Saving Money
08.20.24
We talk a lot about saving money. Like, a lot. It’s on our website, on our socials, on our app. It’s what every reviewer talks about, every publication, every person that recommends TextNow to a friend or family member. That’s because we believe wholeheartedly that saving money shouldn’t be reserved for those that “can” or the ones that are super disciplined – it’s something that should be as easy as not paying for a service that you shouldn’t be paying for in the first place. Phone service is an essential service in today’s day and age, and you shouldn’t be paying upwards of $100 per month for it.
But your money saving journey doesn’t have to end there. We work closely with personal finance and budgeting experts and we’ve been taking notes so that we can build our own guide on how to budget, just for you. With the start of the new year, there is no better time to learn budgeting basics, make a budgeting plan, and save money.
Step 1: List out your expenses
Let’s start at the basics: keeping track of your money. Before you start tinkering with forecasts and prices, let’s first figure out how much you’re actually spending every month.
These numbers will fluctuate month by month as different expenses add up, so it’s best to look back at a 6-month period to get an average number you feel comfortable with using.
TextNow Tip: To make your budgeting easier, split up your expenses into “fixed,” “fluctuating,” and “is it necessary?” categories. Let us explain:
A fixed expense would be one that cannot change or be avoided – this would include recurring bills like rent/mortgage, utilities, insurance, internet, phone, metro pass, car, etc.
A fluctuating expense would be an expense that also can't be avoided, but changes in its total amount month over month. So things like groceries, toiletries (toilet paper, toothpaste, etc.), gas.
A is it necessary expense is an expense that can be completely eradicated without making any significant changes to your quality of life. This would include streaming subscriptions (can you do with 1 vs 3, or with a free ad-supported one vs a paid one), takeout/coffee, clothing, shoes, etc.
Don’t get overwhelmed by the numbers! At this stage, all we are doing is just listing out all the monthly expenses, without any other adjustment or planning.
Step 2: Write down your earnings/monthly income
The logical next step would be to list your income – the money coming in every month. If your job is salaried or you work guaranteed hours, this is an easy step. If that is not the case, then take the same steps listed previously to take an average of your last 6 months to get your baseline.
Step 3: Run a monthly income/expense analysis
Now comes the part you’ve probably been dreading – figuring out how much of the money you’re bringing in is going out every month. But don’t fear! Whatever that final number is doesn’t have to be scary – it’s a temporary number that we will help you improve so that you can feel good about your finances and start building some savings in the new year!
An easy way to do this math is to let a spreadsheet do it for you, like this sample budget we built:
There are a lot of budget templates out there, some free, some paid, but you don’t need anything fancy to figure out how much you’re saving (or losing) every month. You can do the work with a free Google account and 30 minutes of your time. Use this simplified template we put together for an easy start and add/remove the expenses that actually apply.
*Disclaimer: the numbers listed are examples, please fill them with the actual numbers from your monthly statements.
Step 4. Calculate if you’re running net positive, neutral, or net negative monthly
The analysis you complete in step 3 will do this for you automatically, especially if you’re using the sample budget we provided, but this is a crucial step to starting your budget plan. Before you can move forward to any of the other steps, it’s important that you know whether you’re ending your months with extra money in your account, with no extra money (but also no debt), or if you are in fact going into debt from credit card or loan purchases.
Step 5. Set your budget goals
You probably went into this whole endeavor with some goals already in mind, and this is the time to get clear about what you’re trying to accomplish. There are two possible budgeting goals: Pay off debt, and grow your savings.
How to pay off debt
If your goal is to pay off debt, whether it’s an existing lump sum (like a student or car loan), or a rolling monthly credit card debt, then here are a few tips that will help you pay off your debt efficiently:
Look at your monthly expenses and find the lines that can be either completely removed or significantly reduced. For example, cut your takeout expense by half by committing to weekly meal plans, cancel your paid streaming subscriptions for free ones, reduce your groceries bills by couponing and shopping at value stores instead.
TextNow Tip: Even though they’re categorized as “fixed,” those expenses can also be reduced. Shop for cheaper internet plans, schedule laundry and the dishwasher during off-peak hours, and remove your phone bill altogether. Get the TextNow SIM card for a one-time payment of $4.99 to get access to free data for essential apps like maps, email, and rideshare, and of course – unlimited calling & texting – on the nation’s largest 5G network.
Particularly, if your debt stems from the “unnecessary” expenses, consider committing to a no-buy year, or break it up into no-buy months for something more feasible that will still get you immediate results.
If your debt is mostly on credit card(s), look into consolidating it somewhere with a lower interest rate, so you cut the amount you have to pay back in total. This can include a bank loan with a lower interest rate, a debt management plan administered by a credit counseling agency, or even a credit card balance transfer (eg. If there is a credit card company offering an introductory 0% APR for X months rate, and you’re confident you can pay off your balance within that timeframe, you can sign up with them and transfer your existing balance over to pay off.)
How to save money
If you are starting off with zero debt, or can pay it off in a relatively short period of time and would like to plan ahead to the savings part, here are our tips for saving money with your new budget:
Set a savings goal. It can be a lump sum – saving $10,000 by the end of the year – or a monthly goal – being able to put away $1,000 every month – or a sinking fund goal. Whatever it is, it’s important to first know exactly what you’re trying to do so that you can plan to do it.
Calculate whether your current monthly disposable income amount supports your goal. If it does, you don’t need to tinker with your budget (unless you want to increase your savings goal) and can move on to step 3. If it doesn’t, follow the first 2 steps from the “how to pay off debt” instructions above to find the areas in the budget that you can reduce to support your savings goal.
Put your saved money to work. Letting your money sit in your account is wasteful and negatively impacts your overall savings goals! At the very least, open up a high interest savings account and keep your money there. But you should also consider investment options like a 401K account or a general investment account. There are plenty of safe investment options like ETFs that will grow at a comfortable pace without too much risk! Contact your bank or other trusted institutions for assistance and advice, sit back and watch your money grow!
STOP! Paying for phone service
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Step 6. Set Spending Limits!
Now that you have a clear picture of your monthly expenses and how much you can save/pay off every month, it’s time to set yourself up for success and stay accountable.
Within the categories you created, set monthly (can be split into daily/weekly if you’d like) limits, so that you don’t end up overspending on your budget. For example, if your goal is to cut your takeout expense so you have more money left over at the end of the month, set a specific spending limit for that category, so it’s not an arbitrary “spend less” but a real number that you can keep track of and stay within.
TextNow Tip: A lot of banking and credit card institutions will actually allow you to set spending “alerts” for your account, so that you would get a notification (if you have your banking app installed) and/or emails when you’re close to the limit you set, or over it. We highly encourage you to set these up so that you don’t have to stress about doing the math in your head all the time and can be better supported to meet your monthly budget.
Step 7. Save money!
Once you complete the steps above, this final step will just happen without you having to think too much about it! Let your budget do the work for you, and watch your savings pile up!
