I haven’t written on this blog in a long time. I have a lot of thoughts on the government and such, but I’ve been super busy working and teaching yoga and trying to keep my head above water. I was also focusing a bit on a different blog, so this one got neglected.
I recently accepted a job with the federal government, which was a long time coming and I was really excited about the prospect of a regular paycheck. Now the shutdown means 800,000 other employees plus contractors and I are not going to see a paycheck till this is over.
I’ve been talking to friends and am reminded of what I take for granted: I am really good at living on a little. One of my friends told me I should consider it as a new career. While one would argue that there is not a big market for theatre majors to advise on finances, I thought I might at least share some of my best tips.
My credentials are not in my education, but in my life experience. After college, I graduated with student loans and headed to L.A. to pursue a career in film and television. After being a starving artist for five years, I joined the Peace Corps. Then, although I had not finished paying off my undergrad loans, I took out loans for grad school. After grad school I worked for two years at a nonprofit in London before joining Peace Corps again for a one year service. Since then I have been teaching yoga, consulting and temping. Basically, I am very used to being pretty broke.
I have never made more than $40K a year, and mostly I have made a lot less than that, yet I have paid off my undergrad loans, nearly paid off my grad loans, saved money for retirement, traveled to over 30 countries, never had credit card debt and now, have a cushion to live off of while this furlough means I won’t get my first paycheck for many weeks.
I don’t own a home and I have never had a high income, so this is really meant for those of you who live paycheck to paycheck, not those of you who want to know the best thing to do to save taxes on your six-figure salary.
Those are my creds. Here are my tips.
THE LITTLE STUFF
1. DIY coffee (or tea)
It is amazing how much a coffee a day can add up. The more you can use grocery stores, not restaurants, the better. If you are not a coffee or hot drink drinker, skip this, but lots of people spend a FORTUNE on coffee. If you buy coffee out once a week or more, take a moment and add up how much you spend on coffee. Bad at math? Let me help: Cost of drink X number of times a month you get it = monthly spent.
- I’m a coffee snob and an ethical shopper, so I only want fairtrade, organic coffee. This may be $12/lb and up, but since I only use about a pound a month, that is still way cheaper than a daily cup of coffee out. Buy your coffee and make it at home.
- Pods are expensive, bad for the environment and not good coffee. Buy a french press or a drip coffee pot or a stove top espresso maker. They are all cheaper, greener and tastier
- If you must go out for coffee, make it infrequent. Some bargain coffee spots include Pret, which offers drip coffee for $1 and Whole Foods, which offers a refill (bring your own cup) for $1
2. DIY lunch
I’m always amazed by the people who go out to lunch during the workday. I’m not aware of anywhere where you can be out the door for lunch for under $10. If you work five days a week, four weeks a month that is $200! That is money way better spent on one of the items below in “The Bigger Stuff.” Buy groceries and make yourself salads, sandwiches, soups, etc. If you really can’t cook, frozen meals, canned soups, etc ares still a much more frugal option. Think of going out for lunch during the work week as a special occasion. Maybe it’s on Fridays or one day a month. I often make food Sunday night that I can eat for 2-4 days during the week for lunches or dinners. You can make soup and freeze it in single-portion size. My kale salad is excellent to make ahead and eat three days in a row.
3. Ditch the fancy cell phone contract
You need a phone, but you don’t need more phone or plan than you need, right? Phones get better, faster and more expensive every year. The cell phone companies lock you into contracts and then you are paying $50 or more forever in order to pay for the fancy phone and the ability to use it. They tempt you telling you that you can upgrade each year, but you can find plenty of low-cost plans. I pay $30 a month with no contract. I also have unlimited calls and texts and more data than I ever use. I got a free phone, but my options were the lower levels of Samsungs, LG’s that just aren’t quite as fancy as the latest and greatest, but they still work for all that one would need and for a lot less a month.
4. Don’t buy memberships you won’t use
Gym memberships can be healthy, if you use them. Food delivery services can be convenient, if you aren’t wasting the food. Those monthly clothing boxes? Would you otherwise buy that stuff? Do you need it? Memberships only “save” you money if you would otherwise spend that elsewhere and the membership is less. You can exercise without a gym, cook without meal kits and buy clothes without it arriving automatically. Same goes for Groupon. So you get a massage for $50 instead of $100, but you still spent $50, so have you saved anything? Would you have otherwise spent that money?
