Tag Archives: money

How to Budget for Beginners

Everybody needs a budget.

But that doesn’t stop “budget” from being an intimidating word to many people. Some folks may think it means scrimping on everything and never going out for a night on the town. It doesn’t! Budgeting simply means that you know where your money is going and you have a way to track it.

budget quoteThe aim with budgeting is to be aware of your spending, plan for your expenses¹, and make sure you have enough saved to pursue your goals.

Without a budget, it can be easy for expenses to climb beyond your ability to pay for them. You break out the plastic and before you know it you’ve spent fifty bucks on drinks and appetizers with the gang after work. These habits might leave you with a lot of accumulated debt. Plus, without a budget, you may not be saving for a rainy day, vacation, or your retirement. A budget allows you to enact a strategy to help pursue your goals. But what if you’ve never had a budget? Where should you start? Here’s a quick step-by-step guide on how to get your budgeting habit off the ground!

1. Track your expenses every day

Start by tracking your expenses. Write down everything you buy, including memberships, online streaming services, and subscriptions. It’s not complicated to do with popular mobile and web applications. You can also buy a small notebook to keep track of each purchase. Even if it’s a small pack of gum from the gas station or a quick coffee at the corner shop, jot it down. Even tiny expenses add up to sizable amounts if not tracked. Keep track of the big stuff too, like your rent and bill payments.

2. Add up expenses every week and develop categories

Once you’ve collected enough data, it’s time to figure out where exactly your paycheck is going. Start with adding up your expenses every week. How much are you spending? What are you spending money on? As you add your spending up, start developing categories. The goal is to organize all your expenses so you can see what you’re spending money on. For example, if you eat out a few times per week, group those expenses under a category called “Eating Out”. Get as general or as specific as you wish. Maybe throwing all your food purchases into one bucket is all you need, or you may want to break it down by location – grocery store, big box store, restaurants, etc.

3. Create a monthly list of expenses

Once you’ve recorded your expenses for a full month, it’s time to create a monthly list. Now you might also have more clarity on how you want to set up your categories. Next, total each category for the month.

4. Adjust your spending as necessary

Compare your total expenses with your income. There are two possible outcomes. You may be spending within your income or spending outside your income. If you’re spending within your income, create a category for savings if you don’t have one. It’s a good idea to create a separate savings category for large future purchases too, like a home or a vacation. If you find you’re spending too much, you may need to cut back spending in some categories. The beauty of a budget is that once you see how much you’re spending, and on what, you’ll be able to strategize where you need to cut back.

5. Keep going

Once you develop the habit of budgeting, it should become part of your routine. You can look forward to working on your savings and developing a retirement strategy, but don’t forget to budget in a little fun too!

¹Jeremy Vohwinkle, “Make a Personal Budget in 6 Steps: A Step-by-Step Guide to Make a Budget,” The Balance (March 6, 2020).

Mediocre Money Mindsets

Healthy money habits start with mature money mindsets.

Even though it’s not always obvious, we carry lots of assumptions and attitudes about money that might not be grounded in reality. How we perceive wealth and finances can impact how we make decisions, prioritize, and handle the money that we have. Here are a few common money mindsets that might be holding you back from reaching your full potential!

I need tons of money to start saving
It’s simple, right? The rich are swimming in cash, so they’re able to save. They get to build businesses and live out their dreams. The rest of us have to live paycheck to paycheck, shelling out our hard earned money on rent, groceries, and other essentials.

That couldn’t be further from the truth! Sure, you might not be able to save half your income. But you might be surprised by how much you can actually stash away if you put your mind to it. And however much you can save right now, little as it might be, is much better than putting away nothing at all!

I need to save every penny possible
On the other side of the coin is the notion that you have to save every last penny and dime that comes your way. There are definitely people in difficult financial situations who go to incredible lengths to make ends meet. Just ask someone who survived the Great Depression! But most of us don’t need to haggle down the price of an apple or forage around for firewood. And sometimes, the corners we cut to save a buck can come back to bite us. Set spending rules and boundaries for yourself, but make sure you’re not just eating ramen noodles and ketchup soup!

