There is an old saying that states your expenses will rise to meet your income. In a large sense, that’s true. A person that makes $20,000 a year may think, “If only I made $40,000 a year. My money problems would be solved!” But then, when they are making $40,000 a year, they find they are still as broke as they were before. Successful budgeting requires a frugal mindset, and the first step to living debt-free on a $25,000 salary is to understand that it’s not about, “What do I have to cut out to live within my budget?” but rather, “How can I have a rich, full life while spending as little as possible?”
1. Put it on paper. This common step is in every budget advice column, but it is still the best way to visualize what your expenses are and where your money is going. Pare your list down to the basic essentials – housing, electric, food and so on – so you can see what you have to work with at the end of the month, and where you can cut back.
2. Reduce your base expenses. If you have a high mortgage or rent payment, consider taking in tenants or roommates. You could also rent out your house and lease a cheaper apartment for yourself. If you have a high car payment, trade your car in as a “wash” for a cheaper vehicle without payments. If you live in a large city, use the mass-transit system and get rid of your car altogether.
3. Pay with a debit card. If you have credit cards, get rid of them. Keep one that does not have monthly fees and save it only for true emergencies. Use your debit card for everything from gasoline to groceries. This is the equivalent of paying cash, but it has the advantage of tracking your expenses on your monthly statement. At the end of each month, go through your bank statement and see where you spent money and where you can cut back.
4. Make a nightly list. Every night, write down what you plan to spend the next day. Include everything from road tolls to parking fees to your morning coffee. Go over the list and see what you can remove – is there a route you can use to avoid the tolls? Can you park a block away and avoid the parking fees? Can’t you really just make your coffee at home? And the holy grail – is there a way to get through the following day without spending any money at all? Yes, parking a block away and walking may be inconvenient, but you’ll have a hard time living debt-free on a $25,000 salary without making adjustments.
5. Lower your monthly expenses. Go through your expenses and look for ways to lower each one. For food, consider buying your groceries through the Angel Food Ministries. They sell enough food to feed a family of four for a week for $31.00 (as of November 2010). Raise the deductible on your auto or homeowner insurance policies to lower your premium. Request an energy audit from your electric company to see how to lower costs.
6. Buy used. To live debt-free, you should aim to spend money as little as possible. Sometimes, however, you don’t have a choice – the washing machine breaks, the hot water heater develops a leak, the television goes out. Peruse your local thrift stores, Salvation Army outlets, Goodwill stores and consignment shops. There is hardly anything that must be bought brand-new. Don’t forget pawn shops – they typically have good deals on electronics, and most pawn shops offer warranties, as well. Stores such as Game Stop have new and used sections – you can pick up video games and movies for just a couple of bucks. You can find good deals at Craigslist and at garage sales, too.
7. Go for the freebies. The best way to live debt free on a $25,000 salary is to get as much as you can for free. Craigslist has a section of free items, but you need to check it daily as the stuff goes quickly. Find out where the free Wi-Fi spots are in your area, and get rid of your Internet connection. Pay attention to radio and television station local announcements – a radio station in Central Florida, for example, has free concerts. They recently hosted Blues Traveler and the Spin Doctors. Most local communities have free events such as plays, movies and art shows.
8. Ditch your phones. If you have a landline, get rid of it and use a service such as MagicJack. Yes, MagicJack has its detractors, but it costs less than $20.00 a year for phone service. Many users are quite happy putting up with a few bugs in exchange for such inexpensive phone service. Stop paying for high-priced cell phone plans and switch to economy pay-as-you plans. As of November 2010, Net10 offered a pay-as-you-go plan with 750 anytime minutes for $25.00 a month.
9. Network. Seek out others who enjoy the minimalist lifestyle. There is a wealth of information on tips, tricks, discounts, coupons and much more on how to live cheaply available on websites and blogs.
10. Embrace the minimalist lifestyle. It is quite possible to live debt-free on a $25,000 salary. In fact, a family of four can live on that amount. The book, “Your Money or Your Life” gives many examples of families who live quite well on very little money. The specifics on how you can live on less than $25,000 will vary depending on where you live – someone in California may have to do things differently than someone in Arkansas, as the cost of living is different. Start by looking at the very basics that it takes to exist – to keep a roof over your head and food in your stomach – and realize that almost everything beyond that is optional. Eventually, you may come to see how freeing it is to spend very little; the less you spend, the less you have to earn. And the less you have to earn, the less you have to work and the more free time you have.