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How To Reach Financial Independence On A Low Income

One question we’re often asked is “how do I save money for financial independence when I don’t have much money?”

People often think that you need to be on a six-figure income, while saving 70% of it, to reach financial independence and retire early. But that’s just not true! The key to reaching financial independence is by focusing on the money that you do have and prioritizing how you spend it.

I truly believe that financial independence is for everyone, regardless of income. That’s because it is based on your own expenses, not the specific expenses of millionaires. There are three things you need to focus on to achieve financial independence: making money, saving money, and investing the money that you make and save.

I want to talk about saving - how you can save more money to put toward your financial independence goals, no matter what your income level is.

1. Calculate Your Savings Rate

Your savings rate is the percentage of your income that you are saving. To calculate your savings rate, you need to divide your monthly savings amount by your monthly net income. For example, say you earn $2,000 a month and put $200 of your earnings into a 401(k) account. That means your savings rate is 10%.

Yes, I include 401(k) contributions as savings, because anything that contributes to your net worth contributes to your FIRE number, which is the amount of money you need to reach financial independence and retire early. Any money you contribute to savings, investment, or retirement accounts is part of your savings rate.

2. Identify Where You Want Your Savings Rate To Be

You don’t have to reach a 70% saving rate overnight, and you shouldn’t expect to. Try setting small goals to improve your saving rates until you get that number where you want it to be, whether it’s 30%, 40%, or 50% of your savings.

I recommend you try to bump your savings rate by just 1% per month. Starting off this small will trigger that muscle that gets you used to automatically saving a little more every month.

3. Find That Free Money

There is a lot of free money flying around out there, you just need to find it. In particular, I’m talking about programs and services that are offering financial help to people on lower incomes. These can include downpayment assistance for homebuyers, childcare subsidies, childcare assistance, and more.

A great example of these kinds of assistance opportunities is the individual development account. The US has more than 250 of these types of accounts, which are designed to assist people on lower incomes to save for things like education, first-home buying, and starting businesses. When you deposit money into these accounts your contributions will be matched, often 1:1, by a government agency, non-profit, or even a private corporation. Often the only prerequisite for this kind of account is that you make more than 200% of the poverty line.

There are a lot of different programs like this that are available, but people often don’t realize they are eligible. My advice would be to do your research, and find out what assistance options are available in your community.

4. Trade A Skill For A Product Or Service

Using your skills to trade for a product or service is a great way to save money. You can use skills like website design, graphic design, social media marketing, or anything else you can think of, in exchange for a reduced cost or free service.

For example, Amon and I have both offered our services to our daughter's sports teams. Amon volunteered as a basketball coach, and I volunteered as a swim coach, and in return, we saved a lot on our kid's sports fees. You’ll have to think a bit out of the box for this one, but if you’re looking for opportunities to exchange your skills you are sure to find something.

5. Stop Paying For Convenience

A lot of people who tell me they can’t afford to achieve financial independence are often spending money on “conveniences.” Conveniences are things that you spend extra cash on as a matter of inconvenience. For example, overspending on food because you haven’t planned your meals, and it then becomes more “convenient” to eat out.

Consistently paying for convenience will seriously reduce your ability to save enough for financial independence. By exercising foresight and planning more carefully, you can save a lot more in the long run.

6. Make YouTube Your Best Friend

You can learn so much from Youtube, it truly is a great money-saving resource. You should be learning how to DIY everything via Youtube so you don’t have to pay someone else to do it; home repairs and renovations, car maintenance, managing your personal finances. So many things you pay other people to do you can actually do yourself, with the right amount of research.

7. Use Cash Instead of Credit Cards

Using cash is a far better way to gauge how you are spending money, because you see the money depleting before your eyes, compared to a credit card where you don’t see proof of your expenditures until you check your statement. Paying with cash will often change the mentality you have when it comes to spending because you see the money dwindling in front of you. It encourages you to spend less and be more intentional about how you spend. It’s a simple but effective way to lower your costs.

8. Invest Your Tax Returns

This may sound counter-intuitive, and a lot of people love getting a hefty tax return at the end of the tax year. But the truth is that when you have a huge tax return it means you are loaning the government more money than you could have in an investment account that is actually making you more money. Getting a big tax return is not as great as it seems.

The other problem with big tax returns is that most people spend it like it’s a bonus. So if someone gets a $2,000 tax return they might go and spend it all in one go - they see it as free money when it is actually your money that you worked for, and it should be invested. If you want to solve the problem altogether you can change your tax withholdings so you don’t get such a hefty tax return at the end of the year.

9. Organize and Minimize Things In Your Life

It’s that simple! Organize your home and minimize the number of things you own. Organize your bills and the number of bills you pay. Condition yourself to prioritize the most important things in your life, and spend your money only on things that serve a purpose. Once Amon and I began organizing our finances and minimizing clutter in our life, it gave us more space to save money and think about how we could make more.

Hopefully, I’ve given you some helpful ideas that you can implement in your own financial strategies. Remember that no matter what your income level is, you can find ways to save and work towards financial independence.


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Hello, We’re Amon & Christina

We’re former federal government employees that focused on saving, making, and investing money so that we could grow enough wealth in our investments to never have to work again.

And, guess what? We did it! At the age of 39, we reached financial independence, quit our jobs, and . . . we retired!

So, if you’re interested in learning how to save, make and invest money on the road to financial independence and retiring early (i.e., F.I.R.E.) - this site is for you!

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