I don’t need to budget
There are definitely times when you might not feel like you need to be proactive with your finances. You don’t feel like you’re spending too much, debt collectors aren’t pounding down your door, and everything seems comfortable. Budgeting is for folks with a spending problem, right?

The fact of the matter is that everyone should have a budget. It might not feel important now, but a budget is your most powerful tool for understanding where your money goes, areas where you can cut back, and how much you can put away for the future. It gives you the knowledge you need to take control of your finances!

Breaking mediocre money mindsets can be difficult. But it’s an important step on your journey towards financial independence. Once you understand money and how it works, you’re on the path to take control of your future and make your dreams a reality.

The FULL COST of Smoking Cigarettes

This is how smoking is usually pictured when the cigarette companies used to freely play mind games to convince you to smoke.

Nowadays, not many would argue the fact that smoking is bad for you. It’s linked to lung cancer and heart disease, and is associated with nearly 1 in 5 deaths in the United States.¹ Yet so many people, even some I know personally still smoke despite the health consequences.  Besides ruining your physical health, smoking can also seriously ruin your financial health.

The upfront cost of smoking
Cigarettes aren’t cheap. Prices per pack vary from $5.25 in Missouri to $12.85 in New York, but the national average comes out to around $6.28.²’³ Smoking a pack per day will run you $44 per week, $188 per month, and $2,292 per year. Over 20 years you’ll have spent $91,671 on cigarettes. You’ve literally burned almost 6 figures!

If you got it like Granny, then ‘burn baby burn’, I guess.

Health care costs of smoking
Besides the up front cost, there are more subtle costs associated with what I’ve heard some say is their way to relieve stress. Extra doctor visits, prescriptions, hospital bills, and other treatments all cost money, and smoking increases your chances of needing those at some point in your future. In total, smoking-related illness costs the United States over $300 billion per year.⁴ Smokers also have to face higher insurance costs because of the health risks presented by their habit. All told, smoking one pack per day costs around $15,000 a year, or $40 per pack.⁵ Having $15,000 go up in smoke sounds pretty stressful to me.

The opportunity cost of smoking
Opportunity cost is a concept covered in economics and business courses. So unless you’ve taken both at the K-12 and collegiate level like I have you might be drawing a blank here. In a nutshell, it’s FOMO realized. In other words, (for my non Gen Z & Millennial readers) what are you missing out on because you decided to spend resources on a different option.

In our smoking scenario it means what could you have done with that $15,000? Did you want to start building a business but found yourself short on start-up funds? Maybe that could be the foundation of your child’s college fund or inheritance. Or is it that vacation you desperately want to take (of course while still keeping your physical distance; not trying to sort out catch dat ‘rona). Is your habit costing you the potential to live on your terms and start building your future?

Anyone who may be reading this and is struggling to quit smoking, I understand that it’s hard but keep trying. I want to see you reach your full potential and stop missing out one life-changing opportunities. Check out these resources from the CDC. And share your story in the comments.

(1) https://www.cdc.gov/tobacco/data_statistics/fact_sheets/health_effects/effects_cig_smoking/index.htm

(2) https://worldpopulationreview.com/states/cigarette-prices-by-state/

(3) https://smokefree.gov/quit-smoking/why-you-should-quit/how-much-will-you-save

(4) https://www.cdc.gov/tobacco/data_statistics/fact_sheets/economics/econ_facts/index.htm#:~:text=Smoking%2Drelated%20illness%20in%20the,%24300%20billion%20each%20year%2C%20including%3A&text=Nearly%20%24170%20billion%20for%20direct,due%20to%20secondhand%20smoke%20exposure

(5) https://www.washington.edu/admin/hr/benefits/events/flyers/tobacco-free/hidden-cost-of-smoking.pdf

Save a Buck on National Dollar Day

Have you ever heard of National Dollar Day? This little known day commemorates the August 2nd in 1786 that Congress established the U.S. monetary system.

