FEATURE //
How I Saved $10,000 in 10 Months (at an Entry Level Job)
by Derek Johanson
Over the course of 10 months, I was able to save $10,000, working an entry level job, in one of the most expensive cities in the U.S. – Los Angeles. I saved over half of my measly $2,400 monthly income despite the inflated costs of living. Now I’m traveling the world, starting my own businesses, and generally loving life.
I don’t say this to brag (entirely), but to remind everyone that anything is possible if you focus enough energy towards your goals. Here’s I how I did it.
#1: I Tracked Every Expense
I saved my receipts and entered them into a spreadsheet at the end of every day. You’d be amazed how quickly the little untracked expenses add up – coffee, gum, etc. If you record your spending you’ll naturally be a little smarter with it.
Here are what my expenses from January ‘08 looked like (rounded up to the nearest $):
- Rent: $485
- Utilities (gas/electric/water): $35
- Cable: $15
- Bus/Gas/Transportation: $53
- Food/Vitamins/Supplements: $265
- Eating Out: $41
- House Items/Toiletries: $11
- Entertainment/Beer/Gifts: $230
- Education/Business: $70
Total: $1,165
*Note: I didn’t have a cellphone bill because I was still on my parent’s plan.
Clever Budgeting © Jeff Keen
#2: I Opened a High Yield Savings Account & Paid Myself First
I had a set amount of money deposited directly from my paycheck into a high yield savings account. This way I didn’t have the chance to spend it. A high yield savings account is better than a regular savings account because I accrued interest.
#3: I Saved on Rent & Utilities
The more people you live with, the cheaper the rent and utilities are going to be. My bill was split between five guys. 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.
Privacy was hardly ever an issue for me and my roomies. Whenever my girlfriend and I ‘needed the room’, I just asked and it was ours for a bit.
I don’t, however, recommend sharing a room with a complete stranger. You could get a psycho – I know from experience. Screen potential roommates carefully.
#4: I Saved on Food
I was eating 5-6 times a day and a lot of healthy foods at each meal. I also bought an expensive protein supplement from Biotest. Yet, I still spent less money on my grocery bills than most people I know. These strategies worked for me:
I bagged my lunch to work.
People hear this all the time but hardly anyone actually does it. My co-workers would routinely eat out and spend $7-8 for their lunch-time meal. I spent just over that for an entire day’s worth of food.
I had a meal plan.
I made a meal plan for the whole week and bought all my food at once. My roommates would often end up at the grocery store every other day because they didn’t want to buy a week’s worth of food at a time. What they failed to see is that they were actually spending more because when they didn’t have food in the house, they’d end up at a fast food joint spending about 1/7 of my weekly bill for one, awful, greasy meal.
I followed the deals.
For healthy, cheap food I went to Trader Joe’s. It kicks the competition’s butt on a lot of products. A dozen cage free eggs is only $2.50!
Go to farmer’s markets on the weekend and stock up. Buy in bulk from Costco. There are cheap places for high quality food in every city. You just have to know where to look.
I ate out sparingly.
Eating out is great. It’s fun and delicious. But it’s also expensive. I usually end up ordering a drink or two so it gets out of control very easily. Instead of going out, I tried cooking nicer meals for my girlfriend at the house. I’m not a good cook (yet) but I tried and I think she appreciated the effort.
Daily Commute, Istanbul © Kıvanç
#5: I Saved Huge On the Commute
Try public transportation – it’s not as bad as you think. I rode the bus in LA for ten months with no real incidents to speak of. Unless you count getting made fun of for wearing a tie.
I had no car so I saved on all types of expenses – oil, insurance, and the other hidden costs. When I needed to borrow a car, I did, and I paid my roommates for my share of the gas. But, because I didn’t have my own car, I felt the need to drive places less. Obviously, if I didn’t live with friends, it might have been a problem, but that’s where good roommate decision making comes in to play.
#6: I Saved On Entertainment
Everyone’s idea of entertainment differs so you might have to get creative. Rent movies and split the $5 rental fee with a friend, or go to discount theaters. They often have movies that are just out of theaters. Avoid the hype and necessity to see a movie as soon as it’s released.
Some of my best nights in LA were spent with a cheap bottle of wine watching classic movies with my friends in a discount theater near my house.
There are times when you need to cut loose. Because I was spending so frugally on other things, I decided to splurge and spend a lot of cash on my friend’s birthday in January. The extra cash for sushi and drinks was well worth the fun.
