Since my last two posts were long and wordy, I’m going to attempt a short and sweet post today about budgeting. Like all discussions about money, this is not a one size fits all kind of post. This is a skeletal break down of how I have been budgeting my regular income since my first real job out of college. I’ve been able to adapt it to every level of income bracket I’ve found myself in and I totally foresee myself using this one day when i’m married and running a house with two incomes.
First and foremost… I give away 10% of my income to my church in what is commonly known as tithe. I have a personal conviction on why I feel it necessary to tithe, but that’s a topic for a future post. For this post chew on this: according to the World Bank, 2.8 billion people live on less than $2 a day. A movie ticket to my local movie theater costs $10.50. That means that five people from the poorest nations could live one day off of the price for one movie theater ticket. By American standards you and I may not be considered wealthy, but by worldly standards we are. Which is why I encourage everyone to give away 10% of your income to some/any organization that helps others. If you are curious as to how rich you really are click here.
20% of my income is then placed into savings. To keep myself from spending that money I have my employer deposit it directly into a Money Market Savings account. Why a Money Market? They offer a higher interest rate and limit how often you can withdrawal (typically no more than 3 times a month). You probably already have your paycheck set up for direct deposit, so I recommend you ask your employer to help you split your deposit among two bank accounts. *Two side bits here: 1) Some Money Markets require a deposit to open and require a maintained balance. If you need flexibility I recommend you look for a bank that requires neither. 2) I’ve never had an employer tell me they couldn’t split my paycheck so if you are told “that’s not possible” investigate, because something is amiss. My last employer, however, advised me they could only split by a dollar amount not by a percentage. So I gave them a dollar amount that was roughly 20% of my income.
The remaining 70% is for my living expenses. I know what you are thinking “how do I live off of only 70% of my income.” It can be difficult, especially if you are like me and have debt. My rent and student loans make up the bulk of that 70%.
But think about it. If you are living off of only 70 cents for every dollar that you make, chances are you will ask yourself, “do I really need that?” and your impulse spending will decrease.
Now, I wrote that last sentence out of my love for Capitalism. Spending is good for our economy but impulse spending can drown you. When you spend with a purpose you are doing more for our economy because you will be able to spend when times are good (and the economy is doing well) and when times are bad (and interest rates are low). But I digress.
How do I live within 70% of my income? I don’t always. Some months I have to dip into my savings, but that is what they are for. My savings are my cushion -my wiggle room- to help pay for things I’ve planned and for the things I didn’t. But here are somethings I do to help me stay within budget:
- I only pay for internet, no cable. I bought a refurbished Apple T.V. for $89.99 in 2013 and I haven’t looked back since. Aside from my monthly internet bill (which I flip flop between Comcast and Verizon -depending on who is offering a better deal) I pay for online streaming apps such as Netflix, Hulu, HBO Now, etc. If your internet/cable package is cheaper than the price for just internet + 7.99 for Netflix, then you have found an awesome deal and I would not recommend giving that up. Otherwise, go one year without cable and see if you miss it.
- I live within walking distance to work. In fact I used to live outside of the city where rent is cheaper until I figured out that my old rent + the cost of my commute = rent in the city. Now that I am closer to work, I’ve found it easier to pick up overtime hours.
- I do not pay retail price for anything. If it is not on sale, not on clearance, and/or I do not have a coupon, then I don’t buy it. Unless it is a Vera Bradley then…
- I sell stuff on eBay. I’ll wear a new Vera Bradley print until the newer must-have print is rolled out, I then sell the old one online. The money I get for my old one is then used toward the new one. I also do this with my Coach and Michael Kors, as well.
Yikes! this post turned out longer than I expected. But hopefully, I have left you with something useful. Give my advice a try and then feel free to adjust it to accommodate your needs.