My husband and I have a saying we use when deciding whether to buy the cheap version of something (that will probably be less functional, soon break, and have to be replaced) or buy the more expensive, higher-quality version. We say that we’re too poor to not have the best – meaning we can’t be wasting our time and money on ultimately worthless goods. And the same applies to your finances: we’re too poor to not be good with money.
I used to get so frustrated with “money saving tips,” thinking, “How can I get on a budget when I don’t even have enough to pay my bills?” Guess what: you don’t need a lot of money to sharpen your smart money skills. And if you can be smart when you are making minimum wage, think about how much more your dollars will go when you land that big career! So let’s get going!
Step 1: Open a Money Market Account
You want to save, but you’re paying bills out of the same account where you keep you “someday I’ll get to do ______” money. Two problems: you can never really tell which is which, and have a habit of dipping into your “savings” to pay everyday expenses.
Here’s what you do: open a money market account (I have and love the simple, no-fee, no-minimum money markets with Sallie Mae bank*). Put some money in there – anything. Now, you have a dedicated account for saving up for the emergencies or the somedays (ours is for emergency savings and a down payment on a house).
Bonus: establish an automatic savings plan: every month (or week, or whatever), automatically transfer funds to your money market account. You will watch that money GROW! Plus, you’ll earn a competitive interest rate (that Sallie Mae account is a cool 1.05%, which is shocking for money market accounts these days).
2. Make a budget and use an awesome budget app.
Mint and Goodbudget are two great free apps (I use both: Goodbudget to track our spending in different categories (groceries, eating out, etc.) to make sure we are staying on track with our budget; Mint to get the big picture of all my accounts, debts, and assets).
A simple spreadsheet is all you need to make a budget. Start with how much money you expect to take in each month, then take out your expenses: tithe, rent, food, insurance, savings, etc. At then bottom of the spreadsheet, you should have nothing left! Adjust the budget every couple of months as you get the hang of it, and make adjustments for seasonal changes and extra expenses.
3. Pay down your cussing debt.
I currently am on the cusp of breaking down below $60,000.00 in debt – that’s right, I am this just a few thousand dollars close to getting into the $50,000.00’s! I’m so excited for many reasons, but mostly because the sooner we pay off these student loans, the sooner we can move on with our lives. Our monthly student loan payments are almost exactly the same as our rent – which means we’re basically paying two rents every month! This just won’t do…
What’s my strategy? First, I took the fastest plan to paying off my loans. I realize this is not an option for everyone, but for us, it was a worthy sacrifice. I signed up to pay off my loans in 10 years – which gave us huge, steady payments that are a struggle to pay now, but over the years we will save tons on interest and will eventually be able to make those payments (and maybe even extra) more easily as our income gradually increases.
Next, I’m paying down extra to reduce my monthly payments. I found my smallest loan, which also happened to have the highest interest rate, and one of the higher monthly payments ($50.00/month). When we get extra money – tax refund, bonus at work, refund from my Bar review course – it goes towards that loan. We are tackling that loan head-on, and we’ve paid it off in just a couple months!
Now that this loan is out of the way, we’ve reduced our loan payments by $50.00 per month, and we’ve saved hundreds in interest! What will we do with our new-found $50.00 per month? One idea is to put it towards our next-smallest loan, to pay that off faster. The other idea is to start an IRA and put that money in the IRA every month. Another idea is to just save it, and get into a house even sooner! The point is, paying off debts means money in your pocket – scraping and fighting in the short-term to get to freedom later! It’s 150% worth-it. I promise.
Go forth and be smart with your money now! You’re too poor to put it off.
*Not a paid endorser, just a huge fan of this account!