#7: I Read Personal Finance & Travel Blogs Daily
Saving was difficult so I had to keep myself motivated. I made sure I read at least one personal finance article (usually something at GetRichSlowly.org) and one travel blog a day (Vagabondish.com anyone?). It helped me stay on track and stay focused on my travel goal.
Conclusion
The bottom line is: I didn’t spend my money on stupid things! As long as you follow that rule you’ll be fine. If it does you no good in the future, don’t buy it. Everything is an investment.
Yes, I may have forgone some immediate pleasures and comforts, but now I’m in a position that few people ever will be. I was able take an entire year off to make my dreams come true.
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About the Author
Derek loves doing things that people think are more dangerous than they actually are: bungee jumping, traveling to Colombia, and talking to strangers. "He's the real deal. His blog is an experiment in micro testing his philosophy (Live Uncomfortably) and creating his personal lifestyle design" - Jet Set Life.tv
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April 28th, 2009
I agree mate. That’s the problem with people in developed countries: they make good money and feel the need to spend it! I was living cheap like that all throughout college. Then I moved to China and I still do it, and because of this I can travel often and enjoy myself!
Check out my travels at
http://www.worldresolution.net/travel
April 28th, 2009
One of the best blog posts I have read in a while. Very useful information!
That is an astounding amount of money to save in that amount of time. Great job.
April 28th, 2009
I saved like you did and traveled for a year as well. It was amazing, but to be honest, life was boring until I left to travel.
April 29th, 2009
This is all good advice, but you lost me a little at “my measly $2,400 monthly income”… That’s after taxes, I assume? Not really a low-end entry-level salary for your basic office job.
April 29th, 2009
Good advice there, did pretty much the same thing before my trip. As I only had 5 months to save up I worked two jobs and voila, $10 000 in 5 months
It’s possible!
April 29th, 2009
My wife and I live on about $1,300 a month (and that includes $100 invested) as college students.
I only wish that we made more so that we could be saving for more adventures. We take not-frequent-enough backpacking trips to the nearby national park, hit up the discount theater, and only rent movies from RedBox ($1 rentals, as we only keep it a day).
No TV or internet helps keep expenses low. We access the internet on campus for free, and the two shows that we do watch we can see the next day online for free (via the company websites, so it’s legit too).
I’m currently working on ways to increase my income, and those increases will be applied directly to savings. I’ve got more traveling to do!
April 29th, 2009
Hey everyone,
Thanks for the comments.
The $2,400 was before taxes. I was making $15 an hour. In Los Angeles, that’s bottom of the barrel.
I was able to save like this and still live a good, fun, life. It just takes getting rid of the some of the un-necessaries.
(If you visit my blog for the first time today – haha. I have a pretty atypical post up)
May 5th, 2009
Well, congratulations for your determination! You will be an inspiration for many, i think! It is not really easy to control your account but when it is about travelling, it is possible!
May 5th, 2009
$41 for eating out? I couldn’t do it ! It’s great that you saved 10k !
May 6th, 2009
Well done, glad to see that you’ve got your priorities right, this will certainly give you a lot more happy memories to look back on that a life time of eating out at lunch time.
Good luck with all your travel plans!
May 8th, 2009
i am currently in a situation extremely similar to the author and I’ve been doing all the things he mentioned: he is completely correct. I’ve been steadily increasing my saving account balance by the steps mentioned above. I’m almost up to the $5,000 mark and spending the fall in Asia. I am 21 years old
May 22nd, 2009
These numbers do not add up. So you made $15/hr and you saved $1000 a month for 10 months correct?
So $1000+$1,165(your expenses) = $2,165 a month you had to bring in, atleast. So you only paid $235 in taxes each month?
According to PayCycle.coms calculator you would only be brining home around $1844 a month after taxes. There calculator may not be to the dollar, but I believe you were taking home much less than the $2200 your calculations say you needed.
May 23rd, 2009
He may have worked additional hours ( more than 40 a week ).
May 25th, 2009
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May 26th, 2009
I’ve always known how to live on the cheap, but to be honest, whenever I can afford it (even if it means cutting back on some other spending) I really prefer to eat out.
I think it’s worth it to go out with your colleuges and friends and buy lunch, even the majority of the week. It helps cultivate social … ties, stuff like that. And it’s tastier. Ofcourse If I was low on cash I would have no problem living on the cheap for a couple months, but home made sandwiches often just aren’t as damn tasty as some really good food someone else prepares for you.
