The Year(s) of Saving Dangerously.

Financial responsibility for the rest of us - budgeting, getting out of debt, saving money, and planning for the future.

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Hey folks!

I know it’s been a few weeks since I posted, and that would be because grad school-related stuff has been ramping up the last couple of weeks, culminating in the start of classes this past Monday.

I meant to post A LOT sooner, but with everything else I have going on, I’m going to be taking a hiatus from blogging for a while. I’m hoping that once I settle in to a groove I’ll be able to get back to posting semi-regularly, but for the time being I’d rather just put it on the back burner. 

In the meantime, good luck to the rest of you who’ve started school recently, and don’t forget to keep an eye on the budgets!

[theyearofsavingdangerously]

Who Knew Investing Would Be So Complicated? (Probably I Should Have.)

Those of you who have stuck around for a while may remember this post about my IRA, and the $1900 that was being held prisoner in it. Basically, the situation was this: I had rolled a 401(k) over into an IRA, somehow ended up with everything in bonds, and was unable to reinvest in something that would actually make me some money because I didn’t have enough invested to buy a mutual fund/index fund/other profitable thing that wasn’t stupid bonds.

After far too long with about a .01% return rate on my investment, I now finally have the option to reinvest. When I left my last job, I rolled that 401(k) into the same IRA, and am now thrilled that I can actually do something with the damn thing, instead of sitting here crying as I make pennies a year in interest.

Unfortunately, this has created a whole new problem - I have exactly zero idea what to invest in. I understand that as a general rule most of my retirement funds should be in stocks, but it turns out I can’t just contact Fidelity and do this. Instead, I have to actually select what I want to buy, which I am wholly unprepared for. There are a lot of different options - mutual funds, lifecycle funds, index funds, equity funds…the list goes on and on, and I have no idea what any of them really are. So, I’ve been doing my research, and today we’re going to talk about contender number one: target date funds.

An All-in-One Option.

To put it simply (super, super simply) a target date fund is a ‘one size fits all’ option for retirement investing. These funds include a mix of stocks and bonds, and the ratio is automatically adjusted every so often to ensure your investments grow more conservative as you near retirement age. It’s sort of like putting all your eggs in one basket, except you then hand that basket to someone else who parses them all out again, and then occasionally check back in to shuffle them around.

Target date funds are typically staggered so that one comes to maturity every five years. So, let’s say I want to retire at sixty five. I’m twenty seven now, which gives me thirty-eight years to keep my money invested in the market, and means I’ll be retiring in the year 2053. I personally have been looking at the Fidelity Freedom Target Date Funds, so I could buy a Fidelity Freedom 2050 or a Fidelity Freedom 2055 fund. The 2055 fund is a little closer to my anticipated retirement date, so Fidelity recommends that one, but if I wanted to be slightly more conservative in my investments I could choose the 2050 fund instead.

Fidelity has a neat little tool  that allows me to check and see how the investments on this fund would change if I bought one today and watched it mature until 2053. At purchase, the fund would look like this:

63% Domestic Equity Funds

27% International Equity Funds

10% Bond Funds

Now, I’m not entirely sure what those things are, but I do know that the equity funds are more high-risk and yield more aggressive growth, while the bonds are more secure. As time went on, that ratio would change, with more of my retirement cash being moved into secure investments. By the time 2053 comes around, the fund would look like this:

40% Domestic Equity Funds

17% International Equity Funds

33% Bonds

9% Short-Term Funds

With a different kind of portfolio I would have to make those changes myself, selling equity funds and buying bonds as my investments grew and my retirement drew closer. Because target date funds are adjusted without your involvement, they’re an appealing option if you really dislike the idea of actively managing a portfolio. You can simply select the fund closest to your target retirement date, and then check in every now and then to make sure it’s doing all right.

In addition to their simplicity, target date funds may be popular because they’re fairly ubiquitous - most employers will offer a target date fund option for 401(k)s, even if a good mix of other assets isn’t available. This makes it especially easy to simply choose the blanket approach and call it good.

One Size Fits All Isn’t Good for Much.

In spite of their apparent simplicity, buying in to the ease of target date funds has its drawbacks. While it may seem like a way to save yourself the trouble of tediously researching funds and selecting investments, there is a lot diversity between target date funds. The particular investments they’re comprised of can vary between providers, meaning it can take some legwork to know exactly what you’re getting, and which option is going to let you make the most out of your money.

These funds also have the opportunity to cost you more than other investments - while funds are automatically reallocated, some are not adjusted more than once every four or five years, which means you may not be getting an optimal return on your investment. These funds also tend to have higher fees than say, index or mutual funds, so you’re paying more for the convenience of not having to manage it yourself.

The other factor to consider when looking at these funds is that retirement needs are often personalized - exactly how much is needed to survive after leaving the workforce is going to vary from person to person, as are things like risk tolerance. ‘One size fits all’ rarely works in the clothing world, and it’s not necessarily a good idea to assume otherwise when it comes to finances. While it may seem nice to not have to think too much about retirement, actively planning to ensure your specific wants and needs will be met is a fairly important step in ensuring security later in life. Personally, while I can see the convenience of these funds, I’d rather put in the legwork and plan for myself, knowing that my strategy will be tailored specifically to me.

[theyearofsavingdangerously]

Even More Reasons Credit Cards Are Better Than Cash (When You Do It Right).

I don’t think it’s any big secret that I get pretty excited about my credit cards. Maybe it’s just because I fucked it all up so badly the first time around and couldn’t get one for so long, but something about using them feels pretty darn good, especially now that I can actually trust myself to do so more or less responsibly.

At this point, I use credit cards for pretty much everything I buy. What can I say? I’m a sucker for those sweet, sweet rewards points. There was a time, long ago, when I was a big fan of cash over any sort of card, but over the past year I’ve really come to enjoy just using the card for everything and knowing that the statement balance will automatically be paid in full on the due date every month. It feels even better to know that, unlike with my debit card, every time I use my credit card I’m basically earning money off of purchases I would have made anyway.

That’s Not All, Folks!

For those of us looking to assimilate and thrive within our modern capitalist, consumer-rewarding environment, it’s pretty obvious that credit cards (responsibly used, of course) can be beneficial to your wallet. You can improve your credit and earn money off your purchases, all in one swipe!

As it turns out, those may not be the only benefits to using a credit card for your everyday purchases. I recently learned that both my credit cards come with some other unexpected benefits that I figured I’d share with you today.

Rental Car Insurance This benefit was actually one I was previously familiar with. I’ve heard it mentioned that buying rental insurance from the rental company is sort of a rip-off, because most credit cards offer a certain amount of protection when you use the card to pay for the rental. I’m not planning on renting a car anytime soon, but taking a look at my own card’s policies just for funsies is what got this post started. As it turns out, both my Discover card and my Capital One card do automatically offer a certain amount of coverage when you use the card to rent a car. Discover covers damages or towing costs up to $25,000, and Capital One has the same coverage up to $50,000. Both of these are only paid after whatever benefit your main auto insurance carrier has been used up, but it does mean you can skip the extra coverage the rental agency will try to sell you.

