Why is money such a taboo subject? You typically have to tiptoe around questions involving what a friend makes for a living, how much she spends on a big purchase, and whether or not we’re saving for retirement (or even for a downpayment in a few years). I wish people talked about it more so we could get ideas from each other and not be ashamed of how we handle our finances!
I have found it really useful to learn how other people spend their money. I’m not talking about the “experts” and their “rules” for finances. I mean how much a friend’s rent is or that a coworker puts 1% more every year towards his retirement each year. There are so many ways to handle your personal finances! And (here’s where I struggle sometimes) so many of those different ways are equally right ways to handle them.
I’m here to share how I deal with my finances. I’m just one person, but maybe this will encourage you to ask a friend what she does. Or give you an idea to try! These conversations can teach us all. Let’s get into it.
The Basics
I’ll start by sharing my basic situation. I have salaried, corporate job with full benefits. I don’t have any debt to pay off. I rent a 2-bedroom apartment in Madison Heights, MI. I started sharing a car with Hugh this January, but leased a vehicle before that. I’ve been on my own financially for just over 4 years.
3 Key Things I Do For My Personal Finances
Save for retirement
I have retirement account through my employer. I always contribute the percentage they match as a minimum. Right now, I’m actually putting away double that, so 8% plus their 4%. It’s super important to me that I have these investments for the future. I’ve found that if I never see the cash in your paycheck, I don’t miss it!
Auto-pay bills if possible
Late fees and dings to your credit score from late payments are so avoidable these days! Almost everything can be set up with auto-pay, but I still get email reminders to I’m aware of what/when it’s transferring.
Use reward credit cards
There are tons of options for reward credit cards out there. I have two that earn airline miles and one that gets cash back. The website NerdWallet is a good resource for comparing these cards and rewards. Having (and using) a credit card builds credit, but I make sure to never spend more than I can pay off each month. This is where my budget proves really helpful.
Questions I Ask Myself When Budgeting
It’s really important to me to know how I’m spending my money and how I plan to spend it throughout the year. This helps me make wise financial decisions AND let go of any guilt when splurging on something. For me, it’s (unsurprisingly) all about being intentional! I’m going to walk you through the questions I ask when I’m dealing with my budget.
1. What am I currently spending?
Establishing your current spending is a key starting point. I categorized all my transactions over several months. You can do this on credit card bills or using an app – I used Mint. Mint shows the monthly average for each category and all kinds of other trends.
2. Which categories stay the same? Which can change?
Some categories (like Rent) are the same every month. Others (like Groceries or Entertainment) are totally within my control. It’s important to remember which are flexible.
When I started out budgeting, I made the monthly average for each category the starting budget. Though I use Mint to track everything, I like also having an Excel spreadsheet for year. This way, I can easily place higher spending for categories certain months (like Gifts in January for Hugh’s birthday, when an annual subscription renews, or a planned flight purchase). It’s also just my personal preference to see it as a spreadsheet.
3. How am I actually spending compared to my budget?
I check throughout the month where I am to budget in each category. Mint typically categorizes pretty well automatically, but especially since I’ve made my own (like Christmas and Wedding), I double check every transaction. I typically look at it at least once per week so I don’t forget what each purchase was. Mint makes it really easy to compare spending to your budget.
At the end of each month, I look over how I spent compared to budget and adjust as necessary. These adjustments can be to my spending (fewer Target runs!) or to the budget for that category. As long as the totals remain similar, I have complete freedom with those flexible categories!
Those three simple questions guide me through budgeting. They’re pretty straight-forward, right? It doesn’t have to be complicated. One final thought on personal finances…
Don’t be ashamed of how you spend your money.
I felt the need to include this because I’ve struggled with shame around money and believe a lot of people do, too. I spend a ridiculous amount of money on restaurants and groceries, but that’s because they are priorities in my life! We spend more on our housing costs than certain finance “rules” tell us, but we find other areas to make up for it. It’s all about what’s important to you.
What do you use to budget?
I love using Mint, but do you use something else? Good ol’ fashioned spreadsheets? The envelope method? I’d love to hear how you handle your personal finances! We can learn from each other. Comment below!
