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.
This post was featured on Canadian Budget Binder, The Heavy Purse, 6 Birds Financial, thank you!
My Financial Independence Journey says
Everything starts with tracking your income and expenses and then figuring out where you can save money. Assuming you don’t know how, this is a great time to learn to cook – which will save you tons of money in the long run.
If you’re a college student, your biggest financial asset (your career) has yet to arrive. So long as you’re not racking up massive debt, stay focused on doing well in school and networking to get a job in your field.
You also say that you’re a business owner. You might want to see if there is some way to up your business income without hindering your studies.
Glen @ Monster Piggy Bank says
It looks like she is already off to a flying start – kudos to you 🙂
If I was in her shoes I would probably look at the ATM fees (this is just a waste). Then also things like her BF’s beer. If he frequently purchases beer, perhaps they could buy a larger carton and save money by buying in bulk vs the expensive 6 packs.
Pauline P says
not sure about the beer. I like my beer too and usually have one 3-4 times a week, but I can also have 4 beers in one night, having the case right there may increase his consumption whereas if it is expensive he may drink less.
jane savers @ solving the money puzzle says
Renting a couch? I did not know such a thing was possible. I would ditch that and ask family if they have any old chairs you could use. If not a few lawn chairs could fill the room for a lot less money than a couch.
Pauline P says
I used freecycle and found lots of great things, even beds and a wardrobe, there is also a free section on craigslist. Or wait until June when the students leave their homes and get rid of furniture for low prices.
The Happy Homeowner says
That’s exactly what I was going to say–Freecycle is amazing!!
I would suggest they buy a used couch and stop renting one!!! I would also suggest that they break down their Wal-Mart and Dollar Store purchases to see what they’re really spending on.
John S @ Frugal Rules says
I would second Holly’s suggestion and buy a used couch and stop renting one. They’d likely be able to buy new to them couch for what they’re spending over a couple of weeks in renting. That would then free up a nice little bit of money for them. I would also add tracking those expenses. Like you said, they still need to have fun, so I would allocate a certain amount each week/month and once they spend it then that’s it. Like you said, they’re seeing this need early, which puts them ahead of the crowd. 🙂
Pauline P says
yes, being early is a great advantage. I can’t even imagine how many times over they will have to pay for the couch if they keep renting. I suggested Carrie got a $15-$20/week allowance each, or whatever feels comfortable at first, then they can reduce it progressively.
DC @ Young Adult Money says
It’s always tough when you are in school and trying to make ends meet. You have to commit a lot of time towards studying and being in class, but you also have to make money like everyone else. Small business income is great because it has potential to grow into something bigger, but fluctuations can be painful. I’d say try to build your business to make the income more consistent. Budgeting is great, but making more money is the easiest way to start saving. That’s my two cents.
Thank you guys, for all the tips and advice! We’re really excited about saving money.. Especially since we need some cushion for a rainy day. We will definitely take all of your advice into consideration! Thanks 🙂
I would ditch the rental couch and get a used one off Craigslist. Or just buy a cheap $400 one from the store. The upfront cost will be high, but you will be saving money in the end.
Grayson @ Debt RoundUp says
Stop renting the couch. Unless you are in an iron-clad contract, get out of it and buy something from craigslist. I don’t know why you would be renting a couch anyway. As others have also indicated, see if you can increase your earnings with your business without messing with your education. Also, make sure you don’t have too many business expenses that are unnecessary.
Stop renting that stupid couch! They are free on Craigslist all the time!
Stop buying beer and soda if you are broke.
Stop eating crap fast food and learn how to cook and buy groceries on sale.
mochimac @ save. spend. splurge. says
Obviously renting the couch is something you have to stop as evidenced by all the commenters above.
As a freelancer and business owner, I’d also be keeping track of your business expenses separately from your personal ones, and to make sure that the income from your business covers your business expenses, AND THEN you take out personal income/payment from that.
Obvious cuts: Beer, Snack Food, Pop, ATM fees (just take out more money each month so you stop getting slammed), banking fees (keep the minimum balance), and basically asking yourself if what you are getting is what you actually need.
Other post to read: How to cut your budget and handle it wisely
I’d also bet that your cellphone plan could be chopped down to something cheaper, and you could certainly use less electricity if you turned off your laptops and other things at night (those things really do add up as vampire electricity charges especially for the 8 hours they’re on, using energy while you sleep).
If you want to buy snack food, beer and pop, you need a separate budget for that at $25 – $50 a month. Once the money is gone, no beer or snacks, and it’ll force you to either save the money to use it when you really want a snack, and/or you will prioritize snacking over drinking beer.
From the sounds of it, you were just like I was when I was getting out of $60,000 of debt. I was losing a lot of money in the little purchases without even thinking about it and $5 here, $5 there, it added up to $600 a month in the end.
Budget & the Beach says
Well because I’m a health nut I would totally agree on the not spending money on fast food and junk. Even if I had all the money in the world, that leads to problems later on in life which will ending up costing more money in health care. Trust a 42-year old on this one! I also agree on the couch…I would find someone giving one away or find a cheap one on CL’s. I would also explore other ways to make some extra income.