Price Protection As it turns out, both my cards also offer price protection - the benefit differs a little between cards, but both provide me with the opportunity to get some money back on recently purchased items if I find a better price. Discover will refund me a difference of up to $500 if I find a lower price anywhere within ninety days, and Capital One will refund me up to $250 if the product goes on sale within sixty days. That’s just a little better than the one week window for price matching that most stores offer.

Extended Warranties Both my cards also offer extended warranties for things I purchase, as long as the manufacturer warranty is for three years or less. Both Discover and Capital One offer an extra twelve months of coverage, with a benefit of up to $10,000.

Purchase Protection and Return Guarantee These two are both unique to my Discover card. With their purchase protection, any item is automatically covered for damage within the first ninety days of purchase, up to $500. This means that if, for example, your asshole cat decides the brand new bluetooth headphones your husband bought you to wear running are a perfect chew toy and bites so many little holes in the cord that they no longer work, you can get your money back to have them replaced! Similarly, the return guarantee offers the same amount of coverage ($500) if a store won’t allow me to return an item I decided I don’t want. This would have been useful for me in the old days, when I made a frequent habit of picking up clothes on final sale because they were cheap, only to wish I could take them back when I realized I didn’t actually like them all that much.

Flight Insurance Apparently, both Discover and Capital One also want to be there for me should I or a loved one be mangled or die a fiery death in a plan crash. Both cards offer insurance that covers injury or loss of life during airline travel, presuming of course that the full cost of the fare was paid for with the credit card. I have to imagine this is a benefit that doesn’t get used often, which explains why they’re able to offer a benefit of up to $500,000. While slightly morbid, and not a benefit I ever hope to use, I guess it’s nice to know that if I go down in flames Discover will cover the funeral expenses.

Capital One and Discover aren’t the only cards to offer these types of benefits, either. Chase and Citi both offer some perks like extended warranties and rental car coverage. Of course, all of these perks come with an annual maximum benefit - for Discover I’m limited to $10,000 annually for the price protection and purchase protection, but I can’t imagine I could possibly ever need more than that. If you’re shopping around for a credit card, it might be worth your time to take these extra perks into consideration before making a decision. If you purchase a lot of electronics or appliances, the price match and extended warranty may be really helpful. And, if you already have a card you’re happy with and you haven’t checked in on these complimentary benefits, it’s definitely worth taking a look to see what you’re missing out on.

[theyearofsavingdangerously]

Overdraft Protection and Courtesy Pay (aka More Ways to Spend Money You Don’t Have).

Folks, it has come to my attention that I must be crazy.

Let’s back up a little, shall we?

After much procrastination, I finally went down to one of the local credit unions and opened an account. I’ve mentioned my love of credit unions before, but one of their few disadvantages is that unlike big banks they tend to be regional instead of national. I did have some shared branching options in my new area that would have allowed me to make deposits or withdrawals, but I wasn’t enthused by the prospect of having to phone up my old branch and jump through hoops if I ever needed to do something like replace a card or open a new savings account. So, I closed my accounts right before leaving town, and once my internet here was (finally) installed, I got to work researching some of the local options. I’m honestly not that particular about who I go with - interest rates aren’t a big concern of mine since I don’t keep much sitting in checking or savings, so I just opted for the closest option that had free checking and good member reviews.

Setting up an account was, in and of itself, a relatively simple process. I handed the nice lady my ID and the check I wanted to deposit, she had me sign a couple of forms, and suddenly I was the proud owner of brand new checking and savings accounts. She printed me off a debit card, and then went over all the wonderful benefits my checking account came with. A couple of those benefits happened to be courtesy pay and overdraft protection services, which I promptly asked to opt-out of.

Apparently that’s ridiculous, because she looked at me like I had three heads.

I have to assume that people don’t often ask to opt-out of these services, because when I first opened an account at my old credit union I actually had to argue with the representative for close to five minutes before they gave up trying to make me sign the forms to enroll in overdraft protection and courtesy pay. I think must have been the first person in the history of their organization to actually want my card to be declined if I didn’t have enough money to cover a transaction. Oh, how insane I must be to not want to pay $35 for the privilege of spending money I don’t actually have.

Oh, Courtesy.

For those of you who have no idea what services I’m talking about (which is probably like, one of you, but whatever) allow me to review. Overdraft protection is a service that automatically transfers money from your savings account to your checking account if you don’t have enough to cover a transaction (for a fee, of course). Courtesy pay is a service that allows you to overdraw your checking account instead of having a card declined or a check returned (for an even bigger fee). The actual charges are going to depend on your financial institution, but in my experience the transfer fee is usually between $5 and $10, and actual overdraft fees range from $25 to $35.

In theory, these services are supposed to be a good thing. They’ll spare you the embarrassment of holding up lines if your card gets declined, and let you avoid NSF fees for checks that would otherwise bounce. These are, in fact, the points that the representative at my first credit union made over and over and over again when arguing why I should enroll in those services. Personally, I’m not buying it.

Back when I was a young and fiscally-irresponsible thing basking in the glow of my first bank account, I took advantage of these services. I took advantage of them a lot. I could never keep any money in my savings account because it was soooo easy to simply spend it via my checking account, no trip to the bank or online login required! I lost at least $35 every paycheck because I sucked at keeping track of my account balance and inevitably ended up overdrawing on little purchase I was sure I had enough to cover. While it was great for a while, I eventually started to get pretty pissed every time I realized I was out thirty-five bucks because of some tiny miscalculation, and I’ve been doing it ever since.

A while back I actually had this decision validated. Some big jerk stole my debit card information and tried to put through a bunch of charges on my checking account. Unluckily for them, there wasn’t much money hanging out in my checking at that time in my life, so all the charges got rejected. I did, however, have a decent amount in my savings account. If I’d had courtesy pay set up, they would have gotten all of it. Now, banks generally reimburse you for fraudulent charges, so it’s not as though that money would have been lost forever. However, it was still nice to be able to alert my bank, get a new card sent out, and not have to go through twenty-million steps or a long waiting period to get those funds back.

There’s Probably Money In It.

Call me jaded, but I have a sneaking suspicion that these services are less about helping you, the consumer, and more about making the banks (or credit unions) money. And why would you want to give them any more money than you have to? Oftentimes these services are presented as potentially saving you money, for example by allowing checks to clear so you don’t have to pay an NSF fee. I’m a little confused by this one though, because from what I’ve seen an overdraft fee is generally higher than an NSF fee, so unless you’re planning on having the same check be returned more than once, you’re not saving anything. And it’s not as though it’ll cost you anything but a little bit of pride to have your debit card rejected.

If I’m being honest, these services just strike me as one more thing that subtly encourages a culture of overspending, much in the same way the encouragement to buy things on credit does. And just like credit, all you’re really doing if you use these services is borrowing from your future self, and paying for the privilege of spending money you don’t have. What a racket.

[theyearofsavingdangerously]

Hey Folks!

