Everything You Were Afraid To Ask About Saving (When You Don’t Have A Lot Of Money)
Today’s installment of our Afraid To Ask: TFD’s new expert interview series, is all about how to navigate questions you have about saving and budgeting while still living your life like a real human. The Afraid To Ask series is meant to provide a deeper insight into a variety of subjects, and shed light on topics people are sometimes ignorant about (myself included in every topic I cover!).
This week I sat down (via the internet of course) with a friend, Erica Veeray, who has worked in finance for the last ten years. She’s been navigating through her mid-twenties and well into her thirties as a full-time finance professional. Along the way, she has picked up invaluable knowledge about how to save and budget better, and be a real human while doing it. She’s sharing some great insight into what it means to strike that balance between living your life and saving for your future.
Erica was kind enough to answer the questions that follow, which are a mix of my own questions and reader-submitted ones. While this interview is not exhaustive, it’s a great way to get a peek inside the life of someone who is older and wise, and learn what you need to in order to navigate through life as smoothly as possible.
Can I save when I’m also trying to juggle a few big purchases?
First off, always ensure that the big purchases you are making — anything from a fridge, to a vacation, or a TV for your home — are being purchased smartly. Make sure you’re comparing prices, getting the best value for your dollar, and using coupons (and capitalizing on deals/sales) wherever possible. If your budget is truly too tight for you to save even a tiny bit of money, you’re probably living too close to your financial threshold and should consider shaving some discretionary expenses off. Saving money should ideally be one of those things you account for in your monthly budgeting, and it’s up to you to make it a priority, just as you would any other bill. If you have to cut things like Spotify subscriptions, having your groceries delivered, or that weekly trip to the liquor store to stock up your bar cart, so be it! I’m always shocked when I talk to people who say they can’t save a dollar, but haven’t even thought to cancel their Wine Of The Month Club membership! If saving is a true priority then you should put away even a small amount, say $20 a week. It’s up to you to decide how to make that work best within your budget.
How much would you say one should ideally save from month to month?
There’s definitely not a one size fits all approach to saving a set portion of your income — some people say 10%, others say 20%. Some financial professional will advocate for the financial freedom method where you simply try and save as much as you are able, over X amount of time, so you amass enough investments to one day fund your annual living expenses (i.e retire). But generally, it depends on your savings and financial goals. As a very general rule of thumb, I’d say anywhere from 10%-20% of your gross pay before tax or deductions.
I just recently moved to a big city — do you have any useful money saving tips for people who love to socialize?
I always tell friends that the easiest place to save money is on “alone time” spending. For example, when you move to a new city and are thrilled to go out socializing and enjoy yourself with friends, it’s important to make sure that those habits don’t seep into every facet of life. If you want to focus on spending more of your discretionary income on going out with friends, you’ll have to be very diligent about reducing spending while you’re alone. That means minimal Seamless orders for one, avoiding extras like ordering movies off of iTunes, racking up your online shopping bill while you’re at home alone bored, etc. If getting out and seeing your new city with friends is a priority, brainstorm all the ways you can do it on the cheap! If you significantly cut back spending in one area, you’ll have a bit more money to spend exploring, but know that it probably won’t be a long-term solution.
I remember being so incredibly broke in college — do you have money saving tips for students?
Saving as a student is not easy. You’re so busy with school and homework that it feels like making money (let alone saving it) can be a huge distraction — but it’s not! Now’s the chance to maximize side-gigs so you’re actually making a little more money to save. Seize this opportune period of your life where you get to juggle flexible jobs like paid internships, part-time work, side jobs, and creative hustles that can be done during whacky hours. The more money you’re bringing in, the easier it will be to save money. You’ll also give yourself the flexibility to afford a more diverse diet outside of ramen, cereal, and peanut butter sandwiches! There are some great tips on how to save strategically as a student here, here, and here. Whether it’s cutting down on vices (like smoking and drinking often), or limiting grocery store shopping to the healthy essentials (sans takeout), there are ways to make your budget work for you.
My sister is graduating college in May and is always looking to me (as the older sister) for financial advice. Do you have any money saving tips for new grads?
People laugh when I tell new grads this, but I always suggest taking advantage of any graduation checks, gift cards, etc. that might come your way. If you are lucky enough to be receiving money as a symbol of congratulations, then use it wisely. Put it away in the bank, use it frugally, and consider it an immensely fortunate circumstance that shouldn’t be peddled away on useless crap. Make it stretch the farthest for you and put it toward a down payment on a used car, or to pay off your credit card debt so you can start your professional life with less weight on your shoulders, etc.
If you aren’t one of the lucky few to get that little financial bump heading into the adult world (I wasn’t), look for ways in which you can start making money as soon as possible. Many student loans have a six-month grace period before you have to begin repaying them, so make sure you’re focusing on making money. Most new grads stress out about not landing their dream job right away, but baby, it’s 2015 and that fairytale is a thing of the past. It took me years to find my footing. Do what you need to do and find productive meaningful work where you can find. Never lose sight of your dreams, but understand they take time to achieve! Alexa Von Tobel offers great advice for new grads here, and there are other great financial tips here, and here.
I feel like taking control of your money is similar to a diet, and when I slip up I’m doomed to repeat myself. Do you have any tips for getting back on the saving bandwagon after I fall off?
Everyone has good and bad days. Chelsea and Lauren offered up great insight and tips in their savings video, and it’s important to remember two things: 1) your bad days don’t define you, and 2) tomorrow is a new day. Here are some great resources to help you get back on track:
- How To Overcome Financial Perfectionism
- 5 Ways To Get Your Budget Back On Track
- Slipped Up? Here’s How To Get Your Budget On Track Again
How does a person get started creating a comprehensive budget for themselves?
Again, building a personalized budget is a tricky question that is determined case by case. Some people like a lot of detail; for others, it stresses them out to the point that they no longer feel compelled to save. My biggest piece of advice (that goes for everyone) is, the more information you have, the more informed decisions you are able to make.
But, if creating a comprehensive budgeting sheet scares you, maybe you need to take smaller steps and start more simply with an app for example. Lauren wrote about the best budgeting apps here, which can help you get a jump start. This website also offers free budget spreadsheets that you can download and customize. If you’re really keen on using excel (which does a lot of the math for you if you program it correctly), this article is great how to.
Sometimes I feel like the ways in which I’m burning through money aren’t clear to me because my spending habits have become habitual. Would a fresh pair of eyes be worth seeking out to review my finances?
Absolutely! If it’s not a financial professional at first you can seek out an older wiser adult/parent/mentor that you know and trust, to ask them a few questions on how much they spend on what. These sort of conversation can help you gain an understanding of how your own financial picture compares. This article can illuminate some of the ways you’re burning through money in ways you might not have realized it. If you’re wondering whether in a certified financial planner can help you, this list can help you understand what services they provide. CFP’s assist you with investments, insurance, estate planning, budgeting, retirement planning, tax planning/prep, saving for long-term goals, etc.
If you are mindful over each financial decisions you make, and are decisive about choosing what you need vs what you want, you’ll free up more funds that can be put into savings. The most important thing that that you always stay positive, focused, and feel invested in the financial health of your future self!