Imagine an extra 500 dollars a month in your pocket. How would your life change?
This was on my mind a lot when I was paycheck-to-paycheck for the past few years. I dreamed of buying my first audio interface (since I’m a big ol’ music nerd), paying off my debt and maybe just enjoying life a bit more. While this fantasy rested in my mind, I waited around for tiny pay raises and tax refunds to save the day. My bank account was overdrawn more often and I started to panic.
Then a great friend of mine helped me finally get common sense– spend less money, and I’ll essentially get an instant pay raise. Here’s how I found an extra $500 in my monthly budget.
Step 1: Find out where my money goes
Our first big step was figuring out where my money disappears to.
My friend’s plan? 1) Set up a money tracker that logs all my spending in the background of my life. 2) Have me spend money as usual. 3) After a month, see where the heck my money went.
One month later, my Intuit Mint app showed me exactly where my money went… and it was a little scary.
My spending was a mess
Over $500 of my monthly pay went to food because I got fast-food nearly every day. Five. Hundred. Dollars. That was the last straw. Seeing that number alone made me physically ill– and it wasn’t just the fry grease sloshing in my belly. The rest of my money boiled down to uncontrolled spending that I could easily change. But, my friend reminded me I could only change if I had a plan for my spending.
My account was overdrafting
We noticed another trend: overdrafts. I was spending more than I made at times. But I checked my accounts constantly! While that was true, I didn’t realize every purchase doesn’t fully post immediately. While it processes, it disappears from your account activity. This makes your balance seem larger than it is. If you’re not tracking it, you’ll easily overdraw. Not good. Once again, my friend made the point that this would only change with a plan. So, she and I finally sat down to make my written budget.
Step 2: Set up a written budget (a real one)
The word ‘budget’ annoyed me. I felt like I was out of control and couldn’t be responsible with my money without living by rules like a child.
But I WAS out of control. The truth is, changing bad habits doesn’t happen without a plan. I knew I didn’t want to be broke anymore. We started figuring out where I could peel my budget back.
The “Anti-Broke” formula
My income must be greater than my expenses. We physically wrote down how much money I make a month. Then, we wrote down my monthly expenses based on my past spending. We simplified my budget in order-of-importance:
- My essential spending would maintain my life so I wouldn’t be broke, dead or homeless.
- My growth expenses were set aside to help me move forward in life.
- My desired spending went towards things I “want” to do with the remaining money.
The breakdown
The essentials covered basic life expenses. I needed to knock these out first. Shelter, utilities, transportation to get to work, food, insurance, minimum debt payments and clothing all fell in this category.
My growth expenses were like investments in myself. These were next things to tackle. Emergency savings, books and online courses, and future expense savings were in this category.
Desired spending came down to the endless list of music stuff and leisure activities I wanted. A few of these were: a recording interface, concert tickets, guitar strings, music education apps, dining out, and vacations.
On paper, it was finally clear where I needed my money to go (and where it can’t go right now). I knew where I could change, and all that was left was to do it! One problem down, one more to go: no more overdrafts.
Step 3: Monitor my cash with a checkbook
Checkbooks seem like a relic of days gone by. The fact is, they’re way too relevant for us even in the age of online banking. Like I mentioned above, your account balance isn’t always accurate.
If a transaction– an $100 student loan payment, for example– disappears from your spending activity during processing, you’ll think you have $100 more in the bank than you thought. Then you spend it, the transaction officially posts, and you’ve overdrafted by $100. Not to mention, bank fees get slapped on that: now you’re $135 in the hole. In other words, you’re screwed.
I needed a reliable, manual way of monitoring all my deposits and expenses– whether it’s cash or debit.
This checkbook app changed the game for me. No paper, no manual math, just log my transaction and done. (No this isn’t sponsored. I actually use this every freaking day and it really is essential to my life now). Problem #2 solved!
Set 4: Modify my behaviors
All that remained was to change how I actually spend my money. So, I set some solid ground rules:
No fast food, and way more grocery shopping: $350 saved
Doing some quick math, we realized $8 lunch and dinner every day came out to nearly $500 a month. No more of that… grocery shopping should at least cut that in half. I had to double-take when I realized I’d spent only $150 a month on groceries from that point on.
Fewer leisure activities: $150 saved
I wasn’t doing an outrageous amount of things for fun. That said, I did spend a bit more than planned if I did extra on a road trip, had a night out with my girlfriend, or spent on video games that I didn’t really have time to play. Cut back here and suddenly I had an extra $150 a month.
Downsizing my bills: $20 saved
My car insurance was a bit higher than it should’ve been. I shopped around and slashed it. I don’t really pay too much else here because I use prepaid phone service on my iPhone. I don’t have many other random subscriptions or bills.
Honorable mentions: $70 saved
Using less gas thickened my wallet up a little too! My awesome Mazda3 is a fantastic gas saver already. Shopping around for gas using the GasBuddy app was a nice helping hand. $20 saved.
Finding DIY ways to maintain my car was another bonus. For example, a dealership was going to charge me $60 for replacing a $9 air filter. With a little YouTube research and a quick Amazon purchase, it only took me 5 minutes and no tools to replace myself. $50 saved.
How do you find an extra 500 dollars a month?
A super special thanks to the amazing friend in my life. This was a quick way for me to quit living broke between paychecks— and to finally get that audio interface! I want to learn other ways I could lighten up my spending, and I’m sure you all would love that too. If you have any cool tips for freeing your money up, contact me directly.
