Tips that can help others save money

Many people find it hard to start saving while they’re still carrying debt. It can feel overwhelming to think about building savings when money already feels tight. To illustrate how saving can be possible—even while paying down debt—I created a hypothetical person named Sally.

Sally’s story shows a realistic journey from financial stress to stability and long-term security. Her experience can serve as a guide for anyone looking to start saving while finding a path out of debt.

---

Sally Begins Her Journey

Sally starts by understanding exactly where her money is going. She creates a spending plan by breaking her expenses into clear categories and doing some simple calculations.

1. Monthly Bills

Sally reviews her bank statements to determine how much she spends each month on:

• Rent
• Utilities
• Cell phone
• Online subscriptions
• Other recurring bills

Her total monthly bills come to $2,400 per month.

---

2. Periodic Bills

These are expenses that don’t happen every month but still need to be planned for, including:

• Car tabs
• Auto insurance
• Car repairs and oil changes
• Medical bills (even with insurance)
• Vet bills for her aging dog
• Pet expenses
• An annual trip she enjoys taking

Sally totals these costs for the year and divides by 12. Her periodic expenses equal $600 per month.

---

3. Transportation Costs

Sally calculates her average gas spending by reviewing bank statements. Another option would be tracking gas purchases in a notebook, phone app, or budgeting app.

Her average transportation cost comes to $200 per month.

---

4. Debt Payments

Sally’s debts include:

• $100/month payment plan with the IRS for back taxes
• $600/month payment toward consolidated credit card debt through a Debt Management Plan

Her total monthly debt payments equal $700 per month.

---

5. Flexible Spending and Savings

Next, Sally subtracts her fixed expenses from her total monthly income to see what’s left for:

• Food
• Clothing
• Household essentials
• Non-essential spending
• Savings

---

A Reality Check

Here’s what Sally’s monthly expenses look like so far:

• Monthly bills: $2,400
• Periodic bills: $600
• Transportation: $200
• IRS payment: $100
• Debt Management Plan: $600

Total expenses: $3,900 per month

Sally’s net income after taxes and benefits is $3,500 per month.

At this point, her income doesn’t even cover her fixed expenses—and food and clothing aren’t included yet. Something has to change.

---

Increasing Income to Create Breathing Room

To solve this problem, Sally finds a roommate and charges $1,200 per month in rent.

This arrangement works well for both of them:

• The roommate gets affordable housing
• Sally increases her income without overworking herself

Sally’s new monthly income becomes:

$3,500 + $1,200 = $4,700 per month

Now the numbers finally work.

---

Creating Flexible Spending and Savings

With $4,700 in income and $3,900 in expenses, Sally now has:

$800 per month available

This $800 must cover:

• Food
• Cleaning supplies
• Clothing
• Haircuts
• Household items (toilet paper, batteries, etc.)
• Savings

---

Separating Flexible Spending

To stay on track, Sally decides to separate her flexible spending from her main account.

• She sets aside $600 per month for flexible spending
• She transfers this money into a separate checking account with its own debit card
• Before shopping, she checks the balance in this account to guide her spending

For larger or seasonal expenses—like holiday gifts—Sally picks up seasonal part-time work. Any income from that work goes directly into her flexible spending account.

---

Building Savings

The remaining $200 per month goes toward savings.

Sally leaves this money in her main checking account and lets it accumulate. Over time, this creates a cushion so that when unexpected expenses arise—like car repairs—she doesn’t have to rely on high-interest credit cards.

---

Sally in Three Years

Three years later:

• Sally has paid off her back taxes
• Her income has increased slightly
• Her expenses have decreased by about $300 per month
• She has saved $7,000

Her beloved dog has passed away, and she decides to wait before adopting another pet as she prepares for her next goal: homeownership.

Her credit score has improved significantly through the Debt Management Plan, and her debt-to-income ratio is strong. She begins working on next steps toward buying a home.

---

Sally in Five Years

Five years into her journey:

• Sally owns her home
• She has a child on the way
• She sets up a special savings account for her child
• She keeps savings set aside for future home repairs

Sally didn’t use all her savings to buy her home. She’s thoughtful, intentional, and flexible—adjusting income or expenses as needed.

---

Sally in Ten Years

Ten years later:

• Sally has built equity in her home
• Her mortgage payment is lower than comparable rent
• She prioritizes her mortgage above all other bills
• She ignores credit card offers and refinancing ads

Sally understands how hard it is to escape debt—and she has no desire to return to it. She has a stable home, strong savings, and a plan that works for her and her daughter.

---

We’re Here to Help You Start Saving

While we can’t predict the future, we can take steps today to create the future we want.

LSS Financial Counseling can help you:

• Build a customized spending and savings plan
• Eliminate debt
• Prepare for homeownership

📞 Call 888.577.2227 to schedule an appointment with one of our certified financial counselors or get started by creating a financial profile.. North Star Credit Union members have access to six free and confidential financial counseling sessions. Let them know that you are a member when you call.

Author Sarah Jannusch is a certified financial counselor with LSS Financial Counseling.