Budgeting Isn’t Fun, But Doing What I Want Is

I was hanging out with some friends at a barbecue today when the conversation turned to one of life’s great mysteries—where does the money we earn go? One friend in particular straight up asked me if I ever had money left over at the end of the month. In a prior life, the answer would be a big “NO”, but these days, it’s always yes.

Saving is important to me because it provides a sense of freedom in my life—my savings account is my “F*ck It” fund. Bad roommates? F*ck it, I’ve got money in the bank and I can move out. Hate my job? F*ck it, I can quit and and scoop ice cream in the Caribbean because I have savings. My F*ck It fund is the ability to do whatever I want. In its current incarnation, its slowly growing, intended to one day liberate me from the grind of corporate drudgery before I qualify for a senior citizen discount at the movies. And saving—even saving for some crazy number like $1,500,000.00—begins with budgeting.

Not waiting on anyone to give me a sock, I do what I want.

My monthly spending budget looks like this:

• $850.00, rent
• $89.00, rock climbing gym membership
• $240.00, groceries (LOVE Trader Joes)
• $8.00, Hulu
• $9.00, Starz
• $70.00, commuter tolls
• $100.00 utilities (sometimes it’s more, sometimes less)
• $60.00, gas (#Priuslyfe)
• $20.00, cat food and cat litter
• $37.00, Viviscal (I’m trying to grow my hair out…)
• $28.00 Ouai hair supplements (see above)
  • Total: $1,511.00

I leave about $300.00-$600.00 per month left over for fun things, like frozen margaritas, road tripping, and rolling around in money.

 

Me twice a month on payday.

The rest goes into my savings account and investment portfolios. That number fluctuates every month (like last month, when I paid $400 for new brakes for Karen, my Prius), but I aim for at least $1,000 in savings and $200 in contributions to my Betterment investment portfolio. Once I hit my liquid savings goal for emergency f*ck it cash, I’ll transition over to investing more and saving less.

The fact is, it takes a lot of self-control to budget. I live next to a mall, and the desire to ravage Sephora is, on some days, overwhelming. Sometimes I exceed my budget by buying things I don’t need, like those cute shorts I saw at Target last week. I think about shopping all the time. It’s my crack.  A lot of the times I return my purchases when I’m over my budget, but sometimes, I don’t. Hey, I’m human.

All the lights and the colors and the glitter…every time I pass a Sephora I spend money. It’s worse than Target.

Point is, knowing the ins and outs of my cash flow is essential to saving, and so is knowing my spending weaknesses. A lot of finance bloggers who have reached millionaire status by their thirties spend almost nothing and live like monks, which is extremely admirable—but I want to be able to have some fun. I believe in living life to the fullest, spending time with friends, and having cute shoes, all of which require money. And by having a budget, I know exactly how much I can spend each month, so I feel free to enjoy the fun things while knowing I’m saving enough to reach my goals.

Starting a Budget

When I first started on a budget last year, I created an outline of monthly expenses and wrote the essentials down on paper: rent, car expenses, utilities, groceries… before I built in the extra wiggle room for margarita night. The 50/30/20 budget is my favorite, because you don’t need to track every penny you spend, it’s more about broad trends.

Here’s how it works: using your after-taxes monthly income as 100%, budget 50% of your income for needs (like rent, food…), 30% for wants (Sephora!) and 20% for saving/debt. Knowing 30% of your income can be spent on wants is comforting, because it provides enough cushion for fun while also allowing 20% left over for debt and savings.

This pie (pi?) is your income, but probably a lot tastier.

Once you know what expenses you’re dealing with, tracking your budget month to month to see how you’re doing becomes important. I track my budget using an Excel spreadsheet because I’m a nerd, but I also love the budgeting app Mint. It’s totally free, and allows me to link all of my bank accounts and track my cash flow. I can set a monthly predetermined budget for the expenses I list above, and Mint tracks how close I am to reaching my limit, and sends me a notification when I exceed it (plus, it’s great for staring at and analyzing when I’m trying to look busy on my phone).

I’m also eager to try Personal Capital, which is geared towards tracking net worth, including budgeting capabilities like Mint, but also tracking investment portfolio performance. Since I’m early on in the investment game, this may be something I look at trying out in the next few months, as my investments grow and I contribute more to them monthly.

