IDK Wednesday: The Fun Stuff

Let’s be real. The fun stuff is what makes life… fun. We want to pay for those things. But are you paying too much? It’s important to shop around a bit and make sure you’re getting the best bang for your buck. Sometimes it can be frustrating and difficult and not even worth the extensive searching it might take you to find the best deal… but if you’re strapped for cash, paying less for things is a great way to have more money.

lolcat saves money by working out at home.

Is your gym more expensive for no real reason? Do your mani/pedis or haircut cost way more and you can’t really say why? Are you buying books from Barnes & Noble instead of at Half Price Books or Amazon? Make sure you’re paying for what you get.

Questions about budgeting?

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The Plan: the Fun Stuff

Now that you know how to pay for things you absolutely need in order to survive, let’s move forward and look at the things you want to pay for in order to more than survive.

Whatever you have leftover from your paycheck(s) after you pay for the necessities is called a discretionary income. You can use your discretion (hence the name) to decide what you want to spend it on. It can be difficult to not go overboard or not budget enough for these things–keep in mind what we talked about concerning indulging.

Here’s what I suggest– figure out the minimum you need or want to spend on each of these things, then do the math to figure out if you have any discretionary money left over and then go back and add more on to things you want. Some things are easy, for example, your gym membership is going to be the same each month. Some are harder, for example you don’t need a haircut every month (probably) so that budget will change from month to month.

 
Now, entertainment is a whole other animal. You need to take a quick second to figure out how often you do fun things and how much they cost. Do you like going to the movies once a week? Do you get popcorn when you go? That’s $15 a week times four weeks is $60 a month for movies at least. Like to go out and eat and drink with friends? Let’s say you get an entree at a mid-scale restaurant. That’s $15 with tax and tip, maybe. Then you go out for drinks with friends at a bar; you get three drinks and buy a round for friends? That’s $40 easily including tax and tip (and that’s at a cheap bar, where each drink is $6). If you like doing this at least once a week, that’s $220 a month for restaurants you have to put aside.

If this sounds too complicated you can do what I like to call the EZ-Fun Method: Income-necessities-known discretionaries (gym, educations, health/beauty costs, travel, finances)= leftover amount can be used for all the entertainment/restaurants/shopping it can get you.

 
The two that can be most intimidating for people our age is travel and finance–but they’re important. If you go home for the holidays, have a week-long trip you want to take with your significant other when your vacation comes up at work, or if you have a big European tour you want to take, you have to save money for it. Figure out the exact cost of your trip (listen, if you can’t figure out how much a Spring Break trip to Mexico is going to cost you, you shouldn’t go. I don’t care. Don’t forget any shopping you want to do wherever you go.), then divide that amount by how many months you have until the trip date. That amount is how much you have to save a month, which you have to budget for. If you can’t afford to save that much monthly, then you obviously can’t really afford the trip– either push the date back, cut back on some of your other discretionary budget items to prioritize the trip, or get more money.

Financial. What is that doing on your budget? You need to plan to put money away to either make more money or to use later. Allocate $50 a month (or more or less) to investing. Grow that money! Or put some away to save for a special plan– wedding, car, house, huge trip abroad, whatever. Whenever you plan on paying for this special thing, divide the amount you want saved by the months you have until the big day and that’s how much you need to put away a month.

DISCRETIONARY BUDGET

Education (books, fees, etc):

Entertainment (movies, recreation, etc):

Shopping (shoes, games):

Restaurants:

Health/Personal (gym fees, doctors, haircuts, waxes, mani/pedis etc):

Financial (investing, loaning money, non-emergency savings, etc):

Travel:

Notice how savings and retirement wasn’t on the list? That’s because they’re things that you should just do automatically–before necessities and discretionary. You cannot afford not to save and plan for retirement. Trust me. How do you figure out how much you should save and put away for retirement? Luckily we’ve already covered saving.

For retirement, it gets complicated; I’m going to make an entirely separate post about retiring, but for now, just pick a flat amount per month, like $25-100 a month and put it in your savings. When we cover what kind of accounts to put your retirement money in, you can just transfer what you’ve already saved for retirement. Since you’re starting so early, you can afford to put in less per month, as long as you’re putting in something.

Congratulations! You’re continuing to take control of your finances.

IDK Wednesday: when you can’t afford the bare necessities


Having trouble with having enough money?

1. Slash the budget. Figure out what you can do without. Do you really need cable tv? Do you need the most expensive data plan for your phone? The answer is probably no. Call and have them cut off or reduced. You can always bring them back into your life later when you can afford it. But if you literally cannot pay for it and still have money left over, you need to reevaluate.