5. Consider your commute
I realize that I’m lucky because I live in a city. Those of you in suburban areas must have a car. That’s a given. If you live in a city, cars are super expensive and not always needed. Can you ditch the car and use public transportation? Even better, can you walk or bike? You get great exercise and save money. I started commuting on bike when I lived in London. A monthly bus and subway pass was £110, while the ANNUAL membership for the bike share was £90! Now, I live in Washington, DC. I bought a used bike and commute most days on it. As a result, I spend less than $50/month on metro and about the same or less on Uber/Lyft. That is much less than parking, gas, insurance, etc. Consider what your most efficient transportation option is. It may take longer on the bus, but is that lost time lost revenue or can you use that time to do something else? Does your employer offer pre-tax transportation funds? If so, use them! Do you need the entire Uber/Lyft or can you share the ride and save money? Can you drive to work with a colleague? If you live with a partner or even close, trustworthy roommate, can you share a car? Many of us have gotten used to a car per person, but years ago when I lived in LA, my roommate and I shared her car and it worked out really well. Be creative about your commute, and you may find you can save money there.
6. Shop second hand
- Furniture and home goods. Old furniture can be funky, good quality and there is nothing weird or gross about an old table that can’t be cleaned up. It is MUCH cheaper to buy from Craig’s list, Let Go or other apps or your local Goodwill or other thrift store. I just moved into a new apartment after not living in the US for a long time and I had literally no furniture. I was not keen on getting a used bed, so I bought that new. Almost everything else I got used: Coffee table, sofa, tv, tv table, end tables, dresser, etc. Most of these items needed some work. I stripped them of paint and stain and refinished them the way I wanted them to look. The result is exactly what I wanted.
- Thrift stores are great resources for kitchenware and other home goods, as are yard sales and even estate sales.
- Consignment stores, both online and brick and mortar, and thrift stores are great resources for clothes. Ethical shopping is really important to me, and buying second hand means not supporting fast fashion and saving money. In preparation for my new job where dress is much more formal than I’ve been used to, I hit two local consignment stores. For $500 I bought a DVF dress, a pair of Tracey Ellen shoes, a Ralph Lauren jacket, a black blazer, a printed blazer, an Alice & Olivia top and six additional dresses!
7. Don’t throw away food!
You are literally throwing away money.
- To start with, try not to buy food you won’t eat. Once you have it, use it before it goes bad. If you can’t use it, there are other solutions.
- Bread freezes well. So do cooked vegetables: You can steam beans, broccoli, spinach, etc. and then freeze it. You can freeze onions and peppers sliced and raw if you intend to cook them later. Cheese gets crumbly after freezing, but other than that it is fine.
- Sell by dates are not “throw out” dates, nor are “Best if used by” dates. I often say that food is VERY good at telling you when it is bad. Is your milk past the “expiration” date? Smell it or taste it. Soured milk won’t actually hurt you, in fact, you can use it in recipes that call for buttermilk. Cheese grows mold, but that can be cut off. What do you think blue cheese is? Overripe bananas are great in smoothies. Yogurt is literally already spoiled milk; unless it’s started to turn green, it’s fine. Dried goods will get stale, but sometimes things like crackers and chips can be freshened by putting them in the oven. Seal such items in zipper bags, plastic containers or with rubber bands or clips to keep them fresher longer. Cook vegetables that are going bad in stir-fry and freeze them in single-serve containers.
- Meat is problematic when it goes bad, so portion meat into single serving size and freeze raw to be defrosted and cooked later. Better yet, save money by reducing your meat consumption.
- If you go out and don’t eat it all, take it home; don’t throw it out. In fact, discipline yourself to only eating half, and save half for lunch the next day. That makes an expensive restaurant meal much more affordable.
8. Stop buying water!
Scientists tell us that one day in the near future, water will be the most valuable commodity on earth, but right now it is basically free. Plastic bottles, glass bottles and cans are all waste. It is not only expensive to buy water, it is also very ungreen. Don’t trust your tap water? Drop charcoal filters in a pitcher, which is even cheaper than one of those fancy filter pitchers. Water delivery service is greener and much more affordable than individual bottles. Like it fizzy? Cut your La Croix habit and get a soda stream. The initial investment will save you money and cut waste in the long run. Yes, you need to hydrate, but this should not impact your budget.
THE BIGGER STUFF
With all the money you have saved on the little things can help you towards the big things.
1. Make payments on your student loan
I wish someone had told me while I was in school that I should at least pay the interest each month because it compounds. If you are in school, pay AT LEAST the interest each and every month. If your loan is deferred, pay AT LEAST the interest each and every month. Once you are making regular payments, the more you can pay the better, so if you can pay MORE than your minimum payment, you will pay it off faster and pay less interest in the long run. Take advantage of any government programs you may be eligible for, but don’t rely on them. Make payments every month without fail. Chip away little by little.
