4 Changes I Made To Reveal An Extra $400 In My Monthly Budget
Something I’ve been struggling with over the last two months is that my life has gotten more expensive. I haven’t moved; my rent is still “reasonable” compared to rent prices in NYC, and my utilities haven’t gone up. But this year, for the first time, I had to start paying for health insurance. (As I’ve discussed on TFD, I was on a low-income plan last year — mainly because I couldn’t get off it — so my payments for a bronze PPO plan only started at the beginning of this year.) Not only does that mean I’ll be paying about $215/month, but I’ll also be paying for doctor’s appointments that I’d been putting off, which are not cheap on my insurance. I am also dealing with a car expense that had not kicked in until the beginning of this year, which is another $200/month. Overall, my cost-of-living has increased by about $415/month.
Obviously, this stresses me out. Last year, though I wasn’t always #crushingit on the income side (when I first went freelance at the beginning of 2015, part of my rent was funded by Airbnb tenants), I was actively keeping my expenses low, and was still able to save diligently. This year, with my new expenses, I’ve had to make some quick changes to make sure I don’t fall behind and put things on my credit card that I can’t pay off. Here are four changes I’ve made to deal with my increased cost-of-living:
1. I calculated how much more I’d actually need to earn to cover my new expenses.
If my cost-of-living has increased by $415, I would have to make an additional $700 a month (which factors out to about $460 after taxes) to cover the expenses. One of the biggest mistakes I made last year was not factoring tax in whenever I calculated my earnings. If I needed an extra $300 for something, I would make it my goal to make an additional $300. Unfortunately, when I get a check for $300, I automatically deduct a third (which is what my accountant recommends I take out) to go toward taxes. So, $300 actually becomes $200. While this is a sad truth, it’s important to accept it and factor it into your budgeting and savings strategy if you’re a freelancer.
I then followed through and increased my earnings when necessary. Around the beginning of every month, I figure out how much my earnings will be for the coming month. This means calculating how much I can make based on work I’ve promised to clients, and how much I need to earn to comfortably cover my expenses (including my new expenses and any unexpected ones that pop up) with room for spending money and money to put in savings. If the first number isn’t high enough to cover everything the second number comprises, I find more work to do and add an extra project to my docket.
2. I looked through my budget meticulously and found a substantial expense I could cut.
I went through my checking account statement and my credit card statement, and I tried to find a money-draining culprit that I could slash. I was successful: I was paying $130/month for a storage unit because I moved from a large place to a smaller place, and had furniture I couldn’t part with, but couldn’t fit in my apartment. I got the storage unit on sale for $100, but in the last few months, they’d started aggressively raising the price on me. I decided it would be best to spend money up-front to rent a U-Haul, and save money on the storage unit in the long-term. With the help of a few friends and my boyfriend, we took one Saturday in early February and cleared out the storage unit. I split the furniture between good will, my place, and my boyfriend’s place. My roommate and I are still trying to figure out what to get rid of in our overcrowded living room, but, on the plus side, that’s $130 I can now use toward my new expenses.
3. I also made “unnoticeable” changes to my monthly budget.
While combing through my budget, I also tried to identify spending areas that I could trim down. I did this about six months ago, so my food, entertainment, and utilities budgets are already fairly low, but after the holidays, I got more lax about adhering to those budgets than I should have. I decided to tighten up by taking away a not-too-noticeable amount from my food and entertainment category (about $60). To accommodate this budget cut, I did one “No Eating Out” week in February (and also did not spend on entertainment), and it worked perfectly for my budget. For anyone trying to cut their food/entertainment budget down just a little bit, I definitely recommend skipping eating out and going out for one week out of the month! I’m going to try to do it again in March.
4. I transferred money from my savings to my IRA so I couldn’t be tempted to dip into my savings.
I left enough in my savings account for a hefty emergency fund and put the rest in my Roth IRA. I’m glad I moved the money, but it definitely makes me feel shaky that I don’t have that lovely cushion I always could dip into. However, I don’t want to accommodate my two new expenses by taking them out of my savings account, and by taking a large chunk of my savings out and relocating it, I won’t have that temptation. I’m equally glad that I moved my money because I don’t want to rest on my laurels when it comes to savings. Even though my 2016 budget has presented some challenges, I want to make sure I’m not throwing my savings plan out the window in order to accommodate my new expenses. By ensuring that I can’t see a portion of the money I saved last year, I can guarantee that I won’t let myself off the savings hook.
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