Not having a lot of money and wanting to have an expensive lifestyle is a recipe to have a disaster of finances. Before I got my priorities in check, I’d get paid and before I know it, I’m waiting for the next payday. The paycheck to paycheck lifestyle is dangerous and can cause all kinds of pain. As I began to work myself out of the cycle, I noticed three things that dictated how much money I had at the end of every paycheck.
When I realized how much my finances were out of whack, I knew I had to make a change. The first thing I did was throw a little pity party for myself. That didn’t get me very far, so I decided to put together a budget in order to understand exactly where my money was going each week. Apart from from big expenses like student loans and car payments, the next three things that stood out had to do with housing, transportation and food stood out. It makes sense because these are high on our needs to feel secure so they are bound to cost us the most. These are also things we can change, so I decided to do my best to lower them as much as possible in order to free up more room in my finances.
Following the most popular rule of thumb to make sure costs do not exceed 28% of my gross monthly income has been a great guide. This means if I was to make $1,500/month after tax, my monthly housing cost should be no more than $420. It's a great thing that the local housing market is pretty cheap. For around $600, there’s a great amount of safe and comfortable options available. After crunching some numbers, I noticed that based on the current local housing prices and interest rate levels, I could lower the my housing costs if I bought instead of rent. That kicked off the house shopping and within 6 months, I closed on a house. In the first year of living in the home, my housing costs was close to 30% of my gross monthly income. There were some needed repairs I didn’t anticipate in that first year. The second year, that percentage dropped to 28% and now, it hovers around 25%. This decrease is due to getting some yearly raises and also not needing any other crazy repairs. The 28% rule of thumbs has been helpful in my housing decisions and I will continue to use it.
The longest commute I ever had was 1 hour and 30 minutes one way. This was a construction gig I did for 2 summers after high school. At the time, sitting in a car for so long was one of the worst things ever. Even after getting a big paycheck, my gas budget took a big chunk of it. I should have learned from this instance a lot sooner as just a few short months ago, I had multiple cars, a truck I didn’t need and I was driving everywhere to practice some escapism. As a professional, My commute is about half an hour one way and I’m very happy about that. Sometimes, I will even get jealous at a coworker who can walk to work because they live so close. Since I’m doubling down on lowering costs, I’m working on lowering any car loans, gas spending, and insurance. I’m getting rid of the extra cars I have. I was upside down on my truck payments so I have one of my managers take over the payments and I should have the car out of my name in a few weeks. That will lower the monthly insurance dues I currently own. I’ve since found a sedan to drive around, so the gas spending has gone down significantly from daily driving a truck. The one thing I will keep working on is the amount of driving I currently do. Instead of stopping home before heading to the gym after work, I need to plan better and pack gym clothes and head straight to the gym. Minimizing all the detours and stops help to save money.
I’ve been a hefty fella my whole life, and sure do enjoy my food. Until a few years ago, I didn’t care about what I ate as long as it got me full. This meant many pizza deliveries, multiple cereal bowls during the day and going out for food. Since then, I’ve learned to have a more balanced diet and to stop going out so much. A trip to the grocery store now means spending $50 to $60 every other week. This is the sweet spot because if any more, things get thrown away. If less, I resort to having to eat out. I only have to get food for one person, which make it easier. I count eating out in this category too because, going out with friends and family is all fun, but it adds up. I sometimes will bypass eating when I’m out because it’s not in the budget. That way, I get to enjoy the company of people and entertain, but still live out my goal.
I’ve been really trying to live up to what my goals are, so If I want to be a better version of myself like I say, saving more money will get me there. When a networth isn’t desirable, cash flow should be the focus, so that’s my priority right now. Cutting down expenses while receiving raises is a way of resisting lifestyle creep and will also help increase my me fund. When I figured out how much of an impact I can make on my budget by lowering these 3 things, I doubled down. There’s more to be done, and with time, it will come together.