Taking action to save money
Lately I have been talking a lot about the importance of deciding exactly what you want for your money, setting goals, and making sacrifices to reach them. This week I wanted to show that process in action, to provide an example of how this can work.
My savings goal
This year I set a goal for myself to save $22,000 toward the purchase of a home. In order to do this, I have to set aside $875 from every paycheck, while still paying all my other bills, and saving for expenses such as health care, auto maintenance, etc. So far, I have managed to stay on track, and have saved over $5,000 since January 1st.
Our savings goal may be too lofty
While I have been making excellent progress, keeping up with my goal every month has required all of my surplus income. I have a $10,000 emergency fund, so this is not a critical problem, but it does mean that if I had to draw on my emergency fund, I would not be able to replenish it and stay on track with my goal. Additionally, surplus income allows me to budget for discretionary purchases. What this means, is that if an emergency occurred, or my wife and I wanted to buy something, we would not be able to meet our goal.
Our sacrifice to meet the savings goal
My wife and I talked it over, and decided that we would make a change in housing to free up extra money. Most areas of our budget are already pretty tight, but we spend $700 month for our apartment, which is a little steep. We have lived here for a year, and have no complaints, but we initially chose it simply because it was easy to find, which was important when we moved into the area. I was sure there had to be better deals available, and a little research revealed an apartment of the same size for only $495/month. After a phone call, and a visit, we decided to make the change, and are now just waiting for our move in date.
Sacrifices and Gains
There are pro’s and con’s to every decision made. Here are some of the things we had to give up, and some of the things we gained by making this move.
- Location. Our current apartment is right across the street from where I work in a prestigious area of town. The new one is not in a bad area, but it is older, and will add 5-10 minutes to my commute.
- Perceived Security. Our current apartment is a gated complex; the new one is not. However, we have noticed that the gate to our current complex is frequently left open for long periods, either because it is broken, or to allow for deliveries.
- Laundry. This is probably the biggest one for us. Our current apartment had a washer and dryer in the unit; the new one has an onsite Laundromat. The actual cost is negligible, but we both enjoyed the convenience of not having to leave our apartment to do laundry.
Pros – Savings!
- Rent. We will save $205/month just on the face rent.
- Water. Our new water bill is included in the price of the rent. This will save us $12-$15 dollars a month.
- Gas Bill. Our current apartment has a gas water heater. This was the only gas appliance, and the monthly base fee for gas hookup is $15, making for an average $17 month bill (even though we only used $2 worth of gas). Absent additional gas appliances, it makes sense to have only one utility bill, and the new apartment has all electric appliances.
- Internet. Our current apartment required that they provide any Internet service. They charged us $45/month for the slowest service. The new apartment allows us to get out own contract, and due to a sale, I will be getting faster internet for only $30/month (price locked in for 1 year, same as my lease)
Pressing on toward the prize
I have previously written that sacrifice is made meaningful by having a goal. This is a perfect example, because my wife and I both hate moving. It is uncomfortable; a lot of work, and there are some not inconsiderable downsides. It would have been far easier to simply maintain the status quo. However we do have a goal, debt-free homeownership, and because we kept that goal firmly in mind, we have the motivation to make a sacrifice that should net more than $3,000 dollars a year to propel us toward our objective, while also returning a surplus to our budget. Additionally, this lower rent means we are more able to choose to stay in an apartment until we are prepared to buy. Even with some annual increase in rent, we will avoid paying “as much as a house payment” every month.
I hope this helps illustrate how a concrete goal can lead to saving money, and maybe motivate you to meet your own goals. If you have taken action to reach your goals lately, or plan to, we would love to for you to share your story with us.