What is your financial situation right now? Are you making ends meet or are you struggling? Maybe you are somewhere between. The choices we make every day with our money seem insignificant at the time. What’s $5 for some snacks at the convenience store? What’s $12 for that cool new case for our phone?
In the long run, these small everyday purchases have a big impact on our bottom line. They determine how comfortable we are at the end of the month when all our bills are due.
For me, I’m lucky in that I don’t have to struggle to make ends meet at the end of the month. I have a buffer. I’ve taken the time to budget my money and built up an emergency fund. But it wasn’t always this way.
Back in 2007 at the height of the housing bubble I bought my first home. It was one I couldn’t afford but I was approved for the mortgage anyway. Luckily as I was looking for a house, a good friend of mine was looking for a place to rent. We decided to move in together into the house I was buying.
If it wasn’t for him paying me rent every month, I would have been bleeding money. Just my mortgage, HOA fee, and utilities were more than I was making in a month.
With his rent money, I was able to buy groceries and put gas in my car without going into debt. But when it came to any other purchases, I had to think long and hard since I didn’t have much wiggle room.
At first, I didn’t think things through too much. I just bought things on credit. That led to me getting myself into some debt. I had to learn that I needed to think long and hard about my purchases because I didn’t have much wiggle room.
Trying To Live On $1,000 A Month
Recently I found the online game Spent and must say it was a blast from the past. It took me back to the days of thinking through all my purchases. Trying to determine which ones to make and which ones to skip.
The premise of the game is that you’ve lost your job and house and are down to your last $1,000. Can you to survive on $1,000 for a month? As you play the game, you need to find a job, a place to live, buy food, and deal with everything else life throws at you. The game only takes 10 minutes to play, so I suggest you try it out. You can play a few different times as each time the scenarios are different.
Click on the image below to play the game. When you finished, you can read my experience below.
How to Live on $1,000 A Month: Lessons Learned
I failed to survive on $1,000. I ended up running out of money after 12 days. I thought I was smart about my spending decisions, but life kept throwing me curveballs. I could have run away from the accident or not answered that collection call. But I just couldn’t do it – I’m too honest!
The most striking thing that I learned from playing the game is how expensive it is for health insurance.
Many low income earners forgo insurance because of the cost. If any issues come up, they will cost you much more money than if you were paying for health insurance each month. It sounds simple to buy coverage, and from a strictly personal finance point of view, this is the right thing to do. But many cannot afford it without forgoing something else. There are so many tough choices that you need to make.
For anyone reading this post who is living close to the edge, realize that you aren’t alone. It can feel like this when you see others with the latest gadgets and vacation posts on Facebook. But the truth is, over 60% of Americans cannot come up with $1,000 in the event of an emergency.
If this describes you, here is my advice for helping you to break from the cycle and start growing your wealth. I realize it isn’t easy to change your financial situation. But if you have a plan and stick with it, in time you will begin to see some changes for the positive.
- See where your money is going. You don’t have to create a budget, but it wouldn’t be a bad thing. You can use a basic spreadsheet budget or you can use a program. It doesn’t matter which one you choose, just the one that works for you. Record your spending for a week or a month so you can see where exactly your money is going. Sometimes, those little purchases make a big difference.
- Find areas where you can cut back on expenses. Buy alternatives, like store brands over name brands. Limit your spending. You can live off of Ramen noodles for awhile. Buy non-perishables like canned vegetables that will last. Take advantage of food stamps. It may not be glamorous, but don’t worry what others think and be proud of who you are and where you are going. When I was struggling to get by, I was eating peanut butter and jelly sandwiches for lunch every day for months.
- Cancel unused expenses. Do you still have a gym membership that you never use? Maybe get some magazines in the mail you never read? You can save money by ending these subscriptions. And thanks to Clarity Money, it gets done for you! When you open a free account, they will scour your expenses and find bills that you can cancel.
- Take a look at your big expenses. This includes your mortgage and student loans. Can you refinance your student loans to save money? Maybe refinance your mortgage as well?
