Budgeting Case Study for Saving Up

Budgeting might feel like a punishment to some, but in reality it is a tool to help lay out steps to achieve financial confidence and independence. Here is an example of how I helped a client’s son use a budget to lay out his spending and build up a cash safety net.

Jared is a young professional who graduated college, got his first “real” job, and was ready to take on the world. He made enough money to cover his core needs, but felt frustrated that he seemed to run low on money towards the end of each month and was anxious about when his next paycheck would arrive.

We met to review his cash flows and build out a budget. The goal was to build a cash reserve of $5,000 for a safety net/rainy day fund.

The easy answer would be “find a cheaper place to live”, but that was unrealistic because he had just started a lease and was already living with a roommate to share expenses. So, instead we looked at more directly actionable ideas. Here are four specific areas of change that helped him reach that cash reserve goal within about a year:

Eating out/Going out: Jared thought he was spending ~$400/month, but we found it was closer to $550 /month. He set a goal of $400/month and phased himself down to that total over about 6 months, then was able to stay there ongoing. Total saved over 12 months: $1,500

Streaming services/internet: Jared and his roommate found they had 4 redundant services and could also save money by bundling their cell phone and home internet service. These changes saved Jared about $100/month. Total saved over 12 months: $1,200

Memberships: Jared held a gym membership, climbing wall membership, and a social club membership. He used the climbing wall maybe once a month, the social membership here and there, and the gym multiple times weekly. He just kept the gym and cut out the other two. Total saved over 12 months: $1,800

Clothes/shoes: we all obviously need clothes, but Jared was making “impulse buys” several times a year for expensive shoes or a fancy shirt he would then rarely wear. Cutting out those buys saved $300/quarter, or $1,200/year

So how did this all play out? Jared was able to accumulate over $5,000 in a cash

reserve within 12 months by making simple cuts that did not involve finding a new

apartment, selling his car, changing his loan payments, or reducing his retirement plan

savings.

This is the true value of budgeting: lay out all of your inflows and outflows, see where the money goes, then take actions that are measured without being drastic. Eating out and going out a bit less might feel hard at first, but Jared still sees friends and is hardly a hermit. The shared household streaming was cutting waste, and they still have access to the exact same programming- they just don’t pay for it twice. The memberships were drastically underutilized, so that did not have a major impact on his daily life. And the clothing/shoes were recurring impulse buys that added up fast with little benefit.

Jared is still saving for the future, still covering his recurring cost obligations, still living an active and social life, and has now built up a cash reserve that is there for emergencies and/or opportunities. Budgeting has simplified his financial life and built up his confidence!

We cover budgeting tips and tricks like these in our Money Skills workshops. Check out the website at www.moneyskillswa.com for more information and enrollment details.