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Bernie On A Journey - Part 5 - July 26, 2019

07-26-2019

BERNIE TALKS BUDGET

Given the topic of my last blog, on the pain of unexpected expenses, it reinforced the need to be careful in my spending, saving and overall budgeting. So this week, I want to share how I do my budgeting and what helps me stick to it!

Please forgive how crooked these are! This wall helps me remember what experiences budgeting helped me have, also I firmly believe that beauty is healing for the soul.

1. Figure out the motivation and goals for budgeting. I am a person who does better when I see the purpose behind what I am doing, and yes, I was that child who always asked: “why?”. Motivation can be as simple as: I have a limited income and don’t want to go into debt. Or as ambitious as I want to visit my friend in Australia and take a two week trip to Europe with my best friends.

For this, I have to do some soul searching and be honest about my priorities. I don’t care about saving for a new computer, but I will drastically cut spending if  I know I can save up for a trip to see friends that live far away. Priorities dictate spending, so I find something I care about and use it to motivate me to stick to my budget. I also try to use the acronym SMART (specific, measurable, achievable, realistic and time-bound) to guide how I make goals.

2. Know all spending habits. How I start my budget is to look at where I unconsciously spend money. One of the easiest ways to do this is to go through piles of receipts or my bank statement/bank account. I also use an app called Mint that links to my credit cards and bank account to automatically categorize purchases and spending. Regardless of methods, I think the key to a successful budget is being honest about spending habits.

Graphing expenses is also one way I keep track of my spending and what portion of my income is going where.

3. Consider how much monthly costs add up over the course of the year. I purposely avoid subscription services like Hulu, Pandora, Ipsy, Sephora, Easyfresh, etc., because I know when the “reasonable monthly cost” is multiplied by 12, it starts getting pretty expensive. For example, $20 per month, means I am paying $240 each year. This is also relevant when considering unplanned spending sprees. Sure a $75 spending spree at Target is fun, but if I do that each month - I would be spending nearly $900 a year. I paid less than that for a round trip flight to Switzerland. Little choices add up. 

4. Pay yourself - that’s what saving is. When I choose to save I am choosing to accomplish my goals and have a more stable future. A good rule of thumb is to have 3 months of living expenses saved in the bank and a separate $1000 emergency fund. This is the bare minimum, I’ve come to realize. After that is created, I can start proactively saving for future events, like to replace aging appliances or my car, to invest in the future, or to fund trips and purchases. It’s crucial to keep a spreadsheet or journal with the amount of funds allocated for each project, though, so I don’t end up depleting the accounts when whimsy strikes.

5. Be reasonable and complete in budgeting: Inaccurate budgets don’t work. I can be pretty unreasonable, such as my desire to make extreme budgets with a food budget of less than $10 per month, but that is a budget setting me up for failure. Instead, I focus on being a conscious consumer. I buy what I need, and save for the future I want to have. Learning to separate needs from wants is a crucial part of my budgeting, and I usually have to weigh what I am considering buying against the goal I am budgeting for. E.g. is the box of candy more valuable than going to Florida to visit my relatives? Every $1 or $2 purchase adds up and can move me closer or further from my goals. I also received good advice to account for little, miscellaneous things in my budget, like paying for my toiletries or keeping some extra money for parking and toll roads, etc. 

6. I’ve also come to realize that budgets evolve. I have to be realistic, and track my expenses and income accurately, and shift spending as needed. 

My wallet and I with my wall of inspiration at my desk in the NeighborLink office. I bought this wallet at a thrift shop because it has envelope-like compartments and I can use that to separate cash I have allotted for different purposes (see the resource on envelope method budgeting if you want more information).

Resources I’ve Found Helpful

https://www.daveramsey.com/blog/how-to-make-a-zero-based-budget

https://money.usnews.com/money/personal-finance/debt/articles/easy-ways-to-pay-off-debt

https://www.mint.com/

https://www.daveramsey.com/blog/envelope-system-explained 

https://www.nerdwallet.com/blog/finance/how-to-build-a-budget/