2. Negotiate. Call the credit card  company and loan company and car loan company and explain that you’re financial times aren’t so good. They want to work with their customers– especially if you’ve been paying so far. They’ll probably give you rebates, lower the monthly payment, change the interest rate… any number of things to ensure you will keep paying instead of defaulting. I promise. It may seem scary, but you can do it! Be your own hero!

3. Cut back on what you can’t slash. Can you save money on gas by driving your car less? Are you buying smart at the grocery store or are you spending most of your money on junk food? Do you have the best insurance rates? Are you sure you’re not wasting water or electricity?

Have questions?

The Plan: The Bare Nessecities

Now that we’ve familiarized ourselves with and armed ourselves against Ignorance, Denial and Indulgence, it’s time to make a financial plan that is tailored to your specific needs.
Now, financial goals are as individual as the people they belong to– you may want to save for something special, for the unknown, for a faraway wedding. You may want to get out of debt. You may want to construct a plan that allows for you to pay your student loans and have a social life at the same time. You may live in an expensive city and just want to pay all your bills and have enough to eat and go out once a week. You may want to re-do your entire wardrobe or take a trip to Turkey.

The first step to making your own plan is figuring out what you want to do with your life. Scary, I know. Senior year of college and the following months after getting that diploma, this thought permeates almost every moment of your existence. I know it’s overwhelming to think about, but luckily, figuring out your financial goals is a bit easier than finding out what career path you want to follow. Good places to start:

1. Pay for necessities. Pretty basic, right? You want to have shelter, warmth, running water, food, clothes and internet, right? (If you don’t, might I suggest the Peace Corps? You’ll do some great work for the world and also get some student loan forgiveness.) If you want these things, they need to be part of your financial goals.

2. Plan for the future. Start a retirement account. Contribute to your job’s retirement plan for you if applicable. Save for emergencies. Save for a down payment for a car or house. For a wedding. For kids. Investments. The earlier you start, the bigger the nest egg gets.

3. Pay for things you want. A new haircut. A new video game. A trip to Vancouver. Now that you know how to battle indulgence, hopefully this last part won’t hurt to much.
You need to create a plan now and reevaluate it once a year because things change, after all. During college the plan might focus on paying for things you want. After college, the plan might focus on paying for the necessities. A couple years after graduating, the focus might shift to planning for the future. It all depends on your current financial situation and where you want to be in a year.

Remember when I told you to figure out what your net worth was? It’s time to use that number. If it’s negative, you might want to create a plan that focuses on getting yourself out of bad debt. If it’s positive, you may want to focus on saving. If it’s really really positive, feel free to focus on accumulating. But the very first thing to do in order to create your financial plan is budget!

Prepare yourself mentally and physically to MAKE A BUDGET. Get coffee. A blanket. Your laptop. A fluffy cat. Put on Beyonce. You’re taking your finances into your hands now. This post is going to focus just on the necessities part of the budget– step number 1 listed above. The other steps will have posts of their own following this one.

BUDGET- the necessities

Monthly income:

Rent:

Electricity bill:

Water bill:

Internet/TV bill:

Vehicle payment:

Vehicle insurance:

Gas/oil:

(Public transportation, ie bus pass, train pass, subway, taxis, parking, etc):

Phone bill:

Health insurance:

Groceries:

Student loan repayments:

Minimum credit card payments:

Other debts (loan from mom and dad, etc):

Pets (food, vet, grooming, supplies, etc):

Those are all your necessities. But where are the gym fees? The eating-out budget? The money for buying books for classes? Those are NOT necessities. Stick to the things that you ABSOLUTELY have to pay for to function. Take Baloo’s advice: “Look for the bare necessities.”

Figure out what each one’s monthly cost is by looking at past payments and receipts. Things like the electricity bill may fluctuate from month to month, so try to average and then round up to be on the safe side. If you’re share of the electric bill was $158 in July, $146 in August and $140 in September, than budget for $145 a month. Other things like rent and your phone bill will be more consistent. Groceries may be the hardest; single people usually spend $150-200 on groceries depending on their needs. I include my toiletries, household and pharmacy needs– try not to leave anything out. Think of everything you’ve bought in the past month.

Subtract your necessities budget from your income. Now, if you have more in your budget than you have money to spend on it, we need to make some changes immediately. If you have nothing left at all, or if you don’t even have enough to cover a month’s worth of living, you’re on dangerous ground–this week’s IDK Wednesday will give tips on how to fix this issue.

Now take a break. Go watch a movie with friends and wine. Or cuddle with someone. You’ve taken a huge step to figuring out your finances. What a grown up you are.

IDK Wednesday: Splurging

Need tips on how NOT to splurge?

1. When you go shopping, go with a list. Only buy things on that list. Do not buy anything not on the list (unless it’s an essential you just happen to forget to put on the list, like toilet paper).

