I wanted to start something new I’ve never seen in the blogosphere before and share with you my monthly savings report. Income reports, where bloggers break down their expenses and income, I have seen, and that was inspirational to this post. But I think a savings report is wholly new, and I wanted to share that with you today!
What you’ll learn:
- Why Save Money?
- My Money Goals
- How I Save Money
Why Save Money? Why a Monthly Savings Report?
I’ve noticed a lot of cool bloggers putting out monthly income reports to show how they scale their business and to let people get a better idea of what kind of salary they can expect in the job. And I think that’s very cool and helpful! I love to read those! And I love to read articles on personal finance blogs about saving money and side hustles to gain money when cash is a little tight. I’ve just been a little bummed that it doesn’t seem like anyone out there has thought about putting some of that same transparency into their savings habits. It’s all well and good to have backup measures like coupons and doing surveys to make balance out a tight checkbook, but it seems even better to me to share ideas on how you can save money and make it grow so you have something to fall back on when money gets tight. Bankrate’s Financial Security Index Study showed that a quarter of Americans don’t have anything saved for an emergency, 60% of Americans couldn’t cover a $500 emergency, and two thirds have less than the recommended 6 month emergency fund (Which is especially worrisome considering many financial experts have now increased their recommendations to a 12 month fund, but this is mostly depending on your circumstances).
I wanted to shed some light on my own savings habits, and hopefully show others how easy it can be to save money. I made a whopping $15,000 salary last year, once you remove taxes, and this year hasn’t been a big jump in income (yet!), and yet with my limited resources I have a 6 month emergency fund built up and I can pay my single *fixed *expense of $430 a month in student loan payments without fail. (Note: My expenses are low because I have been graciously given the opportunity to live at my parent’s house until I can afford the $1,000/month rent at the cheapest apartment in the area. I have taken full advantage of this opportunity because I refuse to go further into debt paying rent for the sake of the pride you can feel being an adult and living on your own as is the cultural norm in my country.)
When my tax return came in this year, I knew it was time to try something radically different. In the past few years (since I’ve begun having taxes to file, as a matter of fact) I’ve put that money straight towards paying off my student loans, because I’m an American and that means I have a lot of loans.
But for the past year I’ve decided to do something different. I wanted my money to not just be safe in my bank, but to actually grow. And today is the day I will show you how.
*Expense: paying money to buy something.
*Fixed Expense: Money you have to pay regularly. This usually means bills.
My Money Goals
My money goals so far have been divided into three stages of my life:
- Saving up my dimes and dollars to buy an American Girl Doll when I was 8
- Putting my life savings of a grand $800 to use when I was 14 and investing in a mutual funds so I could have grow a bit more money to pay for college
- Being in college and throwing every cent I made directly at my massive debt
And the throwing money at my debt thing worked for me. It worked really well. I started out with $54,000 in debt for my two years in college (you read that right, I didn’t even do a full degree and college still cost me more than 50k) and after three years I was able to bring that down to $50,000. I’m not sure exactly how that happened, because I threw $6,000 at my debt so my remaining balance should be much smaller. I didn’t realize *interest grew that fast! But it did indeed so in the end I didn’t end up paying down as much *principal as I would have liked.
Still, my priority since I was 18 has been to just put everything I have into paying down my debt. This hasn’t been a great strategy for me though, partially because sometimes things come up and I need money to pay them, and if everything is going into paying down debt there isn’t any money available to give me wiggle room. I didn’t think I needed wiggle room, because I don’t pay rent or worry about the expenses of owning a car, but I still have to pay for my prescriptions and metro fare and now that I’ve started a business I’ve developed even more expenses that I need some money available to pay.
