In general, when I share reader questions, I try to keep them as broad as possible. I get a lot of requests for advice about specific situations, but I try to steer those to the Get Rich Slowly discussion forum. I like for the questions on the blog to be relevant to a lot of readers.

Here’s a small exception. Christine wrote for help with her specific circumstances. She’s a twenty-something student overwhelmed by her finances. Her concerns are representative of many e-mails I receive.

I am an avid reader of your blog and have been trying to follow your advice but can’t get any of it to stick to my personal situation.

I am twenty-four years old, working a full-time job earning around $33K annually and attending college part-time a couple evenings a week. I’m single, no kids or roommates. My main problem is my fixed expenses are just too high and I cannot dump them anytime in the future.

  • My rent is $595/month (including all utilities & internet).
  • My car payment is $200/month and insurance costs me another $220/month (the cheapest I could find).
  • My cell phone is $100/month.
  • I pay an additional $200 in debt payments to my grandfather for a loan for school.

I’m enslaved to contracts for each one of those fixed expenses. I am barely making ends meet currently, and have taken drastic steps to save money, but I never have enough to last till payday. Furthermore, I graduate college next year and have taken out a few student loans, which will have to be repaid.

Because I don’t have time for another part-time job between working 9-5 and going to school in the evening, I’ve been exploring alternative methods of increasing income (babysitting, etsy, selling unused things). While these afford me minor relief, they are few and far between and I cannot really rely on them. I’ve also been avidly using coupons, which helps, but I honestly don’t buy that much of anything to make a difference.

A lot of the advice I read on saving money involves economies of scale and planning fun nights at home. What do you do when that doesn’t apply? How can I manage to have a fulfilling twenty-something life  while managing my finances? I am lost, please help.

Christine is experience the pain of pinched cash flow — her expenses are too high and her income is too low. (Going back to Monday’s discussion of the balanced money formula, Christine’s needs are too high, cramping the other aspects of her financial life.)

In David Copperfield, Mr. Micawber astutely describes the thin line between joy and despair: “Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

When I was in debt and living paycheck-to-paycheck, I was perpetually $50 or $100 behind. It felt like I was drowning. But once I managed to lift my income over my expenses, even by just a small amount, I felt like I could breathe again. I believe that this is what Christine needs to do, too. But how?

  • When her contract is up, Christine should ditch the cell phone. Find a cheaper alternative. If possible, live without a telephone at all. That’s $100/month in savings right there. (From my own experience, $100/month can be huge.)
  • Depending on her relationship with her grandfather, Christine could ask if he’s willing to temporarily accept reduced payments: $100 or $150 per month.
  • Though I don’t know her circumstances, $220/month for car insurance seems astronomical. She should shop around again, but she should also look at her current coverage to see if there are ways to cut costs. (Here are 10 expert tips for saving on car insurance.)

These steps (and others like them) will increase Christine’s cash flow, which should make a huge difference. However, it’s important for her to maintain any surplus she generates, and not just to sink it into other expenses. Christine is locked into contracts, and it may be a while before she’s able to improve her cash flow significantly, but I believe this is where she needs to start.

Do you have any advice for Christine? Do you have any suggestions for her current situation? Any general recommendations for twenty-somethings who might find themselves in similar circumstances? How did you cope with these sorts of problems when you were just getting started in life?

Update: Christine added a comment answering a few questions, including additional expenses. Your encouragement has already helped her drop her insurance to $116/month! Also, I’ve marked a couple great comments in the thread. I especially like this comment from Jonathan.

This article is about Ask the Readers, Basics, Budgeting, Choices, Real-Life  Thursday, 30th October 2008 (by J.D. Roth)