I know it’s been quite a while since I posted. Moving was, as expected, a pretty big pain, and trying to get settled hasn’t left me with a whole lot of time (or energy) for writing. 

That said, I finally have my internet hooked up and the majority of my boxes unpacked, so I’ll be getting back to it and slowly trying to build up some momentum again; you can look forward to a new post or two by the end of the week. 

In the meantime, maybe now is a good time to go back through the archives and refresh yourself on the importance of budgeting, or maybe renew your love for You Need a Budget? 

[theyearofsavingdangerously]

Bonus to Being On Top of Your Finances: No Holding Up Lines!

A couple of days ago I had to make a late-night run to the store. Of course, I ended up at Walmart, because that’s about the only place near my house open after midnight, and in spite of the late hour there was also an inexplicably long line at the one register that was open. Fantastic, right?

Even better, the people in front of me kept having their card declined. I wound up having to wait there for ten minutes to buy one stupid thing, while they got on their cell phone and wandered off to try and transfer money or check balances or something along those lines, and the poor cashier tried to flag down someone who could suspend the transaction for her.

Now, I want to be very clear - I’m not judging those people for their card getting declined. It happens. I’ve been there - we probably all have, at one point or another. I was slightly annoyed, but I kept it to myself and took advantage of the adjacent magazine rack to catch myself up on what our current pop culture icons are up to. However, while I was politely ignoring the concerned whispers of the customers in front of me, and the cashier’s frantic shouting for assistance, I got to think that this wouldn’t have happened if they had a good system for keeping track of their finances. If those people had You Need a Budget, or a spreadsheet, or even a good old pen-and-paper budget, they’d have known there wasn’t enough money in whatever account they tried to use, and would have either transferred some funds before heading to the store, or scaled back their purchase. It was all I could do to keep myself from preaching the gospel of financial responsibility right there at checkout stand 15.

I know there is a small chance that it was a bank error - my husband’s bank likes to freeze his credit card whenever he uses it to buy things from overseas (a not uncommon occurrence) - but that wasn’t the impression I got. In the end, the cashier got the transaction suspended, and I was able to escape from Walmart relatively unscathed. And the whole situation just made me appreciate that financial planning has left me with one less negative possibility to worry about.

[theyearofsavingdangerously]

Moving On the Cheap.

So, in just a few days, that move I keep mentioning is set to happen. A new place to live has been secured, my current landlords have been given notice, my house is half-packed, and I am, of course, filled with dread.

I don’t think anyone is going to argue that moving sucks. I’ve done it several times before, and I never particularly enjoyed it. This time, however, I’ve taken a particular interest in the financial logistics of relocating and realized that not only is moving soul-sucking and awful, it’s also stupidly expensive. I mean, I knew it was expensive before. But now that I have more perspective, those numbers carry more weight.

The High Cost of Having Stuff.

Over the course of my adult life, I have somehow managed to accumulate a lot of stuff. I’m going to go ahead and blame part of it on my husband, who collects things for somewhat indiscernible reasons (though, to be fair, we do have some great decor thanks to him). I’ll even take the blame for my own fair share - that predilection for retail therapy I’ve mentioned before left me with an obscene amount of clothing. I parred it all down before packing and wound up with five big trash bags to donate, and still somehow packed a huge suitcase, four space saver bags, and two big boxes with nothing but my wardrobe. We’ve also got the usual stuff - furniture, TVs, an obscene amount of small appliances, you get the idea. It’s a lot, and though we did clear out what we don’t need to keep, we’re still taking so much with us.

When I first started planning to haul all my crap to another state, I had this romantic notion that we’d just hire one of those companies that does it all for you. We’d just box it up, and they’d come load it, haul it, and unload it for us. Bam! Stress free. I figured it couldn’t be that much more expensive, right? Oh, how wrong I was. After calling around and getting price quotes in the several thousand dollar range, I resigned myself to the stress of doing it all on our own. It still hasn’t exactly been cheap, but it’s a far cry from thousands of dollars, so I’m going to try not to complain too much.

Save Money on Your Move.

After realizing moving was going to be expensive no matter which way I cut it, I did take a few steps to try and keep the costs down, so I figured I’d share them with you.

Beg everyone you know for boxes. Okay, so maybe don’t beg. But moving requires a lot of boxes and while you can just buy them, the costs add up. I lucked out by having a couple friends in a position to hook me up with a bunch of nice boxes. I still ended up having to purchase a few, but I probably saved at least $60 on boxes getting most of them for free.

Shop around for your truck rental. When I initially started looking for a rental truck, I went straight to U-haul. I’ve used them before, and they’re a name I’m familiar with. Once I’d gotten a quote and compared them to a couple other options, however, it turned out they were a couple hundred dollars more expensive than renting a Budget truck. Also know that when you’re renting makes a difference in the price. When I was scoping out U-haul the price for a truck was the same no matter what day of the week you rented, but the cost per mile was $.20 more on the weekend. That may not seem like a lot, but for a 450 mile trip it was about $90 cheaper to move on a weekday.

Scrounge for packing materials. Making sure breakable items are safe on a move is an important priority, but buying bubble wrap or paper sheets for wrapping that stuff up can get expensive fast. I did end up having to pick up some packing paper, but not until I’d exhausted my supply of towels, old newspapers, and crumpled wrapping paper.

Consider just selling all your stuff. I know I thought about it. This obviously isn’t a good option for someone like myself - it’d be a lot of things to replace, and my husband would probably kill me if I tried it - but if you’re living on your own and haven’t accumulated an overwhelming amount of crap, it may be more cost effective to skip renting a truck and just sell anything that wouldn’t fit in your car and just replace when you get to destination. Not for everyone, certainly, but if you’re one of those people who doesn’t own much more than a bed and a couch it’s definitely an option.

Or, if you prefer, just settle in where you are now and vow to never, ever leave. I promise it’ll be easier for you.

[theyearofsavingdangerously]

Maximize Your Drunk.

In planning for my going away party, I stumbled across this great site  that not only tells you what cocktails you can make, but also how to maximize the number of cocktails you get. Just think - that buzz will be far sweeter when you know how cost effective it was!

[theyearofsavingdangerously]

If You Can Only Do One Thing...

Over the past year, I’ve doled out a not-insubstantial amount of advice. I’ve even followed some of it. Now - in the wake of the monumental occasion that was one whole year spent blogging on the incredibly stimulating and very exciting topic that is personal finance - I’ve been thinking a bit about which piece of advice was the most important. The odds are you can follow more than on piece of advice, more than one strategy, when it comes to getting your finances in order. But what if you couldn’t?

If You Can Only Do One Thing…

Save money.

I’ve been thinking about this long and hard and, really, saving money is what it’s all about. It’s the whole reason finance even matters. All the other rules and guidelines are there to (you guessed it) help you save money.

Let’s really consider this for a moment. Why do you budget? So that you know where your money is going. Why do you want to know where your money is going? So it doesn’t all slip through your fingers and leave you sad and penniless. What’s the opposite of being sad and penniless? Being happy with some money in your pocket. This is pretty much the same reason to avoid getting in to debt - you end up paying for it down the road with cash that could be getting nice and cozy in your emergency fund or savings account or 401(k) or mattress or whatever. And that’s the dream.

