How to Budget: How to Save Money When You’re Broke

The Value of Small Improvements

Let’s talk about saving money.

Saving money may seem a hopeless endeavour if you’re already struggling to cover your monthly bills, but I’d like to show you how even tiny sums of money set aside regularly can add up to allow for decent savings.

As James Clear writes in his New York Times bestseller Atomic Habits: An Easy & Proven Way to Build Good Habits & Break Bad Ones, “It is so easy to … underestimate the value of making small improvements on a daily basis. Too often, we convince ourselves that massive success requires massive action [but] the difference a tiny improvement can make over time is astounding.”

I would like to show you a simple but effective way to put Clear’s philosophy into practice to save more money than you may think is possible when looking at numbers on your monthly bills overview form.

This article is primarily for those who, like me, live on a tight monthly budget and, once their variable expenses are accounted for, have little to no money left over for their “savings” (in the traditional sense of the word).

Read on to see the detailed method I use to save whatever money I can every month (more than you’d think—and more than I’d thought, too).

Step 1:
Choose Your Subcategories

a. Get it all out

To start, make a list of everything you’d (ideally) like to save up for and include the amount you think appropriate for each subcategory/fund. Grab a piece of paper and write it all down (or use your phone/computer, but get it out of your head).

When you’re done, review your list. Consider how much money you have remaining after accounting for your F+V expenses every month.

Which goals seem reasonable?

The less money you have, the fewer categories you should choose to save up for. You will need to prioritize and make sacrifices.

You may not be able to celebrate every holiday or event you would like to. Perhaps you need to downscale your expectations for birthdays so they’re more affordable.

In my opinion, it’s better to pick 3 or 4 priorities and hone your focus in on them. If you meet your goals before the deadline, there is absolutely no reason why you can’t save for something else. But if you spread yourself too thin, you may fall short on all of your goals and become discouraged.

b. Prioritize and commit

When you have chosen your saving priorities, write them down somewhere. I used Google documents to create an incredibly plain but effective table. I keep it in my finance folder, in Google Drive, in the same place where I go to print off my daily expense and monthly bill tracker forms. Very easy to find and access.

Compare my final savings list with my brainstorming “wish list” above!

You can make a copy of the table yourself. Follow this link, then go to “File” -> “Make a Copy” and save it to your preferred folder in your Google Drive.

(an aside: the reason I have “n/a” listed for my general savings/emergencies fund is because I have already met my goal. But, I list it alongside my “work in progress” funds because, if I meet my other monthly goals, I can always add more money to it.)

Start your savings today. It doesn’t matter if you decide to save from “July 2020 to January 2021” or “July 2020 to July 2021” or a different timeline altogether. It doesn’t matter. Do what makes sense for you. The important thing is that you start today. Don’t put it off.

c. Calculate the ideal “minimum monthly payment”

Based on the amount of money you’d like to save and the date you’d like it to have it saved by, you can determine how much you would (ideally) need to save each month to meet your goal.

Do not get discouraged by this number and do not let it rule you. This is a guideline. An IDEA. It can help you determine whether you goal is realistic or a bit too ambitious. It can help you stay on track or readjust as needed. Be flexible.

I put my monthly savings in italics because I know it’s highly unlikely that I will be able to meet each minimum payment every month. That’s okay. This isn’t a fixed expense or a variable expense. This is savings. Even if I only save, say, $8 or $10 where I would have liked to have saved $14 or $21….that’s still $8 or $10 that I did save! While it’s not “as good” as the total amount, it is better than $0!

Everything adds up and the mindset you choose in this endeavour matters almost as much as the money you actually save. If you are struggling to make ends meet, then you should congratulate yourself for every dime you manage to save. Down the line, this will be money you don’t have to scramble to scrape together when a birthday approaches or your car needs new tires.

Step 2:
Decide Where To Store Your Money

Cash on hand or Cash in the bank?

a. Online Savings Account

If you are going store your savings in the bank, then you will either want to:
1) have a notebook to track how much money is for which savings fund (the lump sum in your savings account can be confusing and it can be tempting to overspend for one fund, taking money intended for another) or
2) open up a different savings account for each savings fund you create.

Whichever you decide to do, be cautious. Most banks only allow you a certain number of free transactions every month. This is the case for both checking and saving accounts. You will have to check with your bank if a transaction includes both withdrawals and deposits, or just withdrawals.

For example, with my savings account, I am only allowed 3 transactions a month. My checking account allows me 50 free transactions a month. After that, I’m charged an additional $0.50 – $3.00 per transaction depending on if I withdraw in-person at my bank or at the ATM.

