Saving money is difficult, especially if you’ve conditioned yourself to spend. When I decided to turn my finances around and get out of debt, I wanted to do it as quickly as possible. For me, the solution was living the minimalist lifestyle. My only expenses were crucial for survival and even those, I reduced as much as possible.
By reducing my expenses, I had more money to dedicate to debt. I paid off $40,000 in about six years. But that’s not all. After paying off my debt, I carried on living the minimalist lifestyle and went on to accumulate $50,000. That’s not a bad result for sacrificing my lifestyle for a few years. Now, living the minimalist lifestyle has become the norm for me. I’ve learnt to live without the sports BMW I owned and the gadgets that did nothing but rob me of precious time.
I understand that changing your lifestyle drastically is extremely difficult, and most people don’t want to live the minimalist lifestyle. They want to be comfortable while accumulating savings.
That’s the reason I came up with the $100-saving challenge.
The $100-Saving Challenge
The only consistent way to save money over a long period is to condition yourself to become a saver. My $100-saving challenge will put you on that path.
Here is how it works:
- Compile a cash flow statement (actual figures) of all your entertainment expenses. These include shopping, clothing and takeouts. The only way to know the actual figures is by keeping all the receipts for an entire month.
- Choose one entertainment expense. If you choose shopping, and your monthly expense is $400, your goal will be to reduce it by $100 in the first month. Now, how can you be certain that you’re not going to spend that $100 or even more? You should allocate cash in envelopes or jars for each expense. Once the $300 runs out of the envelope/jar for shopping, you have nothing left to spend. To ensure that you save $100, you need to deposit the first $100 from your salary into a high-yield savings account.
- In the second month, you will reduce the shopping expense by another $100. That’s a total saving of $200 in the second month. The first $200 from your salary will go into a high-yield savings account.
- Keep reducing the expense and increasing the deposit by $100 until the shopping expense is zero and the monthly deposit is $400.
Takeouts
Takeouts is a major expense for many people. The average American spends about $500 monthly on takeouts, which I consider entertainment. You will do your health and savings a massive favour by buying healthy groceries.
In most cases, your takeout bill is likely to be double your groceries.
Let’s assume that you spend $500 on takeouts. In the first month, you’ll have to reduce the takeout bill by $200. By reducing takeouts, you have to replace those meals with groceries. Since we assumed that takeouts are double the price of groceries, by reducing takeouts with $200, your grocery bill will increase by $100. The difference between the two ($100) will go into a high-yield savings account.
In the second month, you’ll reduce the takeout bill by another $200, which is a total reduction of $400 in the second month. That will increase your grocery bill by another $100, so your groceries will be an additional $200 in the second month. The difference ($200) will go into your high-yield savings account.
Get the Best Results
Obviously, to get the best results, you should be living the minimalist lifestyle. But if you can’t do that yet, then reduce two or more entertainment expenses in one month. The more expenses you reduce in a month, the more you’ll deposit in the high-yield savings account.
Besides saving money, you will begin to condition yourself to become a saver by accepting this challenge. By eliminating your entertainment expenses, you will eventually begin to live the minimalist lifestyle.
After the entertainment expenses, you’ll wonder how you can reduce more expenses so that you have even more money. That’s when you’ll look at getting rid of the fancy car, which you don’t need, and the gadgets.
The fewer expenses you have, the more of your income remains in your account.
After doing this challenge for a year, you will have saved a few thousand dollars. That might not sound like much but keep in mind that most Americans don’t even have $1000 saved. They’re drowning in debt and living paycheck to paycheck.
Ideally, you should be living the minimalist lifestyle. But my $100-saving challenge is the least action you should take to improve your finances so that you get out of debt and build savings.
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