Budgeting 101: For the 9 to 5er (hint, it’s not just about money)

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Do you know how much you spend on coffee a month? How about your non-negotiable bills like rent, utilities, phone and transportation? Do you know how much it cost to put a down deposit on a 350k home? Most of you are going to say no. Why is that? Because we live in an instant gratification culture that is manipulating your emotions to believe that stuff fulfills you. There I said it! Hot beverages make us feel safe, paying rent feels frivolous, buying a house feels limiting. Until we change our relationship to the stuff, we’re not going to make actionable changes. Changes that affect every single aspect of our lives. How you treat money is a direct correlation to how you value yourself. Simple as pie. You want to drastically improve your life, take care of your finances. Let’s begin:

Write It Down:

First start with your non-negotiable’s.

Non-Negotiable’s definition: An expense that happens every single month. Rent is an example of a non-negotiable for survival. Book club is an example of a recurring expense that adds value to your life, something that supports your overall well-being. {My style of budgeting does not ask you to eat cup of noodles and never go out. No, instead I match your budget to your unique lifestyle. You can have your $75 classpass membership and a mani pedi. As long as it’s within your monthly revenue.}

TIP: Overestimate It’s always better to over-project. Especially when it comes to things that are consistently due every month but tend to vary like utilities.

Rent:

Phone:

Utilities:

Internet:

Student Loans:

Car Payments:

Therapist:

Book Club:

Supplements:

Metrocard:

Music:

Amazon Prime:

It doesn’t matter how small. Gather all the payments you make a month.

Supplements and therapy? Why are these in non-negotiable’s? Your life is made up of many different categories. You don’t just live to pay rent, you live to thrive and these added expenses help make you the best you! Maybe for you it’s reading or playing video games; if these monthly payments make your life better and are consistently taken out of your bank account then put them in your non-negotiable’s. Some of my clients have fitness, skin care, or credit card debt in their non-negotiable’s.

Let’s talk about Debt:

Do you have credit card debt? A grand or two that’s been accumulating interest, never really completely paid off, just kind of hanging over your head like last nights guilty pleasure? From my experience the only way you can begin to clear that debt is by prioritizing it. Most people throw money at their debt; like reluctantly chucking $100 at a family member or friend who’s always asking for a little something, something. But your debt is not an annoying burden that should be disregarded. It was your choice to spend above your means, it was your decisions that gave you debt, and it must be your decision to pay it off.

TIP: Call your Credit Card No matter how big or how small, find out if you can negotiate down your interest rates. Explain your financial situation and see if they can work out a payment plan with you.

Debt should always go in your non-negotiable’s. That way you know exactly how much money you need a month for all of your expenses.

0% Interest: There are plenty of CC’s out there that have 0% interest rates (that’s the Annual Percentage Rate or APR) for up to 21 months! Do a little research or check out Credit Karma’s post. The most important rule is to set a goal. If you move your debt to a 0% CC than you better commit to paying it off before the ARP changes. Divide your debt by the amount of months they offer so you know the minimum you should be putting towards your debt every month.

Debt is bondage. It is a terrible feeling but you’re not alone. Here are some hard facts. Consumer debt has reached $1.3 TRILLION. The average household debt is $16k. The average student loan is $46k a year based off NerdWallet

Long story short, A LOT of us are in debt. I racked up $10k by living above my means. I chose to travel the world and spend while I wasn’t earning. I even enlisted my sister to help with some of the bills and was rightfully put in my place when she noticed the monthly bills were rising. I get it. I had shame, anxiety and a lot of rage about my debt. I made my last credit card purchase in March 2013, and finally started paying it off in August 2016. I freaked out after 2 months of payments and put it on pause for another 6 months. Once I was ready to pick up my debt again I created an aggressive payment plan that I committed to and never wavered. It took 13 months but I am completely free of CC debt.

