How I Learned To Live On Half My Take-Home Pay
At the end of last year, I had a thought: I have a master’s degree, only make about $30,000/year after taxes, and I overwhelmingly feel a crushing sense of financial failure day in and day out. I have student loan debt that never seems to decrease, an emergency fund that I have nightmares about tapping into (mostly because I use it fairly regularly for emergency medical care), and a general feeling that this is not how a 27-year-old should live. All societal pressure aside, I began crunching numbers and realized that while it would be challenging, I could potentially live off half my take-home pay each month.
You may be thinking, How does limiting your monthly income ease your financial situation? Won’t it just make things worse? I had this thought, too. I already have anxiety about my finances, so living off even less money than I already do seems crazy, and crazy scary. But if I devote half of my paycheck to straightening out my finances, maybe I could pay off my student loans (I have about $13,000 left from grad school) and build an emergency fund that can withstand other emergencies in addition to those caused by chronic health issues.
So, potential benefits: Save more and get out of debt. The disadvantages: Feel (and “be”) more broke. What the hell — I decided to give it a try. I’m now three months into my financial adventure, and I’ve managed to save just about $4,000. Here are a few ways I did it, and you can do it, too:
1. Know how much money you have coming in and going out — be honest with yourself.
This is a pretty straightforward step. I get paid twice a month, so I totaled the paychecks and subtracted all my bills (rent, utilities, student loan, car loan, phone bill, insurance, etc). Then, I tracked what I was spending on food, gas, fun, etc. Turns out, I was leaking money in these areas, and while I couldn’t keep going at the rate I was going on just one paycheck, if I only paid for what I absolutely needed, I could make it work. Honestly, I had no idea how much money I wasting before, but I remember feeling broke. Now, I can account for nearly every dollar I spend, and while I don’t feel rich, I definitely don’t feel hopelessly broke (all that often, at least).
2. Pretend that second paycheck doesn’t exist.
I barely look at my second paycheck each month. It comes in, and I move it directly from my checking to my savings. (For wimps like me, just get your bank to do it automatically, if you can. Don’t even tempt yourself). If you get paid once a month, move half immediately on payday. It might feel horrible watching your paycheck drop so quickly, but just look at that savings balance! It’s a big “pick-me-up,” and really hits the spot for any instant gratification junkies out there.
3. Stick to a budget. It makes a difference.
This is a hard one for me. After subtracting my monthly costs from my paycheck, I have $374 to spend for the rest of the month. It sounds like a good chunk of money, but that includes groceries, gas, fun stuff, gym fees, car maintenance, health bills, and anything else that might crop up in a month. So I made a budget for all these categories (and a few others). I budget $50 a week for food (max), and then I eat it (cue sounds of shock and awe). That $50 includes any eating out, so I don’t really eat out. I only fill up my car with gas twice a month; the cost fluctuates with gas pricing, but carpooling and hitching rides with friends really helps. I started to do free things to help manage my health issues, like exercising more, joining support groups, and taking advantage of health/wellness discounts through my employer. I invite friends over to my house instead of constantly “going out.” I borrow DVDs, music, and books from the library instead of “buying” these fun things. I switched to a gym that had pricing based on age, so I only pay $27/month now. Do whatever you have to do to stick to your budget.
4. Have a plan for the money you’re saving.
I’ve been using the second paycheck to throw extra cash at my student loan, beef up my high-interest savings account, and increase my pre-tax 403(b) contributions (the non-profit’s 401(k)). Having a plan helps you stay focused, even if it’s just saving for a vacation or a new iPhone. Without a goal, you might end up blowing your hard-earned savings on random things. Plus, for me, knowing there is something I want at the end of the tunnel (being debt-free, vacationing on a beach, less stress and anxiety, etc.) keeps me motivated to stay on track.
5. Acknowledge that it’s hard, not always fun, but will still be worth it.
I expected to ride the “saving like a boss” train all the way to “I’m a financial goddess” town, but the truth is that it’s hard for me to save like this. It’s hard when I want to see three movies in a month. It’s hard when I want to eat out with friends. It’s hard when I want to go crazy at Total Wine but I know it’ll put me over my grocery budget. It’s hard when others are aware of my situation, but just think I’m psycho. Frankly, it’s not all that fun, and I sometimes feel like I’m not really “living” because I’m too busy saving. And yet, if I keep this up, I’m going to be out of debt in less than half the time I thought I would be. I’m saving so much cash, working towards buying a new car or pulling together a down payment on a home no longer feels completely impossible. I’m not having fun every minute of every day, but I’m setting myself up to have a lot of fun in the future, all while being financially secure.
I want to say that I know this won’t be possible for everyone. Don’t feel bad about that. And don’t let that keep you from trying this on a smaller scale. Maybe try living with $50 to $100 less in a month’s time. See how high you can get that number up in the next year, and notice the impact on your savings. It’s about the long game, really, and a little hard work will go a long way in terms of financial security and freedom.
Kate is a happy-ish medical librarian, who spends an inordinate amount of time fantasizing about getting out of debt. She feels newly empowered to talk about money, loves to hear about the experience of other debtors, and genuinely hopes to one day own a bakery that sells nothing but pie. Find her on Twitter and Instagram at @katnotkitten where she posts and retweets things about food, libraries, and hockey, on a fairly inconsistent basis.
Image via Unsplash