I’m a passionate person that hasn’t followed a typical career path. I also enjoy discussing and writing about money and finances. Those two ideologies normally don’t mix together very well. Yet, between pursuing my passions and figuring out budgeting, I’ve realized that I’ve become competent at saving money even though I don’t earn a six-figure salary living in Los Angeles.
Let me back pedal a bit here for a moment: I am often intrigued by articles that say things like, “How I paid $80,000 off in 6 months,” and “I slayed my student loans in under a year!” But once I read these articles, I find out that these individuals make over $200,000 annually, live in a low-cost area, and have roommates. These situations are few and far between and really don’t define the majority of adults. Most people probably read these articles and think, “Well, never mind. That’s not me. I can’t do it.” Sure, you might be able to change your circumstances to make your scenario match that of the person writing the article, but for most, it may not be realistic at all.
So, instead, I’m going to share an approach that better applies to the typical wage earner for saving money and paying off debt. The approach I’m talking about isn’t flashy, won’t grab headlines, and isn’t very exciting, but it works; it’s called BUDGETING.
Boring, I know, but that’s what it boils down to; knowing how much money comes in each month and how much goes out and adjusting accordingly. That’s step one. Once you know these figures exactly, then you know what you’re working with. Before you begin calculating your expenses, set a savings goal for yourself – whether that’s a percentage of your income or a fixed amount, set this aside first so you don’t end up skimping on savings after expenses.
*I created an excel sheet for easy budgeting that you can download.*
Next, figure out your fixed expenses. These are expenses you have to pay each month and they usually don’t change; mortgage/rent, car payment, insurance payments and debt payments. Usually, there’s little wiggle room in these expenses, but sometimes you can negotiate a lower insurance payment or interest rate on a debt repayment, mortgage or car payment (just make sure that you weigh all costs if you refinance – sometimes it doesn’t save money in the long run.)
Your variable expenses have more wiggle room like groceries, utilities, entertainment, vacations, pet expenses, and gifts. Here’s where you can adjust your monthly amounts to meet your savings goals or increase your savings amount. This is where cutting back on something might be what needs to be done. I know this part isn’t very fun, but if you can cut back a little in certain categories without feeling deprived, it’s worth it.
Finally, if there just isn’t any wiggle room at all in your budget to meet your savings goal, you have to get creative. That might mean finding ways to make a little extra money on the side; pet sitting, tutoring, earning money online through surveys or affiliate links, proofreading, selling things on eBay, Amazon, Craigslist or other sites (as a teacher, I sell my lessons and activities on Teachers Pay Teachers and make a few hundred dollars each month). This extra income can pad your savings and may even allow you some freedom in your budget.
Budgeting takes a little bit of work in the beginning and some work to tweak it throughout the year (budgeting isn’t a “set it and forget it” approach), but in the end it’s well worth the time spent if it means more money in your pocket.