One more thing about debt. Don’t rush to pay it off in expense of your sanity. What I mean is that while you might feel very guilty about your debt, if you put yourself in a compromising position to pay it off, as soon as you’re debt free you’re WAY more likely to end up where you started. It is MUCH more sustainable to pay what you can truly afford and pay it off slowly and measurably. This is why it’s important to find out if you can lower your interest rates or get a card with 0% interest. Don’t let the shame run your decision making. Think logically and realistically. 2 years might feel like a long time, but if it’s what you can afford, it’s the perfect amount of time.

Let’s talk about Lifestyle:

The first thing I hear is “Oh, I’ll cut down on going out, or stop buying clothes.” You cannot understand why you spend if you don’t understand how you spend. Write down your lifestyle expenses. {This is a key component to your success. Most financial advice you’ll get is too general. Understanding where your money goes will give you a direct lens into your personal desires, needs and expectations.}

TIP: Look at the last 3 months of your spending to come up with an average allowance for each category.

Nightlife:

Lunches:

Entertainment:

Groceries:

Home goods:

Beauty Maintenance:

Clothing:

Weddings/ bachelorette parties:

Gifts:

Coffee:

Alcohol:

Be Honest: I have several clients who have a category for recreational drugs. Do not hide from yourself in your expenses because it will come back to bite you in the behind!

The Homework: Go into your bank account and write down your 3 month historical expenses. See how much you really spent on that wedding, how much you typically spend on clothing. Once you write it down you’ll start to see a pattern. You might even notice that without thought, you spend roughly the same every month on ‘going out’ or ‘beauty maintenance.’ When you notice a big discrepancy figure out why. There will always be a reason why your spending fluctuates; be it a bad week or a family emergency, a friend visiting town or a new job.

Let’s talk about parents:

If your parents help you financially; you still need to write down how much they give you a month. Financial independence includes cutting the cord between your security blanket (your parents) and developing trust in your own skills to support yourself. I’m not saying never take money from your parents but until you can support your own lifestyle you really aren’t in control of your decisions. Choice is the most powerful tool we have and if your parents support you, you better bet they weight a heavy hand in your decision making. Your parents have a right to start enjoying their lives post raising and supporting you and your siblings. Financial independence makes you a better child, it helps you build gratitude and it enables you to stand on your own two feet. Figure out how much money you’re using from your parents each month. And make conscious efforts to change this pattern. If you can’t support your lifestyle without the help from your parents then a change has to happen; maybe a raise, a new job or an honest conversation with your career choice.

Let’s talk about Goals:

Lower your expectations. The biggest limitation people come across is creating impossible goals. Unless you understand how your money works, you can’t possibly know what your able to accomplish. Real life example: You want to run a marathon but can’t run for longer than 10 minutes? So you create actionable, small, bite sized goals. You say tomorrow I’m going to run for 15 minutes, then 20, then 30. Next thing you know you’re running 13 miles. You’re way more likely to accomplish a goal when you have attainable steps to actively achieve it.

Here are some assessable goals you can bang out as soon as you start taking your finances seriously.

  1. Write down your 3 month historical expenses.
  2. Find out the details to your companies 401K plan.
  3. Restructure your income so you match your companies 401k plan.
  4. Add your average monthly expenses (non-negotiable’s plus lifestyle), then x the total by 8. This will show you how much money you need to build an 8 month emergency fund. Create an attainable goal say 18 months to create your fund. Take your 8 months of expenses and divide it by 18. That will tell you how much you need to put away every month to achieve your goal. Set up a bank account where you auto-transfer the same amount every month towards your emergency fund. Example: You spend $3700 a month on average. $3700 x 8(emergency fund)= $29,600. $29,600/18 (goal) = $1644 a month in order to achieve your goal.

For more support in making your dreams a reality reach out. I’ll get you set up with the following services: a live personalized budget to match your unique needs, assistance with creating attainable goals, and monthly challenges to build your ‘wealth’ muscles. Contact: ajwolbrum@gmail.com

Written by

AJ is a Financial Freedom Coach and the founder of Beyond The Green Coaching.

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