Electronic transfers tend to be free from checking to saving accounts (and vice versa) as long as the accounts are from the same institution. So be careful: if you are transferring funds between different banks, you may be charged additional fees.

Do your due diligence and find out exactly what the parameters of your bank accounts are. Phone customer service or go in person if the information provided online is unclear.

There is nothing worse than painstakingly saving your money only to find out you’ve been charged upwards of $10 at the end of the month (excluding your account service charge!) for exceeding your free transaction quota!

b. Cash At Home

I keep all my savings at home. I like seeing the cash, being able to hold it, and having control over how to organize it into the various savings funds I have.

Another reason I prefer saving my money in cash at home is because quite a bit of my savings is made up of loose change. I let my change accumulate in a jar, and when I see there’s a nice stack, I count it out and divide it up between my savings funds.

Step 3:
Keep Your Funds Separate

I’ve already touched on how you can stay organized if you decide to save your money at the bank. In this section, I will show you how I have been managing my cash savings at home.

I keep my money in a briefcase. It’s not exactly the most secure system, as someone could easily carry it away, but it’s better than nothing. I am currently thinking of a more discreet and secure way of storing my money that is also convenient to access since I check and update my finances almost daily.

The reason I mention this is because my financial organization methods are a constantly evolving state of affairs, and yours should be as well. Don’t let perfection get in the way of action. You may not have the perfect hiding spot or organization method yet, but if you wait around for the perfect spot/method/time/location, then you never will start. Start now and modify, improve, adapt as you go along. Life is a constantly fluctuating state of affairs, and if you view your finances in the same light, you will make more progress than you could imagine.

(That being said, I feel compelled to add that, if you live somewhere with a high risk of being burgled, then you should obviously think long and hard before committing to storing cash where you live).

a. My method

I use Ziploc bags, a sharpie marker, and small paper clips. Observe:

Savings on the left, F+V on the right.

The reason I use Ziploc bags and not, say, envelopes, is that loose change makes up a large portion of my savings and envelopes would not be practical. Once zipped up, I fold the Ziploc bag and use the paper clip to keep it compact. Then I write down the name of the fund so it’s visible when the Ziploc bag is laid down (I always have a can of WD-40 handy if I need to rename a fund or replace faded ink).

As you can see, in my briefcase, I also have non-savings Ziploc bags. This is where I put money for fixed expenses that have not yet been paid that month. This way, I don’t have to worry in the least about spending money meant for other expenses. That money is already put aside so when the bill day rolls around, I don’t have to think or stress about whether I have enough money or not.

To prevent the two categories (savings and F+V expenses) from getting mixed up, I put a few heavy folders on top, that way nothing slides around.

It’s not pretty, but it gets the job done.

This is my method and no doubt I will move my money to a different location in the future, because this is not the most ideal set up. That being said, having a set up, no matter how imperfect, is better than having no set up at all.

So take a look around your house. What could you use that would be convenient and practical, at least for the time being? An accordion folder? A drawer in your desk? Heck, even a shoe-box stored in the pantry behind all those extra cans of beans would even work—at least until you devised a better solution!

Think of the Future, Act in the Present

Let not perfect be the enemy of good enough—I’m sure you’ve heard of this or read it somewhere, like I have.

If you are motivated to save money, it is possible to do so, no matter your financial situation. You may have to be creative about where to keep your money; you may have to be selective about your priorities; and, you may have to be patient, accepting that you can only save small amounts at a time—but saving money is possible and you can do it.

And as your saving funds increase, you will become more aware of the power of saving little amounts of money—even if it is “just” $2 here and $5 there. If you are tracking your variable expenses, you will be able to target, with intent and precision, the areas where you can cut back incrementally to instead put that money into a savings fund.

For example, even if you skip the to-go coffee every second day, you can save an estimated $8 a week (assuming you’re only having one cup of coffee a day at an average price of $2.70)—which is $32 a month, and that’s already 66% of my own monthly savings goal! In this hypothetical scenario, I would only have to come up with another $16 to meet my goal…now, don’t my saving goals suddenly seem a lot more achievable?

Do the math, save the change, and watch your funds accrue!

Head over to the series masterpost to start the series from the beginning or to find a specific article within the series.

S. N. Rabble

Undergraduate of American and British Literature, Language, and Civilization from Paris-Sorbonne, France. Now living in Canada, I am CEO of my life and Operations Director of Household Management and Finances for my household.

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