6 Money Habits I’m Adopting to Pay Off Debt and Save Money On a Low Income
I often see articles about how to manage your finances and save up x amount of money by x amount of months. Usually, the examples in these articles are very impressive and the amount of money that the person has saved is a lot. Sure, to a lot of people this can be extremely helpful and motivating. Tips on how to get into stocks, passive income, and saving up to thousands of dollars a month are not uncommon.
Usually, the authors of this type of article will assume that you already have a decent amount of money saved, a steady job, a house. But what about those of us who don’t have any of these things? What about the people who live in low-income households, are unemployed, chronically ill, or are living paycheck to paycheck?
We are advised to have emergency savings account with roughly 3 months worth of living expenses saved up. To many people, this is something that can be saved up relatively quickly. But there are also many people who have never had that much money in the bank, and can’t imagine it happening in the future either.
Living in Sweden I am lucky to have a sturdy safety net thanks to our welfare system, which I am incredibly grateful for. I am well aware that things are much harder for people in many other countries. But regardless of this, I have struggled financially since I moved out of my parents’ house 3 years ago.
Because of my chronic illness, I have never had a proper, long-term job. For a big chunk of this time, I have been living off monthly student grants and loans, which are government-funded and will, of course, have to be paid back. I am currently about $12.000 in debt and have recently dropped out of school.
As I am unable to work right now, I’m experiencing a lot of stress regarding my situation when I will no longer be getting my student loan. I have no savings, and I will have to apply for financial aid, which is a bare minimum amount that will not allow me to save much money for the time being.
So how am I going to pay off this debt, get back on my feet, and start a savings account that lasts? I recently sat down and made a plan for the coming year, and this is what I came up with.
1. Regularly looking over my spending and making a detailed budget
At the start of every month, I will sit down and write down all of my expenses from the previous month on a piece of paper (I’ve found that physically writing it down and putting it somewhere I can see it on a daily basis helps motivate me to stick to my goals). I will include every expense and purchase: rent, electricity, wi-fi, phone, groceries, public transport, random shopping, etc. This will give me a detailed view of how much I’ve spent during the month. I can then set a new budget for the coming month, set a realistic but slightly lower limit for each expense category that isn’t fixed, in order to be able to save some extra money. Looking over the budget once a week is a good way to make sure you’re on track.
2. Cutting down on unnecessary shopping and small luxuries
This is a hard one for me, considering I am used to shopping for things I don’t necessarily need. None of my purchases are big or expensive, but they add up, and I know if I didn’t buy that new moisturiser or the pretty top or the new book, I would have more money left over at the end of the month. How I tackled this is by compiling all of my monthly shopping expenses that aren’t absolutely necessary on a piece of paper. Because it’s never the same amount each month, I looked at my previous purchases 2–3 months back for a clue on how much I spend on average. And instead of pushing myself to completely give up shopping, I set a maximum amount of money that I will allow myself to spend each month on shopping and small luxuries, that would still allow me to treat myself every now and then, while still cutting my costs.
3. Avoiding credit cards and no more credit or part payment accounts
I have never owned a credit card, but I have made many online purchases that I paid with credit, and I also have a part payment balance that needs to be paid off. These are purchases I’ve made when I’ve bought pricier necessities, such as shoes and coats, but also those unnecessary impulse buys when I was feeling down and hoping some online shopping would make me feel better (Anyone else who can relate to that?). Of course, that feeling only lasts a few seconds, minutes at best, and then I’m back to feeling crappy again. But as I sat down to look over my budget I made a promise to myself: no more credit purchases and no more monthly payments for things. Instead, I’m going to focus on paying off my current credit, and if I’m going to buy something, I will pay all of it upfront.
4. Living a more minimalist lifestyle
This is a popular one, that I’ve also noticed often gets taken to the extremes. When I say I want to live a more minimalist lifestyle, I do not mean I’m going to give away or sell all my belongings and living off the bare minimum. I know this lifestyle might work for some people but personally, it would make me miserable. I like having things around me. I like my decorated apartment, the art on my walls, my candle holders, and houseplants with mismatched pots. I like having a skincare routine with a wide variety of products, and I also like having a lot of utensils and kitchenware, because I love cooking and baking. I have no desire to deprive myself of these things for a minimal aesthetic and frugality. When I say I want to live a more minimalist lifestyle I am talking about the mindset. I no longer want to shop mindlessly and fill my home with more things that are not going to bring me joy. Sure, I might declutter a bit, but I want to focus on keeping the things I actually like and use. To me, a minimalist lifestyle is to be aware of your habits and needs. Do I need this or genuinely want it? Or do I just not want to miss out on a “good deal”?
5. Focusing on realistic and long-term goals
I’m going, to be honest. I am not a patient person. I’m the type of person to always look for a quick fix, a solution that’s going to solve my problems fast and easy so that I can focus on other things. But that’s not how good money management works. In the past, I have set up savings accounts where I would put two-thirds of my income that month, telling myself that “this month I’m going to save all this money, only buy minimal groceries and nothing else!” Of course, I would always end up having to transfer most of that money back into my checking account. Because I didn’t actually have that much money to save as a low-income household. Changing my mindset and being okay with the fact that saving money and paying off debt is a long-term commitment is going to be hard, but it has to be done. Rather than saving 2/3 of my income every month, I will set up an automatic monthly transfer to my savings account with a much smaller amount of money. It will feel insignificant, but this way I won’t actually have to take money from my savings to cover my expenses later on.
6. Not comparing myself to others and not being so hard on myself
I have a bad habit of constantly comparing myself and my progress with people around me, such as my friends, old classmates, and even people on social media who I don’t actually know! Compared to these other people I always feel like I’m behind in life. Many of them are married, have children, they own houses and nice cars and have steady jobs and go on holidays every year. But comparison will never make your own situation any better. It will only stress you out, you will beat yourself up and set unrealistic expectations for yourself that you just can’t live up to. And that’s not your fault. Everyone’s situation is different, and that is okay. What matters is that I am on the right path to better my own situation, no matter at what pace, how big or how small.
Introducing new habits and new routines is always going to be difficult, especially in the beginning, and especially if you’re someone who has a hard time adjusting to changes. Ultimately you just have to believe in your own abilities, stick to your commitments and not give up. And don’t let anyone make you feel like your financial situation is something to be embarrassed about.
