1. Not Having a Budget: 34 years I went without a budget and I am still alive. How about you? Do you find budgets to be a pain in the ass? Why not live live and enjoy ourselves right? I said that for years while simultaneously wondering why I had no money. I enjoyed several pay increases but never seemed to have enough cash. Damn, the budget people were right. Since starting a budget, I went from saving 0%-5% of my take home pay to 50%-60%. Nothing dramatic changed. It blew my mind when I went back to old bank statements pre-fellowship and saw that I spent $300, or $400 or even $500 a month on eating out. I would spend another $200 or more on booze at bars. I spent $500-$750 on groceries for myself alone. What the fuck was I buying????
The truth is some of us need to see where our money is going. I give myself simple goals for spending now on all major categories. I still do all the things listed above I just put limits on it. My wife does not budget at all but seems to save at about the same rate as I do. She calls it common sense but I obviously did not develop that gene.
Try tracking your spending to start. Do not put any limits on it. See what happens. You might find some good clues. After that put some soft goals in and see if you can meet them. Play with the limits and see if you cant stash some cash. If I can learn to appreciate budgeting, anyone can.
2. Not Figuring Out What Is Important: Some people say you should never eat out, never go to movies and never drink at bars. Some crucify people for getting coffee at a coffee shop. I am not one of those people. I enjoy all of the above. However; I enjoy them because I choose my moments. Let me explain. I like going out to coffee at our favorite cafe in Upper Queen Anne on a Saturday afternoon to read a book and chat with my wife. It is relaxing and we just hang out. To me it is worth spending the $2.50 for a cup of coffee. However; mindlessly buying cups of coffee on the way to work 5 days a week is not worth spending the money. I buy coffee on the way to work because I did not prepare. There is no value there except convenience. I am not hanging out enjoying time with my wife. I was lazy and unprepared. I could have brought coffee with me to work. I can drink coffee for free at work. It is about knowing what is important.
Ladies and gentlemen if you are not saving for retirement and do not have 6 months or so worth of income in the bank, you need to think your expenditures through. I am not telling you to stop having fun but get with it! Are you going out to eat for lunch everyday but then complaining about how your job is not paying enough to keep up with the cost of living?
Figure out what is important to you and spend your money there mindfully. If you like having drinks with friends on the weekends, great! Do it once a weekend and put a limit to how much you will spend. If you cant control yourself once a few old fashions are in the system, bring a limited amount of cash with you.
3. Not Automating Your Savings: I learned this lesson the hard way. If you have a 401k especially one with a match, do it! I know it seems like a financial pain but man after a while you will not notice it. If it feels easy, it is not enough! I started putting $50 a month into my deferred compensation account ,which is the government version of a 401k, at my first job. The money slowly added up and it helped with forming habits. I started getting used to not seeing the money and pretty soon I found I could add even more. If you get a raise or new job, put at least half of it in the account. Think about it this way. If you earn more money you can do 1 of 2 things. 1. Inflate your lifestyle or 2. Keep it the same and save the money.
Somehow you managed life without the extra money before so why not put it away for yourself? I get it! Life is hard and is becoming more expensive but the future you needs this money. I worked in the affordable housing industry since I got out of college. I have seen what happens to 70 and 80 year old who do not plan outside of social security. They sit in their small apartments all day with little to do and no money to go anywhere. Learn now and plan for the future!
4. Lifestyle Choices: This one is hard. I think I accumulate less shit than most people but that is probably because of traveling a lot over the years. I mentioned in the point above that lifestyle inflation can get us in trouble. I want to warn that this is not judgement. I may have not bought fancy cars,clothes or other houses but I spent enough money on eating out, booze and entertainment over the years that one might think I was an investment banker. I am not going to belabor the point but as we get older we tend to accumulate more stuff or upgrade cars and houses and lifestyles as we earn more money. We need to think a little harder about this. Growing income is great and we deserve some of the spoils but at the same time we need to think about the opportunity being given. If we are used to not making so much money, why do we immediately have to spend all the new income coming in? I took a look in the mirror this year and I am seeing a huge benefit. I am saving more than I have in my entire life. I am still having fun but with the added comfort of a nice emergency fund and retirement account.
Conclusion: This blog is not gospel which is good because I hate preaching. First and foremost I am here to hold myself accountable. I hope that giving tips might help those in similar boats. Take a look at the points above and see if you can figure out some ways that they might help you like they helped me.