*Principal: the amount of money you first borrowed for a loan, like a student loan. Learn more
*Interest: When you take out a loan, the amount of money you owe grows over time. The interest is the amount of money tacked on to what you your lender. The interest usually grows by pre-determined percentage of the total of what you owe, and usually is added to what you owe every month. (Interest can also apply to investments, see below.) Learn More
How I Save My Money
That is why I started branching out my savings efforts, and put some money into a retirement fund (Roth IRA 401k), and separated my savings accounts into different categories like “Business”, “Debt Payments”, and “Life Etc” so that when I do make some money I can put it aside for my different bills instead of bundling it all together into one general savings account. That has really saved my bacon on automatic loan payments several times just since I started doing this last year!
But my savings strategy isn’t just to put money aside for my bills as they come. Nope, I also put money aside for occasional expenses I know I will have. That means I have a *CD at my bank to save for my weekend camping trip this Summer, and another *CD to save for Christmas presents. This lets me put money aside and save for these things easily, without letting me cave in and use that money on shopping sprees that always seem like a good idea at the time but leave me disappointed and frustrated with myself when the time comes that I need to use that money for the thing I saved it for but it’s all gone and I have to scramble to find a way to put a lot of money together in a very small amount of time.
Basically a big part of my savings strategy is to do envelope budgeting, but instead of using envelopes or complicated and expensive accounting software like You Need a Budget, I just divide a percentage of every little bit of income I make into my different savings accounts. I got the idea from this genius book that talks about money for the self employed! (Affiliate link) It was a life changer, I recommend you at least check it out at your local library.
First thing I did with the money I made this month was to put it towards my student loans, just like I have been doing for awhile. This month, however, my interest rate bumped up to 9%, so I had to make spend more on interest than I had been. I looked into my accounts and found that I was also behind on paying the interest in one of my 3 loans, because I had forgotten to pay it last month (thankfully I currently don’t have a minimum payment on that particular loan I missed, but it’s still a problem!) So, with the new interest rate, I like to pay the month’s interest+$10 on each of my loans, each month.
$380 for this month’s interest+ $150 last month’s interest on just one of my loans+$30 to pay some of the principal on all three loans=$560 towards student loan debt.
Ouch! This month’s payment sincerely hurt. But thankfully, I’ve been doing some side hustles and made a bit of money on Ebay, so I still had $100 left to put towards my savings.
You can read more about setting up a budget for freelancers here, or do a super simple 50/20/30 budget for just about anyone here. But I have my own system for myself, and I’m going to show you how I break it down using this month’s savings as an example.
I had $100 available in my bank account for savings. I put it in small increments in a few different places:
- *Cushion Fund:$10
- Student Loans:$20
- Learn to Drive a Vehicle Class Expense:$0
- Experiences (Travel, eating out with friends, metro fare, general life experiences and costs):$0
- Retirement Account:$0
I didn’t add any money to the “Learn to Drive a Vehicle Class Expense” partially because I instead took some of that money out to take a “Learn to Ride a Bike for Adults” class, and partially because I didn’t need any more in there. Thankfully I still have enough money left to pay for driving lessons, whenever I finally have enough time to put towards that. It’s not really essential to me to learn to drive a car immediately, mainly because I use public transport and I am working towards using a bike as my main vehicle. This is partially because I know I can’t afford a car and I’m not willing to go into debt over a car when I don’t need to, but also because I do think it’s necessary to learn how to ride by the time I’m thirty and not being able to use a car is part of the incentive I’m using to get me on the scary bike over and over until I get used to it and start to enjoy riding. Besides, the bike is on my “30 things to do before 30” personal goals list, so it’s gotta be done!
Thankfully, while I worked at the Library of Congress I was able to put a bit of money into those other savings accounts and I have just enough set aside that I don’t feel like I need to become a Minimalist and sell all my stuff to keep myself financially afloat.
*Cushion Fund: I’ve heard this called a rainy day fund or money cushion, but either works. This is a fund you set aside in a liquid savings account you can access at any time, but do not spend unless an emergency comes up. The idea is to have some money set aside so that if an emergency that must be taken care of right away comes up, you can pay it off. The majority of household emergencies are $5,000 so depending on your obligations like a car or house you may want to aim for the more costly option. Read more about cushion funds here. Learn how to save for a cushion fund.
