We’re told to save roughly 20% of our income to ensure a comfortable retirement. But on average, people save closer to 5% of their income. (source)
There have been times in my life when saving anything felt impossible. Frankly, I was going deeper into debt every month.
How are you supposed to save money when you’re barely able to pay the bills?
In fact, 64% of Americans live paycheck to paycheck, not being able to save money due to high bills. (source). With rising inflation, this problem is getting worse every month… That’s a huge problem because saving money during inflation is important.
Today, I’m going to tell you how I personally got out of this situation, and try to give you tools and practical tips to do the same.
Here’s the short answer:
To save money despite bills you need to cut down on your biggest expenses and/or make more money. This is best done by cutting down on housing and transportation, and asking for a raise or starting an online business.
Alright, let’s get into the more detailed and nuanced discussion on how to save money despite having high bills.
Warning: I love math, so you’ll have to excuse me if I throw some numbers at you…
Why You Can’t Save Money Because Of Bills:
To solve any problem, we first need to figure out why it exists. Let’s begin by getting down to the fundamentals of personal finance:
Every month you have money coming in, and you have money going out, income and expenses. Let’s call the money coming in, income, “X” and the money going out, expenses, for “Y”.
Let’s call the amount you’re left with at the end of each month, your leftover cash (or added debt), for “Z”.
So, every month can be expressed in this equation: X – Y = Z. This reads: “Income minus expenses equals leftover money”.
You cannot save money because Y is as big (or bigger) than X. Meaning your expenses are as big or bigger than your income.
Two solutions to this problem are Increase X (income) or decrease Y (expenses). Both of these solutions will result in a bigger Z (leftover money).
You probably already knew this, but it’s easier to talk about when expressed in this simple and precise way.
Suggested reading: Yes, You Can Live On $2,000 A Month! Here’s How & Where
Now, let’s look at some strategies to achieve both of these solutions:
Decrease Your Expenses to Save Money Despite High Bills:
On average, people earning $100K a year have thousands left every month after taxes and expenses (read this article to see how much), making investing and saving easy.
My guess is that you don’t earn $100K a year (me neither…), but maybe one day, right? Meanwhile, you need to cut your expenses!
It’s often easier to cut down on Y than it is to increase X. It also has an immediate effect: Increasing income takes much longer than cutting down on expenses.
Now, the thing most people tell you is to cut down on the small luxuries like Netflix, Spotify, Coffee, etc. That’s not what you should do.
Cutting down on small luxuries doesn’t work because changing the small things makes a small difference!
What you need to do is to change “the big stuff”. The big stuff is what makes the big difference!
According to The U.S. Bureau of Labor Statistics, this is the spending habits of an average U.S Citizen:
| Category | Percentage of Monthly Expenses: |
|---|---|
| Housing | 34.9% |
| Transportation | 16% |
| Eating | 12% |
| Personal Insurance and Pensions | 11.8% |
The expenses mentioned in the table above are the most significant contributors to your high Y (expenses). Notice how “Netflix” isn’t on that list?
What you need to do, if you want to make a significant change to your X – Y = Z equation, is to change to four expenses in the table above.
Changing the big stuff makes a big difference!
Unfortunately, those things kind of suck to change. They are a significant part of our lives and are often hard to cut down on.
However, if you’re in a financial hole, you have no choice…
Suggested reading: Is Saving $100 Per Month Good? (Worth it in the long run?)
What I Personally did to lower my monthly expenses by almost 40%:
I was in your situation financially, but I’ve never been in your social, family, or work situation. Therefore, I can not tell you what to do, but only what I did:
I did ONE thing that cut my expenses by almost 40%: Moved into a smaller apartment closer to work.
This resulted in two things: Lower rent and living within walking/biking distance to my job.
The lower rent made a huge dent in my biggest expense, housing.
Being within walking/biking distance to my job almost eliminated my transportation costs.
I made a huge dent in the two biggest expenses simultaneously, which made all the difference for me.
I still subscribed to Netflix, Spotify, and all the other stuff. I still ate the same way. I still worked out at the gym. I still bought the same clothes. I still did the social stuff I used to do. But I could now save money at the end of every month!
I am convinced that you can continue to enjoy lives many luxuries, while simultaneously being able to save money despite your bills. You just have to make a few changes and adjustments on the big stuff like housing and transportation!
In summary:
To save money despite your bills, you need to cut down on the big monthly expenses like housing and transportation. This will result in a lasting, significant improvement in your finances.
Increase Your Income to Save Money Despite High Bills:
The other way to increase Z (leftover money) is to make X bigger than Y – Increase your income!
This one is way more fun than cutting down on Y, and is often more significant and long-lasting (if you do it right).