I was going to bore you with more facts about dollars and money. But instead I’ll leave that to the Federal Reserve and jump to the useful tips on how to save a buck on this National Dollar Day. Please note I am not being compensated to mention any of the companies or programs listed below; these are personal recommendations from one consumer.

Tips to save a dollar

  1. Couponing

    Not talking about the old school sit and cut coupons from the Sunday paper, although those are still useful if you have the patience. Digital coupons and saving apps are the quicker and easier way to save a buck. Most grocery stores will allow you to load the coupons directly to your store card. Very often there is little wait time for the coupons to load as I’ve loaded coupons at a wholesale club while walking through the store shopping.

    Saving apps and rebate websites are the next easiest way to save a dollar when shopping. My personal favorites are Ibotta, SavingStar and Checkout 51. Be careful to read the details on each offer carefully and match the product exactly. Fortunately some of the apps, like Ibotta, have a built in feature that allows you to scan a product’s bar-code while in the store to confirm it matches the deal. Even with my sporadic usage I’ve still managed to save over $120.

  2. Buy generic

    Unjustified brand loyalty is a waste of money when it comes to shopping for food and other household items. I came to that realization years ago when I started trying some of the store brands and generics at my local grocery stores. At times there was a clear preference for a brand name due to a difference in taste, but more often than not the two were extremely comparable in every way except for price, where the store brands consistently won.

    The rare exception to this is when using saving method #1 makes a brand name less expensive than the generic. Here’s where I have to mention Ibotta again because they have these great any brand rebates that you can use on store brands to save even more bucks.

  3. Libraries

    In July I encountered a Twitter-storm surrounding a foolish suggestion for the closure & replacement of libraries by a corporation. Needless to say that idea, didn’t fly with all of the savvy savers out there who know the best place to pick up a book for free still is the public library.

    Besides saving when it comes to buying hard copies of books, some libraries like my local one also allow you to borrow digital copies for your e-reader, saving yet more money. It’s also a great place to get DVDs and CDs (which we all know methods of digitizing, right?), although perhaps not the newest and latest ones.

  4. Kill the vampires

    The energy vampires that is. Not everyone can afford to immediately upgrade everything in their house to a more energy efficient model. However, you can stop things like phone chargers, computers, printers, TVs, sound systems and other random appliances not used 24-7 but plugged in all the time from increasing your electricity bill.

    The easiest way is to shut them off and unplug them when done using them. But realistically when it comes to our daily electronics (PCs, TVs) we’re not unplugging these, so the best bet becomes to put them on a power strip that you can flick the switch off when you’re done. Other tips to stop the energy vampires can be found at the U.S. Department of Energy’s website.

  5. BYOL

    This is the best tip but probably the hardest (at least for me) to execute: brin your own lunch. Here in the U.S., food establishments are practically everywhere. And if they aren’t close by yet, just give it a few months. Choosing to brown bag it over fast food or casual dining can save you hundreds each month. The trick I’ve found works best is planning ahead and duplicating my favorite meals from the closest casual dining restaurants near my work and office locations.

  6. Consignment

    Growing up what came to mind when I thought of a consignment store was the cluttered stores in the back of a shopping center where it became a tedious chore to find anything of value. Thankfully most consignment stores have changed. Also in all fairness, it may not be appropriate to refer to these stores as consignment at all, since they generally buy clothes on the spot as opposed to the old school method of splitting the money once the clothing is sold.

    My recent favorite is the franchise Clothes Mentor, which offers a personal shopper option. Online options like Thredup and Poshmark offer similar curation services, but to me, nothing beats being able to try something on first. Yes there are free exchanges and shipping, but who has time for that? Not me. Saving time is just as important as saving dollars.

Check out three other ways to save on my all finance blog.

What way(s) to save a dollar have you discovered? Share in the comments!

How to Divorce Your Job and Keep the House – #2

There are a multitude of different types of side hustles, side gigs, extra revenue streams or whatever you want to call it. As promised, here’s a list of eight: Continue reading How to Divorce Your Job and Keep the House – #2