2. Avoid malls, shopping centers, strip malls, outlet malls, boutiques, electronics stores, superstores, online stores, etc, unless you have a list of things you plan on buying.

3. Have a little note or card attached to your credit and debit cards, right on the front, that says, “Do I really need this?” When you get to the checkout, you’ll be reminded and it’ll make you think again. Later, when you remember that the note is there at all, you’ll think about it before you even get to checkout.

4. After you tally up all your necessary expenses, savings, investing, and money for miscellaneous expenses that are more important than new shoes, withdraw the exact amount of money you have left over and keep that in your wallet. This is money you can spend on whatever you want to splurge on– no more, no less. Don’t like dealing in cash? Get one of those re-loadable cards where you put money on it and that’s all you have to spend; no overdraft, no credit.

5. Plan for splurging. If you know you like to have new clothes, budget to buy one new item a week. Like to travel? Plan on saving the money each week to take a small or big trip in the next six months. Like to go out to eat and drink?  Budget for one meal or two nice drinks out a week.

Remember, there’s no need to live so frugally that you feel like you’re not enjoying life, but pretending you have money to burn on the fun stuff when you’re barely able to keep the lights off is a dangerous and equally un-fun way to live.

Questions? Let’s hear ’em!

La Dulce Vita

Indulgences, while they are AWESOME at the time, often end up costing you the most money, which you can later regret. I know. My boyfriend and I used to love to eat out at gourmet restaurants, often. At the beginning of the summer when my bank balance started to dry up like the plant on my porch in the growing summer heat due to lack of employment, we cut back; we started eating awesome meals at home and went out maybe once every week or every other week (as opposed to almost daily). I cut back on a costly indulgence and saved a bunch of money that I needed to use to pay bills. No new information there, right? Everyone and their grandmother knows that if you cut back on stuff, you end up saving money. Well, would it put it in perspective for you if I gave you numbers? My numbers?

(Okay, don’t judge. Here they are:)

In April of 2012 (right after I got my tax refund check), I spent $220 on restaurants. $48 on fast food and$8 on groceries. And $109 on bars.

June of 2012 (the difficult month of unemployment), I spent $13 on restaurants. $9 on fast food. $32 on groceries. And $0 on bars.

Crazy, huh? I told myself it was okay to spend that money in April because the stuff I needed to pay for was taken care of. I had saved a little. I could treat myself. And I enjoyed that great food and drink. Then it took a little longer to get a job than I thought it would and I burned through those savings in June. And was left wishing that meals I had had at those tasty restaurants in April were still feeding me.

But there’s no need to live like a monk. Just last night, my good friends and I went grocery shopping. I had proudly announced that I was a dollar under my $50 budget. One of them asked, “Is that including alcohol?” I smiled and said, “I didn’t buy alcohol. I treated myself to some beauty products instead.”

I explained to them that I budget in for one treat on something like that a week. So sometimes I’ll buy a bottle of wine with my groceries. Sometimes I’ll head out to my favorite local bar and sip a well-made cocktail with friends. Last night I bought some blush and nail polish, neither of which I really needed. The difference from now and my past is that I plan for these little enjoyments. I don’t let them get the best of me and my wallet.

Spending is often tied to our emotions. Feeling sad? That chocolate bar at the checkout line looks pretty good and it’s so cheap! Feeling sexy? You definitely want a new dress to show off your legs. Feeling bored? That new gadget could help with that. If you buy things that you didn’t plan for, they’re splurges. If you plan to buy something you know you’ll enjoy, it’s a treat. Don’t let your emotions get the best of you.
There’s zero guilt associated with a treat because you not only earned and deserved it, you’re not hurting yourself by doing it. There’s tons of guilt associated with splurges because you know you probably shouldn’t have spent that money.

Indulgence is the last thing we needed to confront before we’re able to make our plan. Ignorance, Denial and Indulgence are all hindrances to your successful financial life, and now we’ve delved into all three to figure out how to combat them.

This week, look back at your spending and see what you bought that you didn’t plan on buying that you bought just because you wanted it: clothing, food, drinks, toys, manicures. A great tool to do this is Mint.com. When you link your accounts, all of your spending using your cards is logged and then it will label all the expenditures so you can see what you spent on what. Know where your weaknesses are. We’re going to use it next week to make your budget!

IDK Wednesday: DE-Nile

This Wednesday, I will be helping out with any matters that you have come to realize you were in denial about! Enjoy Denial Cat.

DENIAL

Just because you refuse to check the weather report doesn’t mean you’ll stay dry in a rainstorm.

 
I don’t know if this is a saying, or if I made it up, but I feel like it’s true.

