Wednesday, June 8, 2016

Budgeting 102: How to Live Cheaply

Budgeting on Less than 25k


So in the first post I covered how to make a budget. Let's say that you looked at that and realized that you make less than the average income for someone your age, or roughly $24,062 for someone under the age of 24. Assuming you get taxed at 23% like the rest of us, we'll say you take home $1,423 a month, or on average $355.76 per week.

Seems pretty low right?

Let's look at some guidelines to increase our quality of life while living within our means rather than having a victim mentality. If you make $355.76 a week and have student loans I highly recommend you log into your account at studentloans.gov and get going on some payment plans. While I advocate paying down your loans as quickly as possible, $1400 a month is not going to go very far if you're sticking 10% of your take home pay into debts. Look into consolidating if you have several open student loans and get onto a plan that takes your income into consideration.

So, car loans...What about those?
On $1400 a month car loan isn't feasible unless you have a way of making extra income outside of your normal job. It just isn't, because we want to survive and thrive, not just live paycheck to paycheck. This may mean that you won't be able to go out of town much on your own, but maybe you could help with gas if someone else drives.

Considerations:
Getting places: Having a car is expensive. It's one of those big purchases that you'll never get your money back on. Consider living close to work to cut down fuel expenses, riding a bike multiple times a week vs driving, riding with a co-worker, or using the bus (if you work 5 days a week in Wichita it comes out to around $60 a month to get to work.) Or you know, stop driving all together - which admittedly is pretty dang inconvenient, but

Drop your cell phone bill pronto. In this day and age you can get by on a burner phone for emergencies - I promise you'll live without access to Facebook all day, though honestly you'll find that a lot of places you go during the week have free WiFi and that your current smart phone works pretty dang well on it. Google has a phone app that can be used to make local calls on Wifi, but let's be honest...Who the hell calls anyone anymore? And instead of paying for Wifi at home use the library, or ask your neighbor if you can borrow their WiFi for a small fee.

Rent:
On average most people spend about 30% of their take home pay on the place they live. At $1,423 a month this means you'll want to spend $426 or less on rent. Let's go with less. Way less. Get a roommate. If you're lucky and live in the Midwest like I do, apartments can be found at around $350-$400 a month if you'd like to live alone.

Utilities:
Find a place where you're paying only electric and one other small bill, or gas and one other small bill. Trying to pay both (with out roommates) will be a huge challenge and you'll fail - trust me on this one as I've been there and it was not a good time.

Groceries:
There are multiple ways to stretch your dollars here. So many in fact that I'm just going to name a few and link you to the rest. Learn how to cook, how to find deals, shop at places like Aldi and Sav-A-Lot. Big chains like Dillions and Kroger are not your friend unless you're sticking to the manager's special items. Consider getting a Costco membership if you're able to. For the rest, check out this article in Time from 2014, while it's a little dated it's still super helpful.


So let's line this out shall we?


Monthly Expenses: $1423
Rent: $365
Electric/Utilities: $60
Health Insurance: $129 (average cost for KS)
Groceries: $300
Commute: $60
'Fun' Money: $210 - (Averages about $6.77 a day, look for happy hour specials and invite friends over for dinner)
IRA: $100
Savings: ~$199

Weekly: Averages between $352 and $355 depending on how you (in this case me) average the above out to find your weekly totals.
Rent: $92
Electric/Utilities: $15
Health Insurance: $33
Groceries: $75
Commute: $15
'Fun' Money: $48
IRA: $25
Savings: $49

 
And there you have it. Obviously you can pull money from your 'fun' money category without worry, and even move some of your weekly savings into other areas. You'll notice I didn't put in a category for a phone. This is because I believe they're a waste of money. The cell phone was invented in 1973 and the crime rate has gone down since (funny story, some people attribute this to women being able to get abortions) so you'll be just fine without a cell phone. Though if you commute more than 5 miles between work and home in a remote area - go ahead and buy that burner phone.

I also did not account for children. If you're making this much money and you have kids definitely jump on government aid, live with your folks, or consider living with people who also have children in order to share childcare responsibilities. I personally have no experience with what it takes to raise children, but let me know in the comments what you're struggling with and I'll see what I can do to help you out with finding resources.

Extra Income:
Also think about what you can do as a side gig for more money. I am one of the only bloggers that will tell you NOT to do a blog. You'll notice I'm not trying to sell you an ebook on how to make money blogging, because the truth is those bloggers that do make money are selling you a guide on 'how to make money' - one of the oldest scams in existence. While I personally am working on an ebook to sell on this blog, it'll be about things like this post - not bullshit.

If you are interested in online commerce why not just dupe a website like thisiswhyimbroke.com? Or learn how to make Facebook quizzes and sell adspace?  While I haven't done this yet, I've looked into being a reseller of goods from China. Check out Alibaba and price some things that you think you'd be interested in, then open an Amazon store. Typically you can mark up the items around 60% and most consumers won't blink an eye.

Let me know in the comments what incomes and housing are like in your area - especially if you live in San Francisco where I hear the median rent for a 1bdrm apartment is close to 2k a month!

***The Amazon link for starting your own store is an affiliate link. If you start an Amazon store let me know! I will buy things!!**





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