Last year, Sandra Cunha blogged about her experiment to live on less than $20,000 in a year. Her blog archives aren’t available for example, but what I loved was that she was very detailed about accountability to her budget and any exceptions.
I’m going to try it.
THE WHY: to set up your Future Self with financial flexibility and freedom, one of the best things to do is increase your savings rate (see Mr Money Mustache, Getting Rich: From Zero to Hero in One Blog Post). This means is spending far less than you earn, and wisely investing your cash. Though you can’t be sure what your future self will want, you can be confident she will appreciate options. Money helps with options.
THE HOW: focus on keeping your monthly spending low, including cost of living (rent, utilities – for me this means living in the smallest bedroom of a house I share with three other people), transportation (public transit vs. driving a luxury car), groceries, health, and fun. You might think – “$20,000 per year, that’s $1,666 month – not bad!” But no. If you anticipate any big purchases this year, you need to subtract those from $20k and divide the remainder by twelve months to hit exactly $20,000. I’m aiming lower than $20k (I track my finances using Mint.com and it’s great).
My living expenses are pretty low, but I anticipate some big expenses: a car, laptop, #BullCon15, bridesmaid’s dress (!), possible plane ticket(s) overseas. Conservatively, this will cost $10,000 – so I need to spend less than $1,000 a month to be sure.
I’ll track my spend at the end of each month in these categories:
- Home (rent, utilities)
- Transportation (car insurance, gas, EZ pass parking, public transit, taxis)
- Groceries (duh)
- Health/personal (medical, toiletries)
- Fun – eating (restaurants, bars, coffee shops)
- Fun – entertainment (movies, theater, museums, dancing)
Anyone want to join me!?