4 ways downsizing saved my budget
Editor's Note: This is a guest post from Chelsea Baldwin at Broke Girl Gets Rich.
I never knew the first time I set off overseas with only one suitcase it would change my life.
OK, maybe I had an idea that it would kick off this insatiable urge for more travel to see more places, but what I mean is I didn’t expect it to really affect other areas of my life so positively… especially my finances. (After all, plane tickets to the other side of the world aren’t cheap.)
Traveling taught me some wonderful lessons in minimalism and how to live a full, everyday life with fewer possessions.
It also saved my budget.
With all the on-again, off-again travel I’ve done, I’ve taken on a lot of low-paid internships, rendering my yearly income for the years since my college graduation well below poverty level.
But, given that circumstance, I’m able to fund travel, I don’t have debt, I’ve got a decent emergency fund and I’m gearing up for 2015 to be a year of serious retirement-based investments.
I learned how to downsize, almost out of necessity at first, and my budget reaped the benefits.
1. I sold my car in exchange for a bicycle - and got a nice emergency fund in exchange
I realized I didn’t have any need to be holding onto a car that I hardly drove… especially since it was far easier, cheaper, and healthier for me to buy a $60 bicycle with a basket on the front to carry my things, a $10 helmet and a $5 lock. A whopping $75 for more than a year’s worth of transportation. (And I could get my tires refilled for free from a local shop!)
With the money I got for selling the car, I set up an emergency fund, which is now one of my most prized possessions. It brings me so much peace of mind to know that if a financial emergency comes up, I won’t have to scramble around for months or pay credit card interest because I can’t afford it in the moment.
I also don’t have to buy gas, pay for car insurance, or set money aside for those lovely car repairs that are inevitable with older vehicles—something that’s definitely made my lifestyle possible with such a low income.
2. I got a basic smartphone with a foreign SIM card—no fancy data plan
In the US, any kind of phone plan you get will cost you at least $65 per month—and that’s without roaming charges.
When I needed to “upgrade” my phone last year, I opted to buy an unlocked Samsung S Duos 2 for about $150. I was in India at the time, so I got a pre-paid Indian SIM card with a pay-as-you-go option for texts and calls, and a monthly rechargeable data plan that cost about $3 per month. Each month, I spent less than $5 - freeing up some nice space in my budget for groceries, savings, weekend travel trips, or whatever else I wanted to spend it on.
And thanks to apps that also run on wifi, I don’t need to buy a US-based SIM card and plan when I come back to visit - I can use apps like WhatsApp, Viber & Google Voice to take care of all the calling I need for free.
3. Cutting down on “stuff” that needs repaired
Repairs cost money.
And in the world of self-employment, any time that cuts into your daily work schedule to manage these repairs also costs you money.
Getting rid of things like an extra netbook computer, mp3 devices, my car, old jeans, excess kitchen utensils, and unused furniture means I no longer had to worry about keeping these things in good shape.
And because I had far fewer possessions, far fewer things were breaking on me. (The things I kept were higher quality too, further decreasing the rate of needed repairs—like keeping the MacBook & selling the Asus netbook, for example.)
Now I don’t lose working hours and I save cash that would have normally gone out the window.
4. Using money from sold items saved me in tight situations
I’ve already mentioned that I used the money from selling my car to set up an emergency fund, but selling items that were a little more expensive than I wanted to donate has helped me out more than a few times.
For example, one Christmas I cut back by selling a piano keyboard set and my netbook. I took that money to fund my budget for buying Christmas presents that year—so I never had to cut into my own finances where I didn’t have room.
Moving Forward: Recognizing that ‘things’ are a means to an end
This year, my income is much higher than it’s ever been, so the downsizing I maintain will be more for my mental sanity than financial reasons.
They key lesson I’ve learned from all this, which I will hold onto moving forward in the future, is that things are merely a means to an end, but life is an end in and of itself. Things are great when they help you move forward, but need to be eliminated when they start holding you back—financially or mentally.
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Broke Girl Gets Rich is a blog that chronicles the journey and lessons behind creating a life of financial stability and freedom. You can read more about it here.