Many people believe that saving is an impossible mission, that they barely make it every month or that they simply don’t earn enough money. However, recovering from being broke is easier than you think. Here are 5 cases of people who have achieved this in different periods of their lives:
Case #1 Fresh out of college
Rodrigo is a physician who just finished medical school and found a job at a medical association which helps the destitute. He was hired as medical coordinator with a salary of $12,000. He also works translating medical articles on the side, making up to $5000 extra per month.
Rodrigo still lives with his parents because he’s saving money to pursue a medical specialty abroad. To this end, he puts apart half of his salary ($6000). He gives $3000 to his family for groceries or bills. He spends another $3000 per month on transportation, cell phone service and meals. Whatever he earns on the side he splurges going out with friends or buying something for himself.
He knows he should have separate savings for an emergency fund, but he thinks he could take some money from his education fund if necessary. He doesn’t own a car and travels to his job via public transportation every day.
Case #2 The single professional
Ana works in publicity and she just got a raise from $15,000 to $20,000 approved at the agency where she works. And contrary to what you may be thinking, she doesn’t spend half her salary on shoes and clothing.
After many financial hiccups regarding her irresponsible use of credit cards when she began her career, she has finally started saving. She’s part of the 40% of Mexicans who start saving after they turn 35.
To get out of debt, she analyzed all her expenses and made a conscious budget that she religiously respects every month. 50% of her salary goes towards fixed expenses like rent, utilities, groceries, transportation and debts; 30% for variable expenses like entertainment or personal purchases; finally, 20% is destined for savings.
The extra $5000 she will be making every month will be deposited directly to an investment account every month, so she can open her own agency in the future.
Case #3: The couple
Edgar and Luis have been a couple for 3 months and just agreed to move together. They met on an editorial design course. Since then, Luis has been working at a magazine and Edgar works as a freelancer.
At first, Edgar wasn’t so sure about this next step but he realized that if he started charging a 50% up-front pay to his clients, he could insure the payment of these projects and give himself a stable, monthly ‘’salary’’ and have a more stable financial situation.
Besides, living together will make them share expenses and responsibilities, which will lower the financial burden each of them have at the moment.
They decided to open a joint account and to deposit half of their wages; together they have $15,000. This allows them to pay their rent which, even if it is more than the 30% most experts recommend, is of $8,000 per month.
Utilities come to $2,000 per month, considering their music and TV streaming services. They occasionally eat out, but they prefer buying local produce at a market and cooking home meals to take for lunch. This comes to about $2,000 every month.
The remaining $3,000 are untouchable; the bank discounts them every month and puts it apart in a savings account on the first day of every month so they can buy their own apartment in the future.
Case #4: The family
Marcela and Fernando are married and expecting. He is a systems engineer currently heading the technical support division of a transnational company and she just abandoned her job to become a full-time mother.
The understand the huge expenses coming their way shortly, so as soon as they learned about the pregnancy they decided to open an investment account together in which Fernando makes a contribution of 20% of his monthly wages to have a safety fund for future debt.
Marcella contributes her entire salary. They decided this together because the moment the baby is born they will only have Fernando’s salary and they want to have some money saved in the bank.
They now live with the $25,000 Fernando makes every month. To make ends meet, they have cut down on many menial expenses like eating out or shopping so they can put that money towards their family’s future.
Case #5: Retired
Alicia has been a widow for a couple of years now, her children are adults now and visit her once a week but none of them live with her. She sustains herself with the monthly $6,000 pension her late husband left her, but this is not enough to pay for all her expenses.
Her children help her with the medication and doctor visits she requires for her arthritis, and since they can deduct all these expenses from their taxes, it helps them keep a positive balance for tax season.
Even with this help she still falls short of her expenses every month, so she has started offering the spare rooms at the house for rent to students at the local university. She is making an extra $8000 from this.
Knowing how you spend your money and making your money work for you is what you need to stop being a slave of it. The important thing is not how much you have, but how you’re using it. The ideal thing is to invest your money in a way that you stop depending entirely on your salary or monthly earnings so you can not only pay the bills, but save for your future.