And no internet? F that noise. I mean, I won’t pay for cable (netflix instant, hulu, torrrents, etc).
May 30th, 2009
You also don’t know what his W-4 form looks like – single, married, head of household, 0 exemption, 1 exemption, 2 exemptions, etc. or the frequency of his pay periods. Because this was not a full 12 months, there could be an additional one or two pay periods. I ran several calculations at PaycheckCity.com and depending on his specific information, it would be possible to save $1000 + $1165 in expenses every month for 2009. I didn’t bother looking at previous years, but tax calculations change every year.
May 31st, 2009
We (family of 3) are living off of $12,000 a year right now. I’m starting work this month (with a new degree) and should be able to make 5 times that. I hope that we continue to live as frugally as we are now, just so we can put the rest into savings.
June 2nd, 2009
I didn’t realize some people were questioning my calculations. Thanks for concern.
I was in fact working overtime hours. Plus, some months I spent less than others. For the 10 months total it averaged out to $1,000 a month.
I hope that clears it up.
June 3rd, 2009
your numbers don’t make sense to me. Where in the US can you live and pay only $35/month for all utilities? In my area the electric company charges a minimum of $20 just to give active service, even if you don’t turn anything on. Your food costs are less than $10 a day, which makes me wonder if you were eating real food or just surviving on ramen noodles and spaghetti-os. You forgot the one thing that can make or break someone: medical expenses. Even with insurance your co-pays, prescription drugs, and not-covered expenses could wipe out your entire monthly salary. If you got injured in the US, you’d not only go broke trying to pay the medical bills, your low-wage job probably wouldn’t give you any paid sick time. You’d be behind on the rent, late fees would pile up, and you’d be living in your car the moment they release you from the hospital.
My point is that minimum wage is not living wage. If we’re going to financially plan to help the average American, we should address some of the common reasons people end up in a downward financial spiral.
Thanks for the great ideas otherwise.
June 4th, 2009
Utilities – I lived 4 other guys and we split the bill.
I ate 5-6 healthy meals a day and it’s extremely possible for under $10. Trader Joe’s in CA was my best friend.
12 eggs = $2.50.
Bag of chicken breasts = $6.
Cheap veggies and especially bananas.
I also supplemented with high quality protein from Biotest = $0.50 for a scoop of protein with 22 grams of protein.
Medical Expenses – I had excellent medical coverage.
I disagree on your last point. The whole point of the article is that I was able to live on a low salary and save for travel because I got control of my spending and was smart about saving.
June 9th, 2009
[...] yet another example of how someone can significantly grow their net worth if they’re willing to control their spendin…. There are the [...]
June 9th, 2009
Forget about what the last person commented on.
I stumbled on your post and I love it!!!
I live in new york and we make about the same amount of money a month. I live at home and don’t pay rent so I save a lot from there. But of course where one thing lacks you make up for it elsewhere. I love to eat out and thats where my extra cash goes.
So, im using your method in hopes of having 10G’s when im ready to buy my condo next year.
I think you did a great job of explaining and making it realistic for everyone to do.
People end up in downward financial spirals because they live outside of there means!!
June 9th, 2009
[...] home rather than eating out so much? Could you save a tidy $10,000 in 10 months on a $2,400 salary? This guy [...]
June 10th, 2009
I just found this post linked from an FMF blog. I am currently saving for a house and I am now even more geeked up to save after reading your blog! Especially considering your healthy eating. That is what usually makes up the most of my costs – protein supps, egg whites, organic produce, etc. Most people show savings by eating cheap (but unhealthy)and I just can’t relate because I won’t sacrifice my shape for money. Anyway, thanks for the inspiration!
June 12th, 2009
Right on Lizzy.
Just make sure to cook your own food as much as possible. Also, if you have a Costco near you take advantage of it. Natural peanut butter, fish oil, almonds, and even produce, is super cheap in bulk.
June 18th, 2009
thank for the tips. I’ve know this is what I needed to do for a while now, but you really put into persepective.
I just got back from a month long trip to India, and it wasn’t enough. I want to buy a house in the next few years, and travel more. Thanks agian!
