Living in a high-cost area on a modest income presents unique challenges. For one, the cost of housing is astronomical, and then there’s inflation to drive expenses up.
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Thankfully, there are several strategies that can help make it work. Here are some actionable steps you can take if this is your situation.
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Optimize Your Housing Costs
First thing’s first: housing typically consumes the most significant portion of your budget in expensive areas.
Abid Salahi, finance expert and co-founder of FinlyWealth, recommended house hacking by renting out a spare room or parking space.
“This can significantly offset living expenses,” he said. For example, renting out a parking space in San Francisco can generate $200 to $400 per month, according to SpotHero data.”
Melanie Musson, finance expert with Insurance Providers, agreed that this is a good strategy.
“Get a roommate. If you can get into an apartment with more than one bedroom, get a roommate for the other bedroom,” Musson explained. “That will give you a way to split the cost of rent. You can also get a roommate if you own your home.”
She said another strategy is to apply for housing assistance.
“Cities with a high cost of living will often have higher limits for low income housing than state or federal low income limits,” Musson added.
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Work On Your Credit
According to Musson, it’s harder to get an apartment when you have a low credit score in a competitive market.
“If your credit is poor, you will likely have to come up with a two or three-month deposit and have a co-signer,” she suggested.
If you have to get a co-signer, she recommended finding out if your parents will be willing to sign for you.
“If that’s not going to be an option, you’re probably going to have to get a better credit rating to qualify for a lease,” Musson said.
Leverage the Sharing Economy
Use platforms like TaskRabbit or Uber to supplement your income during off-hours.
“A study by the JPMorgan Chase Institute found that individuals in high-cost metros who participated in the gig economy saw an average 15% increase in their monthly income,” said Salahi.
Master the Art of Frugal Living
Embrace a minimalist lifestyle and focus on experiences rather than material possessions.
Salahi suggested using apps like Too Good To Go to find discounted meals from local restaurants, saving 50 to 70% on food costs.
Negotiate Remote Work Options
Arrange for partial remote work to reduce commuting costs.
“A 2023 survey by FlexJobs found that remote workers save an average of $4,000 annually on expenses like transportation and meals,” Salahi pointed out.
Utilize Local Resources
Take advantage of free community events, libraries and public spaces for entertainment and learning.
Many cities offer free museum days or discounted cultural passes for residents.
Optimize Your Spending
Salahi recommended using cashback credit cards strategically for everyday purchases.
“For instance, some cards offer up to 6% cashback on groceries, which can result in significant savings over time,” he said.
Invest in Yourself
Focus on upskilling to increase your earning potential.
Many libraries offer free access to online learning platforms like LinkedIn Learning or Coursera.
Build a Robust Emergency Fund
Aim to save three to six months of living expenses. According to Salahi, this provides a crucial safety net and reduces financial stress.
“Start small by automating a transfer of even $50 per paycheck into a high-yield savings account,” he said.
Seek Out Employer Benefits
Fully utilize any benefits your employer offers, such as health savings accounts, commuter benefits or professional development funds.
Experts said these can provide substantial tax savings and reduce out-of-pocket expenses.
Consider a Side Hustle
“Leverage your skills or hobbies to create additional income streams,” Salahi advised. “Websites like Etsy or Fiverr can be excellent platforms to monetize creative or professional skills.”
Final Words of Advice
By implementing these strategies, Salahi said you can survive and thrive in high-cost areas without resorting to the expensive and disruptive option of moving.
“The key is to be proactive, creative, and willing to adapt one’s lifestyle to the local economic realities,” he noted.
Overall, experts said to keep at it.
“Don’t settle for your income,” Musson advised. “Look for where you could work and make more money, be willing to work overtime and consider getting a second job. There’s a good chance you can make more money than you do now if you’re willing to look.”
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This article originally appeared on GOBankingRates.com: 11 Moves To Make If Your Paycheck Can’t Keep Up in Your High-Cost-of-Living Area
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