As a key account executive with food manufacturing giant Kellogg Co., Daron Pressley enjoyed a six-figure salary and an extravagant lifestyle. It was nothing for the twenty-something bachelor to spend $400 partying with friends at a local lounge in Washington, D.C., or to whisk off on a last-minute weekend trip to St. Maarten. Since he was easily bringing in more money than he was shelling out, “Spending wasn’t something I had to really be conscious of,†the now 30-year-old says.
That’s not to say money management wasn’t important to him. Having watched his divorced father struggle as a single parent to raise him and his two brothers, Pressley resolved to regularly set aside money for a rainy day. “My dad would always say, ‘Save your money,’†he recalls. Another lesson his father taught him: Avoid using credit cards. So while Pressley might have been impulsively spending up to a third of his salary, he had no debt and habitually saved about 30% of his paycheck.
But in 2009, Pressley reached a crossroads. “I was at a point where I was pretty successful, but I wasn’t doing what I was passionate about,†he says. After months of thinking about what his next chapter would be, Pressley, a former student athlete who had played basketball while at Virginia Military Institute, opened The Premier Athlete in 2010. Pressley had saved enough to handle his living expenses for about 13 months, so he left Kellogg and devoted his energies to his business full time. Through its training programs, the company prepares student athletes for professional success. He works one-on-one with the 70-member youth group of the Bright Side Baptist Church in Lancaster, Pennsylvania, using a renewable monthly contract, and charges up to $70 a month per student. He and his business partner, Jason Conley, go on-site twice a month to work with Bright Side’s middle and high school students and between visits keep in touch via e-mail and Skype. They are seeking to expand their client base by contracting schools and other organizations.
While his savings freed him from needing a paycheck for more than a year, Pressley knew that his money would go even further if he reduced his expenses. First he cut his living expenses, moving from a $2,000-per-month new condo in Bethesda, Maryland, to a $1,250-a-month apartment in Silver Spring. Then, he lowered his car payment from $700 per month to a little more than $300 a month (with a three-year financing term) by going from a Mercedes Benz CLS500 to an older and less expensive car.
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Instead of paying for cable TV, he spends $8 a month to get movies streamed to his computer via Netflix, and he watches free TV shows and movies online via Hulu.com. A sports junkie, Pressley watches live games on his smartphone with apps such as the CBS Sports mobile app, saving him about $500 a year, he says.
Another way Pressley has cut costs is by forgoing a landline telephone. Using Google Voice, he set up a business phone number that directs calls to his cell phone and allows him to make free domestic calls within the U.S. “I estimate an annual savings of at least $800 by using my cell phone or Google Voice to make personal and business calls,†he says. Altogether his expenses now total about $2,000 a month, down from more than $3,000. While his business is currently bringing in about $3,000 a month in revenues, the company has yet to break even, so Pressley is still living primarily on his savings. Initially he used some savings to cover startup costs, but now he invests his earnings back into the business.
For Pressley, living within his means is a lifetime commitment. He devised a 30-30-30-10 rule and says that even when his disposable income grows, 30% will go to savings, 30% will go to retirement, and 30% will be invested. Only 10% will be allotted to discretionary spending. “I’ve been finding creative ways to do things,†he says. “For example, free museums for entertainment, using the metro when gas is high, and maybe waiting for Restaurant Week before going to that expensive restaurant.†He’s also given up the last-minute trips and stopped frequenting nightclubs.
Pressley’s primary goal is to grow his business to the point that it not only supports his lifestyle, but thrives and eventually employs others. “Living within your means doesn’t mean you can’t have nice things,†he says. “It’s about using your money as a tool to get where you want to go.â€
HOW HE DID IT
- Align spending with priorities. Before you can find ways to cut spending, you need to know what you’re spending money on. Take a couple of weeks to track your expenses and “You’ll probably find that you’re spending money on things that aren’t even that important to you,†he says. For example, Pressley didn’t miss going out to nightclubs. Add remaining priorities in moderation to your budget. For example, if you value travel, save up for a trip you can drive to, or if you like socializing with friends, invite them over for a potluck dinner rather than eating out.
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-Â Consider alternative currency. Though Pressley had less money
to spend, he didn’t want to cut down on his charitable giving so he started doing more volunteering for local charities through HandsOn Greater DC Cares. “Your time is probably your most valuable resource,†he says. Exchanging one service for another is a way to get things you need without spending money, he says. Pressley bartered his marketing expertise to get some business services such as website development and video production, although he sees it more as an extension of networking than as bartering. Websites such as www.u-exchange.com and www.swapace.com can help you find people beyond your network who are looking to swap products and services.- Make use of technology. Look for Internet services and mobile phone apps that can reduce your monthly expenses. Pressley recommends services such as Netflix and Hulu.com to reduce your entertainment bill, while smartphone apps such as CBS Sports Mobile and WatchESPN can give sports enthusiasts on-the-go coverage. Instead of paying for the fastest Internet service, Pressley suggests using a less expensive plan and finding free public Wi-Fi hotspots at www.wififreespot.com.
- Adopt a goal-oriented mindset. Many people think that living within their means is a way of depriving themselves, but that’s not true, Pressley says. “It doesn’t mean you’re poor or broke.†It means you’re ensuring that your money is available for the things that matter most to you. Knowing that his spending and savings choices allow him to meet his obligations and invest time in his startup provides Pressley with the motivation he needs to give up some of his former luxuries. He suggests coming up with one or two financial goals that excite you so you can focus on them rather than on what you’re “giving up.â€Â