Are you struggling to survive on $1,000 a month? Does it feel like the cost of living keeps going up, making it harder to get by? Many people are in the same situation as you are.
A few years ago, I was too. Back in 2007 at the height of the housing bubble I bought my first home. It was one I couldn't afford but I was approved for the mortgage anyway. I quickly realized I was in trouble when I added up my monthly mortgage payment, utilities and homeowners association fee. They totaled close to 90% of my take home pay.
I had a friend who was in need of a place to stay and he agreed to move in and I charged him rent. But even with him paying rent, I was surviving on peanut butter and jelly sandwiches and putting just enough gas in my car to get me to work. Add in me ignoring my finances and spending on my credit card, and my financial life was in trouble.
I wasn't following a monthly budget, I was just spending as l pleased, not caring about the consequences. My thinking was one day I'll figure it all out. But this kind of living led to a lot of stress. I slowly became a different person, depressed and unmotivated. My happiness was gone.
One day I decided to make a change. I started to watch my spending and in the coming months, I slowly dug myself out of debt. In this post, I share with you the steps you need to take to survive on $1,000 and work towards getting ahead with your finances.
Recently I found the online game Spent and must say it was a blast from the past. It took me back to the days of thinking through all my purchases, trying to survive on my income.
The premise of the game is that you've lost your job and house and are down to your last $1,000. Can you to get by on $1,000 for a month? As you play the game, you need to find a job, a place to live, buy food, and deal with everything else life throws at you.
The game only takes 10 minutes to play, so I suggest you try it out. You can play a few different times as each time the scenarios are different.
How did I do trying to live on $1,000 a month? I failed to survive on $1,000. I ended up running out of money after 12 days. I thought I was smart about my spending decisions, but life kept throwing me curve balls. I could have run away from the accident or not answered that collection call. But I just couldn't do it. I'm too honest!
The most striking thing that I learned from playing the game is how expensive it is for health insurance. Many low income earners forgo health insurance because of the cost. But if any issues come up, they will cost you much more money than if you were paying for health insurance each month.
It sounds simple to buy coverage, and from a strictly personal finance point of view, this is the right thing to do. But many cannot afford it without forgoing something else.
You really need to set up a budget so you know where your money is going. I remember the first time I sat down and made a budget. My eyes were as big as saucers when I saw just how much money I was spending eating out at restaurants.
As I spent my money, I didn't think $10 here and there really added up. But it did. By knowing just how much I spent eating out, I made some small changes and freed up a little bit of money.
One option is to use a basic spreadsheet budget. There are many free templates available to get you started.
Try Free Budget TemplatesFor an automated option, Tiller Money is a great choice. It pulls your spending data and helps you categorize it.
Learn More About Tiller MoneyHaving decent shelter when you are trying to live on very little income isn't easy. Your first step should be to apply to your County Metropolitan Housing Association for help finding housing. Just know that the process usually takes 6 – 12 months before you are offered a residence.
Another idea is to lower your housing costs by moving into a one bedroom apartment. This doesn't sound ideal, but it is a better option than finding a stranger for a roommate. Finally, you can consider moving back in with family members.
Once you see where your money is going, it is time to try to find ways to cut back. Some options include buying alternatives, like store brands over name brands. You can also limit your spending, such as living off of Ramen noodles for a while.
Can you lower your transportation costs? If you have access to public transportation, buying passes to ride will be cheaper than making a monthly car payment, paying for car insurance, gas and maintenance.
Do you still have a gym membership that you never use? Maybe get magazines in the mail you never read? You can save money by ending these subscriptions. And thanks to Trim, it gets done for you!
This includes your mortgage and student loans. Can you refinance your student loans to save money? Maybe refinance your mortgage as well? What about lowering your insurance premium? Lowering these large expenses can have a dramatic impact on your monthly cash flow.
Gabi will compare your policy to 40 other insurance providers and show you the ones that will save you the most money.
Learn More About GabiIf you aren't covered by health insurance at work, be sure to shop around for coverage to try to save the most money.
When it comes to saving money, make sure you save first. Too many times people spend first and save what is left over. Instead, make it a point to save when you get paid. You don't have to save a lot of money, just save something to start building an emergency fund and improve your finances.