Mmm, money. I’m a big fan. I love to go into my bank account and see all the dollars stacked up there together, waiting for me. Mostly I like money because to me money equals freedom. When I have enough money I feel secure. When I don’t, I feel untethered, like my life isn’t my own to control. Not having enough money is a big stressor in my life. As the great philosopher, Kanye West has said – having money’s not everything and not having it is. True words, Kanye.
Ultimately I feel like you’re not completely free to do what you want and be who you are unless there’s enough money in the bank to provide a cushion. I loved feeling like I could quit a job I don’t like or be able to go on a vacation at a moment’s notice if I was interested. And knowing that if an emergency happened I had a back-up. Plus it really sucks watching the credit card companies charge you a crap ton of interest, realizing that $30 shirt you bought ended up costing you $52.80 once you add in the interest.
So how are you going to be financially free? To start with, that means getting rid of credit card debt and saving 3-6 months worth of money for expenses to provide a cushion for yourself. That sounds like a tall order but there are steps you can take to make it happen.
- Weed down your big expenses.
Hey have you heard, you can become a millionaire just by getting rid of your $4 a day latte habit! Unfortunately, the guy who wrote that massaged the numbers a whole bunch, saving $4 a day isn’t going to lead you to financial freedom. It’s a start but it’s not the start.
Surprise, surprise most of the money we spend goes to our big expenses – with housing, transportation and child care topping the list. You probably will want to cut down on the expensive lattes, but getting your big expenses under control first is goal number one.
This is a big one. Like most of America, my housing expenses are the largest spending item every month. And there’s not a lot of wiggle room, my interest rate is low and my HOA is set. I’m on a 10-year payment plan, which is the way I like it.
You’re probably also thinking it’ll be hard to change your housing expenses. But take a look at it. The general rule has always been no more than 30% of your income before taxes should be used for housing (that includes payment, interest, taxes and insurance.) That varies with each person’s income. If you make 20,000 a year, spending 30% on rent is going to make it hard to live, while $60,000 a year gives you some leeway.
If you’re really serious about saving you could move back into your parent’s house for a bit. Or give up having a place and work hard at finding house sitting gigs. You may need to move into a new place with roommates or even rent out a room for extra cash. I have a friend who occasionally rents her place out on AirBnB and pays me a lower rate to stay at my place. It’s a win-win for both of us. If you’re serious about saving you might have to give your housing situation a look.
Your Car –
Your car can be the biggest money suck of them all. You don’t need a new car. You just don’t. There are plenty of used cars out there that’ll get you where you need to go. My car is 14 years old, I bought it used about ten years ago and paid it off over six years ago. It has over 125,000 miles on it and still going strong. As long as the car repairs remain less than a car payment every month (and even with no cars you’re not guaranteed they’ll run perfectly) I’ll keep it. Drive your cars into the ground and you’ll get every penny out of your investment.
Check your car debt. If you owe over $10,000 on your car you probably want to sell it and get something cheaper. There are perfectly good used vehicles for under $10,000. If you want to save money the expensive car’s got to go. If you can get by without a vehicle, or with one vehicle for a two-person household, even better.
- Look at your spending, really look at it.
Credit cards. Mostly they’re considered the devil’s work for people who need to get their spending under control. Credit cards do make it easier to put that new purchase on your card until weeks later when you look at your bill and realize you spent $100 on culottes for no reason.
But one good thing about credit cards, most cards give you a snapshot of what you spent. Go into your credit card accounts and download your spending report for the last year. They’ll even break it down into categories for you, entertainment, travel, car expenses, restaurants and merchandise. That’s how I figured out I spent over $1,000 on restaurants last year. Damn you, takeout.
Do this with all your credit cards and your bank account. You can use all this information to help you figure out what you’re spending money on. This will help give you a good idea of where you can cut costs. Giving yourself a specific budget for entertainment, clothes, random trips to Target, can help you save thousands in unnecessary purchases.
If you have issues sticking to that carefully crafted budget then you need to go the cash method. Take out enough cash for the week, divide it up into your sub-categories and skip the credit cards altogether. When your cash runs out your done spending until the next week. Any cash left over can be saved or used for the next week. Nothing keeps your spending under control like having to pay in cash at Target. You’ll start weighing if you need those new throw pillows or that lip gloss when you came in to get toilet paper. Try it. It’ll work.
- Make more money
Yes, I know you probably make a set amount of money a month. There’s only so much you can save without putting yourself in a ramen starving fugue. You still need to eat, there’s student loans that need to be paid, and the occasional splurge item to buy. You don’t want to cut all the fun out of your life. There are two ways to save money, cut back on your spending and make more money.
Lucky for all of us, there are a bunch of ways you can increase your income. With this lovely invention they call the internet now there are hundreds of ways you can make extra money. From things as basic as babysitting or pet sitting to a more exotic approach, all it takes is a little time to figure out what extra money making plans work for you.
Most of all, you have to make saving money a priority. It’s easy to get sidetracked by a pretty new pair of boots or get sucked into a lifestyle you can’t afford because other people around you can. Even if you have to hustle for a little while, taking a second job, moving in with a roommate, take the bus, give up sushi, knowing that you have enough savings so you don’t have to hide from your credit card bill every month is worth it.
So run, run like the wind girl, into the open arms of financial freedom. Being in charge of your finances, instead of them controlling you, means you’re in charge of your life. Do what it takes. Show money who’s boss and who’s the little bitch (you’re the boss, money is your bitch, in case that wasn’t clear.) It’s your life.
Do you want to take control of your finances? How are you going to do it?