My Savings Blueprint
My savings blueprint is a three part system.
- Have separate savings accounts for the different parts of your budget, like bill payment or your health savings
- Putting a little into savings each month can add up a lot over time
- Every time I skip buying something I put the money I saved into my savings accounts
With this system, I don’t have to strictly budget. I know what my rough average costs are in each of my budget categories, but I don’t need to keep track of every little dollar I spend because I can see at a glance how much I have left to spend in any of my budget categories.
I also like that this system lets me make sure I’m on track with savings. If I just put all of my money into a single savings account, I usually end my savings efforts at just a thousand or so, because that feels like a lot, and then transfer the rest to my checking account to throw at my loans and leave other necessities like being able to reload my Metro card underfunded. When I have these separate savings accounts though I can see how small an amount I really have set aside for each type of spending I have to regularly do, so I find it easier to save more.
I don’t really use the third step, to put money I would have spent into savings instead, mainly because I am not really doing any spending for fun right now. But for those times when I do have a burst of money and I do take the chance to live a little, I can reward myself for those times I do decide to skip clubbing with friends in favor of keeping that 200 bucks stashed away.
My savings blueprint might not seem that revolutionary, until you again consider how few Americans have any savings. And the number of people in their early twenties with no savings soars above 60%! It’s a big problem. I’m convinced that a large chunk of the problem is that people with very small incomes like me are not sharing how they save money. The only money saving advice you tend to find online is from people who are well established in their careers and salaries who have a good amount of money set aside. And even then, it’s rare to see solid numbers on savings. It seems like numbers are only saved for investing reports, while no one wants to share how much they have saved. But I don’t feel it’s a security concern for me to share this- it’s hardly likely to cause anyone to want to rob me, when there are people with tens of thousands of dollars saved- but I think this can really help someone get an idea of what’s possible.
Savings Blueprint For on An Average Person’s Expenses
Because as you can see from my full report down below, it is possible to save quite a bit of money even if you don’t make much. And if you do pay rent and health insurance, unlike me, you might be able to take on some side hustles and work for the full 12 months so you make closer to the regular entry level income of around $30,000/year. That means you are making roughly $2,500 a month, and once you take out the national average of $1000/month rent and $240/month groceries you still have a fair amount of money left to pay for affordable healthcare alternatives and set some money aside in savings before you give what’s left to your favorite cause or spend it on something fun.
Average person savings: $2,500/month salary
-$150 healthcare & Necessities=
That number of money you have free will wiggle around a bit, depending on if you are paying for health insurance or health care cooperative, or if you buy more expensive organic groceries, or have to pay for gas for your car. You also probably won’t have any money left at all if you are providing for a child or sharing expenses with a significant other. But if you are young and single and your expenses are anywhere near the national average in the US, you’ve got plenty of money you can divide up between saving, giving, and fun spending.
Savings So Far
So far, just over the few months where I made about $10,000 take home pay, I was able to put $6,000 into paying off some of my student loans and another $2,500 into my long term savings and emergency fund.
My total savings, including what I put in during May, adds up as follows:
- Cushion Fund:$1000
- Student Loans:$2580
- Health:$500 (I’m on my parent’s insurance so I don’t need too much here)
- Learn to Drive a Car:$600
- Experiences (Travel, eating out with friends, metro fare, general life experiences and costs):$325
- Retirement Account:$1000
It’s not a ton of money, but I feel so much more secure financially than if I’d just put every cent I made towards a lump payment on my student loans. This way I can pay those loans every month for a few months and avoid paying any late fees.
I also like that with this method I have enough security that I can pursue my chosen career as a writer. What better time is there to chase a dream than when you are young and don’t have a house or kids or spouse to provide for?
What are your savings habits? Tell me in the comments below!