How to save when you can't make ends meet

By April Dykman

When your paycheck barely covers rent, utilities and food, most of the usual savings tips don't offer much help because there is no room in the budget to cut back. If that's the case, try changing your focus to earning more.

Setting up a budget and opening a savings account are often among the first steps toward gaining control of your finances. You simply track your spending for a few months, look at which areas could be cut back, and send your new-found money directly to savings.

Savings? Get real

But for some people, those steps aren't simple at all. They can't cut back on dining out, expensive clothes, or their comic book habit because they are barely making ends meet and can't afford those luxuries as it is.

Now there are some people who truly have zero wiggle room in their budgets, and then there are those who only think they don't. If you never have money left over at the end of the month, yet you've gone to happy hour several times with friends, stood in line for the newest version of the iPhone, or engaged in some retail therapy, there is money to be saved, but you have to change your habits.

How to save even if you think you can't

 When you're truly living paycheck to paycheck, however, advice about budgeting and how to compare savings rates can be useful, but your primary goal has to be increasing your income.

In his New York Times bestseller, "I Will Teach You To Be Rich", author and personal finance blogger Ramit Sethi offers the following three strategies people can use to make more money:

  • Negotiate a raise. If you're already employed, the best course of action is to carefully negotiate a raise. Sethi recommends tracking your tasks and results at work for three months, using numbers as much as possible to quantify your results. Ask your boss for a meeting to discuss ways you can up your performance, and then request a second meeting one month later to review your results and make sure you're on the right track. A few weeks before asking for the raise, practice negotiating with a couple of friends who can give you constructive feedback. When you meet with your boss again, bring your list of accomplishments, your salary and benefits information, and data about salaries for jobs similar to yours. 
  • Get a new job. If your negotiation doesn't go well, it might be the case that your company doesn't offer enough room to grow, and you're better off looking for a new job. Sethi stresses the importance of careful salary negotiation when you're offered a new job. "When it comes to you," Sethi writes, "your manager cares about two things -- how you're going to make him look better, and how you're going to help the company do well." Show how much value you can bring to the company with careful research about the organization, the industry, and comparable salaries.
  • Try freelancing. Freelancing can be a simple way to make some extra cash. You don't have to have a sophisticated skill set to babysit, walk someone's dog, or tutor a student in a subject in which you are knowledgeable. Think about what you enjoy doing and whether any of your hobbies could create a side income.

Once you have a little extra income, make sure any money that isn't needed for necessities goes straight to your savings account! Automate your savings to avoid lifestyle inflation.