I didn’t think this needed to be discussed, but it appears that the saying about “he who assumes” is true. For the second time this week, I met with a client to review their budget and found that they didn’t comprehend the term expense. Let me try to put this in very simple terms: if money leaves your hand at any point, no matter how SMALL, it is an expense.
For example, $30 at walmart is an expense and $0.89 at McDonald’s for a coffee is an expense! If you are sitting down at the end of each month wondering why your budget just never comes out right – the fault lies with you. It’s not the budget. It’s not the computer. It is YOU. You have not accounted for an expense.
You see, the fact is that everyone I speak with knows to include the electricity bill, the cell phone, and even the TV. Yet, with coffee at Dunkin’ Donuts every morning, people seem to think is negotiable. So, just so you know, it’s not. $1 dollar a day for five days is $5 dollars per week and $20 per month. If your budget is tight, that $20 may be the difference between bouncing a check and breathing. Then again, if your $1 “negotiable” expense is really the $5 lunch you get twice a week to make it through work — you’re now out $40 a week. I don’t know about you, but in my world my pennies and dollars count — and I count every penny!
So, for those of you that may suffer from this, I suggest a one-month spending journal. For one month of your life, I encourage you to write down every penny, every dollar, and every quarter you spend. That even includes those in the gumball machine! You may be amazed at what those little expenses add up to!
Once you have complete the journal, sit down and categorize each and every penny you spent and create a budget line for them. If if you have a $20 line for coffee stops, that is OK. Just make sure you account for it.
Once you have created a budget line for every item, then you are finally ready to see where you really are. A lot of us like to sit around saying I can save $700 a month no problem. That is great if you actually do that month after month. It is meaningless if it never happens. You might as well say you can save $5,000 a month while you’re at it.
So, maybe you think this is stupid. Why should you waste your time counting your pennies? Simple, you’re not rich. I hate to be the one to tell you this, but you’re not. I don’t care where you live or what your salary is. You are not part of the 1% — start counting the pennies. It is through counting the pennies that you can begin to have real conversations about retirement, savings, and your future. The pennies will tell you your future and they will change your life.
When I was younger, I use to tease my father about worry about every $5 dollar purchase we made. It was like the world stopped when lunch came in 2 dollars higher than expected. He would worry and stress about every grocery store bill. But, the family vacation? That decision was made at the drop of the hat. And adding on to the house? That was quick and easy.
It wasn’t until I got older that I realized that keeping track of $10,000 was easy. Spending $10,000 was easy to decide. Yet, keeping on track with your future and keeping up with the pennies — that was the pain in the behind. You see, you save your pennies for those vacations and those additions. It’s those daily decisions that make the big ones easier — and possible in the first place!
So, if you want to have a budget that works every month, then you have to write it down honestly every month.
Shorting yourself will never get you to financial freedom.
Budgets are beneficial when you are trying to save, live within your means, cut back on reckless spending habits and generally get your financial life in order. And if you are someone with these goals but you have trouble creating a budget and then sticking to it…fear not because you are like the majority of the human population. The good news for the budget-impaired is that thanks to the technology provided to us in this day in age, there are budgeting websites across the internet that have made your financial goals all the more attainable. Check out our top picks:
Mint.com: One of the top contenders for best budgeting site out there is Mint.com. This web-based financial management site is a favorite due to its user-friendly features and automation of your data. You simply provide Mint.com with your login information to your various accounts (checking, savings, credit cards, etc.) and from your data the site will create budgets and forecasts for you. With Mint.com you can easily see all of your money in one place and where it is going—and the best part? It’s free!
Yodlee.com: Yodlee is very similar to Mint but focuses more on providing its users a raw and much more in-depth analysis of their data and can pull it from thousands of financial establishments. Yodlee is home to many users because of the platform it offers for control, security and convenience. Not only can you take charge of your financial outlook by creating a budget, but you Yodlee also lets you track your spending, pay your bills, transfer funds and review all of your finances in one convenient, easy to navigate, free-of-charge place.
Buxfer.com: Another site that automatically compiles all of your accounts into one place where you can easily and safely view your money is Buxfer.com. Now, many people hesitate to sync all of their financial accounts to one site for security concerns; but a great thing about Buxfer is that it allows you be in complete control by offering several different methods for inputting and storing your data. Use the Basic Buxfer.com for free or register for an upgraded experience with Plus ($2.79/month) or Pro ($3.79/month).
ClearCheckbook.com: By using this service, you will gain access to a web-based checking account where you can manage your money by tracking what you’re spending, creating a list of your daily expenses and composing a budget that has set limits so that sticking to it will be a breeze. Use the basic edition for free, but if you want more features like custom reports and future balance projections, then sign up for the premium ClearCheckbook for only $4/month.
