Carrie wrote to me recently and said
Reaching financial freedom for me is very difficult. I’ve tried and it never works. A little about myself? I’m a 21 year old college student, engaged, business owner, and we have a small pet. I really struggle with saving money and it’s starting to become a pain. My pockets are always empty and I have $0.00 in my savings account. Very sad! Not having a cushion for a rainy day really makes me nervous.
Sounds familiar? Making money and not knowing where it is going? Tackling one emergency after the other without seeing how you can meet your financial goals?
As I told Carrie, she has a very positive thing on her side: time. She is willing to turn her finances around at the young age of 21. And she is already a business owner while in college. So she is determined and willing to work.
How should she start? OMG, Carrie is going to make me say the B word. Yes, she needs a budget. I have proclaimed high and loud that I am not a big fan of budgets myself because they are demanding and you have to keep track of every item, but in Carrie’s case, that is what is going to help us determine where her money is going. When I asked her, together with a list of several usual expenses such as grocery, loan payments, insurance, clothes, etc. Carrie replied
Our business income really fluctuates every month. Sometimes we earn $1300 up to $1800 almost.
We’ve been cutting down on our bills, thank goodness.
Rent we just upgraded to a two bedroom apartment so that equals $550.00
Phone and internet is $65 per month
Electric ranges from $125 to $180 per month
Then we have small household items and puppy food, etc.
She considered the most obvious bills but surely has forgotten a few. She does not say how much their grocery bill is, or if they have a car to gas up, insure and maybe even finance.
So I suggested Carrie start writing down ALL of her expenses for a week. Then we can review them together and see where we can trim some fat, and reduce her expenses so the fit into her minimum business income of $1,300.
If the budget is tight, then we can admit that there is not enough money, and see what we can do about it, namely, increase her income. But first, since she is a freelancer, she needs to know what her survival budget is, and how to stick to that for the time being, until things loosen up a bit.
After a week, Carrie was excited to report that she and her boyfriend has embarked on a spending freeze, and had managed to save $98.06!!
Those are the things she did spend on
our net income was $347.96 this week.
We did laundry for $10.00
BF got a pack of beer for $13.00
We went to Dollar General and spent $15.66
We are renting a sofa and that cost me $90.00
(We don’t have much furniture so this expense will add on another bill of $124 per month)
We went to Wal-Mart and spent $94.00
(Paint, paint brushes, transportation to get there, quick food, paper towels and McDonalds)
Dollar General was $10.19
(snack food and pop)
Our total was $232.85. The extra few dollars that flew off in the wind somewhere probably came from ATM fees and yesterday I bought something at our gas station (chips and allergy medicine) for $3.89 total.
As you can see, there are still a few expenses she could cut, such as beer, fast food, and she could probably ditch the sofa and buy a used one from Craigslist until she can afford a nicer one (unless they are stuck with a renting contract for a while).
But I’d rather they go slowly and keep a few fun expenses or drastic measures could make them throw the towel after a few weeks. They have a long way to go, and it will be even longer if they keep renting furniture and eating out, but they may stick to it and make more progress in the end.
My question for you today is if you had one painless tip to give to Carrie, what would it be? Something easy to implement and stick to? I will start with ATM fees. Changing bank for one that doesn’t charge them, or making sure you withdraw somewhere you are not getting charged can save you some change every month.