This is a guest post from Laura. Laura is an engineering student from Vancouver, B.C. She can usually be found in an electronics lab or under a pile of yarn. Sometimes both.
My parents supported me all through university. But when I moved from Vancouver to Prince George eight months ago to start a co-op position, I was (temporarily) cut off and had my first real taste of financial independence. (Note to all American readers: a co-op is like an internship, except they have to pay you.)
I was dealing with a much larger income than I had ever had before, but I also had financial responsibilities that I wasn't used to, such as buying groceries and paying rent. Since I'm not the sort of person who likes diving into things without a plan, I turned to the world of personal finance to figure out what I'm supposed to do with all my money.
I found a lot of helpful advice, but the bulk of what I read wasn't working for me. I'm in a unique situation: I don't have any debt, I don't currently have a car, and my rent in Prince George is about half what it normally costs in Vancouver. If I followed the usual advice of saving 10% of my net income, I would have a huge amount of spending money left over, but it would be an artificially inflated amount.
I felt I could either use my time in Prince George as an opportunity to get used to a lifestyle that I wouldn't be able to afford once I moved back to my beloved but grossly overpriced hometown, or I could build up my savings. (My super-frugal dad will be proud to know that I picked the latter.)
I decided to shoot for saving 50% of my net income because it was:
- A large enough amount that I would have to be mindful of my spending and exercise self-restraint on occasion
- A small enough amount that I wouldn't have to subsist on rice and ketchup
- An impressive sounding number
So far it's been a success — I'm proud to say that next week I'll have deposited $10,000 into my savings account. I feel like I've come a long way in the past eight months. I now know that I am capable of taking care of myself and managing my finances responsibly. And I have come up with a strategy that works for me, one that I hope is general enough to help others who are just starting out.
How to do The 50% Saving Project:
- Know your priorities and be prepared to make sacrifices for them.
I had to trim down my coffee/budget (again) to make room for a new pair of running shoes which I bought at a local sports store. “Not destroying my knees” and “buying local” are both fairly high priorities for me, so I felt the purchase was justifiable as long as I trimmed the fat from the rest of my budget.
- Challenge yourself, but don't compete with other people.
I walk and bike to get around town (see lack of car). I play soccer, and I'm a long distance runner. Consequently I need to eat around 3,000 calories per day, and since I try to eat relatively healthily, this gets pretty expensive. When my roommate mentioned he spends $200 per month on food (?!?!), my attempt to out-frugal him resulted in me being hungry, tired, and irritable. On the flip side, fussing over the fact that I don't dress as well as my friend that makes 50% more than I do hasn't added any days to my life. Your budget is for you, so design your budget based on your income, your goals, and your life.
- Get some hobbies.
If you're fresh out of school, you won't be drowning in homework anymore. This will free up a lot of time, so try to fill it with something affordable. Bonus points if you find something productive that gives you a sense of accomplishment. Personally, I like taking on weekend coding projects, crocheting, reading, writing, and running. Paper, shoes, and yarn aren't free, but they are infrequent purchases and I can get hours of entertainment and self-improvement out of them. When you're saving money, you don't want to feel like you're trapped by your budget. Find something that challenges you that you can get excited about, and let it enrich your life.
I may not be able to save the same amount once I go home, but I will be able to follow these guidelines and manage my money effectively. Budgets may not be one size fits all, but good habits are universal.
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