Living debt free, especially these days, is extremely hard to do, especially if you aren’t making that much to begin with. I currently work as an event planner, and I am the assistant to the owner of the company, making a little less than $30,000 per year in San Francisco, a pretty expensive city. If I can make it work, so can you, but it won’t be easy.
Most people don’t take much though in picking a bank. Usually, if it is close to work or home then it is a good bank for them. This method of choosing can be a mistake, causing people to miss out on better deals.
Many banks have started offering free checking, meaning you don’t pay monthly fees and for some banks, you don’t have to pay for your checks either, but don’t forget to read the fine print. For most of these benefits, you will need to keep a minimum balance in the account. It is also important to make sure that the banks and ATMs for your bank are easily accessible. Many people overlook the fact that using a generic ATM can cost a $2 bank charge and $2 to $6 in transaction fees from the ATM. As with any account, you should keep a close eye on your checking account. While technology, like online and mobile banking, makes it easier for us to see the balance of our accounts, many transactions don’t post immediately. Some debit transactions and checks can take up to 3 days to post, which could leave you at risk for over draft fees, which typically range from $25 to $40, if you don’t keep good records of your spending
If you don’t write many checks, a money market account (MMA) may be good for you. Many MMAs offer a low interest; however you will receive a fee if you write more checks than the agreed upon amount, which is usually 3 checks per month.
Other ways to gain interest is to open up a savings account; however you aren’t likely to make much with a standard savings account. If you have a large enough amount of money saved up, a certificate of deposit (CD) may be best for you. You usually get a high interest with a CD; however, you aren’t allowed to make withdrawals from the account within a certain amount of time (3 months to over a year) without incurring additional fees.
Once you have your bank picked out and decided what kind of account to get, it is time to start thinking about your budget. Say you make $30,000 per year, or $2,500 per month, like I do. You typically only want to spend 25% to 30% of your income on rent, utilities, and rental insurance (if you have it). That means, you should only spend $625 to $750. 18% of your income, or $450, should go to transportation. This includes buses, trains, tolls, gas, and auto insurance. 10% of your income should go into savings, and stay there. $250 saved up each month will start to add up quickly.
If by chance you do have debt, I would portion an additional 10% to go to your debt each month. While I usually discourage people getting credit cards, it can be good when you are in a bind, and it is good to establish credit, but remember, don’t live beyond your means. It is good to set a low credit limit, so you aren’t tempted to over spend. Also, it would helpful not to spend over your 10% allotted to debt, that way you can pay of your credit card bill each month.
The remainder income that you have can be spent on your regular living expenses (i.e. groceries, entertainment, insurance, etc.)
While you may have to make some cut backs, it is quite easy to live on a $30,000 salary.