The Poor Man's Dilemma: How to Save Money When Living Paycheck to Paycheck

>> Friday, May 22, 2009

This post was included in the 179th Festival of Frugality at Suburban Dollar.

I've been thinking about getting a pressure cooker. I'd like to be able to buy large amounts of fruits and vegetables at the peak of their season (when the cost is lowest) and can them in jars for use during the rest of the year. A pressure cooker would also make using dried beans more convenient, and would be a great tool when I have a garden someday.

I know a cheap pressure cooker only costs $100 and would save me much more than that over time, but there's a problem...I don't have $100.

This is the poor man's dilemma. To acquire money-saving tools takes money. To acquire money-saving skills takes money. To increase income through investments takes money. And for someone living paycheck to paycheck, extra money is hard to come by.

So what can you do when you really want something but don't have the money? In particular, what can you do when you know that object or skill will ultimately save you money, if only you had the money to acquire it?

Check under the couch cushions, break open the piggy bank, or try this...

1. Make a list of the items you want in order of greatest need or greatest return on investment. Focus on saving for the things you need most, and don't get sidetracked by the lesser or cheaper items. For example, if buying a car would enable you to obtain a better paying job farther away from your home, don't waste your savings on the $100 pair of designer jeans that won't increase your salary no matter how good you look in them.

2. Get creative with ways to increase your savings.

  • Keep a change jar. Anytime you pay in cash, put your change in a jar. Eventually, the change will add up.
  • Use your weekends and evenings to do odd jobs. Mow your neighbors' lawns. Babysit. Teach a class.
  • Sell something. Hold a garage sale. Put little used items on Craigslist or Ebay. Take your scrap metal to a recycling center.
  • After you've paid off a debt, keep making the payment for that yourself. When you've paid off your car, pay a monthly car payment to your savings account. Hopefully, by the time you need a new car, you'll have a significant down payment saved up.
  • Temporarily increase frugality. You can ramp up your ability to save for a short time by going without luxuries or vices until you've saved up enough. Cut back on unnecessary expenditures like dining out, movies, alcoholic beverages, soft drinks, and dessert.
3. Find a deal. Consider buying the item used, or at least on sale. The cheaper you can find the item, the less you need to save up.

4. In the meantime, borrow. Do you have a friend with the same item who would loan it to you until you can buy your own?

5. Use your tax return. My father has his tax deductions perfected so that my parents rarely get a tax return. If you need more money upfront (and hate lending money to the government like my dad does), that's a good strategy. But I prefer to think of my tax return like a savings program. It's automatically deducted from my paycheck so I don't spend it, but eventually I'll get it back. The key, though, is to make sure you invest your tax return in something useful rather than looking at it as a windfall that you can blow. Spend your tax return on an item that will save you money or a skill that will increase your income, or invest it in a long term savings program.

6. As a last resort, consider a loan. In general, if you can avoid going into debt, you should. But if your investment will earn you far more money over time than you would spend on interest, a loan is a reasonable option. For example, going into debt to increase your level of education is a smart investment in the long run.

Good tips for everyone...including me

My family is far from poor. My husband has a very good job - good enough that I can stay home with my kids with little financial sacrifice. During normal times (when we haven't been making two house payments for almost a year), I would plop down $100 for a pressure cooker in a heartbeat. (Okay, maybe not in a heartbeat - I've always had a thrifty streak - but after careful consideration and months of desiring something, I'd definitely buy it.)

But right now, money is still very tight, my husband has another computer conference next month, and then we're heading home to Kentucky/Tennessee to see our parents. $100 feels like a lot of money to part with right now.

I know I'll buy that pressure cooker eventually, but for now, I'm content to wait and save - keeping my change, selling off things we no longer need, and cutting back unnecessary expenses - until I can really afford what I want.


kellie.alley May 23, 2009 at 10:38 AM  

I liked this one. I am currently in the problem of not having a job and am moving back home, so trying to figure out how to save money for me is a big deal right now. I do the change thing, but I usually don't pay with cash often enough. The tax refunds have always helped me go on spring break trips, but this year, it has helped me during my unemployment. The main thing I need to focus on is not spending money on things I don't need (but want!). My favorite is the one that said when you finish paying off a debt, pay yourself. When my car is paid off, that money is going to be great for savings!!!

Jesse May 23, 2009 at 5:11 PM  

A better way to deal with taxes is to figure out how much you need to pay at tax time. Keep that money and put it in a high-yield savings account. When it comes to paying taxes, just pay what you owe. At that point, you have made a bit of money off the taxes you would owe as opposed to Uncle Sam. :)

Anonymous,  May 24, 2009 at 12:34 AM  

Most modern libraries have internet access - use it to join FreeCycle and other sites like it.

Craigslist works in the same way but you may have to pay a bit to get the item - much lower than retail.

Second hand stores are usually very good resources as well, especially for items like clothes and cookware.

If you find yourself in a new city find and talk to the people at the welfare office (in line as well as behind the counter). Same goes for homeless shelters - these people are usually well versed in the resources out there.

Ask at the library for information on local "low income resources" like Harvest Boxes, lower cost dental care, year long Leisure Passes (free pool access and a discount on classes).

The hardest part is finding out about your resources... ask around!

(YMMV, of course)
Amanda Kerik

Erin aka Conscious Shopper May 24, 2009 at 9:41 AM  

Jesse - You sound like my dad. :) It's a smart strategy, though!

Amanda - Thanks for sharing all these great resources!

CyberCelt May 25, 2009 at 8:47 PM  

Clicked over from Its Frugal Being Green.

Have you joined FreeCycle?

I bet someone would be happy to get rid of a pressure cooker.

Another place to check is Goodwill. We love to bake bread and we have found bread makers, some brand new, for under $10.

Erin aka Conscious Shopper May 25, 2009 at 10:48 PM  

CyberCelt - Normally, I do try to find things on Craigslist or at the thrift store (though I haven't joined FreeCycle yet), but my husband and I decided we want a new pressure cooker because there is some small danger involved in using one. Maybe it's silly, but you never really know what you're getting when you buy something used. But I completely agree about finding great stuff at Goodwill!

Monroe on a budget May 27, 2009 at 8:39 PM  

Another tip: ask the reference desk staff at your library about local resources.

I know of libraries where the staff has built up an information link list on a web site or created a list of popular frugal / financial books.

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