#HowToSaveWhenLivingPaycheckToPaycheck
Trying to save money in this day and age sucks. Cost of living is high, pay is low, and when that elusive money does finally become available, it has a habit of slipping away without leaving a clue as to where it went. In college I accepted this as part of life. Heck, college kids are supposed to be broke! It's so common it's cliché.
As a college graduate, with (as Dad would say) a "Real Job," money problems should be a thing of the past, right? Wrong. (And Santa Claus isn't real, and acne isn't something you age out of, etc... sorry kids.) But even if you're starting off with college debt, maxed out credit cards, and looming bills, there is still hope of having a financially strong future.
First and foremost, I recommend anyone who, like me, is fighting to get their finances together, must read Dave Ramsey's book The Total Money Makeover. This book changed my entire outlook on money and gave me a roadmap to finally being at peace with my finances. But this post isn't about reviewing Dave's seven Baby Steps (though they did effect the tips I am about to lay out.) This is more a practical guide to show what I (an admittedly, card carrying Broke Millennial) am doing to turn around my spending habits, refocus my vision, and get started on the path to financial freedom. WOOT WOOT!
1. Get in the habit of saving
You cannot, will not, save money if you don't make it a habit. The willpower just simply isn't there. This is why so many diets, exercise plans, and other admirable attempts at living better, fail. If you don't stick with it, you fall down, get discouraged, and eventually give up altogether.
I started with a very simple program. I copied a chart off Pinterest with different dollar amounts in little squares, then taped this chart to an empty oatmeal canister. (You can use any type of container, coffee cans, etc. Just try to make sure you can't actually see the money inside. Out of sight, out of mind.) I gave myself one year to save a thousand dollars, one square a week, and set the strict rule that the money was not to be touched for any reason.
Because of the varied amounts in each box, I was not limited to any one sum of money. This gave me the freedom to say, "I don't have an extra $40 this week, but I do have $12 left over from groceries." Once that $12 was in the can there was no going back. While that did leave a few mornings where I had to skip coffee at the café or a stop at the pretzel maker (I work in a mall, and those pretzels...yummm) it did gradually build up my self restraint. Also, there was the added psychological boost of seeing those crossed off squares, those coiled bills piling higher and higher every time I opened the can to add more. The weeks I did find more in my budget and could add $40, $50, or even (one exciting day) $100, I got such a rush at knowing just how much I had boosted my little stash.
2. Have a separate Savings Account
To repeat what I said in step one, out of sight is out of mind. If you don't have your lump of savings sitting right in front of you, you are less likely to nickel-and-dime it away. Once you've developed the habit of putting aside a little money every week (or every paycheck) it becomes easier, and at this point I suggest moving from the oatmeal cannister to an actual bank account. (An added advantage of keeping your money in a savings account is interest, but we can discuss that at a later time.)
This might not be for everyone, but I went to talk to a banker about setting up two new savings accounts in addition to my primary savings. (Because of the way my accounts are set up, the bank pulls funds from my primary savings if checking gets too low, and I wanted these new accounts separate from that system.) These two accounts I labeled "Long Term Savings" and "Short Term Savings" - though if you want you can call them after specific savings goals, Vacation, Christmas, Future Home, etc.
Having these separate accounts keeps the money clearly divided so you can see how much you've saved for each goal. I found it so much easier to keep track of my goals once I could see them laid out on my bank website. I also didn't run the risk of accidentally using my vacation funds for a credit card payment, or paying for lunch with money earmarked for a future home.
3. Automatic savings
After the accounts were set up, I arranged automatic transfers to each account on payday. This doesn't have to be much! Just like with the oatmeal can, you put in what you can afford. Maybe that's $20 a week, or $50 per paycheck. Once, I limited my savings to $0.75 a day- a tiny trickle that added up slowly without pulling a large lump sum at any one time. The choice is up to you what you can afford, but the key is consistency, and that is where automatic transfers help so much.
Because Dave Ramsey is my finance guru, I'm fascinated by the psychological reasons behind this tactic as well. You really feel it when you pull $50 out of one account and put it in another. There's almost a panic, remorse. We're comfortable looking at that big sum all together in our checking. There's a false sense of security. Then we shoot ourselves in the foot as we wear down that lovely lump sum until nothing is left and once again there is too much month left at the end of the money.
