Originally published 5/13/2019 on Alternative Control. Updated in December 2021 and January 2022.
The first installment of Money Hacks for Metalheads and Old Millennials reviewed the basics: knowing your income, expenses, and spending; brainstorming short term, medium, and long term goals; and creating a budget that moves you towards your goals.
(If you didn’t read that already, go back and read it! This column will make much more sense if you do. Plus, it's a lot easier to "spend less" if you know what you're spending in the first place.)
The budget area is where we left off because this will be different for everyone. When you are making changes to your budget, there are two roads to go down: spending less and making more. No matter how large or small your budget changes will be, there are a couple rules that apply to all situations:
Pay yourself first. Most of the real financial gurus recommend saving 10-15% of your income, although Grant Sabatier would have you saving and investing almost all of it and retiring at 30. That ship has probably sailed for us old millennials — but no matter what percentage you’re putting away, automate retirement savings as much as possible and remember to increase the amounts if/when you get a raise. For cash savings, once you’ve determined how much you can save from each paycheck, transfer that amount in a separate account the day you get paid. Now that money “doesn’t exist” except to serve your goal. Bonus points if you put the cash in a money market account — but we’ll talk about that in the “Making More” column.
Screw paying interest. I’d use a stronger verb, but I can’t swear on the internet…. There are times in life where you will have to get a loan. Pay more than the minimum each month if/when you can afford to, and make sure the lender applies any extra to the principal. (Sometimes they “make mistakes.”) Apply most of any windfall, large or small, to loans. Each loan you pay off will mean one less monthly bill, which is more money you can save, buy fancy beer with, pay for 70,000 Tons of Metal tickets, etc. And the less money you spend lining the pockets of billionaires, the better!
Now let’s look at some different goals and how to spend less accordingly….
Goal #1: I have five figures of student loan debt and I want to get out from under it so I can have a normal adult life.
Even if you have federal loans that are on hold right now (January 2022), that May 1st, 2022 restart date -- or some other restart date -- will arrive eventually.
Before payments resume, check to see if you qualify for the revamped public service loan forgiveness program (PSLF). In the past, this program basically screwed most people who applied for it; after years of extensive reporting by NPR on how dysfunctional the program was, the Biden administration made changes so that it will include more borrowers.
But let's say that for whatever reason, your student loans aren't going anywhere. Unfortunately, cutting out the Dunkin isn’t going to help you in a meaningful way. The best method for tackling big debt is to reduce your biggest expense: housing.
If you’re still young enough that your relatives will let you live with them for free or on the cheap -- or you're old but you all still like each other enough -- DO IT. Then apply one third to one half of your take-home pay (what you’d otherwise be spending on rent) to your loans. Savings: $800-$1600/month.
If living with the folks is not an option, consider living with roommates. And if you are renting without roommates, embrace minimalism and find the smallest, least expensive place possible. This also means thinking about your geographic location. I can’t tell ya how to live your life, but it could be worth it to relocate. Whatever you end up doing, apply the savings towards your loan balance. Savings: $200-$500/month.
(I originally wrote this column in May 2019, but was smugly pleased to see the exact same advice on NPR, published Jan 4, 2022.)
Maybe as an elder millennial, you already own a house and/or have children -- so moving in with the 'rents or having an acquaintance crash in the spare room aren't feasible ideas. But with good credit and a steady income, it might be possible to refinance your loan/loans into one with a lower interest rate. (Don't bother with this if you're counting on PSLF or if you're on an income-driven repayment plan.) Read more on NerdWallet. Savings: ???
Need some more ideas? Keep reading. There are more money-saving strategies below...
Goal #2: I have no emergency fund and my essential expenses are $3,000/month. I need to save three grand ASAP!
Cut your “fun” spending to the absolute minimum needed for sanity maintenance. If you get Dunkin every day on your way to work, cut back to once a week — or not at all. Put a moratorium on mall trips, new vinyl, and weekend outings with friends. Remember, this is only temporary. It might suck for awhile, but it also means that the next unexpected car repair or vet bill goes from a Big Freaking Problem to something you can pay for in cash. Savings: $50-$500/month.
Examine your spending on food and gas. Can you carpool? Can you cook instead of getting takeout? Can you buy what’s on sale and eat all the random stuff in your freezer before you go shopping again? Savings: $50-$100/month.
Cancel nonessential subscriptions and services. I would argue that a phone and home internet are essential. But what about cable? Probably not. Spotify Premium? The gym? Probably not. Subscriptions are the low-hanging fruit of saving money, but they add up. Savings: $10-$200/month.
If you have credit card balances, pay only the minimums for the time being (yes, I know this goes against the Screw Interest rule) and divert what you would have otherwise paid into your emergency fund. Savings: $50-$200/month.
The success of these strategies depends on what spending is available to cut. If you already make your own coffee and trashed cable years ago, there is nothing here to gain. Keep reading for some tips that anyone can act on.
Goal #3: I want to take a really cool vacation next year (if COVID allows) and I think it will cost me $3500. I need to save an extra $300 per month to pay for it in cash.
This goal example is not as urgent or life-crushing as the previous ones, but the savings tips can be applied to all three.
Review your insurance policies. Can you get a better rate at another company? Are you paying for coverage that’s not necessary? I did this for real in December and saved $65/month, plus found a much better home insurance policy.
Call up services that you’ve decided not to cancel (I’m thinking cable and cell phone) and ask how you can reduce your monthly bill. Chances are, there is something that can be adjusted — again, I did this for real with my cell phone recently and knocked $25 off my monthly bill.
Use David Ramsey’s snowball method to pay off debts — thus freeing up extra money for savings, eventually. (Yes I know we're supposed to hate DR, but I'll give him this.)
Like we mentioned in the beginning of the article, auto-transfer any saved dollars to a separate account each month. If you're now paying $25 less on the phone bill and $65 less for insurance, plus you paid off debts and no longer have those monthly payments, add it all up and put it in another account before it trickles into the ether.
The savings above won't necessarily add up to $300 per month, and part of the potential savings is from getting rid of debts. This is where the rule of Paying Yourself First comes in. If you hide “X” amount of money from yourself each month, it just won’t be there to spend on random stuff.
One thing I've learned about personal finance over the past few years is that there is no one-size-fits-all strategy -- just use the strategies that apply to your situation. Hopefully some of these ideas in this post can help you take the money and run, as Dire Straits would put it.
Eventually, however, there comes a point where it’s not possible or practical to cut your spending any further. That’s when it’s time to make more money… Stay tuned for side hustle and passive income ideas in the next installment!
On not buying dumb s***: The Millionaire Next Door: The Surprising Secrets of America’s Wealthy
(That’s an Amazon Affiliate link. If you buy the book through it, I’ll get like three cents — or you can borrow it from your local public library for free! )
To learn more about budgeting, band finances, and more, order Money Hacks for Metalheads and Old Millennials in paperback and ebook formats: https://amzn.to/3lCsFdq
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