Having extra money sitting around (figuratively or literally - that’s your call) is pretty much never a bad idea. It gives you a little wiggle room. A little extra freedom. Some peace of mind when something unexpected happens. So, I’m going to say it again. If you only do one thing, start putting some money aside. It should be evident that I’m a big fan of doing a little more than that, but if you’ve really thought about it and decided that financial responsibility just isn’t for you, at least start tucking some dollars away. Rack up the credit card, spend everything else on frivolous crap, but at least make sure you’re tucking a few dollar bills into a jar before you head out to blow the rest of your paycheck.

And, if you’re gonna go that route, maybe make sure you’re hiding it all somewhere discreet, in cash, so that when you inevitably declare bankruptcy it doesn’t get counted towards your assets and taken away.

[theyearofsavingdangerously]

Happy Anniversary (A Reflection).

Folks, today marks the one-year anniversary of The Year of Saving Dangerously.

Holy cow.

First off, I want to you all for actually reading. When I first got started I figured I’d wind up with about three readers, and one of them would be my mom. Now I’m creeping up towards two-hundred which, while not incredibly impressive, is definitely enough to give me a nice ego boost and some motivation to keep writing.

You’ll have to forgive me for today’s post being a little heavy on the navel-gazing, and probably somewhat self-congratulative. I’ve got some serious feels about the fact that 365 days ago I made my first post. It seems like so long ago I was outlining my irresponsibly-earned debt, my impulsive spending habits, and my concerns about going off to graduate school (still just a hope at that point) with nothing in the bank. It’s been a long, wild ride (as wild as personal finance can be, anyway), so of course I’m going to take today to wax poetic about the journey and reflect on how my relationship with my finances has changed.  

Goals Set, Goals Met?

Of course, the obvious thing to do would be to check in and see exactly where I sit in relation to those goals I set last year. And, that’s exactly what I’m going to do. My goals at the time weren’t incredibly specific, but they did exist. So, where are we?

Writing more. One of my main reasons for starting this blog was completely unrelated to personal finance - I wanted a reason to write more. When I first put together The Year of Saving Dangerously, I had a handful of blogs under my belt, none of which made it past their fifth post. I figured that documenting my journal towards financial responsibility was as good an excuse as any to turn an on-again, off-again (mostly the latter) hobby into something I did consistently. Fun fact: over the last year I have written 53,384 words for ya’ll. For reference, that’s three thousand more words than were contained in the questionable novel I wrote in my youth, making this the longest writing project I’ve ever worked on, in terms of both word count and time spent. I’m going to go ahead and chalk that one up as a victory.

Building some savings. My next major ambition - this time actually finance related - was to get money set aside for graduate school. As much as I wish I could say I got this one in the bag, that would be a bald-faced lie. What I have is the tiniest of emergency funds - enough to maybe cover me if a cat gets sick or some other unexpected expense crops up. On the plus side, I’m getting fully funded for my graduate program, which makes this a significantly less important goal to have achieved. I guess I’ll call this one a draw.

Paying off debt. When I first got going, this was one of my major goals. I had an overwhelming amount of debt, split between credit cards from my irresponsible youth and student loans from that less-than-marketable liberal arts degree. I hadn’t paid on the credit card debt in years, but my student loans were in good standing and I was hoping to make a substantial dent in them. In this case…I didn’t get very far. I’m a little ahead on my student loans, but not by much. And, while technically I am free of credit card debt, it’s only thanks to the reporting period for delinquencies running out. The credit card debt is gone, but not actually paid. I’m probably going to have to consider that one a failure.

Unexpected Victories.

Despite the fact that I make it sound as though I’ve accomplished nothing financially, there were quite a few benefits to this whole focus on finances. I’ve learned a heck of a lot about managing money, and I’ve seen some substantial changes in the way I think, feel, and act about money. Some of those benefits?

My credit score rocks. A year ago, my credit score sucked. I could barely get approved for a not-great credit card. I had some hope that I could improve it, but I didn’t expect much. Now, of course, I know that my credit score is not anywhere near as important as my credit report. However, that doesn’t make it feel any less good that over the last twelve months mine has crept from a 600 upwards of 750.

I rarely make impulse purchases. Buying things just for the rush of purchasing a new shiny was my biggest spending problem a year ago. I’d buy things I didn’t need, or hadn’t planned on buying, just because they caught my eye for a moment. Retail therapy was my coping mechanism of choice, and if I was stressed about something there was a good chance I’d end up coming home with a bag full of something, a lot of which I never even used. When I started budgeting, I was pretty much forced to pre-plan my purchases. I do still have a little bit of money to play with, and I’ve accounted for that, but since my last big moment of weakness around Christmas, I don’t think I’ve bought anything on impulse that cost more than five dollars. Basically, I accomplished this by channeling my purchasing impulse in to less destructive behaviors; my husband makes fun of me for how much time I spend building and managing my Amazon wish list, but at least when I buy something off of it I’ve considered it for months and budgeting the money out.

I am WAY less stressed. Despite having heard to the contrary, I sort of expected budgeting to be stressful. And it was, at first. Seeing the stark actuality of what was coming in and what was going out was sort of a nasty shock after years of spending and spending and letting the chips fall where they may. Fortunately, after a few months that passed and it just became another system for making my life easier. Paying bills stopped being a cause of stress, because I knew the money was there. Once I learned to trust myself to have the money set aside, I was able to put everything on automatic payments and just let it go. (PSA though: even if you’re on autopay, look at your damn bills. There’s nothing more annoying that having to argue with someone who’s pissed because their bill went up six months ago and they’re just now noticing.) Not only is it one less thing that I have to worry about, but it since the money was getting budgeted as soon as it came in, it eliminated the sense of loss I used to feel watching cash go towards boring things like electricity instead of cool things like coffee and shoes. Basically, instead of my spending restraint being always on my mind, it faded to the background and financial responsibility became just another part of life.

And then some.

Obviously, there’s about a million other things I’ve learned over the last year. And don’t worry, I’m sure I’ll be milking that for the next couple of weeks as I struggle for post ideas. But for now, there you have it: even if you suck at meeting goals, it’s completely possible to see at least some benefits from getting aboard the fiscal responsibility train. Who knew?

[theyearofsavingdangerously]

I <3 Costco (and Free Samples).

Folks, let me tell you something: I love Costco. My father, the frugal fellow that he is, has had a membership for as long as I can remember. When I was growing up there’d be one weekend a month when we would all pile in to the car and make the long, long drive to the nearest warehouse. (To be clear, we weren’t taking a road trip just for Costco - we lived in the middle of nowhere. Going anywhere was kind of an event.) My dad loved it because bulk goods were cost effective, and (at the time) I loved it because of all the free samples.

After I grew up and moved out of my parents house, I didn’t go to a Costco for years (save for that one time me and a friend snuck in specifically for frozen yogurt at their snack bar). Apartment living wasn’t really conducive to bulk buying, and I could never justify the $55 for a membership when I didn’t think I’d be able to pick up enough to make it worth it.