How much is in your bank account right now? How much have you charged to your credit card? Are you thinking about planning for retirement?

If you’re living your life day to day without knowing the state of your fiances, you’re in denial. And denial is a dangerous enemy. Pretending you don’t have problems doesn’t eliminate the problem, after all–it usually just makes it worse. So if you get a bill in the mail and it goes unopened because you don’t want to deal with it… If you don’t know how to make your student loan payments or who to call if there are problems–DENIAL. no budget? Denial. Do you make impulse buys because you don’t see why it would hurt? Denial. Don’t know your credit score? Denial

Time to grow up, I’m afraid. No one is in charge of your financial success or demise except you. And you need to be vigilant if you want to be successful. Look at the various components of your financial life– checking, savings, credit, loans, debt. You ought to be able to know your approximate net worth at any given time.

Why?

Because the world runs on money. You need to know how much you have and how much you owe so that you can survive–and possibly succeed– in this world.

Think I’m exaggerating? Let me say some things to you:

Grad school. Travel. Eating. Moving cities. New job. Wearing clothes. Rent. Starting a business. Mortgage. Furnishings. Toys. Car. Sickness. Accessories. Vacations. Marriage. Children. College. Retirement.

Feel like being able to pay for any of those things?

I’m sorry to say it, but if you’re reading this blog, you’re probably in a first world country and thus your society operates on a system of earning and spending money, at least secondarily to, you know, love and happiness and stuff like that.

Let me say some more things to you:

You can afford all of those things and more as long as you are not drowning in denial. If you know what the heck is going on with your purse or wallet, you’ll be able to do things like: plan and execute that plan. And while I wish my plan would take effect immediately, it doesn’t. It will take time to get out of debt, to pay off student loans, to pay off my loan for a mode of transportation, to save for my wedding, to start a trust fund for my kids, to have a retirement nest egg… but the point is: I’m taking steps to do all those things. A lot of people who declare bankruptcy or are homeless say that a bunch of stuff  just piled up on them and they just ignored it… then those problems consumed them and ruined their lives. The first step to avoiding being in a bad situation, or getting yourself out of it, is overcoming denial.

The awesome thing about being young without money is—we’ve got time on our side. Sadly, there are countless individuals who are 65+ that are in much a similar situation as we are… except worse. Because now they’re older–they have just as much, if not more than we do, to pay for but they can’t work as much and they don’t have much time.

The first step is admitting you have a problem. Wake up and smell the coffee. All those other cliches about how you need to not be in denial anymore. They’re all true.

Take your future into your hands today.

Denial-No-More

1. Write down– paper and pen, or use whatever system you have for remembering things (I use Evernote) how much money you have right now in every single account. All your cash, checking accounts, any investments your parents (or you!) may have, savings, trusts (lucky you), etc.

2. Write down how much money you owe… anyone. Student loans. Car loan. Credit cards. Friends. Family. Library. Whatever.

3. Find out your credit score. You’re allowed one free credit report from the three bureaus a year; you can go to Annual Credit Report, which is run by the government office that overseen by the three credit reporting agencies. Or you can use CreditKarma.com to get an estimated score, but you don’t have to pay to use the site (you should do this in addition to your real annual one, just to keep track of how you’re doing). Or you could do FreeCreditReport.com (but you have to pay the subscription fee after the trial period). The latter two sites have helpful tools to help you track your score and more. You need to make sure there aren’t any costly mistakes on your reports… identity theft is real and happens most to people our age.

4. Sign up for notifications. Your bank most likely has options to send you notifications about your checking account balance daily. Check to see if your credit card has this, too. You need to get a text or email every day– either in the morning or night– about the state of your accounts. It just may keep you from overspending. This is an exercise in beating denial. You also need to have a good system to remind you when your bills are due. Having a calendar–I use Google Calendar– to put down when each bill is due and have notifications sent to you a day before is really helpful and can keep you from paying late fees and maintaining a good payment history. Every single bill you pay needs to be on your calendar.

5. Open your mail. Email or hard mail is easy to delete or throw away,  but it could hold important info for you. Your student loan owner will probably mail you when your interest rate changes– you need to know what the new rate is! Open and read all financially-related email or mail the day you get it. Except stupid,  unsolicited credit card offers. Throw those away immediately. Those suck.

If you do these things, you’re no longer in denial about your finances. You will have taken the fist step to owning the responsibility of your finances. And that is awesome! Knowledge is power, right? Now that you are no longer in denial, you can look at these areas of your life and create your plan. That means looking at what you spend, finding out where you’re indulging yourself, make a budget, stick to it, make a plan for saving, investing, buying and retiring… and living your life the way you want.

Money is a tool– you can use it or it can be used against you. Let’s build.