Saving

The Three-Step Budgeting Process That Helped Me Stop Living Paycheck to Paycheck

Marianne Hayes

This is the story of Sam Price, a 43-year-old insurance broker in Birmingham, Ala., as told to Marianne Hayes.

In my former life, I was a broke 20-something. I lived paycheck to paycheck, routinely charged everything from rent to gas and had a credit score in the 500s. As my 30s neared, I was $15,000 in debt and months behind on my utility bills.

Everything changed when I met my now-wife Chrisynda. I couldn’t imagine saddling her with my debt, so I made some drastic moves, like moving in with my parents. Thanks to a simple budgeting process and the debt snowball technique, I wiped out my balances in about 13 months. Over the next year, I saved $8,000 to cover Chrisynda’s wedding ring and our honeymoon before walking down the aisle.

That was just the beginning of my turnaround story. Since blending our finances, we’ve stayed loyal to my budgeting process to keep us financially fit for the long haul. Here’s how it works.

1. Look for money wasted.

When I was whipping my own finances into shape, I tracked my spending and looked for obvious money wasters. I discovered, for example, that I was spending $65 a month on video games alone and decided to sell my gaming systems and opt for hikes over screen time.

After merging finances, Chrisynda and I pored over our bank statements to understand where our money was going. A recurring bank charge stood out immediately, so we switched to another bank with free accounts. We also cut our food spending in half after learning we were dropping $350 per month on restaurants and takeout. And we opted for a slimmed-down cable package, shaving $45 off our bill.

2. Pinpoint where you’re overpaying

I’m a big believer in the power of negotiation. I’d been paying $50 per month for a gym membership when I noticed a new gym opening in my area. I offered to pay $200 for a one-year membership. They were hungry for new customers and took my offer, saving me $400 annually! I’d do the same years later with our electric bill, which could hit $400 in certain months, locking in a year-round rate of $200.

We looked to our employers for missed savings opportunities, too. We started using employer-sponsored health savings accounts to set aside pre-tax cash, shaving about $1,800 off our yearly medical spending. We also discovered that Chrisynda's employer offered a 5-percent discount with a major insurance carrier for employees who bundled home and auto coverage. We signed up and reaped $1,200 in annual savings.

3. Sacrifice now to make a big difference later.

Sometimes you need to make sacrifices in the name of financial stability. In 2010, when Chrisynda and I started planning for a family, we eliminated a $200+ car payment and lowered our insurance premium by selling my relatively new truck. We used the profits to pay off the loan before buying a used sedan and putting the rest in our emergency fund.

Financial security is all about tradeoffs—and looking back, they’ve all been worth it. We’re debt-free, have a six-month emergency fund and regularly invest 10 percent. My once-sad credit score is now around 800.

What I’ve learned is that these things don’t just happen. Some attention and reasonable sacrifice is required, but once these habits become routine, keeping up with them is much easier than dealing with the stress of living paycheck to paycheck.

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