Then, a couple years ago, my husband and I upgraded to a house, and for the first time in my adult life buying in bulk seemed feasible. We talked and talked and talked about getting a Costco membership, but we are both expert procrastinators. Then, father to the rescue. My dad came to visit a few months after we had moved into our house, and I off-handedly mentioned that oft-discussed, never-realized plan for a membership. It turns out that my dad was only taking advantage of one of his two available membership cards so, being the awesome guy that he is, we went down to the Costco, they snapped my picture, and suddenly I had my own pass to roam free through the giant warehouse of awesome. I was in heaven.

Then…not so much.

What the F*@# Do You Buy?

The first time my husband and I ventured into Costco to stock up on bargain-priced bulk goods, we had no real plan. Oh you know, I had thought to myself, bulk stuff. We’ll get some paper towels or dry/canned goods and we’ll just avoid anything that isn’t a good deal. The problem, it turned out, was that I had no idea what was a good deal.

Since this first adventure took place before I had really started tracking my grocery spending, I couldn’t have told you how much I paid for most things at the regular grocery store. I must have spent five minutes staring at the eggs, trying to gauge how certain I was that I normally paid less than $3 for an 18-count carton of eggs. This paralyzing uncertainty hit again minutes later, when I was trying to figure out whether $5 for a gallon of coffee creamer was less per ounce than what I usually paid for whatever the volume of a normal-sized container was.

We fumbled through that initial trip blindly, making less-than-educated guesses, and in the end the amount of money we spent was nothing short of ridiculous. As it turned out, some things were cost-effective (the coffee creamer), and some things were more expensive at Costco than my regular store (eggs). Some things were reasonably priced novelties, but things I would never have bought, or been able to buy, at another store (a rack of the glass-bottle Coca-Colas, made with the real sugar).

This can’t be right, I thought. This was supposed to save money.

Do Some Research.

Given the sticker shock that came with our initial bulk-buy experiment, it took some time for us to work up the nerve to try again. Luckily, this was about the time that my penchant for meticulous planning was reaching full swing, so I spent a little bit of time looking in to what was actually a good deal, and what was just going to cost us more money. After much research, careful planning, and a few successful shopping trips, I’ve come to a few conclusions.

Bulk buying produce is a terrible idea (for us). While a lot of people vouch for Costco’s produce, there’s just no way for my husband and I to make it cost effective for the two people in our household. If we had kids, or did a lot more involved cooking, it might work out. If you have a lot of freezer space, you can try cutting up and freezing fresh fruits and veggies for later use. Personally, freezer space is the one thing I lack, and I have a bad habit of letting regularly quantities of produce go bad in the fridge, so I skip it.

Pantry staples are where it’s at. Rice, olive oil, oatmeal - these are things that I really save money on. I’m a little freezer-poor, but I’m cupboard-rich, which makes storing these types of things easy. They also last a long time, so it doesn’t particulary matter that I’m often fickle about cooking regularly. And the savings are obvious - you can get a huge bottle of olive oil at Costco for close to same price you’d pay for a normal size bottle at the grocery store. I paid $10 for ten pounds of basmati rice that would have cost $2.50 for a one pound bag where I regularly shop. If you’re a sucker for pre-cooked bacon like I am, you can get a huge package for only $2 more than the pathetic little boxes they sell elsewhere.

Household stuff is hit or miss. I haven’t found paper towels or toilet paper to be any better than what I can get elsewhere, but dishwasher detergent is a great deal, as are trash bags. Last time I was there, I picked up a six-pack of my deodorant for the price of two sticks at my local Walgreens. Again, this is one of those situations where you’ll really have to know what you usually pay to gauge whether or not it’s a good deal.

Sticking to the list is a must. One of the things that killed my husband and I on our first shopping trip was being suckered in by everything that looked like a good deal. Some of it we used, but a lot of it was stuff we would never buy on a regular shopping trip. Now when I go in to Costco I force on my blinders and try not to look at anything that isn’t on my list.

If You Have Storage Space, You Can Definitely Save Money.

I know it’s sort of a cop-out that my dad is paying for my Costco membership, since it does eliminate the question of whether or not the money I save is worth the $55 membership fee. However, I can say that if for some reason he needed the second membership card for his own household again, I wouldn’t hesitate to go shell out for my own.

If you have the room to store things in bulk, you can definitely save more than $55 with a Costco (or comparable bulk-buy) membership. I’m fairly certain I’ve saved that much on olive oil and bacon alone over the last year. Plus, you know, there’s free samples.

[theyearofsavingdangerously]

Buying Isn’t Necessarily Better.

A couple days ago, my husband and I signed a lease for the house we’ll be renting while I go through my Master’s program. Alongside worries about whether or not I can get all my stuff packed up in three weeks without having a panic attack, I’ve also been feeling a little down about my perma-renter status. Two of my friends have bought houses in the last couple of years, and a third just announced she’ll be completing the purchase of her first home at the end of the month. While I was never super attached to the idea of home ownership, I do sometimes feel a little melancholy about the fact that it’ll be years before I could even consider owning instead of renting.

Owning a House is the American Dream.

Home ownership is pretty highly valued in our culture. It’s a place of your own, an asset, and an investment. Your own little square of land with a white picket fence is a symbol of success, a sign that you’ve made it. Renting, in comparison, is simply throwing money away. You pay and you pay, and you wind up with nothing to show for it.

If you’re currently renting, you might have some idea what I’m talking about. It can be a bit of a bummer to be at the mercy of a landlord, knowing the price could change at the end of the lease, or that the property could be sold. And then there’s the lack of customization - you’re pretty much out of luck if the carpet is a particularly unpleasant shade of brownish-gray, or the smallest bedroom is, illogically, the one with the attached bath, or the tiles in your kitchen are, for some unexplained reason, adorned with hand-painted cornucopias.

My point is, renting can be a little bit of a bummer. But if you’re like me and looking to feel a little better about it, you can at least take solace in learning that a house isn’t always as good of an investment as everybody claims.

Buying a House Is Not the Same as Investing in Real Estate.

Let me be clear here: buying a home is not the same as buying property as an investment. If you’re buying property as an investment you’re generally considering renting it for income, or turning around and selling it at a profit. For some reason people always want to refer to a house as an investment despite the fact that it’s probably not going to make you money.

You will still be building an asset, of course. The money you pay towards a mortgage helps you build equity, and at the end of that thirty years you have something you can leave to your children, or sell to help fund your retirement, or burn to the ground just for fun. It’s yours - you can do what you like with it. None of that makes it an investment. Calling it that is disingenuous at best and stupid at worst - most people do not buy a house to make a profit, which is the principle purpose behind investing, and that mindset has driven better folks than you to purchase a home without truly considering all that goes into it.  

Buying a House is Not Always the Most Cost Effective Option.

I’ve heard, more than once, that if you could get a mortgage paying equivalent to what you’re paying in rent, then you might as well buy.

