Savings categories growing way too slowly
I have two savings categories in my budget - Emergency fund and Income replacement. Even though I've been budgeting for a year I didn't use to take those categories too seriously. Then covid happened. Now I'm trying to grow EF and IR to at least €2000 each. But in the current situation I can't afford to allocate more than €50 to each category every month, and that's by allocating zero euro to clothes, books, laptop replacement or (and I feel very guilty about this) veterinary bills (kitty looks healthy! She'll be fine! Right? Right??).
I know this just a matter of time and I think I'm doing the right thing for myself, but I'd love to read from others who found themselves in my situation and were able to get out of it, however slowly.
(Also if something happened to my cat I'd definitely draw from the emergency fund so maybe I'm fooling myself by not funding a vet category? Any thoughts?)
When you can't fund something as you would like, either fund something less important at a lower level (possibly $0) or increase income. Those are your only long-term options.
Credit comes into play in the short term, possibly at a price, to bridge the gap to lower expenses or higher income in the future.
Budgeting is about what you do with what you have. It sounds like you're prioritising your spend and at the end of the day finding that you have nearly as much in the way of true expenses as you do income, if not more, with little left over for long term expenses.
Along with budgeting, focus on income. Nothing fixes a budget like a few extra bucks each month.
If there's room for growth in your career, prepare yourself to earn a promotion or pay increase. Look at job postings and see what's out there you might like to do, and pay attention to the requirements. If you're just getting started, these are a cheat sheet you can use to prioritise your skills development. Build a plan to keep growing your income year over year.
These may not be the easiest times but increasing income is still the way to go. By preparing now, you'll be ready when opportunity appears later.
As for my own story, I worked in the restaurant industry after college during the recession and ended up there for far longer than I planned. I didn't budget then, but I knew I was spending more than I was earning and racking up credit card debt without being able to pay it back. It felt like I'd never get ahead in life. Eventually though an opportunity appeared and I was ready to jump at it.
I finally made it out and now earn several times over what I did back then, but only recently managed to pay off my credit card debt. You can do it too, just focus on your career with every spare moment you can.
I think it's a great idea to make an emergency fund and/or income replacement fund. However, don't do it at the cost of filling your true expenses because those will eventually happen, and you'll either raid your emergency fund or go into debt trying to pay them. It sounds like vet bills might be a true expense?
Honestly 50 euros a month seems like really good progress to me! You can 1) do this slowly and consistently—a great method— or 2) quickly, by depriving yourself of things temporarily. I started out slow with my emergency fund but sped it up a little during lockdown by not going out, borrowing house supplies, eating leftovers, and not taking cars for a while. A few months later, I've gone back to eating out and buying house supplies, but I'm still funding my e-fund slowly by declining to buy new clothes, skipping haircuts, and only reading books from the library. Only you can know what works for you. A little progress, regularly, is good progress.