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3 Ways to Fund Your 401k on a Tight Budget

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If your employer offers 401k matching and you’re not contributing enough to max it out, you’re missing out on free money. 

The problem is, if you’re living on a tight budget, taking money off your paycheck to contribute to your 401k may not seem like an option.

So what’s the solution? Well, you either need to stretch your dollars further to live on less, or you need to start making money outside of your regular job to cover some expenses.

The three tips below will help you do both of those things.

Before getting started, check with your HR representative to see how much you need to contribute each year to max out your employer’s 401k match. Once you know that, you’ll have a solid goal to strive for.

1. Cut Your Big Expenses

You’ve probably heard it a million times, “cut your expenses” “make a budget” “spend less” yeah… it’s a lot easier said than done. However, it’s also a lot easier to cut back than it is to make more money, which is why it should be the first place you start.

Now don’t get me wrong, I’m not going to tell you to stop buying Starbucks or to stop going out with your friends on the weekends, that would probably just make you miserable.

Instead, let’s start by focusing on three of your biggest expenses. According to the Bureau of Labor, the average American spends over 50% of his/her annual income in these three categories:

  • Housing (27%)
  • Food (10.5%)
  • Transportation (13%)

If you can cut back on those three categories, you should be able to make a big dent in your living expenses. 

So first, let’s talk about housing. Here’s the reality: 

A lot of people have too much house

If you’re spending most of your time in the same two rooms and you have a three-bedroom apartment, maybe try to downsize, get a roommate, or rent out your spare room part-time on Airbnb.

To cut down your food expenses, one of the best things you can do is start cooking from home more often. You don’t have to slave away for hours every night either. Instead, come up with a meal planning schedule and start cooking meals in bulk to save time. 

Last but not least is transportation. To cut costs here, try walking, biking, or taking transit when you can. Carpooling to work is another excellent way to save. It’s also essential to keep your car regularly maintained to avoid expensive repairs in the future. 

2. Moderate Your Wants

Wants are things that you buy because they make your life more enjoyable. You don’t need them to survive, you just like having them.

Some examples of wants would be your Netflix subscription, going out with friends, buying new clothes, things like that.

And yes, I know I said above that I wouldn’t tell you to stop buying Starbucks or going out with friends on the weekends, but here’s the thing:

It all needs to be in moderation.

If after cutting your three big expenses you’re still living paycheck to paycheck because you’re spending hundreds of dollars on entertainment, clothes, and coffee every month, that’s when you know there’s a problem.

To fix that problem, here’s what I recommend doing:

First, track your spending for a month. You can use an app to do this, or you can write all of your purchases down on a piece of paper. 

Once you have an idea of where your money is going, try to cut back little by little. Here are just a few ideas on how to do that:

  • Make coffee at home and have Starbucks as a treat every once in a while
  • Use Groupon for cheap group activities on the weekend (or do something free)
  • Use a cashback website or app when shopping for clothes (or buy second hand)

Remember, this isn’t about torturing yourself. It’s about living within your means and getting the most value out of each dollar you spend. Once you’re making some more money, you can consider increasing your “wants” budget. 

3. Increase Your Income

If after cutting expenses and moderating your wants you still can’t contribute enough to your 401k to max out your employer match, your last option is to find a way to increase your income. 

There are two main ways to do this:

  • Get a raise or promotion; or
  • Start a side hustle

If you’re going to ask for a raise or promotion, check out these tips from Forbes to increase your chance of success.

If the raise doesn’t work out, it’s time to get into the entrepreneurial spirit. Starting a side hustle isn’t easy, but if you put in the work, the extra income can be life-changing. 

Here are just five examples of things you could do to make extra money in your spare time:

  • Freelance writing – The demand for written content these days is high, so there’s always work to be found.
  • Virtual assisting – As a virtual assistant, you’d be doing a variety of administrative tasks for a business such as responding to emails, researching, scheduling calls, etc. If you already have experience with this, you’ll have an easier time finding online work.
  • Delivery driving – Uber, Lyft, Instacart, SkipTheDishes, the list goes on. There are so many delivery jobs you can do if you have a car, and most let you work whenever you want. 
  • Flipping products – Thrift stores, retail clearance sections, garage sales, etc. These are all places that contain potential products that you could resell. There are people making thousands of dollars a month doing this part-time.
  • Online tutoring – If you like to teach, there are a ton of online tutoring jobs for you to choose from that pay $20/hr or more. Most allow you to work on your own schedule as well. 

If none of those interest you, think about what skills you have to offer that someone would be willing to pay for. There are a ton of opportunities out there!


Just because you’re on a tight budget doesn’t mean you should put off retirement planning.

After you’ve cut your big expenses, moderated your wants, and possibly started making some extra money with a side hustle, you can slowly start taking more money off your paycheck to contribute to your 401k.


About the Author

Dylan Houlihan is a personal finance blogger who shares money-making methods and money management tips on his blog, swiftsalary.com.

Published on August 21, 2019