No. Just no. Ignoring the huge chunk of cash you have to come up with for a down payment, there are a ton of other costs that go in to home ownership. Most rentals won’t require you to pay for maintenance, like replacing that broken faucet or fixing the wiring to that light in your bedroom. You also don’t have to pay annual property taxes on a rental. There are a ton of costs to home ownership that are a non-issue when you’re renting, and you have to consider all of them before you can conclude that purchasing is the best option.

Renting may also be a better option if you don’t plan on staying in one place for at least a decade, preferably longer. Between closing costs, the ridiculous amount of interest paid towards a mortgage, and costs to sell, there’s a good chance that if you’re not buying for the long haul you’re going to be out money when comes time to move.

Then, of course, there’s the general risk. Home values go up and down, and you always run the risk of winding up with a mortgage that’s more than your house is worth. Maybe interest rates right now suck, and it’d be more cost-effective to wait until they go down. My real point is that it’s not nearly so cut and dry, and the banes and benefits of owning versus renting are going to depend a lot on both your particular financial situation and the market in your area.

Just Something to Think About.

Obviously, buying a house isn’t always a terrible decision. Neither is renting. Right now I’m mostly trying to make myself feel about the extreme length of time before I can even start considering whether buying a house is a financially sensible thing to do. Some of these facts do, however, make me feel a lot less like I’m “throwing money away” on rent, since even if I could buy a house I’d be out money when the time came to move.  

And, if you’re seriously considering buying a house and want to decide if it’s better to buy or rent in your area, The New York Times has a handy-dandy tool to help you decide.

[theyearofsavingdangerously]

Let’s Talk About Money.

Today I want to talk about talking about money. That’s right - we’re going meta.

Traditionally, discussing finances is something that’s generally considered taboo in American culture. I was raised to believe it’s considered rude to ask someone how much they make, or what sort of down payment they put up for that starter home or shiny new car. And I’m not the only one - ask a coworker their salary, and there’s a good chance you’re going to get some funny looks. Finances aren’t typically something openly discussed, and information about our personal economic situation is something that’s even less frequently volunteered. I’ve gotten more unsolicited information about my friend’s sex lives than I have about their bank accounts.

We Acknowledge the Taboo, Even When We Break It.

When I first started my last job, one of my coworkers had just recently moved to the area from the East Coast with her husband. The move had been somewhat spontaneous, and they were staying with family until they’d both settled in to their jobs and found a place to live. I invited her over to my house one evening, and after giving her the tour, introducing her to the cats, and making general chit-chat, she hesitantly asked if I minded her asking how much my rent was. It was a personally logical thing to ask - she was new to the area, didn’t have much idea how much places went for in the area, and was soon going to be looking. My house is relatively nice, and the area we live in has a lower cost of living than the national average, so it would be a good gauge of what she’d wind up paying when she and her husband moved in to their own place. Sure, she could’ve gone online and spent some time researching the cost of comparable places, but it’d have been a lot of extra work compared asking a simple question.

My point is, it made sense for her to ask, and even then her hesitation was palpable. She knew she was asking a question that was generally considered taboo. And even though my generation seems to be less uptight when it comes to talking about money, that acknowledgment is something I tend to see  when people do dare to bring up the topic of finances. I see it when I’m asked about my rent, or how much my job pays, or what my car costs. There’s a moment’s hesitation, a lowering of the voice, a lack of eye contact, and the inevitable preface of “if you don’t mind me asking…” It’s fairly consistent, whether it’s someone I’ve barely met asking, or someone I’ve known for years.

This attitude isn’t a surprise - I was raised by my parents to believe that asking people about money, whether it’s how much they make or what they paid for a house or a car or just about anything, was rude. The larger the amount, the more taboo it seems to be. Asking someone in a low-paying job what their hourly wage is generally seems to be more acceptable than asking someone what their yearly salary jumped up to after that promotion, and asking your friend how much those cool shoes cost is generally considered less rude than asking what sort of down payment was required for that starter home.

Not Talking About Money Hurts Us.

This is an important thing to acknowledge, because discomfort talking about money can often lead to discomfort managing money. This isn’t the case one-hundred percent of the time; there’s obviously individuals out there refusing to discuss finances while still squirreling money away and managing things responsibly. But I do think that not wanting acknowledge finances openly is a big contributor to consumer debt. When it’s hard to talk about finances, it’s hard to openly say “I can’t afford it” when you’re invited to dinner at that ritzy restaurant. If your buddy George is constantly buying a new car or the latest gadget, you might get sucked into keeping up with the Joneses, when a simple discussion could reveal they’re buried in debt because of that lifestyle. Money is also one of the leading causes of conflict in romantic relationships, likely because tensions are already running high the moment the subject is broached.

Not talking about money keeps us from helping each other, and keeps us from asking for help. Money problems can be incredibly stressful, and while there are a variety of resources available in print or online that can help manage the problem, there’s often little emotional support available. Most people wouldn’t hesitate to discuss relationship problems or health issues with a close friend, but because financial success is so often used as a measure of our worth, admitting to mismanaged finances or unexpected financial burdens is something many people won’t do.

It isn’t just in our personal life that the money taboo may hurt us, either. In our current economic system, employers benefit as well. If you don’t know how much your coworkers are getting paid, it’s easier for your boss to pay you less. Of course, not knowing how much anyone else is making will, in turn, make you less comfortable with the idea of revealing your own salary. What if you’re making substantially more than Bob in the next cubicle? He’s bound to feel bad. Or, even worse, what if he is making more than you?

Get Comfortable.

I’m lucky in that my family was always pretty open about money. While my parents definitely stressed that it was rude to ask about other families’ financial situations, they were never shy about stressing why we couldn’t afford something. My dad was pretty open about saving for retirement, or how much he made every month, and in general they made a pretty good effort to teach me the basics of financial responsibility (I.e. I can’t blame them for the debts I racked up in my careless youth). Not only has this left me more prepared to manage my money than some of my peers, whose parents kept everything to do with a money a big secret and never even addressed things like saving for retirement, it’s also left me comfortable discussing finances. Now, I don’t put everything out on the table - my husband had an upbringing almost the exactly opposite of mine so I maintain some discretion for his benefit - but I’d happily tell someone how much I make, or discuss my retirement savings strategy (obviously).

While I’m not advocating that you go around telling everyone you meet about your financial situation, I’d definitely advocate continuing the trend of loosening our tongues about money. Given the current economic climate of high debt, especially student loans, and lower wages, coming together to talk about money may not only help us as individuals, but could also help affect a larger change.

[theyearofsavingdangerously]

Reading List (Blog Edition).

While I like to think that all of my fantastic advice and wealth of knowledge is the sheer result of my genius, the sad truth is that I have to get my information somewhere. Though I hate to point you towards the competition, I thought today I’d roundup a list of some of the other personal finance blogs I read. (I’ve actually had a similar post in the works with personal finance books for a while, but that train derailed when I made the mistake of picking up ASOIF to read. Current estimates suggest that post will be published around this time in 2018.)

I’m actually subscribed to quite a few finance blogs, but for right now I’m just going to leave you with my top five.