TL;DR: Saving begins with budgeting. Budgeting isn’t fun, but budgeting money to spend on yourself is. Also, save money and pay down debt each month. Building a f*ck it fund is a slow process, but having the freedom to do what you want is priceless.

How Does One Invest?

Now that I’ve already established my pro-investing stance in prior posts, I want to get into the nitty-gritty details. One of my friends asked, “How does one invest?”, which is a solid question. Investing is can require a multi-faceted approach—you can begin a portfolio through your local bank, through apps, buying stock in individual companies, and through a company-sponsored 401K or personal Roth IRA. For the purpose of simplicity, though, I’ll tell you how I personally invest and manage my own finances.

My 401K:

401K, unfortunately, does not stand for $401,000.00– if it did, saving for retirement would be a lot easier! When I started at my current company last year, I was able to open my first 401K—which allows me to put a percentage of my pre-tax income into an investment portfolio of either of my choosing, or a recommended company portfolio. Most companies will match the contributions you make, up to a certain percentage—mine matches 25% up to a 6% contribution of my income. So, for the sake of easy math, let’s say I contribute 6% of my annual salary, or $200, each month. My company contributes their 25%– or another $50 per month– on top of that. But because the company contribution maxes out, even if I contribute $500, my company will not contribute more than $50 per month.

401Ks also come with a limit pre-established by the IRS (thanks, IRS); this year, the limit is $18,000/year. I cannot contribute more than $18,000/ year to my account, unless I’m over 50, in which case I can contribute up to $6,000 more. Spoiler alert: I’m not over 50.

Not me.

While I like my 401K, and I believe every twenty-something should have one, the fact is the recommended 6% contribution and employer match is not enough to guarantee a comfortable retirement. With the average life expectancy increasing (both my grandmothers are still living independently and healthily into their mid-nineties…), the rate of inflation, and an increasing cost of living, supplementary investing–or contributing more than 6% to your 401K–is a good idea.

My Favorite Investing Apps:

Acorns: Acorns is perhaps my favorite app of those I use simply for its convenience, and was actually the first app I used when starting to invest. The app works by putting you through a brief quiz to determine your demographic before recommending an investment portfolio and strategy ranging from conservative to aggressive. Then, after linking one or more credit or debit cards to your account, it pulls spare change from your purchases and invests it into your portfolio while also allowing you to make weekly recurring investments in an amount of your choice. The spare change contributions round-up to the nearest dollar, so when I spend $5.05 on a grande caramel latte at Starbucks, Acorns rounds up to $6.00 and invests $0.95 in my portfolio. The spare change, coupled with the weekly $5.00 investments I contribute, has me contributing about $85.00 a month. The small amounts quickly compile, and with about 5% (+$40.00) returns, my portfolio is worth about $700.00 currently.

This is what the Acorns dashboard looks like: it tracks your investing history, returns, and withdrawals.

Betterment: Like a more sophisticated version of Acorns, Betterment is a web-based investment service that also has an accompanying app. After asking a couple of questions about your investing goals and timeline, Betterment prompts you to link your bank account and make an initial deposit. Honestly, it took more time for me to set up my Snapchat account. Betterment is a robo-investing service, and therefore my portfolio is managed by advisors and algorithms that ensure my portfolio’s growth is maximized. When I earn dividends for owning stock, Betterment reinvests them. Additionally, Betterment relies on index funds, which are historically a safer investment because they rely on diversification—meaning the collapse of one company won’t cause significant devaluation of my portfolio. I also really like Betterment’s user interface—it has helpful graphs that project future returns and track your portfolio in comparison to your financial goals. Finally, Betterment has a low fee—only .35% of my portfolio’s worth is charged in return for managing my money, and I can make manual deposits, automated monthly deposits, or Smart Deposits. Check out their deal here.

The Betterment dashboard tracks your progress and target allocation, and also comes in an app.

