This blog comes to us from Renée Pichette, a talented young woman on her way to great things. She began working at Confluence Financial Advisors (www.confluencefa.com) last May and quickly made an impact. She’s now working full time and back in school to prepare for a career in financial planning. Enjoy!
Saving While Living Paycheck to Paycheck in Five Easy Steps
Saving is possible, but if you asked me a few months ago if I could set $1,000 aside, I would have called you crazy. Between rent, student loans, and bills, saving seemed impossible. So, I set up a challenge for myself. Save $1,000.
Against all odds, I managed to pull it off. $1,000 in my savings account. My secret for success (which can also be yours) was following a few simple steps.
- Start using a budgeting app.
For me this was Intuit’s Mint (www.mint.com) though another good option is You Need A Budget (www.YNAB.COM). Mint is free so I figured I would try that first. Once you connect your bank, credit card, loan, and other financial accounts, it will automatically update with deposits and withdrawals. This program put my spending into perspective. I had no idea what percentage of my income was being spent on eating out, coffee shops, and bars. Once I could see what my spending habits were, I could start adjusting them.
- Adjust spending (even if it’s only temporary).
Since I had discovered eating out was my big spending category, I decided that I could eat out 2 meals a week. If knew I would be meeting friends for more than the two allotted meals, I would eat first before meeting them, cutting my bill to a simple appetizer or side dish.
- Commit to the transfer.
I decided for each paycheck, I would transfer $100 into my savings account. Moving the money over when I got my paycheck, helped keep me from accidentally spending it. If $100 is not an option for you, commit to a smaller amount. Maybe $20 a paycheck.
- Leave it alone.
This last step is simple but can be tricky in practice. Don’t spend the money in your savings account. It can be enticing to see funds that are only a click away, but resist that urge.
- Remember, even small amounts can add up over time!
Now what? This first thousand dollars has become my “emergency fund.” Next on the agenda, saving to put in my Roth IRA. Care to join me?