How to save money when you are young, dumb and broke

Advice from my own abrupt wake up call

While I was in the middle of the financial hurricane, the only that I could think about was trying to figure out what was the cause and what was the effect: am I broke because I am young, or because I am dumb? Or because of both?

Well, I have never managed to reach any conclusion, but I’ve decided to believe that being dumb was the worst part of it. That if I smarted out, the pile of late bills on my desk would disappear and that I could sleep without having nightmares for a change.

But the truth is that I was living chaotically, and yet hadn’t realized how bad my situation was. I was just laying on my couch waiting for a miracle to happen, that someone would knock at my door with a big fat bag full of money for me.

Unfortunately, someone did knock at my door one day, but it was my landlord instead. He said that his patience had run out and that I would be kindly invited to leave the place by the end of the month if I didn’t show up with the last three months rent.

And it was the perspective of becoming homeless in 30 days that sent me back to reality.

But, believe me or not, I managed to raise the money that I needed in such a short period. And here is how I did it.

Step 1 – The Reality Shock Check

After a couple of panic attacks and visits to the nearest pub, I realized that I didn’t have the luxury to freak out. That going back to my landlord and saying that I was only 23 and had a college to pay wouldn’t make any difference at that stage – plus, I had used this excuse before and this is how I managed to get away with being late for three months.

So I started reading online tips about how to pay off your debts, and I found out that the first thing that I had to do was to check my financial situation with a magnifying glass.

I put all my bills together, along with my bank statement, and my pay slip from a part-time job I was doing for a local pub, and started to write down my debits and credits. And I found out that:

  • The interest rates that I was going to pay for late bills were outrageous, from electricity to credit cards.
  • I was spending a fortune eating out
  • I was spending another fortune in the pub
  • I was living beyond my means
  • My bank fees were absurdly high
  • There was an inexplicable difference between the money that I withdrew to the total amount of my expenses

– in other words, I was spending money on things that I had no idea what they were.

Yes, that was a scary and highly childish moment (why is college so expensive???), but I had no time left to make excuses or feel sorry for myself.

And part of me was glad that I had paid enough attention to all those boring accounting classes in school and that now I could understand what my problem was.

Step 2 – Begging for help

OK, my ultimate goal was to save some money so I could start a life when I would finally leave university. But there was no way for me to do it without stopping being broke first.

But the problem is that my debt was so high and that the countdown was ticking so loudly that I couldn’t even think straight. And expecting for a loan from a bank with my credit history and embarrassing pay slip was hopeless.

So I accepted the fact that I had to beg for money to whoever I could ask. I got my contacts list and started calling people that I thought could be sympathetic to my cause. I prepared myself to hear several ‘no’s and to give a lot of explanations about how I had got myself into such a problem and how come I was asking for money without giving any guarantees about when I would pay it back. But I had to do it anyway.

Unfortunately, from family and friends, I could only raise money enough to pay two months of my rent. One was missing. So I went to my landlord and paid him those two months straight away, so to see a better face in the corridor, and to give me a bit of extra motivation.

Step 3 – Getting my act together

As I said, I still had a lot more debt to pay, so I decided to start putting into practice a few more tactics so to get out off this situation:

  • I sold everything that I had that wasn’t essential for me to live and that could be worth any cent
  • I cut all non-essential costs, pubs and Netflix included
  • I started running on the streets instead of paying for the gym
  • I became a fan of free events and things to do in town, coupons, and discounts.
  • I started cooking instead of eating out
  • I downloaded a daily expenses app, so to check where my money was going to (yes, it was vanishing in the form of candies, beer, and soft drinks)
  • I changed my account to another bank with more attractive student fees
  • I started tutoring kids so to get an extra income I considered as a priority to pay the debts that came with an interest rate
  • I cancelled my extra credit cards, keeping only one just for emergencies
  • I organized a realistic payment plan so to give back the money I borrowed from my family and friends.

Final Step – The payback

After doing all these things regularly, I managed to start paying my bills on time after six months. Yes, it was a struggle in the beginning as I had to make dramatical changes to my lifestyle.

But after six months, I was very adjusted to it and very proud of opening my first saving account. There is a long more way to go, but I am happy to say that I am still young, but not dumb or broke anymore. I even stopped nagging about why university isn’t free. And so can you, just by being prepared to follow the same steps as I did.

Georgia Tech