So You're Happy With Your Job

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So you’re happy with your job, now what? When I drop this next word, please don’t leave and never read my posts again – budget.

The term “budget” is sad. Do I really have to do this? Did I just jump from 25 to 50 years old? It’s likely your parents told you to make one. If you’re like me, you probably told them you did, but never actually got around to it. Well, now you have something to talk about.

Here are three steps that changed the way I think about my spending. Will it change your life? No, but it’s a good place to start.

Step #1: What are my spending habits?

Take the time to go through your transactions from the last month, track where you spent your money and separate into categories. Maybe it looks something like this:

Fixed Expenses– These will not change from month to month.

Ex. Rent, Gym Membership, Student Loans, Netflix, etc.

Variable Expenses– These may fluctuate, but you know they’re coming.

Ex. Gas, Groceries, Utilities, etc.

Think of the above two categories as your needs. You cannot live without them. Then, we have…

Other – Everything else.

Yes, it includes the three rounds of drinks you bought last weekend for your friends. Don’t hold your breath, that Venmo is not coming.

Calculate the totals in each category, and maybe sit down first. This is where the lightbulb moment happens: Did I really spend that much?

Step #2: What’s my plan?

After looking at your spending habits, it should be clear how much money you spent on things that you shouldn’t have. Maybe you’re a little embarrassed. That’s ok! But, how do you want to change it?

A typical financial planner will tell you to follow the 50/20/30 Rule. Meaning, 50% of your after-tax income should be spent on fixed (can’t live without) expenses, 20% should be saved and 30% dedicated to everything else (other). Do you have to follow this? No.

For our sake, determine how much you would like to spend per month, including fixed, variable and other expenses. Add these totals, and there you go – you have a budget. Congrats. Obviously, the goal moving forward is to spend less than this amount.

The easiest way to do this is to pay yourself first. When your paycheck comes in, take your savings goal and transfer it to a Savings account. If you don’t have a savings account, open one. Everything is online now, so you don’t have to go talk to a banker at a local branch.

There is no magic number to save that’ll make you rich. If you do find it, let me know. Maybe it’s half of the “Other” category. For example, if you spent $500 on Uber Eats last month, set a goal to save $250 and maybe hit a treadmill. Start somewhere. You’ll be surprised how rewarding it is to watch your savings balance grow.

Step #3: Why am I doing this?

I can’t answer that question, you need to want to make the change. It will take time, discipline and consistency. Set a target saving amount for a few months down the road.

For example, aim to have $750 saved in three months. Write it down. Be cheesy and post it on your fridge. If you hit it, celebrate and be proud of yourself. Only 39% of Americans have enough cash on hand to cover a $1,000 emergency. Crazy, right? Be different! Saving can help you gain confidence for the future and separate you from the crowd[LL1] .

Final Notes

Maintaining a budget is an ongoing process. Continue to track your expenses - you will have a few setbacks! If you’re not hitting your goal, readjust. Eliminate a fixed expense that you don’t need. Keep positive and understand that it’s not easy.

Gabe Martin is a registered representative of LPL Financial. Securities and investment advisory services offered through LPL Financial., a broker-dealer (member SIPC) and registered investment advisor. Insurance offered through LPL Financial affiliates and other fine companies. CRN-3456929-021821

https://www.bankrate.com/banking/savings/financial-security-0118/