Hack My Budget: How Can I Trim $500 From My Monthly Spending?

Lanada

Williams only has $1,000 saved for a down payment on a house.

Think about how much sooner you might be able to accomplish those big financial goals you've been dreaming about—buying a new car, saving up enough for a down payment on a house or finally finishing that home improvement project—if you could just find another, say, $500 to spare in your budget each month.

We know what you're probably thinking: That sounds great in theory—but it's practically impossible to achieve. Well, that's exactly what 33-year-old psychotherapist and Ph.D. candidate Lanada Williams is striving to do.

Williams wants to save up to buy a house in Washington, D.C., to share with her partner and 6-year-old son. But the country's capitol tends to be an expensive place to live, so she's finding it difficult to put away enough every month to reach her goal.

Fortunately, even the best-built budgets typically have room for some improvement. A tip? Learn to pinpoint those improvable spots and then make small adjustments that don't feel disruptive. "No one starts training for a marathon by running 26 miles," explains David Blaylock, CFP® with LearnVest Planning Services. "So you need to set a goal you can work toward over time."

To prove it may be possible to free up extra cash on a tight budget, we asked Williams to share her monthly expenses with us, so Blaylock could help retool her priorities in order to work on saving more for the house of her dreams.

What Williams Has to Say About Her Monthly Budget ...

My main financial goal is to become a homeowner as soon as possible. My partner and I are renting a house right now, but nothing compares to owning. That's the American dream—to have a sense of permanence and stability.

We have $1,000 put away so far, and I'd like to buy a house in the $300,000 to $500,000 range. This means that I probably need to save $60,000 to $100,000 for a 20% down payment, so I know I have a long way to go. And I don't have an emergency fund, which I feel guilty about.

RELATED: Buying a House: How Much Can You Afford? 

  • Mary

    What type of account is best for saving/growing a $115,000 house down payment? I’m in the same situation, living in DC and hoping to save enough for a down payment on a house in the next few years. A savings or money-market account earning 1% doesn’t seem like the best choice, but an investment account seems too risky, especially with a near-term goal.

  • flours

    So, if I do the math correctly…at $500/month…she should have her down payment in just over 16 years? If she needs $100,000 that is…add in the closing costs & that is another two years…I’m all about having 20% down, but maybe this is not a realistic area or salary to buy that amount of house…I also think taking a look at our goals to help us focus and visualize what we want is a great idea…but so is beling realistic and honest about how much house we can afford

    • Jane

      I totally agree! Be realistic!

  • Sam

    Capital*

  • MP

    I understand this scenario may only be an example, but trying to build up to 100k with just $600 savings/month seems like not enough. At this rate, it would take 13 years to build up to 100k. even if $600/paycheck, 26 week pay period, that would still take 6 years. Accounting the potential of home prices to increase, this scenario seems to be unattainable.

  • Jamie

    I agree with the other commenters.This is pretty weak advice from the financial adviser. At this rate, she won’t be able to save a house by the time her kid graduates from high school. If she’s serious about it, she needs major contributions by her partner and a serious reevaluation of her expenses. $600 a month is pretty absurd for a car. Buy a beater in cash(it is the city, after all…no one cares what you drive), use the Metro, and definitely get rid of cable at the very least. Is $1,800 her rent alone or does she split that with her partner? I don’t see how they’ll make it to this goal in a reasonable time period without 2 salaries. My husband and I want to buy a home in the DC area in a few years and we throw down $2,000 towards that goal every month. Otherwise, better rely on FHA loans…

  • samoore

    Really? Almost a Phd with 40K of debt and only $1000 saved up. There is much more needed here in order to have financial success then thinking about a car payment. I would never advise someone to even think about home ownership until there was 0 debt (no student loan), and at least 5% going into retirement along with the 20% down payment. The focus should be on the lifestyle change here and not so much where to pinch pennies.

  • parker

    This picture is incomplete. E.g., What is her salary, post-tax? Do the expenses reflect her expenses or the household expenses? If household, what is the combined, household income? A rough tally suggests she spends over $5000 a month. Wow. I wish her luck meeting her goals.

  • Paula

    Lanada is doing well in areas such as utilities and car insurance. I have a few suggestions for cutting her budget but I am not a financial adviser (smile).

    I don’t think there should be a credit card category since she pays off her balance in full every month and the expenses she is charging on the card such fall into other expense categories say eating out. So I think that’s double counting.

    She can definitely cut down on beauty, clothes and kid expenses. She can choose clothes that are classic pieces which can be worn year after year. For kids clothes (and this can work for her as well), buy at the end of a season when there is a clearance sale. For her child, she can buy a couple sizes bigger so her kid can use next year. Consolidate eating out and entertainment into one category and reduce the expenditure here. How about going out once a week? Use coupons when eating out as most chains have them. Lanada can also use coupons to shop (if time permits) and her money can go further when shopping sales eg some grocery stores have buy one get one free sales. Miscellaneous expenses can also be cut. She can decide what household purchases are necessary. Lanada can let her family and friends know she is saving for a home and give them cards and small tokens when gift giving. $150 on a cell phone seems like a lot of money. All carriers are competing for our business. There are $50 unlimited plans with most carriers and better yet some add more discounts when you add a line or use autopay.

    It’s sometimes hard to get out of a car payment since people usually owe more than the car is worth. Downsizing may cost money upfront in the case of selling the car outright. If she trades in the car, her upside down balance will be transferred to the new car payment and everything might just
    even out.

    As another post said it’s hard to determine from the article if some of these expenses are shared with her partner so the suggestions given here would be limited.

    All in all there is room for her to save more money. She can do it. Best of luck Lanada :)

    • Paula

      typo sorry…” the expenses she is charging on the card SHOULD fall into other expense categories say eating out…”

  • gg

    I was hoping to learn something new……but it’s not in this article.

  • Sam

    Really? This is your advice? Can you please come up with some new advice? All of your “Slash Your Budget” articles say the same thing. Wow Thanks.

  • Coltsneck

    Granted that home ownership is the American dream, but on that salary and budget she is at risk that it will turn into the American nightmare. I think she needs to lower her expectations for a while. How about considering a condo for a lot less than $300,000 to $500,000. She will be able to come up with the down payment a lot sooner and then stay in it for a few years. Hopefully, it will appreciate and then, when the kitty is fatter, she can sell the condo and use the proceeds (hopefully there will be proceeds, but you do have to account for the chunk of money – 5% to 6% – taken by the real estate broker) as a down payment on a house.

    Also, since when do people go out looking for houses with that kind of range. If anything, you might hear ‘between $250,000 and $300,000′, not ‘$300,000 to $500,000′.

    To Mary: I agree – an annual earning of 1% (if you can get it) is unrealistic with regard to savings growth. The best you can do if you stay out of the stock market is to look at principal preservation – i.e., focus on not having value of your savings diminished by inflation. Credit Unions may be a better avenue to explore than savings accounts at banks.

    Also, if she has a PhD it is likely that she will get a job in academia which does not pay very well. So it is unlikely that she will have a robust increase in income (as compared to say an MBA with an entry level job for a private corporation). Overall, the advice given to this person really sucks and is very unrealistic.

    Finally, she should try to remember that it’s people who make the home, not a house. Take a conservative approach, cutback some spending, save as much as you can, and don’t obsess over not having a house yet. The time will come!