I never felt that I was bad with money. If anything, I lean
on the side of saver. But I never really
had a financial plan. And as it turns out, having no plan IS a plan. It’s
a bad one. I knew all throughout college that I wanted to get a master’s
degree following graduation. I worked
here and there throughout college but was never serious about working toward a
savings goal so that I could pay for grad school. I think at the time the
thought of having thousands of dollars to put toward school seemed too far-fetched;
too unobtainable. I assumed I would take out a student loan. In all honesty, I didn't even know how much it would cost to go to grad school until I started
receiving bills from Baylor. I had this lackadaisical
idea that it would all work out. So I finished grad school, started my
first full-time job and continued on without a plan. I wasn't extravagant. I drove the car I’d been given at age 16, I filled my apartment with secondhand
furniture from family and friends, I even lived in low-income housing! My
biggest splurge was buying plane tickets every few months to see my
long-distance fiancé. I faithfully paid all my bills on time including credit
cards and my student loan. I was money savvy, right? Wrong.
It wasn’t until I married someone as equally carefree about
money as me that I started to panic. It was easy to justify my way of “managing”
money, but seeing someone else operate in the same way started to drive me
crazy. I knew that money is the number one thing couples fight about and I never
thought that Braden and I would fall into that category. But we did. Worst of
all was that I didn’t know what to do about it. I had been raised to manage
money, save money, tithe to my church, etc, but I didn’t really know details on
how to do those things wisely. What
really scared me is that I had no idea if Braden and I were in a good place
financially or not. I had no idea what amount was normal to have in savings as
a 20-something. I started to feel guilty
thinking about how many years I had been out of college and how little I had to
show for it. I was having a lot of
anxiety. It was time to approach this differently- time to make a financial plan. We are just starting out on this
journey and are by no-means claiming to be experts here, but I wanted to share
5 things we’ve learned on our quest to have a financial plan:
1. Live below your means
This is the one thing that I think Braden and I did correctly
from the start. We made the decision to live
on one income. I’ve seen a lot of people think that when they combine
incomes they can suddenly afford a bigger and better house, car, vacation, you
name it. We’ve chosen not to see it this way. Just because we can afford a 2-bedroom
apartment on 2 salaries doesn’t mean we need one. The reality is that you never
know when you might end up actually having just one income. This way, if Braden
decides to take a non-paid acting job for a period of time, or we decide to
have one of us stay home with our future babies for a season of life, we won’t
take a financial hit.
2. Make baby steps
If only I listened to Dave Ramsey before taking out a student loan! Oh well. I’ve been listening to
the Dave Ramsey podcast on my commute to work for several months now and it had
drastically changed the way I view money. He teaches 7 baby steps to financial peace
which you can read about in more detail here. Here’s a quick overview:
1. Save $1,000 to start an emergency
fund
2. Payoff all debts using the debt
snowball
3. Save 3 to 6 months of expenses in savings
4. Invest 15% of household income
into Roth IRAs and pretax retirement
5. Start a college fund for your
children
6. Pay off your home early
7. Build wealth and give!
My biggest takeaway? It does NOT have to take you 10+ years
to pay off your student loan! Pay above and beyond the minimum payment. Get rid of that thing as quick as possible.
And never take out a loan again (That means paying for things with cash people!).
Unless it’s on a house…in which case, payoff as quickly as possible once you
get to step 6. I strongly recommend
reading and/or listening to Dave Ramsey if you want to eliminate debt or learn
how to make smart money choices. Even if you don’t agree with everything he
teaches, I think there is wisdom to glean.
3. Budget
I learned about budgeting in 7th grade. Why I
waited until I was 24 to put it into practice, I have no clue. Let me tell you,
creating a budget seriously helps. It can feel confining on paper, but in
reality it allows you freedom like never before! I stumbled across the book “Financially Fearless” by chance. I was
in the audience of The Katie Couric Show and the author Alexa Von Tobel was the guest. She gave away her book to everyone
in the audience and 2 days later and I had read the entire book and had a
budget I could stick to for the first time in my life. The book teaches something
Alexa calls the 50/20/30 rule. It
works like this:
50% - Necessities (Housing,
Utilities, Groceries [not eating out], Transportation…these 4 things only)
20%- The Future (Savings,
investments, etc. For us, this includes student loan payments)
30%- Lifestyle (Everything else)
Due to outrageous NYC rent we tweaked this a little so our
breakdown is actually 55/20/25. But the book really provided us with a great
place to start. I’ll probably write a separate blog post later explaining the
budget in more detail because I think it’s so helpful to see how other people
allocate their budget.
The “everything else” category is what saved us. For a while
we tried breaking down every expense into our budget. $45 for eating out, $10
for coffee shops, $50 for clothes, etc. But is was SO hard to stick to because we
couldn’t really foresee what expenses might come up that month. We’d look at
the budget and think, “Oh wow, we didn’t eat out this month so we still have
$45 in the budget…we should go out to dinner!” But in reality we had spent $45
on a haircut that month, so eating out was putting us over. It was just
complicated and frustrating. Setting aside 25% for anything and everything
feels like incredible freedom. Remember, this is based on one salary only.
Everything that Braden earns we put directly into savings. So our “Future”
category is actually much larger! Even though his salary goes toward savings,
we still budget 20% of mine to go toward the future, that way we would still be
able to save without a problem if we lost his salary. We use mint.com to track
all of our expenses, set goals, and keep track of how we’re doing in the
budget. It’s super helpful and free. I check it almost every day.
PS- One more note about budgets- We budget “Braden’s Fun
Money” and “Audrey’s Glam Fund” every month. It’s a small amount ($10 each)
that we can each spend however we want. This means Braden can buy $10 worth of
gummies and I can get a manicure … completely guilt free, no questions asked!
This has helped end arguments when we disagree over luxury (by luxury, I mean
non-necessity) purchases. Maybe it will grow in the future, but right now it
allows us to indulge a little while still being disciplined. If one of us wants
a “luxury” item past $10, we run it by the other person and make a decision
together.
4. Find a way to improve your weak areas
When we first started using Mint.com, before we had a written
budget, I noticed right away that we were spending a TON of money on groceries.
I thought we were being frugal on food because we rarely ate out. It all came
back to not having a plan. I would pick up a few things for dinner on my way
home, Braden would pick up a few snacks while he was out, etc. Neither of us
were spending very much on these little trips but it was adding up to be a lot
because we were going to the store so often and we were going separately. Groceries
were our weak area. Fixing this weak area was part of having a financial plan.
In steps meal planning. The basic gist
is that we now go to the grocery store once
a week. Because we live in NYC and have to carry our groceries home, we go
together. Before going to the store, I sit down with pinterest and my cookbooks
and make a list of what we want to eat that week. I bullet any ingredients we will need to purchase. We take the list to the store
and as we put the items in the cart, we write down the price next to the item.
Before we check out we add up all the items. If we are over our weekly budget,
we put back what we can live without. If we are under, we usually don’t add
anything and know that we have wiggle room if we want a treat later in the week.
You’d think this ritual would get strange looks at the grocery store, but they
are use to us by now :) I keep the lists in a notebook so I can look back at what past meals cost when
planning. Another benefit to meal planning is we never have to wonder what’s
for dinner. We just look in the notebook! In case you are wondering, our grocery
budget for 2 adults in NYC is $75 per week. And we eat good food!
5. Don’t be afraid to ask
One last lesson…it never hurts to ask! I received a raise at work and lowered our rent increase just by asking.
If you are a hard worker at work or you are a good tenant at your apartment, people
will probably be willing to work with you. The worse thing that could happen is
they say no.
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