2. Save for the future
It may seem that when you are just scraping by, saving for retirement is not feasible, but just as negative compound interest on your loans is bad, positive compound interest on savings is good. I am NOT a financial adviser, so seek some professional help on this, but here are some general things to consider.
- If your employer matches contributions into a 401K or other savings plan, THAT IS FREE MONEY! You need to max that out. You can contribute more, but you should at least contribute what they will match. It’s pre-tax and your investment is doubled by your employer. Do not miss out on this!
- If your employer does not match, but does offer a pre-tax deduction, you should still take advantage of that. Set an amount that is ambitious, but realistic and forget about it for a year. Re-evaluate each year to make sure you are saving as much as you can. Because it comes out pre-tax, you will never miss it.
- If you are self-employed, this all sits on you. For only two years of my life did I have employer matched contributions, but since my 20’s even when I was broke and swimming in student loan debt, I managed to save $25 a month. Over the years, that has gone up bit by bit. This means that I have saved almost $30,000 in a mutual fund. Can I retire off that? No, but I keep adding to it, it keeps reinvesting its dividends and it will continue to grow. I have more saved than many of my peers who have always made more money and traveled less.
3. Start a short-term savings account
It’s hard to not spend money in your checking account, so make it hard to spend your savings by keeping it separate. Funnel your long-term savings directly into where ever you are saving that. Once you have paid your bills, paid off your credit card, put a bit towards your student loan, and put a bit towards your retirement, put a little bit (if there is anything left) in a savings account. You never know when you will have a massive car repair, lose your job, go through a government shutdown (!) or anything else. Keep a rainy day fund. If you don’t use it and it grows, allow your self to re-appropriate part of it for something fun or put it towards your loan or your retirement. Or let it grow in (an interest bearing) savings accoung, and one day you will have a down payment for a home or something else you want.
4. Use Credit Cards Wisely
This may seem obvious, but it is really important. Credit card debt is never a good thing, but credit cards can be useful when used well. There are some people who are real whizzes at capitalizing on credit card offers. I don’t claim to be that. These are just some basic tips that anyone can do.
- Many offer introductory offers such no interest for a year on balance transfers. If you have a bunch of debt that you are paying high interest rates on, transferring to a low or no interest card can really help you pay it off, but you must pay it off! Calculate how much you have to pay each month to pay it off during the promotional period and commit to that.
- New cards also may offer a ton of miles or points for joining. While you don’t want to have a dozen cards, if you have decent credit, a new card does not really impact your credit score. If your credit is bad, but you are able to get credit cards, work to build back up your credit by using and paying off the cards.
- Be aware of cards that charge an annual fee. It is really easy to lose any benefits if you have to pay a fee. I had a card last year that gave me 40,000 miles to start and then an additional bunch of miles if I spent a certain amount of money in the first three months, which I did. After the first year, it was going to charge an annual fee, so I set a calendar reminder and cancelled the card before that kicked in. I still have the miles to use.
- Points and cashback really do equal money. At the end of 2018, I had accrued over $300 in total over two credit card in cashback bonus that I used towards holiday travel. Use the right card at the right time. Know which one gives more percent back on gas, restaurants, flights, grocery stores, etc. and use the best card for every purchase.
- Do not miss a payment and do not run a balance if there is interest on the account. Period. No excuses. Unless it is actually an emergency. This means use the above tips ONLY if you know you can trust yourself not to spend more than you can afford in a payment period.
- NEVER get store cards, they are a total waste of money. You are much better off using a points card.
5. Swallow your pride. The gig economy can be your friend.
I really don’t know what it means to have only one job. I have often hustled multiple part-time gigs. I am always looking out for an opportunity. I have never driven for one of the ride share companies (no car), but I have house/dog/cat sat. I have helped people clean and de-clutter their homes. The one time I had a full-time job that actually paid my bills, I took a restaurant job in the evening. I kept a second bank account and funneled that money directly in there. My day job paid my bills, so the second job paid for my travel and other fun stuff. Currently, I teach yoga and it is about a third of my income. I have been really happy to have it now that while I have the promise of a paycheck to come, I am furloughed at the moment, so it is my only income. Keep your ears and eyes open for opportunities to make some extra money..
6. As soon as you get paid, pay your bills
Once the money has hit your account, get rid of it! If you always get paid on the first and fifteenth, set-up auto withdrawals for your rent, your loan, your long-term savings, etc. That way, you can’t spend that money. Pay your credit card in two installments to make it easier, but both before the due date. Money will always burn a hole; don’t let it!
For big, long-term goals, talk to a financial adviser, but all of us can save a little money every day, so that we can be more financially free. Hopefully these tips will help you save a little more each month.