3 Tips to Live on a Budget
I want to take a minute to talk to my younger self about her spending habits. I want to tell her to ignore the curated images of social media influencers, and to stop browsing the Pinterest boards of seasonal fashion styles and home decor. To ignore that pull to keep up with trends, and to instead save her money. To stop living paycheck-to-paycheck, to take advantage of the time she has to save (compound interest anyone?!), and to live on a budget.
I know that word can seem scary. It sounds like going without, and sometimes that is exactly what it means. But it also means security for the future. And trust me, young Carmen, that is what you want.
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Before I dive in to some financial lessons I’ve learned that have changed my relationship with money--and got me to think very differently about living on a budget--I want to say this: there are so many resources out there to guide you on how to live on a budget. If you don't have a budget and need guidance on how to start, I’d encourage you to check out Rachel Cruze. She has a lot of money saving hacks and very fun videos to help inspire you.
Now, some of my own biggest financial lessons that help me live on a budget:
Floor Space is Money
Anxiety from my cluttered house hit me hard about 14 months ago. As I looked around I realized that all this stuff used to be money! Not only had I paid for my possessions when I first purchased them, I continued to pay for them every month in floor space.
Yep, I did the math and realized that I was literally paying in price-per-square foot each month to store all of my stuff, stuff that was causing my family anxiety and needless work. Finally, after five times (Yes. Five times.) of reading the Marie Kondo’s Joy of Tidying Up, the lessons started to sink in.
Think about your floor space as if you were paying price per square foot, because guess what: YOU ARE! Home prices and rental rates are calculated on a price per square foot basis, so the more stuff you have, the bigger space you need, and the more you pay.
And it’s not just your living space. Have you seen all of the storage facilities going up? Even though the average home square footage has increased over the last 50 years, we have more stuff than ever before, and a lot of us are willing to pay to store it.
There is nothing wrong with having a storage unit or having fun things, but I challenge you to rehome anything you have stored that you haven't used at least once in the last 12 months. Think about your purchases from here on out in terms of floor space. Live with less clutter, and you’ll save money.
Calculate Purchases in Time, Not Money
We have all heard the phrase “Time is money.” It’s a cliche but it is absolutely true. Unless you are independently wealthy and living on a trust fund, you trade your time for money. That’s what a job is--an exchange of your time for currency.
Therefore, when you spend the money you have earned at work, you are indirectly trading your time for an item or experience. So do the math. How many hours of your time are you trading to have this new pair of shoes? How long did you have to work last month to pay for those concert tickets? Is that new jacket really worth one full day of work?
Set your priorities, and spend your money--and your time--only on what really matters to you.
For everything else that really doesn’t matter to you, either pass on the purchase or, if you must have it, find ways to get it cheaper. Generic products cost an average of 30% less than brand-name products, and often have the same quality as name brands. For instance, Kirkland Signature batteries, the generic brand at Costco, are made by Duracell! And if generic brand medicine is good enough for 90% of pharmacists and doctors, then they are good enough for me, too.
Dream Big & Save Big
A while back I had a client who lived a very modest life. Simple clothes, unassuming car. There was nothing flashy about him.
He was also investing in real estate with cold, hard cash, and getting a huge savings because of it.
He told me that the key to having a liquid savings account is to put money into my savings account before I pay anything or anyone else. Pay yourself first. This mindset, and modest living, helped him save big and achieve his dreams.
And you can bet that he did so with a budget. A budget lets you turn big dreams into reality.
What are some of your big dreams? Do you have a budget that works to help you achieve them? I'd love to hear about them in the comments.
If one of your big dreams involves buying or selling a home, let’s chat!
And if you're budget game is already on point and you're ready to start the Buying process, be sure to download my Buyer's Guide below for all the information you need to know about the buying process.
All the best,