Now that I have a full-time job, I have no idea how I ever managed to live off of 800 euro’s per month when I was a student. I can’t for the life of me grasp how I even could afford somewhat healthy food throughout those 5 years.
It is true that your spendings tend to increase in the same pace as your income. However, if I could live off of 800 Euro’s 5 years ago, why won’t I be able to do that now and save all the ‘extra’ money in a bankaccount?!
Well, for one: I no longer live on 15 square meters with shared bathrooms down the hall, and thus my housing costs have increased. But besides that, what else has changed? I’d probably say my spending habits on restaurants, lunches, clothes, Netflix, HBO, Spotify, take away coffee and so forth. There had to be a way for me to cut some costs and increase savings right?
So 2 years ago I took a hard look at my finances. 1. was housing: non-negotiable. 2. was paying off debt: also non-negotiable. Then came my card-statements and my oh my: I was ‘wasting’ money. If I really wanted to save up some money, for say, a trip to California or a much welcomed warm car during the Swedish winter, It was time for a money-detox .
Some readers here might not like to read about money (ugh, Ellen’s so boring!) and by all means, click the X in your rightcorner. I for one, love to read about money. Not because I’m spending it on bags, cars or shoes, but because I want to know everything about securing financial freedom in the long run. Now that I have a stable job, good income and a low interest rate on my mortgage (+ paying off debt), I live a pretty comfortable life and it was easy for me to think I didn’t need a lot of savings with my job and the security it gave. Are you the same as me? What could happen right? Well, you could get fired, there could be a re-org, and perhaps… you don’t want to work until you are 70. Seeing as pension ages keep on increasing, and I for one definitely do not look forward to needing to work another 42 years, I had to change my spending. There is a difference here between needing and wanting to work. I want to have the financial freedom between a job that I need and a job that I like/want, so it was time to build my money machine. Your what?!
Enter my chart: I know, I’m a total Nerd for making this. But I love visualizations. I made it in pastelcolours though.
I still have that steady job. But I also have a more realistic view on my spending, and thus savings.
- One way for me to structure my savings was to first look at my spendings. I cut out subscriptions. This came down to HBO, an overpriced phoneplan and Spotify. Nice to have, but barely used. An thus €35 euro’s extra every month in savings.
- Another one regarding expenditures are monthly bills: try to set-up rent, mortgage and amortization payments on an automatic basis. These days companies can find a quick way to your bankaccount. On the 26th (day after pay-day) all my monthly payments are withdrawn at once. I no longer have to spend any time worrying if I’ve paid all my bills.
Ok, so my efforts of all this was an extra 35 Euro’s every month? Those definitely weren’t going to break the bank. Nonetheless, many littles make a lot over time.
However, the big surprise I found in my spendings: what ever is on my checking account, is gone by the end of the month. I’d spend it on wine, dinner, clubbing, clothes. It was my own little gift for having left-over money at the end of the month. And thus, I had to reward myself. At the eve of the 24th all that left-over money was gone.
- After this realization, I set up monthly savings payments to myself. Not at the end of the month, but right on the day my paycheck came in. I forced myself to set-up automatic payments of 15% of my net-income straight into a savings account. I didn’t even have to think about it.
I have since been able to build up a 3 month buffer and save some in a travel-account for whenever I feel the need to evacuate the December darkness. Although I am very proud I have saved up this money, my money isn’t really growing. It’s just standing there. With a measly 0.7% (I know that‘s even quite good for current marketconditions).
Then, I discovered my MONEY MACHINE: I went to the stockmarket! Uuh, you did what Ellen? Yes, I’m investing my money on the market. An no, it’s not just for old grey men (it kinda still is, but I’m on there and it’s amazing). Point to note: my buffer is still on my regular savings account, as is my travelmoney. The only money I have on the stockmarket is money I could do without. By no means do I advise people to trade on the market if you A. still have a lot of debt. B. have very little financial space after monthly payments and C. haven’t saved up for a buffer.
I never thought I’d be able to be active on the stockmarket. But I started with as little as €100 euro’s and it’s very easy to use. Only 1 in 10 people are on the stockmarket, and in the Nordics only 32% of the people with an investmentaccount are female (source). This means of every 100 citizens in the Nordics, only 3 are women that are actively investing their money. I figured it was time to change those numbers. I plan to write more about investmentaccounts in another posts, as I feel this one is getting to long. Lunchbreak’s over!
please note: these are my own opinions and experiences.