In my opinion, anyone offering financial advice must define who their target audiences are, lest people following tips that are not meant for them.
The tips I am going to share in this article all center around managing money. The tips are not for the high-earners or the middle-class. Some day, I will pen down an article that’ll address their money worries. But today’s article is exclusively for those who belong in the lower-income strata.
Rent, don’t buy
If you are on a low income, rent instead of buying. This trend is getting popular. In Germany, almost half of the population live in rented apartments.
The United States is not far behind. In the year 2016, the home ownership rate hit ten years low, partly due to rising mortgage rates, and partly due to people’s aversion to investing in properties and paying mortgages for the next thirty years.
Of course, renting is not a cure-all solution to your money woes. If the apartment you are renting is located in an upscale neighborhood, the cost would be on par with mortgage premium rates. Still, renting is better because it saves you from shelling out a large amount at once, and puts you one step ahead in your money-management journey.
Embrace minimalism
Minimalism is among the top contemporary trends. It’s not just an Internet culture or a passing fad. A growing number of people see it as a lifestyle.
There are quite a few lofty ideals around this trend. As someone who’s operating on a low income, you don’t need to know them. All you need to know is that minimalism saves money. You can decorate your home in minimalist style and save money. Go on a trip abroad and save big bucks without missing out on the fun quotient, thanks to minimalism.
What this trend essentially boils down to is spending only when it’s absolutely necessary. Minimalism prioritizes needs, not wants. Only buy the stuff you essentially need. Things you want but don’t necessarily need drain your wallet. Staying away from such things is the essence of minimalism. It’s a no-brainer how low income earners can benefit from it.
Offers and discounts
Branded products often come with offers. As the marketing landscape is getting overly competitive, brands are putting out exciting offers and giving away discounts to lure new customers and making existing customers more loyal. Finding offers and discounts, therefore, is not as challenging as you think.
What’s more is that there are rewards for brand loyalty. Brands distribute reward cards and discount coupons among consumers that are most loyal. It’s surprising how much money one can save by showing a bit of loyalty to their favorite brand/s.
Reward cards come with several benefits. One of them is not needing credit cards. The less you use credit cards, the better. Using a credit card for payment means remembering when to pay the bills, paying a penalty in case you miss the deadline and all that stuff. Reward cards let you save in a roundabout way.
Buy used goods
Used goods are available online, at half the price of fresh goods. The Internet has done wonders for used goods. Now, there’s a market for such goods, and the market is expanding as I write this.
The biggest benefit of used goods is low-cost. People from low income groups look for cost-effective alternatives to expensive products. What they need are used goods. Cost aside, used products are more environment-friendly than fresh products. If the usage of such products increases, the number of new goods being manufactured will reduce, and less carbon would be emitted in the air.
Americans spend an inordinate amount for the maintenance of their cars. Clothing and furniture also eat away a large chunk of savings. Buying a secondhand car, shopping used clothes and furniture online, instead of branded clothes and pricey furniture help you grow your savings.
Invest in capital market
Low income earners tend to shy away from investing, especially from investing in the capital market. I find it strange as they are the ones who should invest to grow their savings. The high earners double, triple, even quadruple their investment amount whereas low income earners lag behind.
There are risks associated with investment. People in the low income group have less money, so they can’t take risks. Hence, they don’t invest. This mindset needs to change. Understanding the capital market is the first step to foster this change. Additionally, they can invest in index funds and government bonds to keep risks at bay.
Summing up
Money management has two important aspects. One is making money and the other one is saving money. For someone belonging in the low income group, both can be difficult. The tips shared here in this article can make their job easier.