I've got a budget and a plan.
Over the last few months, I've read some great financial books which have helped inspire and now guide me along my journey to become debt-free today and a millionaire tomorrow.
Here are some of the books that I found valuable:
The Total Money Makeover by Dave Ramsey (this book provided me with foundation for my current personal finance adventure)
The Automatic Millionaire by David Bach
You Need A Budget by Jesse Mecham
Love Your Life, Not Theirs by Rachel Cruze
The More of Less: Finding the life you want under everything you own by Joshua Becker
The Year of Less: How I stopped shopping, gave away my belongings, discovered life is worth more than anything you can buy in a store by Cait Flanders
You Are a Badass at Making Money by Jen Sincero
The Latte Factor by David Bach
Meet the Frugalwoods: Achieving financial independence through simple living by Elizabeth Willard Thames
You Need A Budget
You already know that you need a written out budget before you can even try to start paying down your debts or building up an emergency fund. It's impossible to have a firm grasp on what money is coming in and out if you're not paying close attention. I mean CLOSE ATTENTION. You know how many dollars you spent yesterday and how many dollars you're going to spend tomorrow. You've assigned every penny of income to a specific bucket and you're sticking to it...or if necessary, you'll pivot and adjust your budget accordingly if something unexpected arises.
Many folks have found budgeting success by using a cash envelope system, the free EveryDollar app, and the Qapital app ($3/month, but known to save members up to $1,500/year). I tracked every single one of my expenses for the last two months using a standard paper tracker, which I prefer because I'm a poser millennial.
I'm unmarried, without children, without a mortgage, and yet I felt like I was always without money, too. Side note: How people my age own houses and cars while also feeding, clothing, supporting, and educating several children and pets just baffles me. How are they doing it?! I suppose, a budget.
I had a rough idea of where my money was going as I tracked all of my major recurring bills, but beyond that my expendable income became a firehose when I walked into running stores and eateries with brunch and bloody mary's. I tried to set aside $1,000/month each payday by immediately putting it into my savings account, but I was never very disciplined with making sure it actually stayed there until my next payday.
Why work so hard only to spend it on more crap you don't need to impress people you don't like (or who don't like you)? I wasn't living paycheck to paycheck, but I definitely wasn't respecting the time and effort that I was putting into earning that paycheck.
For years I told myself that once I started making more money, I'd finally get to be the kind of person who prioritizes regular travel with once-a-month domestic/local trips and at least one to two international trips. Instead, I fell into the trap of making more money and spending more money on nicer apartments with nicer furnishings, annual moves, bigger cars, and upgraded organic grocery trips to Whole Foods and co-ops.
For me, life experiences have always had far more value than things, so why was I buying more stuff instead of saving for that incredible trip to Greece I'd been dreaming about for decades? Probably because we're really bad at sacrificing now for something that we can't quite grasp. It feels nice to wear a new pair of jeans instead of putting the jeans back on the shelf for the next eight months so that you can instead possibly cash flow a vacation.
It took me awhile to get here, but I'm finally in the right head space and living situation to prioritize my budgeting with my big life goals.
My Monthly Expenses:
1 Bedroom Apartment (split) Rent: $563
Federal Student Loan: $428 minimum (I've been paying up to $1,500 month with the snowball strategy)
2017 SUV Lease: $301
Groceries/Eating Out: $300
Utilities: $90
Credo Unlimited Cell Plan (using iPhone 6s): $75
Car Gas: $60
Geico Car Insurance: $54
Miscellaneous: (clothing, home expenses, hair cuts, pet expenses, gifts): $50
= ~$1,900 of monthly expenses
My Income:
+ $3,128 monthly take-home pay (damn income taxes and health insurance)
+ Side gig income = $250/month
+ Cell plan reimbursement = $60
= $3,438 income - $1,900 expenses
--> $1,538 into savings
My Financial Plan: 2020-2022
(with some help from Dave Ramsey's 7 baby steps)
1. Baby Step 1: Save $1,000 for starter emergency fund ✔️
2. Baby Step 2: Pay off remainder of student loan by January 1, 2020 (nearly there!)
How I've been doing it...
Put entirety of savings account ($17,000) toward student loan balance
Clean out closets and post everything on Poshmark, Mercari, and Facebook Marketplace to make extra $1,700
Pick up extra side gigs including dog walking, cat sitting, and virtual assistant-ing
Try not to buy anything that doesn't have a coupon or discount code
Only buy essentials online when absolutely necessary
Cut up my credit cards and pay with cash or debit card
20 weekly budget friendly meals at home, 1 meal dining out
Use free on-campus work gyms and fitness classes to save on memberships
Get rid of all subscription services - bye, Hulu!
Use the public library and their free Libby app for digital/audio books
Focus on free hobbies and activities like running, listening to podcasts, visiting local parks, learning a language, playing instruments and board games, reading, watching movies, and attending free trainings, meet-ups, and educational sessions at the local university, etc.
Drink coffee from home and take advantage of unlimited free coffee and tea at work
Wait to buy larger must-have purchases until they go on sale
Stock up on free stuff when you come upon it (tampons always)
Unsubscribe from all favorite retailer emails so they're not a shopping temptation
Avoid technology and furniture upgrades (TVs, computers, phones, vacuums, kitchen equipment, speakers, headphones, cars, all of it).
Before purchasing something, ask myself why I'm buying the item and if it is a necessity or a want, and what is fueling the desire to have the item (you usually put it back because you really don't need another cotton sweater or pair of black leggings).
Return unopened/unused items to the store as soon as you realize you don't need/want them
Compare phone plans and get on cheaper family plan with Nick
3. Baby Step 3: Save $1,500/month from January 2020 - July 2020
= $10,500 for fully funded emergency fund.
- Move fully funded emergency $$$ into money market
3a. Turn in car when lease matures by Oct 22, 2020 and add $300 of new savings to house down payment fund
3b. Save 20% or $40,000 for down payment on a house by 2025
4. Baby Step 4: Invest 15% of income in retirement
- $2,440 into work 401k (+3% work match)
- $6,000 into Roth IRA
= $10,120 year toward retirement savings
Interested in learning how much you should be saving right now based on how much you'd like to have by the time you retire?
--> Check out Chris Hogan's retirement calculator to get your retirement IQ.
Based on how much I've already invested in retirement ($0) and how much I think I'll need to live off of come age 66, my R.IQ is $1,412,000. I'll need to invest at least $358/month for the next 31 years to get to this number!
5. Continue to save for annual international trips and bucket list to-dos
- Save $4,000/year for 2-3 trips
6. Finally figure out where we want to live in the world and put down some roots (priceless)
7. Baby Step 7: Start to invest in rental properties and the stock market
- 25% into growth; 25% into growth and income; 25% into aggressive growth; and 25% into international/overseas.
- Look for stocks that have a good track record over 5 years, and that ideally have been around for at least 20 years.
- Don't buy stocks that have been around for less than 5 years.
- Secure stocks that have had an average growth of at least 12%.
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