That's why I love the gradual saving strategy.
If you transfer (automatically, of course) $5 a day, each weekday, into a saving account, what do you end up with? In two weeks you've saved $50. Remember that $50 you were so traumatized at the thought of moving? It's moved! And not only did you feel no pain, no massive strain on your bank account, but you also get that little high from checking the bank balance and seeing your savings has spiked.
If moving your money one day at a time isn't your forte, no worries. I do recommend arranging the transfers on payday though. This gets the saving out of the way before you divide the rest of your money up into weekly/monthly/biweekly expenses.
4. Watch your Budget
There are tons of different ways to budget your money. Just try going on Pinterest and looking up "Budgeting tips." The results are endless! No one has a perfect method for everyone, but that doesn't mean you can't find one that works perfect for you. Maybe it's the Envelope System, maybe it's a spreadsheet on Microsoft Excel, or maybe you can even get a Zero-Based-Budget going! Explore, experiment with the different options. Have fun!
Personally, I found a medley of a few different systems works best for my finances. I start by subtracting my savings plan from each biweekly check. I even have a sticky note beside my calendar reminding me that X amount must be subtracted from each paycheck as it has already been earmarked for savings. Then I divide the remainder in two lumps (one for each week) and decide where to use the money. If, at the end of this step, you find yourself a few dollars over your budget, set it aside. Whether it covers a week you come up short, is there for that online subscription you forgot you had, or just leaves a buffer in your account so you don't get hit with overdraft fees, you'll be glad you didn't spend it!
I use the envelope method for weekly expenses, such as gas, dog food, and groceries. I've tracked how much I spend weekly on these items, and can pull out the appropriate amount of cash so that I'm not tempted to just swipe my card and add on those little back-breaking, budget-choking incidentals like a candy bar or fidget spinner or magazine that stores always have stocked by the register.
Monthly expenses require a different tactic. Things that you can use cash for (Rent, in my case) can have an envelope and build up slowly over the course of the month. Other expenses that you just can't use cash for (phone plans, credit card bills, Netflix, etc) should be blocked off so you don't spend that money on something else. Figure out what day payments come out and mark them on your calendar, or set up alerts on your phone so you can transfer money at the appropriate time. Alternatively, have automatic payments come out of a designated savings account, so the money has already been transferred over and you can remain hassle-free on payday.
5. Enjoy the Process
Saving money can be fun! Beyond the psychological boost it gives you, saving in your twenties and thirties should be a rewarding experience. While concentrated effort on money management can mean cutting out extra treats, it gives you chance to really enjoy your new lifestyle.
One aspect of saving that I never expected to love is Bullet Journals. I saw a savings tracker on Pinterest that I adapted to my own journal (modeling it after Dave Ramsey's baby steps) and I loved it! There is something so fulfilling to me in watching my savings grow (or debt shrink, depends on what page I'm on) and filling the pages with colorful blocks, doodles, and inspirational sayings. I understand Bullet Journals are not for everyone, but this is just an example of a fun way to involve your creative side in the savings process.
Another way I fend off the no-money blues is The Quarter Jar. This is one serious benefit to paying cash. Every spare quarter I find, or have left over, is stashed in the quarter jar. Then, at the end of the month I cash them in and use this little bonus for a fancy coffee, or a new piece of clothing, or some other little reward for all my hard work over the month. Of course the prize is dictated by how well I did, so it spurs greater efforts to scrape together all spare change.
Whatever method works for you, just be sure you have fun. Remember why you are saving! There's no point in becoming the next Ebenezer Scrooge. Money itself isn't the goal, but rather financial security and being able to afford the lifestyle that makes you happy.
I hope these tips help in getting the financial ball rolling! Obviously these are just what I do, and are not a "foolproof plan" meant to make you rich. I hope that by starting with some of these steps you too can look forward to a future of growing financial health. For more financial advice, or for a full layout of the 7 Baby Steps I refer to in this post, please look up Dave Ramsey's books, radio show, or podcasts. Thanks for reading, and Happy Saving!