-Amber
June 30th, 2009
I’m living on the cheap in Malaysia, after a year in the Philippines and years of austerity in Florida. I’ve been thrifty, frugal and cost-conscious and haven’t bought everything that Madison Avenue wants us to buy. No Mustang GT, X-box, jewelry, alcohol, tobacco,… trendy blue jeans, etcetera. i haven’t bought 200 albums and DVD movies per year and gone to movie theaters dozens of time per year. My ‘weakness,’ my entertainment budget,was spent on magazines (news, photography, aviation and cars). a dozen subscriptions and buying off shelves. And I traded trucks and cars every few years, though. I hate all mass-transit!
August 8th, 2009
For those nit picking the figures mentioned in this post, they are the ones who will never have the ambition to move on anyway. I know tons of people always making up excuses why they don’t move or travel.
Derek’s whole point of the article was loud and clear to those of us who do actually make thing happen in our lives. The bottom line is, no matter what your income/expenses, saving for a move or a trip IS possible if you get your priorities straight and make the necessary calculations to achieve what you want in the end.
August 8th, 2009
^ So true! It’s really an inspiring article. I didn’t mean to sound negative in my other comment either. I don’t have the self control to only spend $41 on eating out because that IS my spending weakness. I make up for it in other ways though:
I have a roomate instead of living alone in my townhome ( which I bought via short sales and got a hell of deal on ).
I don’t buy a ton of new clothes.
I don’t buy other misc. crap.
I drive a cheap car that is almost paid off.
^ Those little things add up to decent savings!
October 26th, 2009
Good advice! I saved a little over $2,000 in six weeks this summer to fund a last-minute cross-country road trip, so I know it can be done! It just takes willpower to give up the luxuries we’re all used to spending money on. Once you’re used to “going without”, it doesn’t seem so bad, and there are lots of crafty ways to be entertained and well fed on a very small budget.
I also highly recommend wesabe.com to track where your expenses are going. When you see how much you actually spend on dining out, going to bars, and seeing movies and concerts, it’s much easier to cut it out of your budget!
October 26th, 2009
True for some, I am a graduate my income is 1090€ and rent alone 524€ (crappy apartment). Public transit, meals to work the hole shabang and I save all I can. it doesn’t amount to much and sometimes it doesn’t amount to anything. It really depends on where you live to start with and what you do for a living.
October 26th, 2009
oh wow those are some cheap utilities. while I don’t pay rent, the other stuff really add up:
– internet/phone : $150 (land line, cell for me and hubby plus internet)
– food: $200 a month for 2
– utilities add up to $100 or so a month
and yes, I’m in Europe.
We don’t even own a car and we walk everywhere…
It’s virtually impossible to save anything when you own a house and don’t share expenses.
October 26th, 2009
I hear it so often that people can’t even afford to go on holiday for 3 or 4 weeks let alone have the money for a long term adventure. I would also advise people to go and get a part time job, that will bring in some extra cash.
I think the high yield interest bank account is a waste of time, in one year you aren’t going to make enough to buy a second rate burger from McDonalds.
I however feel that sometimes people should explore there own country a lot more before they go travelling to far flung places. More often than not home offers a lot more and can be just as exciting, if you just open your eyes.
Or perhaps when so called travellers go abroad, they should maybe think about staying in the same city or place for more than just a few days, I don’t see the point of that. I know so they can brag to all their family and friends that they have been to a particular place. They are in fact what I call speed tourists, who are all following the same old boring path, instead of daring to venture forth with their own eyes and imagination.
October 27th, 2009
GREAT! You just inspired me to get on my saving..I moved to Korea to try and control my spending. I really need to focus. Thanks for the inspiration!
October 27th, 2009
This was an excellent blog, well worth the read. Congrats on your experiment, but how will you spend your money? Will you invest, buy a new car, pay loans, ect.?
October 29th, 2009
I really enjoyed the “public transport isn’t as bad as you’d think” part. It’s something I never really think about, because here in Switzerland we have a ticket to travel the whole country for 300$ per month (until age 25 it was 900$ per year!). So me and all my friends have always been without a car and would probably never buy one in the near future… I do most things on this list to quickly get rid of my student loan and to finance some long term travel, hopefully soon. This blog entry helps keep me motivated and focused, good stuff!
October 29th, 2009
[...] It’s not as hard you might think to save a lot of money quickly and go on a trip like this – read my article about saving money on Vagabondish.com. [...]
October 30th, 2009
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November 17th, 2009
Good article! Especially just spending money on useful things and not silly stuff is THE way to go. But i think it´s also important not to limit yourself too much; even if you havent got alot of money it helps to spend some money on entertaiment/things you really like. Lifts the motivation!