Hi guys! Welcome back to the channel.
This week I want to share something personal with you it’s very practical as well. I
want to talk about how to put together a budget to pay off your debt when you’re
in a very low income. I actually want to share Morten and my numbers with you
guys. Those numbers are not relevant to everybody I know that because I’m in
Scandinavia, so if you’re watching from anywhere in the rest of Europe or in the
States, the numbers might not make that much sense. But I want to talk about how
to categorize your spending as well so I hope that this video will make sense
and give you some ideas and encouragement on how to actually pay off
your debt when you have a low income Because it can feel like you have this
big hole in front of you and you’re trying to fill it with small little
pennies so I just want to share it with you guys and hope that you get some
ideas. The first category is housing. So you’re either paying rent or you’re
paying a mortgage. If you’re paying your mortgage then you might consider if
you’re in a really tough situation and you have a lot of debt and you can see
that your income will be pretty low for a long time then you might consider
selling that house and getting an apartment instead. Square footage is
really expensive, it’s one of the biggest categories always in a budget, so
anything you can do to cut this one down It might seem extreme to give up your
nice apartment and move to something smaller, but I guarantee you in the first
year or two you will have saved a lot of money and to be able to pay that off, the
debt, will just really make a big impact So I’m not telling you to run out and
sell your house I’m just telling you to consider what for your options. When Morten and I were paying off our debts we actually managed to get our rent down to
only 150 dollars and that is extremely low and we know that but that was
because we chose to actually take in some friends that live with us so we
kind of rented out a few rooms to these friends and we did that for three years
until we paid off the rest of our debt. So we gave up privacy – and this is not for
everyone – but this is what we chose to do to make it go faster. So for us it was
worth the trade-off of privacy it might not be for you but you might have other
options so just really take a good hard look at what your options are and you’re
going to probably have to sacrifice something The next category that is usually pretty high as well it’s food and household
items. So it’s general groceries and everything you get in a grocery store, so
toilet paper cleaning supplies and all that kind of stuff. This particular
category is something that Morten and I have really struggled with over the
years. We always tend to spend more on food than we plan for so this is one
area where we’ve always had to really restrain ourselves and be extremely
disciplined. A few things that you can do to help your money go further in this
category is of course to make things yourself So cook at home, cook your meals yourself even the lunch and the breakfast ones. Bake your own bread. Some people even make like their own deodorant and
shampoo and stuff and you can go crazy in this area and there’s really a lot of
stuff that you can do and can make yourself. One thing that’s really
important here is to not shop when you’re hungry. If you go to this grocery
store when you’re hungry you’re always going to end up with extra things so eat
before you go to the grocery store! Our budget for this was $375 and
this is extremely low for Denmark I don’t know where you are in the world
and grocery bills might be very different from what they are here, but
here it’s more normal to be around the $440 mark. So just try to really get that category, the budget, the number, get it as low as possible obviously you have to eat properly and get all your nutrition and
stuff like that, but really try to be creative in this area. The third category is transportation Most of you guys might have car, some
people don’t. We didn’t have a car when we were paying off our debt actually.
We have really good public transportation and bike lanes and Denmark are
incredible so it’s really easy in Denmark to save on this bill. If we did
have to go somewhere further away we have to take the trains and ticket
prices are kind of expensive and renting a car can also be pretty costly. But it
was just a good way for us to stay flexible and keep our monthly bill down.
Another option is to maybe sell your car Consider it. Sell your car if you really
need a car then you might be able to take some of that money and buy an older
car with cash, and then use that difference that you get out of selling
your car to pay off your debt faster it really goes a long way whatever money
you can rack up to put towards debt really makes a big difference. Our budget
for transportation was $120 a month. The fourth category is a tricky
one, because this is where a lot of the “wants” are hidden, not necessarily the
“needs”. So this is the lifestyle category It includes date nights, it includes
pocket money. If you have that if you’re a couple. It includes your phone bill, your
TV, netflix, any kind of subscription like that. Clothes, everything. And our monthly
budget for this was $300 This might not sound like a very fun
plan but you do have a lot of options to cut costs in this category. You can get
rid of your cable, you can quit your subscription to Netflix maybe HBO
whatever other subscriptions you might have, it could be the magazines and stuff.
