We have all be there before, the horrible paycheck to paycheck cycle, living on the hope that a tire doesnt blow out or the electric bill isnt higher than expected. This endless cycle can lead to depression and constant stress, but don’t worry!! (Seriously, worrying does nothing) There is a way to actually save your first $1000, and then another….and then another. Also, you are not alone!! Remember that millions of Americans barely make it paycheck to paycheck and help is out there if you look for it!!
First: The first and hardest part of fixing a problem is admitting you have one, this is why when it comes to finances the first thing you need to do is sit down and actually look at your current situation. Take one month and spend regularly; at the end of that month get a copy of your bank statements, pop open a Redbull and evaluate your current spending trends. Circle your regular bills in green, regular bills are what I like to call cost of living expenses and include things like: rent, electricity, car payment, insurance, etc.
After you have circled all the COL, move on to circling your subscription fees in yellow. Subscriptions are anything that you pay for monthly such as gym memberships, Hulu, or Spotify. Finally, circle all items that are just general purchase in red. General purchases are things that you don’t think about buying but do every day such as: fast food, scratcher tickets, soda, etc. Congratulations!! You now have an active understanding on your bills and monthly expenditures and can create a budget to better meet your goals!
Second: (In Ron Swanson voice – Slash It Slash It!) Yep you heard that right, after you have separated out all of your expenses its time to really evaluate what you actually need to be paying for. Are you paying $10 a month for a gym that you havent been to in months? Do you watch more than one show on Hulu? Do you have a bank account you are paying for that could be upgraded? These are all things you need to look at when you are saving your first $1000. Now, if you have some of these get rid of them but here’s where it gets crazy: Save the money you were putting towards those things!!
Yep, that’s right, whatever you are cutting from your budget you are simply going to keep budgeting for them except that you are now putting that money into your savings! So, lets say you make $1000 a month. After evaluating your expenses you see that you pay $10 a month for a gym you don’t use, buy a soda for $1 every day and eat out twice a month, each time costing you $20. If you were to drop the gym membership ( Seriously, why does everyone have a membership but never go?) buy a soda every other day and eat out once a month you would be able to save $45 a month, thats $540 a year!! You are now halfway there!!
Third: Refinance what you can, many people are overpaying on interest and don’t think about refinancing even though it can save them thousands! Refinancing is a great tool if you have a long-term loans such as a car or house payment. If you have been actively building your credit and have raised your score significantly in the year since the loan was opened this is a great time to refinance. The trick is to actually lower your term amount though!! Not extend it!!
So, lets say you have a $20,000 car loan and you are paying 15% interest rates for 5 years. After paying all the interest you would spend $28,548 for the loan total at $476 each month! Now, lets say you have worked hard this year and built your credit score up as well as paid the car down to $18000. If you could refinance the car at a rate of lets say 7% under another 5 year contract you would pay in total $21,385 with monthly payments at $356!! Finally lets say you can refinance at 4 years instead of 5, you would pay $20,690 at $431 a month, saving you an additional $695!! You can also save the additional $45 a month and build up that emergency fund to have a buffer for when life gets hard.
Forth: Get help, no I don’t mean pay a professional to clean up your finances or buy expensive books on how to properly save money or build a budget ( Seriously, Google is free, and all the information is a click away) I mean free help from places such as your bank or financial organization. In todays online banking it has never been easier to build and maintain a proper budget. Many organizations offer online bill pay, automatic paycheck deductions, and rounding dollars spent to help you save even faster. While I am not sponsored by them ( Well, not yet but after this blog maybe!!) I strongly recommend Personal Capital as a way to create a budget and get ahold of your financial future.
Fifth: Relax, it takes time! I know I know this is such a cliché thing to say but it really is true. Proper budgeting and saving money is not a sprint, it’s a marathon that is built on managing finances and wise spending habits. If you look at your budget and find things that you can cut, which everyone can, you will be shocked at how fast it will grow. Each day it will get better and you will get better!! Remember, we are all in this together and I will gladly help any reader get back on the road to financial success!
What are some ideas you have that could help fellow readers on their budgets? What are some things you do to save money? What is your favorite budget app? Share your thoughts!!