- Make saving a priority, not something you do if there is anything left over after the fact. It won’t be easy, but try to find a few dollars each month to put into a savings account. If you are having a hard time doing it, have it done automatically for you. The idea here is to just get into the habit of saving something. I’ve been able to save over $1,000 using this method and only save $5-$10 here and there.
- Make friends at work. If they live nearby, maybe you can carpool and cut down on gas and wear and tear on your car.
- Find a roommate. Find someone to live with to help cut down the monthly cost of rent. I know there are horror stories of roommates, but if it means avoiding debt, it is worth the sacrifice. Even if just for the short term.
- Find other income sources. You don’t need another job. With the internet, you can turn just about any skill, hobby or talent into an income. This post has a ton of ideas to get you started.
- Work on building an emergency fund. Start out with just getting the balance to $1,000. That $1,000 for the unexpected will save you from many headaches down the road. With Capital One 360, you can get a bonus just for opening an account!
- Shop around. When buying things you do need (and not just want), figure out ways to save money on them. Shop around for car insurance. Get cash back when you shop online. The smarter you are with your spending, the further your dollar will go. You can find some of the financial products and services I use here.
- Stay positive. Everyone experiences setbacks in life. Learn to not get down when a setback happens and instead grow and become a better person from it. Check out the video below for some perspective and realize that you still have it better than most.
I know these ideas don’t sound exciting. But the reality is that you have to make some sacrifices now so you can get back on your feet. None of these are permanent. You don’t have to live on Ramen Noodles the rest of your life. Just for a short while as you get your financial foundation back in place.
At the end of the day, you have to think about it this way:
Would you rather live in some pain now by going without things for a period of time so that you can be better off later? The benefit of this is that you would not have the stress you have now and would be happier. Or would you rather just keep living like you are now for the rest of your life? Which includes the stress and unhappiness?
If you make no changes, your current life with the stress and unhappiness will be your life forever. And without making a change, the stress and unhappiness will grow along with your debt. Make the sacrifice and better your life.
For me, I made the sacrifices. I made it a point to put $25 away each month in savings. I shopped for store brand groceries. I found the grocery store that offered the lowest prices in my area. I didn’t buy new clothes for a few years and went without the latest smartphone.
Other things I did included:
- I stopped using my dryer and put my washed clothes on a drying rack.
- I plugged all my electronics into a power strip and when I left for work, I would unplug that to save electricity. Thanks to technology, you don’t even have to unplug anything or turn off the power switch. It’s all controlled for you.
- I replaced my light bulbs with higher efficiency LED bulbs to use less energy.
- I took money I received from tax returns, my birthday and Christmas and used that to pay down my credit cards. Once the debt was gone, I built up my emergency fund.
- I found things around the house of some value that I didn’t use and sold them on eBay or Craigslist.
I also worked hard at my job and earned a few raises as the economy turned around a few years later.
It all paid off. Shortly after getting my second raise, my friend moved out to live with his girlfriend. I was now on the hook for everything. Luckily, I was able to afford to live on my own through all the sacrifices I made. Money was still tight, but I was in a place where I could save some money each month. This allowed me to keep improving my financial situation.
Those lessons I learned during that difficult time served me well. I became a smarter consumer and a great saver. It allowed me to leave my employer in 2013 to work for myself.
Living on $1,000 a month is not easy. But if you are in this situation, you don’t have to settle and accept it. There are things you can do to change your circumstances, you just have to be willing to put in the effort. If you can take steps to better your situation, you will begin to see changes. Use those achievements as motivation to keep pushing through and reaching your goals.
You can overcome this. It will be hard and it will take time. But you will come out the other side stronger and more confident. This will pay off in more ways than just financially in the future. And remember, the sacrifices you make today are not permanent. As the old saying goes, the only guarantees in life are death and taxes. Sacrifice a little now and be better off for many years to come.
Readers, how did you fare when you played Spent?
[Photo Credit: geralt]