There are many ways to make more money, and I’m sure you’ve already looked for ways to do it. There are numerous “top 10 ways to earn more money” lists online. But as you’ve already figured out, most of it is pure BS.
Do you really want to sit for hours every day and answer surveys? Or juggle 9 different “cash-back” apps to save a few bucks here and there?
No. You should not waste your life on that stuff…
As with the expenses thing, I can only tell you what I’ve personally done, and not what you should do. However, I know a lot of people who have “made it” the same way as I have:
Create a website like this one! (Easier than you think)
I used to hate my job. Every day was a fight between me and my instincts to “stop showing up”. Of course, I couldn’t “stop showing up”, because I needed the money. I tried a bunch of different things, but nothing worked. So, I finally came over the business idea that resulted in this website:
Create a simple website and write a bunch of articles answering questions people ask on google.
That’s it. It’s not more complicated than that. The fact that you’re reading this is proof that it works!
I know a lot, and love learning about, finance and investing. Therefore, that’s what I write about. However, you can write about almost anything.
Here’s what you need to do in order to “make it” in this business:
Brainstorm ideas of niches you know a little bit about, or you find really interesting. Create a website. Write 30-50 articles of roughly 1000 words or more answering questions people write in the google search bar. Put some ads on your site. That’s it!
If you do this right, and spend roughly 10-20 hours per week on it, you’ll likely earn anywhere from $250-$1000 every month within a year. And the best part of it is this: It is passive income!
After the articles are written, you just need to maintain the website, which takes roughly 1-2 hours per week. The articles bring in money whether you work or not.
This is the right way to think about this kind of business: You don’t work to get paid. You work to increase your pay.
If you’re seriously considering this, I would HIGHLY recommend checking out these YouTubers:
Income School (I would never have succeeded without this channel)
Jasper Pieterse (“Down to earth” guy who documents his journey in this kind of business)
Passive Income Unlocked (A team of people giving tips and tricks to “make it” in this business)
I am NOT affiliated with any of them, and I make no money if you check them out. I just like their content and want to share it.
These are the ones that showed me the way. They all have courses and such, but I never paid for any guidance. However, I kind of regret it as it would have made the journey much shorter and easier.
This is a great video by Income School, telling you basically everything you need to know:
How To Save A LOT Despite Having To Pay Bills:
We’ve now looked at the two separate solutions: Increasing X and decreasing Y. They both work, and will make it possible to save money despite the high bills.
But why not do both?
If you increase X and decrease Y at the same time, your Z is going to explode!
I did this. It is worth it. Trust me.
I moved into a smaller apartment closer to work and created this website by working 20 hours per week for a year. This resulted in decreasing my expenses by almost 40% and increasing my income by 40%.
Set yourself a savings goal and reach it with the above-mentioned strategy! Maybe you could save $1,000 a month? Or maybe even $1,500 a month?
Read this article for inspiration and tips: Yes, Saving $1,500 A Month Is Good! (and how to do it)
As a math-lover, I’m going to show you just how much this increased my Z:
The equation initially was as follows: X – Y = Z. Assuming you have no leftover money at the end of the month we put Z = 0.
Therefore the equation is X – Y = 0, which is the same as saying X = Y.
Now, after increasing income by 40% and decreasing expenses by 40%, due to the magic of algebra, we can do this:
1.4X – 0.6Y = Z
But since Y = X (since X – Y = Z) we can write:
1.4X – 0.6X = Z
Therefore:
0.8X = Z
In other words, after increasing my income by 40%, and decreasing my expenses by 40%, my leftover money at the end of the month was equal to 80% of my initial income!
To make this even more apparent and clear, I’ll use some numbers:
Initial monthly income: $2,000
Initial monthly expenses: $2,000
Initial leftover money: $0
Now, let’s make the changes:
Current Income: $2,800
Current expenses: $1,200
Current leftover money: $1,600 (which is 80% of the initial income of $2,000)
So there you have it, with a practical example and a mathematical proof. You can make a life-changing difference in your finances by increasing your income and decreasing your expenses.
Suggested reading: Is Saving $1000 Per Month Good? (Where You’ll Be In The Future)
Conclusion and Final Thoughts:
Your finances can be expressed by the basic equation X – Y = Z. Income minus expenses equals leftover money. Manipulating the X and the Y is what personal finance is all about.
You can either increase your income or decrease your expenses to save money despite bills. The most effective and immediate way to rescue your finances is to move into a smaller apartment closer to work, because cutting down on the big things is what makes a big difference.
To increase your income you can make a website like this one. It is the most realistic and best way, in my experience. The business model is simple, and there are good YouTubers and websites that will guide you through the process.
I wish you good luck in saving money and taking economic responsibility for yourself and your family. Thank you for reading!
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