Practical Budgeting Tips

3 Ways to Start Saving Today!

I recently shared how my husband and I paid off $76,000 of student loans in less than 3 years. While this was a huge accomplishment, it can be intimidating to know where to start.

Today, I’m sharing 3 simple ways you can immediately improve your finances.

1. Determine Why You Want to Spend Less: 3_ways_to_start_saving_blog pic

It’s almost the end of March, so I imagine most of us have dropped off from our goals for the new year. Did you hope to get in shape, lose weight, or maybe change your finance situation? I think the reason most of us have a hard time sticking to new goals is because we don’t have a good enough reason to have the goal in the first place.

I think we need a clear vision and reason for a goal to actually achieve it. What’s your reason, your “why”?

If you don’t have an answer, pause and make this clear before starting a radical new change in the way you handle money.

Think about your future and how finances fit in. I get the impression that many people have accepted living with debt, and/or gotten comfortable living with little to no financial margin. Do you live under the “if you have it, spend it” mindset?

Here’s some key areas worth considering when thinking about finance goals:

  • Do you have debt to pay off?
    Paying off debt is one of the quickest ways to make money. Imagine what you could do if you kept or invested the money going towards debt this month! Not only do you keep it, you’re not losing interest every month. Our loans were ~6% interest…aka someone was making money off of us vs. the other way around (dang it!).
  • Do you have an emergency fund and savings?
    An easy way to prevent debt is having cushion in your budget. When the car needs repair, do you have money set aside, or would you need to use your credit card? I recommend building towards 3-6 months savings. If this would be too big of a goal today, set an achievable goal to work towards. Maybe start with $500-$1,000 and then increase again once you hit your goal.
  • Do you hope to save for a home?
    Perhaps you want to save for a down payment on a home. I think this is a great goal, but I do recommend having some savings before purchasing a home because of the risk you take on with unexpected repairs and other expenses.
  • Do you want to save for the future?
    Have you thought about the future and your finance goals? Are you saving for a family vacation? Replacement car? Retirement? If not, would you like to be?
  • Do you wish you could give more?
    What if you could increase your giving and make an impact with your monetary resources? What if you could manage your resources and build a lifestyle conducive to regularly increasing your giving?

For Drew and I, all of the above were and are our goals. We knew having $76,000 of student loans was a huge hindrance in pursuing the other goals, so that’s why we tackled it first.

2. Determine What You Currently Spend:

Genius idea, right? I know this is simple, but it’s so important. If you see a nutritionist they’ll probably ask you to do the same thing (i.e. write down what you currently eat). You’ve got to know where you are to know where you want to go.

Try this. Write down everything you spend money on for a month. I suggest a month so you capture recurring bills (rent/mortgage, car insurance, utilities etc.), in addition to general spending. If you can’t stick to tracking it for a month, start with a week (then repeat x3…just teasing!).

After measuring current trends, learn from your spending habits and get motivation to start cutting back in areas. Could you eat out one less time/month? Shop when you have a need vs. want? How often do you spend $1-$3 without even realizing it (ordering a drink at a restaurant, getting coffee or snack on the go…)?

3. Focus on Areas You Can Save Money:

Find areas in your budget where you can save money, then set goals and stick to them! Again, not rocket science, but super important.

The areas that typically have the “lowest hanging fruit” to save money are groceries, spending, and eating out.

If you start using a budget and set a goal for how much you’ll spend in groceries, I’m confident you can find ways to cut back each month. Maybe you currently spend $400/month and you can shave off $30/month by being intentional with what you purchase.

It’s crazy how you can easily spend $10-20 more each time you get groceries if you don’t have a plan! Think about it, if this is true, and most of us don’t need convincing that it is, this means we could save $100/month just by having a goal!

Where would you prefer that $100 go each month?

Additionally, $400/month was what Drew and I intentionally budgeted for the first year of our marriage. If you’re not currently using a budget for groceries, I bet you could easily save 15-20%/month by starting a simple budget! Do the math for motivation!