You can go to friends houses and watch or you can watch some of the movies that
you’ve already purchased during the years. You also have the option of
actually talking to your friends! Might be shocking. You can read a book, one
of the ones you already have on your shelf or you can go to the library,
that doesn’t cost anything either. So there are options for entertainment, even
though you might be without your cable for a while. And also keep in mind you
can always start up your Netflix or HBO again later when you have a little bit
more money every month. So maybe just think of it as something you do without
for a few months, six months, or a year maybe two years, and then you know that
you’ll join them again. And then it might not seem so bad. I highly recommend that you guys use the pocket money method when you’re doing this if you’re a
couple, because this really gives you kind of a little bit of freedom and
wiggle room to decide for yourself what you’re doing. Morten likes to go out and
have a beer or two with his friends. He like to go to the movies he likes
doing things that are fun like that. For me, I might meet with my friends at a
home more, but I tend to spend more money on clothes and this would just give us a
little bit of flexibility so that if I chose to save up my money for two to
three months to get a really nice pair of shoes or a new jacket or something in
a better quality which is what I generally prefer then I would be able to
do that without him being like: “Are you sure you want to spend that much on a
jacket?” For me it was more like: “Are you going out with your friends again?” And it was just really easy to get in constant conflict with each other and really
start nagging each other. So pocket money –
it might sound a little juvenile but it works. For us pocket money it has to cover both clothes, having fun
with friends, going to the movies, buying a cup of coffee – like pretty much
anything that I would go out and do on my own, had to be covered by my pocket money We had $45 a month and that is
not a lot in Denmark you can’t really get a cop coffee for less than eight
dollars. A simple meal at a cafe would be around $18 and a cheap pair of pants
would be $45 or around there. So $45 a month was very low but we did it and I
think we only kept it like that for six seven, eight months maybe, and then we put
a little extra in there. This category also includes date money. We would use
these to go out to have fun as a couple together or maybe on a double date.
But when you’re doing something like this it can be kind of tough in the long run so
you need a little bit of a budget to have fun as a couple and do things together. But it’s still super easy to do it cheap So you might rent a movie you
could go to a hot dog stand and just go for a walk and talk to each other You could pack a picnic at home and buy your groceries or cook something and
just bring it to the park bring it somewhere with a great view; it’s a lot
cheaper and it’s really a lot of fun! A lot of places, some museums, they tend to
have like one free night a month or something like that so you might also be
able to find something like that! You could also look for deals, just keep in
mind that if you look for deals on something specific then it shouldn’t
make you spend more than what your budget for that thing originally was. So
if it makes you spend more then it’s not a good deal. So stay away from doing that.
Phone plans are in this category as well and just go as cheap as possible. Try to
choose the plan that you don’t where you don’t call much you don’t send a lot of
images and video chats and all that stuff. I don’t know what your options are
where you’re at but just really try to keep this low as possible. This fifth category is miscellaneous.
So the one thing that is completely sure is that something is going to come up,
and you just don’t know what it is. We budgeted $60 every month
for this and we always liked having it there. Putting even just a small number
aside every month will just give you a little bit of a cushion so it doesn’t throw
you off and you can regain your strength really fast and stay on your budget. Category
number six would be to have a budget account. We put $165 each month in a
budget account and this is the cover insurance, dentist, presents for birthdays
and Christmas. You know they’re coming and they come around every year so plan
for them so it doesn’t become stressful What we do is we set a yearly budget for
presents and then we divide that up by 12 and then we set aside that amount every month. Of course it’s important this way that when you have to go out
and buy the presents that you stick to the budget that you’ve already decided
at the beginning of the year because if you overspend on every single little
present then your budget won’t stick of course so stick to the budget that you set. If your insurance goes up then you of course have to go back with the budget
and just accordingly Our seventh category which we paid 10% to our church
every month So put it on here if you guys see that it is possible that even though you have a very low income it’s possible to prioritize giving that 10% One of the last categories is to save up the teeny-tiny little bit every month to
put in an emergency account just to put a little bit wiggle room between you and
whatever might happen We didn’t do this but I would really recommend that you do it even if you can save up $20 a month it really goes a long way for giving you
peace of mind that if something happens then you’ll have at least some money
saved up to put towards that. You might have car trouble, you might have a medical
thing you never know and I really wish that we had done this so I’m passing on
the advice to you The last part is to pay off your debt and try to increase
your income if at all possible We made minimum payments on everything and that
was $1,200 a month Then we took whatever extra we made and
put towards the smallest debt this is a really good idea because when you pay
off the smallest debt then you gain momentum faster. Because when you’ve paid
it off, it’s a small amount, you’ll likely be able to pay it off pretty fast Then once you’ve paid that off you attack the second smallest and then you ask that
amount on top and then that will start to go faster and then you can just start
chipping away really fast as you go along Since we finished paying off our
debt I heard about Dave Ramsey and he actually calls his concept a “The Debt
Snowball” and we did it kind of on our own without knowing about him or his
ideas but I really encourage you guys to check him out because he has a lot of
wisdom in this area when it comes to finances It’s a really good way to do it
because then what every time you pay off a small debt then you get this victory
and it gives you kind of a positive boost of energy to keep going and
pushing through and then you really want to get to the next one and it keep you
kind of competitive with yourself Maybe it’s better if you’re a competitive
person, I don’t know, I am! That’s it guys, that’s everything I wanted to share with
you I hope this video isn’t too long but there’s a lot to say about budgeting and
getting out debt in general. So if you have any more ideas leave them down in
the comments for people to watch I’ll try to link in the cards and in the
description to anything that might be relevant to this! If you want me to do
more videos like this please let me know downstairs in the comments! Like it,
share this video if you want to and we’ll see you guys next time,
bye! you