Nathan and I are not what you would consider professionals when it comes finance. We don't have a huge bank account or play the stock market, but we do live comfortably. Through smart money management we have achieved a lot on very little.
I had an acquaintance comment to me once that we must be in heavy debt to be able to have all that we do. While we do have a mortgage, our monthly payment (taxes and insurance included) is only 22% of our monthly income. Experts suggest anywhere from 25% to 35%. Our vehicles are paid off and we have what I call a three month savings account. A three month savings account means that we have saved up enough money that we could live off it for at least three months.
Our methods for saving and managing money are so simple that anyone, on any income level can do it. Since the main issue that keeps people from realizing their homesteading dreams is money, I thought that I would share what has worked for us. What better way to kick off this mini-series than to address the mother-of-financial-issues... saving.
Whether you're saving for a rainy day, for college, or for that dream homestead, saving is what keeps us out from under monster piles of debt. If you have an emergency fund, you don't have to put that new water heater on a credit card. Your down payment for a house can get you a better interest rate and significantly lower your monthly payment. While most everyone can agree that saving money is important, the methods of saving vary.
Our number one savings method is so simple yet so effective. On our W-4 forms we claim either 0 or 1 allowances. Some of you may be saying "But that's just giving the government an interest-free loan". Maybe so, but it means a larger return come tax time. Try as we may, we simply have trouble putting money into savings on a monthly basis. Somethings always comes up and it's spent elsewhere. By getting a large chunk annually we can use some of it for expensive projects that we put on hold (new tires, fencing, etc.), some into an IRA, and the rest goes into savings. We are able to add about $5000 every year this way.
Another way we save money, is by not taking money out of savings. It's incredibly tempting to take out a hundred here or fifty there but don't do it! Instead of taking away from savings we find other ways to pay for what we need. I go in and substitute at the school or Nathan does construction odd jobs. While these don't make a lot of money, it keeps us from taking from savings.
Occasionally at the end of the month we have enough left over that I just transfer it into savings and hope that the next paycheck comes fast. Somehow we make it. While we do have months that make me nervous, thanks to food storage and free fire wood I don't have to worry about going cold or hungry. God is good and He provides.
What are some ways that you save money?
Next Friday's Money Management - The No-Budget Approach