It’s still a tough jobs market out there and even though you’ve gained your degree, you might still have to wait a while before getting into the career you’ve studied for. In the meantime, many graduates find themselves living on considerably less than they bargained for. Despite what the media would have you believe, you can live on an income of under $20,000 a year. Here’s how.
Keep track of your spending
The key to living on a low income is keeping track of your finances. Take a note pad and pen and spend half an hour writing down all your regular outgoings; rent, food, travel costs etc. Weigh this up against your income.
Now draw up a simple a simple spreadsheet and record every financial transaction you make at the end of each day. Note down money in and money out. This will give you a clear picture of exactly where you’re at financially. If you have any money left over after regular outgoings, use it to pay something off a credit card or other debt.
Kick the habit(s)
- A very good way of instantly saving money is to cut down on non-essential habits. Smoking is extremely costly both to your health and your wallet so do yourself a double favour and quit.
- The same goes for alcohol. You really don’t need a glass of wine or a couple of beers every single night of the week. Cut back your consumption to a social drink for one night only just at weekends.
- Eating out is another expense that you can cut down on. Restrict your restaurant dining to special occasions only, rather than every week. You can still have a special meal at home with a little effort but at a fraction of the cost.
- For the time being at least, holidays will have to go. A ‘staycation’ can be just as much fun and considerably cheaper. It costs nothing to go cycling or walking in the countryside, many museums and galleries are free to view and swimming in the sea is free too.
If you work out just how much you spend each month on paying back loans and credit card debt, the figures can be frightening. Not only that, but you’re paying back interest as well as the actual debt itself which really can mount up. Use every spare penny you have at the end of each week to clear your debts; this will save you a fortune in the long run and leave you with surplus funds as a result.
Set yourself savings goals
Once your debts are clear, set aside the money you’ve saved on repayments as an emergency fund. Next time your car breaks down, you’ll have the money to pay for repairs instead of having to borrow even more.
Work out how much money you’re going to need for Christmas or for a holiday next summer and put a little away each week to cover these expenses. It’s amazing how quickly your piggy bank will build up.
No-one wants to become so obsessed with work that they lose their sense of fun, but if you’re focused on working instead of shopping, you’ll spend a lot less. It’s also hugely psychologically satisfying to see just how much money you’ve earned at the end of each week; how quickly your debts are reducing and your savings are growing.
Keep your eyes on the prize
In order to live on less than $20,000 a year, it’s really important to understand why you’re doing so in the first place.
If you’re saving for a new car, cut a picture out of a glossy magazine of the model you hope to buy and pin it up somewhere you’ll see it every day. Maybe you want to move to a better apartment or go to visit friends on the other side of the world; whatever your motivation, remind yourself of it every day.
So you see, with a little sacrifice and frugality, it is really possible to live relatively comfortably on less than $20,000 a year without depriving yourself too much. We live in a very material society where everyone wants and expects everything now. Be patient, work hard, clear your debts and you will be building firm foundations for your future.
Image source: NadirKeval