That sounds crazy, I know. Saving half of your income seems like a fantasy. How can that be possible while I’m just trying to survive right now? There are many penny pinchers out there that skip out on Starbucks and avoid spending as much as possible. I was never a big spender, but I wasn’t going to restrict my lifestyle for a few extra bucks.
In my last job, my necessities for living, like rent and bills, accounted for 52% of my take home pay. How could I save 50% of my income if I was 2% short? That also didn’t include my growing list of credit card payments and eating. It was literally impossible to save all that money.
Saving money is often seen as a means of losing money or simply a bad thing. The thought of money leaving your account every month puts a bad taste in some mouths. In a recent study, about 69% of Americans have less than $1000 in their savings account. Better yet, nearly half of Americans would have trouble finding only $400 to pay for an emergency. Unfortunately, I was one of them.
The concept of living paycheck to paycheck is a common sight to see, overburdened with piles of debt or simply not making enough money. It’s a cruel and insensitive world out there at times, not stopping for a second to help you catch up. Many Millennials have even moved back in with their parents to help offset some costs. So why are most Americans having trouble saving money?
There can be an infinite number of reasons, but the most common can be broken down into two sections, spending too much or not earning enough. A majority of Americans fall under the umbrella of these two.
Spending Too Much
Spending too much is human tendency, right? We are constantly influenced by what we see on Instagram or carefully targeted ads. We’ll see our neighbor has a new car or your favorite celebrity just released a new line of clothes. We have shiny object syndrome and want nothing but the best of everything. Nothing will get in our way, not even our negative bank accounts.
It is too easy nowadays to buy something. It literally takes pressing a single button to order an item and have it automatically shipped to you. Subscriptions are just as easy, but nearly impossible to cancel. I had a gym membership I wanted to cancel. They had no clear telephone number or directions to cancel on their website, so I eventually gave up and just paid the monthly memberships costs without ever going. It was just easier to shrug my shoulders and go about my life, $25 poorer each month.
3 Biggest Expenses
With the exception of poor spending habits, the three biggest monthly expenses tend to be housing, food and transportation. High mortgages, eating out every night and that fancy new car you recently got take a big toll on your monthly income. So how do6 you save 50% of your income?
When I first moved to Brooklyn six years ago, I was lucky to find an apartment with dirt-cheap rent. It was a decent sized, two-bedroom apartment in the very south of Brooklyn. A monthly price tag of an extra grand on top of what I was paying would typically be the norm. But now my wife and I are outgrowing this apartment. Her work is expanding and we need more space to accommodate new projects, we want to start a family and we need something new. Housing is the largest expense you’ll typically deal with every month, so we are working hard to put down a large down payment when we are ready to move. That way our monthly payments remain low and don’t hurt the bank.
Spending on food may actually be higher than my monthly rent, ironically. I found a good deal on rent, but the terrible cycle of ordering takeout each and every night adds up. The funny thing is my wife and I love to cook. But we always have the excuse of not having enough time, it’s too much of a bother to plan out all of our meals for the week or just simply too lazy. The convenience of literally just pressing a button and having food sent to you is far too easy and tempting.
Since this pandemic, my Mother in Law started cooking every single night and has graciously invited us. We are essentially getting a free meal every single day. That saves us anywhere from our usual $30-$60 per night. I suppose that’s one of the many benefits of marrying into a big Italian family!
Once our world goes back to normal, my wife and I are dedicated to continuing to cook at home. If we don’t have time, we make time to cook or prepare meals in advance. Pizza Fridays will be our only delivery of the week and leftovers can cover our Lunch for the next day. It all starts with good habits and building off of that.
Finally transportation. Owning a car is expensive and the upkeep is just as bad. The car payment can be what puts you over the edge every single month. Luckily, living in Brooklyn, close to MTA, I have been able to avoid purchasing a car since moving here. I live so close to all my essentials, like grocery store, and Walgreens. But since my wife and I are planning to move into a house soon, that convenience will no longer be there.
I mentioned in a previous blog post, we are buying my brother in law’s car from him around the time we are moving. Since his car is already paid for, we made an arrangement to pay his monthly car insurance until it is time for us to move. When that happens, we just bring the car with us. It’s a good deal and we were happy to have 4 wheels available to us.
Figuring Out How to Save More
Finding how much you can save each month starts with one of my favorite things, budgeting! You can’t know what you can save each month without having a clear picture of your monthly expenses. The benefits of doing this include finding areas in our expenses where you can save money. Do you need to order that $25 salad? (Yes, that salad cost $25) It’s okay to order take-out. I’ll admit it. I can guarantee my wife and I will occasionally order out, aside from our Pizza Fridays. We don’t plan to do it that often, maybe a few times a month, but we definitely aren’t going to cut it out completely. That’s the lifestyle we chose and we just budget accordingly.
By ordering groceries every week, we were able to save almost $100 every time! That’s $400 extra a month or $4800 annually. During this lockdown, our groceries are more in the range of $50, paying only for snacks and breakfast/lunch.
Taking your time to save for a bigger down payment is a smart way to go, if I say so myself. By having a smaller monthly mortgage we are able to live more comfortably. We are planning to move to Long Island, so we need to factor in the higher taxes. Having a lower mortgage definitely helps offset that. A hack some people do is renting out rooms in your home or use airbnb. I personally don’t want any strangers in my home, but that’s your choice! It could bring in a few hundred bucks a month if done right.
Your car can rake in thousand of dollars in expenses every month, from maintenance to gas and insurance. It’s expensive to have a car, but a necessity to get around. I’ve definitely missed out on some opportunities by not having a car, but I made it this far without one, so I can’t complain. Finding the right car can mean pumping less gas every week and depending on your location, less in insurance.
Finally, let’s talk about spending. You don’t need to live such a lavish lifestyle to be happy. I’m not here to lecture, but my personal experiences lead me to buy only things that contribute to my happiness. I’m not a big spender by nature, but marrying one has opened my eyes. My wife and I complement each other in that she convinces me that money is just a vehicle to happiness, letting go of my greedy grip a bit to live life. I like to think I influence her a bit to be more mindful of spending. We can all dream, right?
My wife and I plan to live our life the way we want, going to Starbucks if we want, eating overpriced take-out once in awhile and not shying away from spending some of our money. We budget our lives to take all that into consideration, giving us a monthly stipend of guilt-free spending. This way we can live our life, but still within the guidelines of a budget.
By cutting down on our spending of food, cheaper rent (soon to be affordable mortgage) and paying off a car, we found room to increase our saving percentage up to 50% each month.
Not Earning Enough to Save
You have high bills, large piles of debt or earn just enough to pay your living expenses. I get it. Not everyone can cut out expenses to find room to save 50% of their monthly income. You may have childcare to pay for or high medical bills. Everyone’s financial situation is different and unique. You shouldn’t feel ashamed or embarrassed that you are just scraping by. Most Americans are in the same situation, whether it’s from similar occurrences, or just bad with their spending.
Regardless if you earn enough or not, it is still vitally important to budget your monthly income. You could be able to scrape a few dollars together each month to build up an emergency fund or pay down some debt. In some cases, you may even find areas you are bleeding money and could potentially save you. And finally, you may even discover you aren’t making enough to even pay for your home. It’s a difficult realization, but having that enlightenment may help you find a solution, good or bad.
So it all comes down to budgeting. Whether you need to just stay afloat each month or trying to increase your saving percentage, having a clear view of your finances is key. Other ways include taking on side hustles, selling items and others, but I will be covering that in a future blog post.