Fun, Cheap, or Free

This is the personal blog of Jordan, the self-crowned fun, cheap, or free Queen. I’ll admit I raised an eyebrow at that description, but this particular blog has actually turned out to be one of my favorites. It has a ton of content with tips on how to be frugal in pretty much every area of your life, without turning into a weird miser.

It focuses a lot on managing finances for a family (you know, the kind with kids instead of cats), but there are loads of actionable suggestions no matter what your household looks like. Almost all of the strategies I use to save money on my groceries came from here, and if you’re looking for day to day ways to save, Jordan’s got you covered.

MintLife

Yes, that’s the same Mint who’s app I keep talking about. Not only are they making it easier to keep track of your finances, they’re also making it easier to know how to manage them. Their blog offers  a lot of quality information, but the aspect I enjoy most is that they regularly post success stories so that you can be inspired (or shamed) by other’s personal finance achievements.

Dave Ramsey

You might be familiar with this guy - Dave Ramsey’s made a pretty big name for himself in the personal finance circuit, complete with books, seminars, you name it. I don’t personally agree with all of his strategies (like avoiding credit cards - or any kind of debt - completely), but his site is an invaluable resource, especially if you’re looking to dig your way out of debt. The advice offered is always solid and to the point, and covers just about anything you might encounter in your personal life.

Get Rich Slowly

This site covers a huge range of topics, so you can find advice on just about any situation. Personally, I like that it has a ton of content focused on big picture decisions and long-term strategies. Even better, everything is written in easy to understand language - especially helpful if you’re looking at any sort of investing.

Mr. Money Moustache

To be honest, when I first checked this out I really, really hated the whole vibe. At first glance, this entire site has some weird, ultra-masculine hipster thing going on, and I just wanted to run away. Instead, I kept reading.

I like this blog for a few different reasons. For one, it’s different than most of what’s out there - not only in tone, but also in focus. Instead of focusing on budgeting responsibility so you can retire at 65, this site focuses on helping you achieve financial independence as soon as possible. Want to get out of your dead end job at 40? This is the place to find out how. I also have to appreciate the complete lack of sugar-coating on any subject.

While I’m not actually aspiring to be financially independent before standard retirement age - I still have a hope that I’ll actually enjoy my career - I do keep coming back to Mr. Money Moustache, intrigued by the concept.

If you’re still working on increasing your financial literacy and money management skills, definitely check some of these out. And if you have a blog you love that I haven’t mentioned her, definitely send it my way!

[theyearofsavingdangerously]

Working for Peanuts.

I’ve got to be honest with you all - I am really, really enjoying unemployment. I go to bed when I want. I get up when I want. I haven’t had a real obligation to attend to in weeks. It’s glorious.

I have, however, run into one teeny drawback: I’m not bringing in any money.

Shocking, I know. Who would have seen that coming? You quit your job and all of a sudden they stop sending you paychecks. It’s just plain rude.

I go through the income-withdrawals every time I’ve ever faced an extended period of unemployment. I’m fortunate enough to have my husband, so we can do okay without my income if we watch our spending, but it gets old after a while and I start to crave at least a little cash of my own. Inevitably I always reach the same conclusion, which is that I need to start writing for pay. And why not? I do it for free on a regular basis. I’ve got a fairly solid command of the English language. Obviously I can freelance!

This summer marks my fourth stint of unemployment in the last seven years, and the fourth time I’ve had the brilliant notion to make some money off of my writing. In the past, that process has involved me cobbling together a few low-quality articles to use as samples, putting together an extremely meager-looking freelance resume, and then signing up for content mills like Knoji or the now-defunct Constant Content (obviously I’ve been at this off-and-on for while). Maybe I’d register on a couple of freelancing sites, but be too scared to bid on jobs. Then I’d write a few articles for pennies, get bored with the whole thing, and give up to be a bum again.

I’m happy to say that this time around, that was not the case. Maybe it’s the college degree I now have under my belt, or the fact that I’ve actually had a paper published, and gotten some experience editing. Writing regularly for a blog has definitely helped (it does make a snazzy writing sample). I have, so far, successfully managed to secure two freelance writing gigs. They both pay horribly, because I ignored the advice to start out charging what I’m worth and decided I’d rather get experience instead. It’s still better money than the other online options I’ve looked at, like Mechanical Turk or anything involving trying to getting paid for surveys. I’m actually thinking that if I focus on it for a couple of months, I can probably get something going to supplement my stipend when I start graduate school. (I’m fairly desperate to avoid ever having a real job again.)

If you think have any marketable freelance skills - writing/editing and graphic/web design seem to be the in-demand ones - it might be a great way to supplement your income or, if you take it seriously enough, make a living. UpWork and Elance are the two sites I’ve been using, and both come highly recommended. There’s a pretty wide variety of assignments, so you can take something low paying to gain experience, or find people looking to pay well for an expert. (I also highly, highly recommend avoiding Freelancer.com - it’s awful and I’m still not convinced it isn’t a scam.) Maybe someday we can all escape the 9-to-5 grind together.

[theyearofsavingdangerously]

Personal Finance is Personal (or, an Exercise in Stating the Obvious).

Those of you who’ve been reading since The Year of Saving Dangerously first got started might remember the somewhat fickle nature of the initial posts. For those of you who weren’t reading back then, allow me to explain: I had no idea what my priorities were. I’d write a post about paying off debt, and claim that was at the top of the list. I’d explain why an emergency fund is important, and of course that would be exactly what I was going to work towards. The week after that, saving for retirement would be my ultimate goal. Then, of course, there was the YNAB buffer that I would, of course, be working towards.

I have accomplished…some of those things. I have an IRA - it even has enough money in it now to be taken out of bonds and invested in an index fund (whatever that means). I have an emergency fund, though that was less the result of stringent saving and more the result of using a sudden burst of willpower to set aside a large lump sum (thank you, tax return). I’m less in debt, but even the majority of that relief is the result of my unpaid accounts hitting the seven-year mark and magically vanishing from my credit report. I’m still not buffered.

Hindsight is always 20/20, of course, so now that I’m unemployed I can’t help but think about all the sweet, sweet money I was making, and how I could have managed it better. My current conclusion is that the thing that really hurt me was that initial lack of focus. I wanted to save, I wanted to invest, I wanted to pay off debt, and - of course - I still wanted to spend.

The thing that I didn’t want to admit when I had money was that I probably couldn’t do it all. It’s a limitation I tend to struggle with in most areas of my life, so I probably shouldn’t be surprised to see that tendency rearing its head here. I can’t do it all, you can’t do it all, no one can do it all. You’re going to have to set financial priorities.

Some Things Should Come First, Period.

If you have debt, you need to pay it off. Forget about saving for retirement. Forget about an emergency fund. You can’t prioritize anything if you have a deficit hanging over your head. The only possible exception is student loans or a mortgage. Make paying off those credit cards, medical bills, or car loans your number one priority, because getting out of debt is going to be the thing that clears up more of your money for whatever that next priority is.