Like the other comments, I would stop renting furniture. Rental furniture is a huge cash drain. I’d also take John’s suggestion and set aside X amount for fun or eating out and when it’s gone, it’s gone. I think also making some sort of meal plan or trying to grocery shop every other week or once a month could save some money. It isn’t maybe the most fun thing to learn at 21, but if you can learn the right way to grocery shop by knowing the rock bottom prices for things you buy when they go on sale, it would help in the long run. I didn’t learn that until my mid 30’s and wasted lots of money on groceries.
anthony @ financial freedom ideas says
I agree! Budget is the start to financial freedom. Monitor everything that comes in and out of our pocket. The earning should be higher rather than the spending. We need to modify our lifestyle within our means. If we want a higher lifestyle thus increase our income stream. Yes it is a good thing to start early then retire young and rich.
The Happy Homeowner says
Ditch the couch and keep a spending notebook on you at all times–write down every cent (including fees) and reconcile with your statements at the end of the month. Track every penny and then decide where the changes can be made. Be prepared to sacrifice–it’s always worth it in the end!
Laurie @thefrugalfarmer says
Yes, definitely get rid of the couch, and start cooking at home. You can do it, Carrie. Good for you for getting on track. My one other piece of advice is to start reading personal finance blogs frequently if you don’t already. They are SO motivating!
Edward Antrobus says
I definitely agree about the sofa. Rent to buy prices are exorbitant. I believe I told you about the price a local rent to buy place wanted to charge for a washer and dryer. For what the set was worth, the interest rate was nearly 100%!
Pauline P says
yes, still can’t get over that fact. In a couple of payments they will have paid for what a used sofa is worth on craigslist.
Shannon @ The Heavy Purse says
Love this! Hearing about a 21 year old working toward reaching financial independence just puts a HUGE smile on my face. You already mentioned the ATM fees, so the next couple things that popped for me is renting the couch. Unless she needs to break a contract that would be incredibly detrimental to do, I would buy a nicely used couch. There also seem to be a number of stops at the Dollar Store and Walmart, which is good that they are looking for low-cost items, but I’m wondering if they’re making some impulse buys too. I would suggest one shopping day with a firm list. It’s very easy to add things to your cart, especially at a dollar store where you feel you already being very money conscious. So what’s another dollar or two? It’s great that you’re taking so much time to help, Pauline.
Pauline P says
a one day shop can definitely help, although it looks like they have no car so not sure they can carry enough for the week in one go.
Matt Becker says
One step? Automate some amount of money to savings every month. Even if it’s only $25 or $50 to start, getting in that habit is priceless. I agree that tracking spending is a huge first step. Before even putting anything into a budget just seeing where everything is going is eye-opening.
I would say stop renting anything (unless it is a house/apartment because you don’t know where you will be long term) and also nix alcohol. Depending on the person, that may not be “doable” but the savings can add up there.
Essentially, I think every purchase should be looked at with the question of “why am I getting this?” If there isn’t a good answer, then cut it out.
Honestly, congrats to them earning a side income while going to school. If they’re not taking a subject with a high payoff, then they should consider quitting to work full time. If not, then they should be patient — Rome wasn’t built in a day, and maintaining a break-even cash flow during a useful post-secondary program is admirable. Learn today, earn forever, start building wealth from graduation (if they’re 21 then hopefully that’s soon!)
Now I am a complete beer snob, but quality beer can be had for as little as $7 for a six pack. Perhaps $13 for a 12 pack? Perhaps the beer was purchased on sale and will last two weeks or more?
I would never suggest not drinking beer, but I will say $13 is a it much for a six pack unless of course we are having no trouble paying the bills and a hefty savings account.
Pauline P says
haha it would get you a 24 pack in Guatemala 🙂 don’t know how much they bought, but even if it was a 6 pack it is still better than having 2 beers each in a bar.
Canadian Budget Binder says
Good for you for wanting to take control of your finances. First thing, I would get organized and have all the information I need in front of me. I’d create a Budget (of course) and track ALL my expenses. The only way to know where you can improve is by tracking where your money is going. I’d certainly ditch the couch rental that’s a huge waste of money. You’re making someone else rich. Maybe opt for used or free like others suggested. I’d also really ask yourselves what your goals are long and short-term. Do you really need the beer, the snacks, can you cook homemade meals instead of eating out? If you really want to get out of debt or to save money you will do whatever it takes, no excuses. I won’t turn this into a long story but there are many great tips here for you from everyone. Best of luck in your journey!! Mr.CBB
Savvy Scot says
Become addicted to the spending freezes! Make it a game and see how far you can go
Chris @ Stumble Forward says
I agree it’s hard to keep a budget when things are constantly adjusting, but one thing I like to do with keeping my budget is to figure things for a little bit lower than you normally need this way it gives you a goal to shoot towards. For example if she paid $94 at Walmart cut it down to $80 and gradually cut the wasteful spending out of your budget.
Thanks for all the help you guys! I am definitely reconsidering my expenses. Thanks again!
Suba @ Wealth Informatics says
(1) Stop renting the couch. Friends/family, Craigslist free section and Freecyle should be enough to score a free couch. Even if that doesn’t work, there are so many cheap option that to rent.
(2) At this point, I think the problem might be on the income side, not so much on the expense side. Can they do something to even bring in $100-$200 more per month, may be monetize a hobby and set that aside for savings?
Agree on ATM fees, I REFUSE to pay them!
I’d try freecycle or free parts of craigslist for sofa – if it’s possible.
Maybe have a ‘no junk food’ day once a week or a week a month, and all that ‘coffee/snack’ money could be put towards savings? like a zero spend day!
Oh and budget for the bills to go up, cause ‘fat’ in budgets are a godsend!
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