Mvelopes.com: If you like the old-fashioned way of budgeting where each category in your budget gets an envelope with a certain amount of money, then Mvelopes.com is a much more modern take on the concept and would surely be a fit for you. Helping you live within your income, this online budgeting service retrieves data from your various financial accounts, allows you to automatically pay your bills, has the tools to help you eliminate debt and will generate snapshots of your financial makeup as you tailor your budget to achieve your financial goals. And with mobile access, how can you go wrong? Pricier compared to others on our list but well worth the investment, Mvelopes.com charges its users $39.60/quarter.
Erica St. Claire is a guest post author who shares with us the top picks for budgeting sites on the web. In addition, Erica also contributes to Free Dating Sites where she offers singles information about safe online dating.
I am so glad you are asking this question because now I don’t feel so alone.
If you’re like me, you wake up in the middle of the night wondering if you are doing it all right. I mean how do you really know if you’re saving enough and what is really enough?
What I always wanted to know is how much does everyone else have saved. How am I doing compared to others? Well lucky for us Generation Y-ers, the Center for Retirement Research at Boston College released its brief, How Much to Save for a Secure Retirement, in November 2011.
I am going to share some information with you. Then, I want to ask you to step out of your comfort zone and share with us.
Before I do this, I want to note that this study assumes that we will get Social Security. Since I think that is a funny joke played on us, I would suggest saving more than the guidelines. But, since that’s what they are, it is really up to you to decide how much you will save and what your personal financial goals and lifestyle will be.
The results below assume you’re a medium wage earner (which the study identifies as someone with an annual salary of $43,084 in 2010).
Here’s how the combinations work out:
If you start saving at age 25:
— Retire at 62: Save 22 percent of pay
— Retire at 65: Save 15 percent of pay
— Retire at 67: Save 12 percent of pay
— Retire at 70: Save 7 percent of pay
If you start saving at age 35:
— Retire at 62: Save 35 percent of pay
— Retire at 65: Save 24 percent of pay
— Retire at 67: Save 18 percent of pay
— Retire at 70: Save 11 percent of pay
If you start saving at age 45:
— Retire at 62: Save 65 percent of pay
— Retire at 65: Save 41 percent of pay
— Retire at 67: Save 31 percent of pay
— Retire at 70: Save 18 percent of pay
So what does this mean? If you make $43,000 a year and you’re 25, you should be saving: $9,460 per year to retire at the age of 62.
What if you are making $110,000 a year? To retire at 62, the goal would be to save: $24,200 per year. This is approximately $2,000 a month. Now, the older you get, the higher that percentage goes.
So, here is my deal. I am no where close to that. Last year, my fiancé and I saved $1,600 a month and I thought we were doing great. Then, we took all of our savings (minus the emergency fund) and bought a house. Today, I am happy if I save $700 a month and I am 28.
So, if you are feeling brave, how about you share your information with us? Do you measure up to the goals?
We have been told the new 50 is 60, the new 40 is 50, and the new 30 is 40. We think we have more time to figure out our lives, to save money, and to play post-college. We think it is wrong to grow up too fast or get married too young. We postpone it all and celebrate those that postpone growing up — and laugh at those who do it “early.”
There is one problem with all of this: having children.
The doctors tell women that they should have their first child before their 35th birthday to limit birth defects. Whether we want to admit it or not, for those of us who want to have kids, we do have a time line — and 40 really isn’t the new 30.
So, despite what we tell ourselves, one day we are going to wake up with two kids crawling into our bed and a partner sleeping next to us. The question is — will you have spent your 20’s building a strong foundation or will you be scrambling to make up time in your 30’s? Will you have a home to raise your kids in or the really cool loft in the city with one room? Will you have your school loans paid off or will you be spending your kids’ college fund on paying off your own? Will you live in a good school district because you saved the big down payment or will you be paying out of pocket for the private school? The problem is, if you’re not prepared financially and if you haven’t spent your 20’s building the foundation, then you will spend the rest of your life catching up.
So, what should you be doing in your 20’s? Well, society says drinking, living in the big city, buying the cool clothes, living in the sweet apartment, and going out every night. I say you should be saving your pennies for the down payment and buying your first house in the right school district. You should be picking the career path you want to follow and set yourself up with a promotion plan. You should pay off all school debt and consumer debt. You should pick a life partner because divorce is expensive. You should get married and begin making plans together — so you are ready for when you turn 30 and want to have kids.
If you don’t, you will be like a lot of people who wake up on their 30th birthday and suddenly realize they should marry someone because all their friends did. They should have kids because their friends have kids. This is when they will find out the rough truth that a starter home/loft apartment is not good for a family of four. Or that the best school district requires a bigger down payment than they have saved. Or that they don’t want their kids to have loans like they did, but they can’t save for them until they pay off theirs. Finally,they are going to work until they’re 70 and they hate the job they’re in because they were too busy having fun to figure out what they wanted to do.
One day — we all turn 30 and realize that life isn’t like television. We don’t all live in sweet New York City apartments and land on our feet while working as a waitress.
At some point, we realize that society never cared if we ended up happy. It just wanted us to have fun, spend money, and end up screwed like everyone else.