Then build up an emergency fund. Aim for three months, initially, and save as aggressively as you can. A safety net is important. That’s going to give you the security need to feel free to save for whatever your next priority is. Now, you have no debt? You have an emergency fund? Good.

Figure Out Your Priorities.

Now you can think about saving for retirement or paying off your student loans or building a bigger emergency fund (or whatever else). This is where your personal goals come into play, and you may as well figure it out right now. In a second, you’re going to close your eyes and think about what your ideal life would look like if money wasn’t a concern. Let’s be clear - this isn’t an exercise in ‘if I was a millionaire.’ Let’s forgo the private jets and champagne pool parties and mansions. Think somewhat reasonably. What does that look like? Close your eyes and think about it for a minute.

…

So, what did it look like? Were you relaxing in the comfort of a house you own? Were you backpacking through South America? Indulging in designer clothes? Had you quit that fantastically awful job so you could focus on your painting/music/other creative endeavor? The answer to those questions are the things that should guide how you prioritize your spending.

If you imagined material comforts, you best option might be make sure you save reasonably for retirement and emergencies, and then budget for the luxuries you enjoy. I’m not particularly an advocate or detractor of consumerism, so if stuff makes you happy then I say go for it (responsibly). If you were imagining owning a home, then you’re probably going to want to focus on building a bigger emergency fund (home repairs are expensive) and saving for a down payment. That’s a heck of a long-term goal, so cutting out the excesses and choosing to live frugally is probably the best course of action. Traveling is harder the more obligations you have, so if that’s your dream you might want to try a combination of frugality and minimalism - sell the stuff you don’t need for extra cash, and avoid accumulating more. Then save, save, save. Did you dream of quitting your job and focusing on your passions? You might want to do a little research on the intense road to financial independence. There’s a whole subset of the population living extremely frugally, saving and investing wisely, and retiring earlier than you might believe is possible.

I Love to State the Obvious.

You might be rolling your eyes and thinking that focusing on your goals is sort of an obvious thing to do. I don’t entirely disagree. I simply think that it’s easy to lose focus on some of those goals when you have recommendations from all directions telling you what your focus should be. Maybe for you, maxing out your retirement savings every year so that you can retire comfortably at 55 isn’t the best way to live the life you want to live. I also think that it’s easy to start the process of getting your finances in order without a clear idea of what is going to come after paying down debt and building up some savings. If you’re using You Need a Budget, figuring out when to prioritize that buffer might feel tricky. Mostly, I guess I’m just trying to reiterate that your budget is meant to work for you, and your unique individual goals, and there’s no reason to feel like you have to focus on everything all once, or follow someone else’s prescription for a happy life.

[theyearofsavingdangerously]

Pick a budget, any budget.

Recently, it has come to my attention that not everyone is quite as gloriously type-A as I am. In fact, it seems some people actually cringe at the idea of organizing their entire life in great detail. I can’t say that I personally understand it - I’m pretty in love with knowing that my entire life has been well-regulated by a solid productivity scheme that takes all the guesswork and mental energy of my day to day obligations - but to each their own, I suppose. While a lot of budgeting systems claim to be the best, the truth of the matter is that the best budget system is the one that you’ll stick to. So, in the spirit of acknowledging differences, I though that I’d take today to review a few different budgeting methods for different personalities.

Type A? Try Zero-Based Budgeting.

If you’re like me - high-strung and overly excited by lots of detail - then zero-based budgeting is probably the best option for you. The basic principle behind this budgeting philosophy is that the inflows and outflows in your budget balance out to zero dollars. The YNAB system is one popular example of this kind of budgeting, as evidenced by the rule ‘give every dollar a job.’ The envelop system popularized by David Ramsey is another example of zero-based budgeting - in his cash-based system, you use a variety of envelopes labeled with categories to manage your money. So, you’d have one envelop with the cash meant for your groceries, another with the cash for your entertainment, etc, until your entire income is accounted for.

Zero-based budgeting will give you total control over every dollar spent. Some systems recommend more or less flexibility (YNAB encourages it, while David Ramsey seems to be less of a fan), but they all require more time spent planning and tracking. While there are a few different systems out there meant to help you account for every dollar, it doesn’t really matter what you use. Envelopes, the YNAB software, an Excel spreadsheet, or even good old-fashioned pen and paper are all possibilities. What matters is that you make sure you’re planning where each dollar goes, and using some method to track your spending accordingly.

Type B? Reverse Budgeting Will Get You There.

If you’re completely unlike me and the idea of spending your valuable time crunching numbers and planning your spending in detail makes you feel more nauseous than aroused, you’ll be happy to know that there are simpler options. If as a general rule you’re one who likes to let the chips fall where they may, you might want to think about using reverse budgeting to manage your finances.

Reverse budgeting focuses first and foremost on what is often considered the main point of any budget - saving money. With many budgeting systems, you might take a look at your income, subtract your regular expenses, and then determine how much you can afford to put into savings. Instead of following this approach, reverse budgeting takes the mantra of “pay yourself first” to heart, and jumps right to prioritizing your savings account. Instead of taking all that time and energy to create budget categories, allocate funds, and develop spending plans, you would simply earmark a certain amount of your take home pay to savings, and not worry about the rest. A general rule for how much would be assigned to savings is 10% of your regular wage and half of all bonuses and extra income.

This can option can be especially appealing because it doesn’t require you to track anything - you can automatically set up a certain percentage of your paycheck to get transferred into a savings account, and know that the rest is yours to do what you will with. No fancy software, spreadsheets, or notebooks required! (Just make sure the bills still get paid.)

Somewhere in Between? There’s Something for You, Too.

If the idea of micromanaging every dollar seems a little like overkill, but you’re looking to take a little more ownership of your finances than reverse budgeting allows, you’d probably like the 50/30/20 method. This particular system accounts for the three major portions of a budget - household expenses, discretionary funds, and savings - without getting fussy about specific categories. With this system, you break your income into three parts and follow the prescribed percentages: 50% towards household expenses, 30% for discretionary spending like hobbies and entertainment, and 20% to savings.

While the name would be less apt if you don’t follow the prescribed amounts, you could of course opt to break the percentages down differently, say 10% to savings, 10% to discretionary spending, and 80% to your household expenses. Or, if you’re extremely frugal about your living expenses (or rolling in the dough) you could assign less to the household and more to savings. Either way, you’ll still have a road map for where your dollars go, without getting weighed down by decisions like whether your weekly espresso fix should be categorized as a dining expense or a household good (because it’s totally, totally essential, I swear).

Go Forth and Budget.

Of course, if none of these options work for you, you could always try your hand at developing your own system by mixing and matching. Maybe you want detailed categories for your household expenses, but not for your discretionary funds. Maybe you want to start with your savings goals and then break down what’s left into percentage categories. Maybe you’ll only use cash in envelopes for discretionary spending, but pay all the bills from a checking account. It can’t be stressed enough that the truly important thing about choosing a budgeting system is to pick the one that’s going to work for you.

And hey, if you have developed your own super snazzy budgeting system, I’d love to hear about it!