*Note: it’s just my husband and me, so these numbers are based on feeding two people.

Here’s some grocery saving tips we used:
We would often cut back on buying sweets, snacks, and drinks (easily saves $20/each week). We’d frequently choose to eat spaghetti in efforts to make that month’s goal, or eat a bland meal instead of trying a new and exciting recipe (ingredients add up quick!). I’d check the budget before getting groceries, and add up what I thought I was about to spend before checking out.

Make a game out of it. Try to balance the budget without going a penny over. Put stuff back if you need to. Not because you have to, but because you choose to for your preferred future!

As mentioned here, we used the YNAB budgeting tool to help us stick to a budget. One thing I love about this tool are the reports it provides so you can look back at spending habits (data below).

To illustrate how much you can save in the areas mentioned above, check out what we spent in these categories over the past 3 years (the time-frame in which we were paying off our loans):

Groceries:
2014: $4,285
2015: $3,730
2016: $4,350

Spending*:
2014: $2,385
2015: $1,600
2016: $1,840

Eating Out*:
2014: $880
2015: $630
2016: $1,830

* “Spending” includes the “entertainment” budget Drew and I share, as well as the “fun money” and “food money” we each individually have.
* “Eating Out” is a budget Drew and I share, unlike our individual food money listed under “spending.”

I’ve emphasized 2015, because this is the year Drew quit his job to pursue a career change. Literally living on one income, we tightened down our budget even more. This is important for you to see because this was the year we were most intentional with our budget.

Check out the total savings all of this adds up to:

If you compare 2014 to 2015, we spent a total of $1,500 less in 2015. If you compare 2015 to 2016, we spent a total of $2,000 less in 2015.

How many of you could pay off a small student loan or credit card bill with $1,550 or $2,000? The small changes in how we budget for groceries, spending, and eating out go a long way!

Here’s how much we saved in each category/month in 2015 compared to 2014:

Groceries: On average, we saved ~$45/month, ($4,285-$3,730)/12.
Spending: On average, we saved ~ $65/month, ($2,385-$1,600)/12.
Eating Out: On average, we saved ~$20/month, ($880-$630)/12.

So there you have it; cutting back a little each month goes a long way! What one thing can you take from today’s post to apply to your finances?

Please share if this was helpful! ❤

.Em

Practical Budgeting Tips

How We Paid Off $76,000 of Student Loans in Less than 3 Years (and my husband quit his job)

Our strategy to paying off our students loans was really quite simple. Nothing in this post is rocket science, and most of our plan was inspired by Dave Ramsey’s Baby Steps. I share our story to encourage you it is possible to get out of debt by simple principles, and I hope it inspires you wherever you are with your finances.

So here we go..blog_money_03

When Drew and I got married, one of our biggest goals was to pay off our $76,000 of student loans ASAP!

We both wanted to pay off debt before having kids. Not to mention, the thought of paying roughly $250,000 in the long-term with interest rates was infuriating and a good motivator to GET ON IT.

If you haven’t done this, Google a loan calculator to see what the end amount will cost. It’s super motivating to aggressively pay it off!

With the thought of having kids 2-3 years into marriage, we decided to pursue a plan to pay off our loans within this time-frame. We knew it would take a lot of discipline and God’s providence but it would be worth it. With the monthly loan payment of $986/month (basically the cost of a mortgage!!) we knew this would be a huge hindrance and harder to pay off the longer we waited. 

Earlier on in the year that we got married, we started making financial decisions that aligned with our end goal. We purchased older cars that we could pay cash for, and I downsized from my own apartment in a nice area and moved in with roommates to save ~$350/month. We were already frugal but we tightened up on spending, in general.

When we got married, part of our strategy was to primarily build our lifestyle and budget on Drew’s income. For us, this meant making some “sacrifices” like buying used furniture and minimal decorations, living farther from our church and community, living an in older apartment complex, and spending far less than we made.

