When I moved to Nashville, TN in 2004, I had no savings. I had $80,000 in undergraduate debt. I had a hefty car loan. I was on my own financially.
I took a job running errands for a small law firm. It paid $12 an hour. I split rent in a small apartment, planned every expense in advance, and worked my way to Financial Freedom.
If not, you can use a notebook and write it out. (This is what I did because I didn't have a home computer. I wrote out my Income/Expense chart each month and hung it in my room to input the expenses daily.)
Step 1 - Income Category - Any money that you have coming into the family monthly should be listed here.
Step 2 - Expenses Category - All expenses should be listed here. I also add a category for "Savings" and "Investments". (Be sure to list in order of importance.)
I do not list Credit Card unless you currently have credit card debt. If you don't have credit card debt, you're already doing better than most people. The goal is to pay the credit card off in full each month, so you don't pay any interest and maintain a high credit score. I've had a credit card since 2003 and have never paid a penny of interest. The credit card is a way to earn points or cash from expenditures (i.e. Christmas Money). If you chart your household expenses daily, you can watch to make sure you don't spend more than you earn. Thus, you should be able to pay the card in full each month.
If you currently have credit card debt, I'll be doing another post just on that subject.
Example of Expenses List -
Rent/Mortgage
Food (groceries, not dining out)
Electric/Gas
Water
Car Payment
Home Phone
Cell Phone
Gas (for car)
Savings Account
Holiday Savings
Vacation Savings
Tithing/Charity Donantions
Student Loans
Credit Card Debt
Other Debt (list specifically)
Entertainment (movies, dining out)
Cable/Internet
Etc.
I create an expenses chart and list next to each item the projected amount I have budgeted (i.e. - Rent - $750).
Always list the highest amount a category can be. (i.e. - Electric fluxuates, so I list the highest it's been. Then, I can be happy if it's less.)
Input your expenses daily as you spend so you can see where you are throughout the month. If you go over in one category, you have to take the money from another category. DO NOT TAKE THE MONEY FROM SAVINGS. TAKE IT FROM ENTERTAINMENT. You can always find something free to do. Go to a park, have a family game night, make more meals at home, etc.
When you get your paycheck, be sure to put money in Savings first and don't touch it. Do whatever you can not to touch it.
The above is exactly what I did to pay for law school as I went, to pay off $80,000 in student loans in 5 years, to pay for my cars in full at purchase, to buy my own home (with no cosigner) at 23, and to currently have my home loan as my ONLY debt.
Please let me know if you have any questions. I'm going to do a post on eliminating debt too.
If you have any other finance/investment areas you'd like info. on, please let me know.
BONUS INFO. -
Now, the tricky part is, what If I write down my income and my expenses exceed my income?
If that is the case, you've got to prioritize and TRIM, TRIM, TRIM!
I didn't have cable or home internet until 2009.
I know, you're like, what????
Hey, those are hefty bills. I can use the internet at work or the library. Not having cable at home allowed me to be so much more productive too! When I was at home, I could work on projects, study, and spend quality time with people. I never even missed it. If there was a show I really wanted to watch, I watched it on the computer in my office or at a friend's house. Putting the money that could go to the cable bill into savings, I saved so much money. I was able to cut my monthly expenses to under half of my monthly income. So, half of my pay (about $1,500) went to my expenses and $1,500 went to savings and investments. I fixed up my house, sold it for a $50k in profit. Bought a BMW and went into pro-bono law practice where I can stay home with my kiddos.
I can earn income from home and have never been happier. Financial Freedom feels so good!!!!!
DOUBLE BONUS (Because people want to know more!) -
A couple other money savers I did to get ahead were:
(1) Plan meals so I would make dinner at home and have leftovers for lunch the next day;
(2) Do not have a home phone. (I only had a cell phone with T-Mobile because it's cheap, and I still use T-mobile);
(4) Wash dishes in the sink (not dishwasher) to save on water and electric;
(5) REALLY limit eating in restaurants;
(6) Only grocery shop the first week of the month, then only visit the grocery thereafter to get things that go bad in less than a month (like bread and milk);
(7) Don't buy any junk food (no chips, desserts, soda); and
(8) Limit meat to once a week or substitute with chicken to save money. (As much as we love meat, it's so expensive!)
It's the little things that add up. Small sacrifices now lead to big gains in the future.