Robinhood: While index funds, like those used in Betterment, provide broad exposure to the stock market, Robinhood allows its users to buy and sell shares of stock in individual companies. The app operates on the model of no-fee trading—while Betterment and Acorns charge a fee, Robinhood does not. The difference here is that while Betterment and Acorns create and manage a portfolio for you, Robinhood allows the user to trade and manage their own stock. There is no minimum deposit required—I started out by depositing $20.00 into my Robinhood account, and bought 1 share each of GoPro and FitBit stock. Later on, I also bought stock in Twitter and Netflix. However, I soon discovered that I didn’t like the volatility of complete exposure in the stock market (I felt like I was losing money), and closed my account—but while I was using the app, I loved the action of buying and selling stock in real time. I may even go back to it once I am able to invest more and buy shares in bigger companies, like Amazon and Apple, which have historically done well.

Robinhood: no longer just a Disney character in green tights. The app tracks the performance of your stock, and changes the color of its background to indicate whether the market is open or closed.

While there are many more avenues to investing than the ones I’ve listed here, these are the four that I have found to be the most millennial-friendly. However, there are many other resources I use and love that help me manage other aspects of my financial health, like saving, budgeting and credit. Stay tuned for more posts!

 

I Was Wrong About Investing

I’m pretty broke.

It’s not that I don’t have any money—I have some—but in the grand scheme of life, when you consider the massive amount of capital required to live in Arlington, VA, raise a child, plan a wedding, or just take a vacation—I’m flat broke.

How I feel basically all the time.

The fact is, money is more important than I had given it credit for– it makes life easier, and owing money makes life a little bit more stressful. And since I’m not willing to sell my soul to work 100+ hours a week, and I haven’t invented the next Snapchat, the easiest way to grow my net worth seemed to be the simplest: spending less, and investing my savings.

I’ve been a stranger to investing for most of my life. The stock market crashed when I was 15 years old, taking with it a large chunk of my college fund and my parents’ financial security. From 2008-2010, I saw people go from middle-class to broke overnight, some friends could no longer go to college, and others were graduating with absolutely no job prospects.

Basically, I was not keen to throw my life savings onto the financial equivalent of Disney’s Rock N’ Roller coaster.

My pathological avoidance of the stock market was not helped by the fact that, for years, I thought investing involved men in suits and a substantial amount of pre-existing cash. Essentially, I thought investing was only for Donald Trump, and that kid in college everyone knew had a trust fund because he drove a Porsche.

What I thought investors looked like.

But in the last year, opening my first 401K caused me to view investing the same way I approach other mundane adult things like flossing: I hate the dentist, so I floss. I want my money to outpace the rate of inflation, so I invest.

Combine that logic with the fact that thanks to technology I can invest money from my iPhone and laptop, and I was all for it—but more on the apps and FinTech I use later.

All it really took to convince me investing was worth my time was running a few numbers:

• I’m 24 years old, which leaves me about 41 years before retirement—but I’m aiming to reach financial stability a little earlier, around 45. Timeline: 21 years.
• My total savings and investing goal is $20,000/ year.
• The average Return on Investment in the stock market is 7%.
• The average annual rate of inflation is at 2.08%

If I invest $20,000 in 2017 and every year for the next 21 years, I’m looking at a portfolio worth about $980,115. That’s an increase of about $530,115 in value from my original $20,000 x 21 years.

Alternatively, if I put $20,000 in my savings account this year and every year, at the average savings account APY of .06%, in 21 years I’ll have $442,783.12. That’s a gain of only $2,783.12 in interest over 21 years.

For comparison, the annual rate of inflation is currently at a 2.08%, so my money actually loses value in a savings account, and outpaces it when invested.

I invest so I can save for my cat’s future.

Conclusion: if I ever want to own a beach house, become a millionaire, or just not stare at the inside of a cubicle until I die, investing is the best way to go. Sure, some fluctuation is to be expected, but I’ve got youth on my side—with decades for interest to compound, I can afford the risk.

Embracing The Hustle

I don’t remember the first item I ever bought, but I do remember the first bill I saved.

At 7 years old, my grandmother gifted my sister and I each a $100 bill—which was, at the time, more money than I could fathom. My second-grade mind flashed to the sheer amount of Barbies and mechanical pencils I could purchase with that chunk of change, but my mother had other plans—she escorted my sister and I to a local bank, where we each opened a savings account and deposited our fortunes. For the remainder of my childhood, until I turned 18, my mother had me deposit 50% of any earnings I made – from babysitting, lifeguarding, birthday money, scooping ice cream – into the savings account I had opened as a little kid.