We got on a strict budget and used an amazing tool called You Need a Budget (YNAB). This is an incredible tool for predetermining what you want to spend in each category, tracking what you spend, viewing spending trends, and creating saving goals. It’s similar to Mint, but you manually track everything, so you’re constantly aware of what remains in each category.

With the end goal in mind (paying off our loans in 2-3 years), we set our monthly budget categories (groceries, entertainment, rent, etc.) based primarily on Drew’s income so we could put most of my income towards loans. These predetermined goals, both overall and monthly, helped “gamify” sticking to our budget categories.

To reach the monthly goal of putting most of my income (in addition to the regular payment) towards our loans, staying within each category helped maintain the overall goal. Each month paying our end of the month goal brought us a step closer to paying off another loan. If our grocery budget was $300/month, I knew that not spending over in groceries would help reach the monthly goal.

Reaching our monthly goal gave me energy to keep up the hard work. Knowing we had a goal and reaching it in a month was motivating and provided monthly, attainable goals.

In order to stay within our budget, we tracked everything we spent. Not even joking! $1 pack of gum…yep, we tracked it! Seriously. We built the habit of checking our budget before spending, which I think is crucial for serious debt elimination.

Another motivator for us was aggressively paying off one loan at a time rather than spreading the extra loan payments over all loans. We started with Dave Ramsey’s advice of paying the smallest loans off first. Next, we paid the one with the highest interest rates.

It’s super exciting when you pay off a loan to see the total monthly payments decrease. Next to paying off our final loan, our biggest celebration came when we paid off the 1st of 3 major loans that was roughly $20,000. Our minimum payment went from $986/month to less than $500/month, allowing us to add an additional $500/month towards loans.

blog-night-we-paid-of-first-loan
The night we paid off our first big loan (~$20,000)!!!

Cutting our monthly loan payment in half also allowed Drew to quit his job for a year to pursue a career change. Had our debt not substantially decreased a couple of months prior, we probably wouldn’t have entertained the idea. This is just one example of the benefits from making radical, disciplined financial decisions for a preferred future.

Literally living on one income, made us tighten down the budget even more. Again, this is when having a clear vision helped us stick to the daily sacrifices we were making. But… It. Was. Worth. It!

By God’s grace, Drew started his new job in January of last year and we got back on our original plan of paying one person’s income towards loans and sticky to a tight budget. We were able to pay off our last loan 8 months later, August 2016.

I can’t tell you how exciting it’s been, and the weight that’s been lifted! Living on a tight budget for ~3 years was challenging but, in hindsight, I don’t look back and feel like we missed out on anything of significance. If anything, I’m extremely grateful for the experience, as it’s taught me so much about where my identity and joy come from, stewardship, and being grateful for what you have.

I recognize that everyone is at a different place financially, and that your strategy may look much different than ours. I do hope, however, that our story has encouraged you wherever you are in your journey. Our journey required a vision, a plan, and discipline, but the strategy was really quite simple.

Whether you have a lot of debt like we did, or a small amount; whether spending less comes easy for you, or is a big challenge, I’d encourage you to pursue freedom from debt. It’s so worth the sacrifices you’ll make.

I hope this has encouraged you wherever you are today.  I look forward to expounding on many of the things I learned along the way!

~Em

 

P.S. Just for fun, here’s some scenarios from our story. You may relate or feel encouraged to get crazy with budgeting…

You know you’re on a budget when…

  • You think splurging is buying $3 “special” face scrub
  • Buying gum is a treat…and sometimes you chew it as dessert to save money
  • You have random dinner like scrambled eggs with broccoli and Asian dumplings in efforts to stay within budget and clean out the fridge
  • You choose between buying hairspray or mousse, waiting until next month to buy the other
  • It’s the end of the month and you combine 3 categories of your budget to pull together enough money for fast food burgers