How to Save $10k in 10 Months While Making a Low Wage in an Expensive City

I get all sorts of "I can't save that much" comments quite often here. That's why I post examples of how people have gotten rich (or at least well off) despite the fact that they didn't/don't earn very much money. The key? Spending less than they earned. And if they can do it, so can others (including you, Mr. Excuse-opotamus.)

Here's yet another example of how someone can significantly grow their net worth if they're willing to control their spending. There are the details:

• He saved $10k in 10 months.
• His monthly pay was $2,400 (I'm assuming this was take-home pay)
• He lived in LA, a very expensive market

Here are the steps he took to do this:

#1: I Tracked Every Expense
#2: I Opened a High Yield Savings Account & Paid Myself First
#3: I Saved on Rent & Utilities
#4: I Saved on Food (I bagged my lunch to work, I had a meal plan, I followed the deals, I ate out sparingly.)
#5: I Saved Huge On the Commute
#6: I Saved On Entertainment
#7: I Read Personal Finance & Travel Blogs Daily

So, what's the "secret" to his success? He controlled his spending. He did all he could do to create the biggest gap possible between his earnings and his spending. Note that he didn't earn any more money -- he just cut expenses to generate the largest amount of savings possible.

But he had to make sacrifices. It wasn't easy. But he had a goal and the discipline to make it happen. Good for him.

I can hear the nay-sayers already -- "how do you know this is true?" I don't. How do you know it's not true? besides, it doesn't really matter, the point is that if you can create a big gap between your earnings and your spending, you can save a ton of money and dramatically grow your net worth.

How can you do this? For some specifics, see these posts:

• 11 Great Ways to Earn More Money

• The 10 Most-Hated Money Saving Tips

• A Simple Example of Why Spending Less than You Earn Works

• And Yet Another Millionaire Says the Same Thing

• How to Have a High Net Worth

• More Thoughts on How to Have a High Net Worth

• How to Make Money and Save Money

Comments

[m]

FMF, have you been reading Wayne Dyer's Excuses Begone??

[Sarah]

I'm not saying that his experience has no useful lessons for others. He should be especially commended for embracing public transit in LA, where it's not so fabulous. But for $485/mo. he must not only have had many roommates, but been living in a bad apartment in a cruddy part of town (5 roommates with shared rooms indicates a 3 bedroom at less than $3000/mo.). For women especially, this can be a bad idea. Trading safety for money is no bargain.

(I'm not one of the people who are hysterical and/or snobs about this. I live in a neighborhood which is notorious for being unsafe, but which I find to be fine, if a little uninspiring. But I don't think I'd live in South Central to save on rent.)

Also, I wouldn't consider a six-friends-in-three-bedrooms apartment to be a stable living situation--that is, I think he'd find it hard to do long-term. With that many people, you're going to have high turnover, which equals high drama and potential financial issues. So, useful idea for someone trying to build an emergency fund on the entry-level salary, but not so useful for someone looking for long-term solutions.

[Tim]

If you read the list of comments associated with the article the author indicates that $2,400 was his pay before taxes.

[Angie]

Anyone could cut out that much per month if they were miserable for 10 months just to look forward to a year off.

I see this as completely unsustainable, which takes away a lot of its value.

[Danielle]

OK I save $1000+ a month and it is completely sustainable. Plus, I go out once a week and take vacations 2x a year. I'm saving for a home.
My take home pay (after 403b contributions and taxes) is $2600 per month.
I get paid 2x a month and simply have $500 direct deposited into my online savings account before I even see it. I live on what gets deposited into my checking account. It's not hard to live below your means and save your money. I think it's just easier to tell yourself you cant, or find a reason why it wouldn't work for you etc.
I didn't think I could do this. I was living just below my means, and saving only $300 a month. Then I decided to try putting $500 per paycheck away... and guess what... IT WORKED!
I don't use my credit cards, that helps.

[Angie]

Yes, but 2600/month after taxes is a lot different then 2,400/month before taxes.... That's a 600/month difference right there!

[lurker carl]

The difference between $2600/month after taxes and $2400/month before taxes is in the payroll withholds, if they use Uncle Sam as a Christmas Club account.

[Danielle]

The posting says it's take-home pay. Not pre-tax.

[Danielle]

Oh, I read the comments in the vagabondish article, I see now that it was pre-tax.

[gia]

An adult living in a room with a stranger seems like a crummy way to live. I felt a bit nauseous when I read, "Whenever my girlfriend and I ‘needed the room’, I just asked and it was ours for a bit."

I could be overreacting, but I agree with the other posters, this experience is not inspiring or sustainable.

[Danielle]

I think focusing on this person's specific details and then negating the value is kinda the wrong way to look at this article.
I think the point is to see that people in any situation can make it happen. Push your savings to the limit instead of making excuses (under the guise of "reasons")for why you can't save XXX amount a month.

[gia]

^^ I guess I should clarify my previous statement.

It is his living situation that got to me. Particularly this statement, "Consider sharing a room instead of keeping the single. There’s no shame in having a roommate these days, especially with the ridiculous costs of housing." I disagree with is. An adult sharing a room under those conditions is shameful.

I live in NYC and do all of the other things that he mentioned. I agree with all of his points except that one. I was so turned off by it, I missed the purpose of his entire post.