Episode 18: Stop Living Paycheck to Paycheck So You Can Make Your Own Financial Choices
Updated: Jun 2, 2019
E 18 Saving Money, Getting Lean
For awhile when I first got out of school I did what I thought I was supposed to do based off of what I was told by others when it comes to personal finance. An issue I’ve seen today is we don’t educate much on this topic so not a lot changes with how we address crippling college debt or tough credit card debt and bad spending habits.
First and foremost I’m not a personal finance wizard I’m just someone that found something that worked for them to get out of debt, save money, and invest in my own personal circumstances. My methods won’t work for everyone but I hope they can help some people think of some new ideas to try and get them and their families into better lifestyles for them.
The only way to make more money is to make more money or SAVE MORE MONEY!
I went from overspending up to $2000.00 per month to saving $1500.00 per month and investing in my first income property.
My Top Tips!
1. Know Where the Cash Flows
It seems simple I know! But sometimes a cup of coffee, a night at the bar, the nicer beer, the better shirt can add up quickly and secretly until you see your bank account at the end of month. The little things add up and knowing where your money goes gives you control on where it goes. This isn’t about not taking care of yourself, it’s about deciding what is truly worth it and what is a liability.
After you see what your spending your money on because your tracking everything and you truly understand the value and intensity of your spending habits it’s time to anticipate what your going to spend to hold yourself accountable for your spending habits and plan to save some of that check! When you plan what your going to spend you usually stick to that plan whereas if there is no plan or number to aim for then nothing is for sure. Planning what you spend and save will help you stick to a plan instead of winging it and staying unaware.
3. Save A Safety Net
I know you have debt, I know you haven’t felt money stay in your pocket in a bit so it might burn but don’t cave. When you live pay check to pay check for a long time it’s difficult to save it because your not used to having it. This is one of the most important pivots in the process so you don’t go backwards. It’’s time to save 3 to 6 months of your household income or at least an amount that would protect you from a capital expense. If your car goes, your boiler goes, medical expense, or loss of income happens you don’t want to go backwards into more debt. If you have something to protect your progress you will always move forward and never go back to living this way. Hold strong, get safe.
4. Reduce Overhead
Society teaches us to buy better things when we can. You need to define what your American dream is. I followed the traditional steps I thought I was supposed to do by buying a house, buying a new truck, buying a recent phone. I realized that I don’t care about my house, my truck, or my phone if I don’t like what I’m doing for work to afford those things. Think about what you want and reverse engineer your lifestyle to help with overhead to accommodate that. If you can do both then ignore this step. I sold my house, paid off my car debt and am holding my vehicle until it dies. Having a low overhead has given me the ability to save enough to start investing and build my life back with a foundation that is secure for my goals.
5. Attack Debt
Now you know where your money goes, you have a plan, you have a safety net, and you’ve aligned your living expenses with your priorities. Let’s start using the free cash to attack debt and keep yourself out of the situation for good. I like the debt snowball approach but there are many other ways. I paid off my lowest total, highest interest debt’s one at a time using the monthly cost of other debt freed up to pay more debt until I crushed it. Without heavy debt or high overhead I’ve been able to invest in my first income property to go after finical freedom and you can too.
Some resources that go in depth on personal finance
Mr. Money Mustache
Waking Up From Work Podcast Links
Dave’s audio business