you can invest spare change to your investment account.

6. Live Within Your Means

By tracking your spending each month, you may find that you spend well over what you earn. As a result, your cost structure may be out of sync with your annual income.  That is a recipe for disaster in the long term.

Cut your spending so that you keep at a level below your take-home pay. Just because a common budget rule allocates 30% of after-tax income to your wants doesn’t mean you need to spend that amount. Save more of that money instead so that you can reduce your debt, add to your emergency fund, or invest in the stock market.

7. Save on Grocery Shopping

Another great way to save money on a tight budget is to save money on grocery shopping. Make sure you have a good shopping list and don’t go when you are hungry. Otherwise, you may find you overspent on things you don’t need.

The average household spent $8,169 on food (including dining out), or 9.9% of pretax income in 2019. Depending on your shopping habits, this is usually ripe (sorry for the pun!) for reduced spending. Grate your cheese, cut your fresh produce, always look for generic brands, and don’t bulk buy perishables.

Saving money on groceries through couponing or other methods will help keep your budget in check.

8. Make More Meals at Home

It is healthier and cheaper to dine at home rather than going out to dinner every night. I lost a few pounds during the pandemic when we skipped eating out or ordering food. We used to eat out most nights, given our busy schedules, until we had kids.

When cooking, you tend to buy fresh produce and healthier food, and only the occasional Cheetos for the kids. Mindful eating and spending go together very well.

While you can save money eating out, if you’re on a tight budget, it’s best to eat as many meals as you can at home.

9. Shop Around and Negotiate More

When you review your monthly recurring bills, you assume that the rates you are paying are non-negotiable. That’s probably true for many, but not all of them. For example, during the worst of the pandemic, many people lost their jobs and found themselves unable to pay their bills and were able to negotiate with their providers. As a result, you may have more bargaining power than you think.

It is a good idea to understand your monthly bills and the going rate for their services and their competitors. It is always an excellent time to do some comparison shopping.  Become a detective, review bills, and compare them to competitive prices you see online. We constantly find errors in our medical or dental bills, which are particularly worth looking closely at. Besides errors, you may be paying higher prices for services you didn’t know you were paying for and don’t need.

Also, check out your car insurance premiums. If you and your family have good driving records, you may be due for a tick-down in price. Of course, if you just put your 17-year-old son on your insurance as we did, you may want to wait longer.

Your cable, TV, internet, and cellphone bills can be a costly part of your budget. However, your providers face increased competition and may be more willing to reduce your prices than in the past or consider eliminating some services.

You could also negotiate your next lease, but only if you are a tenant in good standing with your landlord.

10. Comparison Shopping

Whether for groceries, a car, services, or non-essentials that you want, do comparison shopping. It is a very satisfying feeling to pay a lower price after looking around.

I enjoy the hunt for bargains almost as much as the item itself. But, on the other hand, my husband often is more of an impulsive shopper than I am.

As we are opposite ends of the shopping spectrum and we often clash when shopping for the household. I admit that I can go overboard with spending too much time looking for mattresses, for example, when we moved a couple of years ago. We spent too much time sleeping on borrowed Airbeds, so I nearly had a family revolt on my hands. Finally, we all ended up with excellent mattresses at great prices.

The point is, you can save quite a bit of money by simply comparing your options.

11. Better Handling of  Your Credit Cards

The convenience of credit cards is often a double-edged sword. Credit cards can become toxic very quickly. They can cause overspending for things we buy impulsively and can’t afford to pay in full. But, on the other hand, if you are only paying the monthly minimum required, your issuers are happy to your detriment.

It becomes hard to manage when you add debt to your balance at exorbitant interest rates, particularly if you are trying to save money on a tight budget. Instead, pay these bills in full. If you are unable to do that, reduce your spending and pay for some things in cash.

Americans carry a lot of debt, not just on their incredibly costly credit cards. 20% of Americans use 50% of their income to repay debt. The more obligations you have, the less money you have to save for emergencies, retirement, or invest for the future.

One of the best ways to save money on a tight budget is to avoid accruing more bills via debt.

12. Make Extra Money

Saving money is one way to get more money, but you can only cut so much. It is often hard to save money from solely reducing your expenses. If you have spare time, you should consider making extra money so that you can contribute some of the added income to bulk up your savings.

Thus, one of the best ways to save money on a tight budget is to expand that budget.

Think about where your interests lie and what you like to do to inspire you to boost your income. For example, you may be able to work online from home, use your car to become a driver, or leverage creativity and skills to write or be a proofreader.

There are plenty of ways to get quick cash when you need it and even some pretty weird ways to make extra money.

Related: Low-tech Budgeting Solutions – Budget Binder

Final Thoughts

It is a challenge to save money on a tight budget. However, it is doable with hard work and determination. These 12 ways to save money on a tight budget will help you get started. By consistently saving money and making it work for you, you will have better financial flexibility for your future.




Linda is the Founder of TheCentsofMoney.com. She's out to teach financial education and inspire a greater comfort about one of life’s great stresses. She uses the financial skills honed by decades of professional experience to help others.