Kindergarten-aged and looking displeased, either because of the 90’s plaid, or because the equivalent of $100.00 in 2000 is $142.00 in 2017, given an annual average inflation rate of 2.08%.

 

If this were one of those “Millionaire by 25” blog posts, the trajectory of my financial success would have been predictable. I’d have bought stock at 12, begun successfully trading on the stock market in high school, and developed and sold a successful business or app in college. But it’s not, in fact, this is the opposite – because as much as my parents tried to instill in me about saving as a child, I’ve always had an Achilles heel: I love to shop, and I tried to keep up with the Jonses.

What I didn’t save as a kid, I spent— designer makeup, brand name clothes, popular shoes, junk food. By the time I got to college and joined a sorority, I was no longer restricted to mom’s inconvenient savings rule, and I’d assumed access over my bank account as a legal adult. I was responsible for paying my sorority dues and fees, which amounted to about $1,000 total a year. And though I worked part-time during semesters and summers in college, any extra income went to clothes, dresses for sorority formals, gifts for my Little during clue week, alcohol, late night WaWa snacks, summer housing rent and food, and road trips (I had a blast during college, obviously).

Junior year of college, I got my hands on my first credit card and started spending money I didn’t actually have. By the time I graduated in 2015, I was $2,000 in credit card debt before borrowing money from my parents to move across the country to Colorado for a job in higher education (read: not a lucrative job).

A year later, tired of shopping at the Dollar Store for grocery items and being constantly in debt, I jumped from education into the tech industry and moved to Arlington, Virginia. With a job that paid me enough to live, I finally felt like I had enough control over my life and finances to relax a little. But that didn’t stop me from spending—still carrying the debt of two cross-country moves, I continued to spend ridiculous amounts of money on Kate Spade bags, J. Crew, makeup I didn’t need, and unnecessary trips to Target.

Whenever I walk into a Target, I walk out with a bunch of scented candles and decorative pillows I didn’t need.

When my two best friends got engaged and planned (separate) weddings a week apart and extended me the honor of being their bridesmaids, it was time to face the financial music. With the commitment of double weddings, destination bachelorette parties, bridal showers, and dress alterations, I didn’t have enough money to pay my credit card minimums, loans to my parents, and support my current Confessions of a Shopaholic lifestyle while also playing at 27 Dresses. Something had to give.

So, at $10,000 in debt last fall with minimal savings, I took on a side-hustle reading college applications part-time while also working my day job. I started saving. I opened an investment portfolio. And finally, three months ago, I paid off all my debt, plus $2,000 dollars in wedding expenses, and figured—why stop there? Why not keep saving at the rate I had been and work my way towards financial independence?

With my savings goal at 45% of my income, a 401k, a new investment tool, and this blog to keep me accountable, I’m now trying to work my way towards achieving financial freedom by age 45.  Not only do I think this goal is possible, but I don’t think finance, or financial independence generally, is discussed frequently or openly enough. Especially for women.

So many young women fall into the same trap I did—spending insane amounts of money to achieve some twisted form of the modern Kardashian feminine ideal. Investing isn’t talked about enough in grade schools, in college, between mothers and daughters. Financial goals are equivocated to life goals: saving for a wedding, a honeymoon, a child. Some of the most memorable advice I’ve received from successful women in my field? “Marry for money, not for love”, given by a female executive with a wave of her sparkly left hand.

My argument is that women, given the right resources and a different social messages, can achieve individual financial independence—or at least, a high degree of financial literacy and control — without marrying rich or winning the lottery. With the rise of FinTech (financial technology) and apps including Acorns, Robinhood, and services like Betterment, financial resources are millennial-friendly and more accessible than they have ever been. By putting aside small amounts of money over time, twenty-something women can be financially empowered to achieve goals and milestones that really matter to them– not things they’re told should matter (hello, Coach shoes I bought to impress my friends).

With this blog, I plan to elaborate on my financial goals and progress, the power of investing and investment strategy, the value of compounding interest, living more frugally, and the establishment of credit. My hope is that I can start a conversation, if not nationally, then at least among my circle of friends and family.

And, with Miss (Financially) Independent as a source of external motivation and accountability, I hope to achieve my goal a little faster—retirement to the beach.

Working as hard as I can now so that one day this can be my office – before I’m 65.