Financial Adulting: Budgeting on a Budget

So, you’ve got your eye on a new, wallet-busting expense that you really want. Your current apartment is okay, but that luxury high-rise is so much nicer...like towel origami nice. The car you drive has served you valiantly since high-school, but that new BMW is so sleek. The new iPhone 20 S.E.X.T. model is much better than your current one, I mean have you seen that camera? Really helps the CIA see every last pore. New upgrades are exciting and we all want them, but it is important to understand where new expenses fit in your budget. Less than one-third of Americans keep some type of working budget and more Americans are in debt than ever before. That is not to say that debt is bad (see our article on credit score), but you should have a thorough understanding of what is going-in and going-out of your bank account before making any decisions about new expenses.

Before we get into how soon you can drive off the lot with that new Beemer, go ahead and snag our excel worksheet - “Personal Budget” which can be found on the Financial Adulting page. Our Adulting Contributors, who have quite a resume of experience if we may say so ourselves, made this and use it for their own personal budgeting. Explore the document a bit, enter a few key inputs, and wallah - a reasonable basis off which to make decisions. If you don’t use this that’s fine, but you may find yourself rolling up to your 20-year reunion in that rusted-out 1997 Miata (surely that’ll impress everyone).

Take Inventory

Right now, off the top of your head, how much are you paying in recurring expenses every month? I’m talkin’ rent, utilities, car payment, Netflix, phone bill, premium access to the Hub (I know, quarantine has been rough), and anything else you pay for each month. The first step to any budget is understanding how much money you have coming in and how much money you have going-out. Start filling out our included worksheet that we linked here for all you slackers who didn’t download it before.

Personal Budget_2020.xlsx

Download XLSX • 44KB

Start with what's coming in - which in this case is denoted as your "salary". In reality, wage-earning employees or those with a heavy commission factor are taxed at a slightly different rate, but we will discuss that in another article. As you fill out the worksheet, be HONEST with yourself. If you have an income source that is part commission and part salary, don’t assume that you are going to close on every sale - that often isn’t the case. It’s better to be conservative and have some leftovers to save for a rainy day or place in a 401k, than to be $5,000 short. Most importantly, you need a real understanding of where your money is going. Some banks and credit cards have great online apps that will categorize purchases for you to provide a more granular look at where you are spending money on - $1,000 a month on Chipotle is NOT reasonable. Do a deep dive through your bank / credit card statements for any of those recurring items you may have forgotten about. Companies nowadays can be quite stealthy when they tack on an extra service fee, activation fee, or increase their monthly rate.

Just a Little Off the Top

So you understand how much money you have coming in and where it is going. Hopefully there were no surprises as you dug through those statements, but maybe there were. Before you contemplate any new purchases, consider whether you are truly utilizing these expenses to their full potential. Are you really using Netflix, Hulu, Prime, HBO, AND Showtime? Game of Thrones and VEEP ended some time ago now, let her go. When was the last time you logged in to that online game? The Season 2 Battlepass ended 3-months ago and if even you WANTED to catch up, you don't have the 500GB of space for their single update. We aren’t saying you should suddenly become amish and live without electricity and other amenities, but rid yourself of extraneous expenses you can comfortably live without.

What Do You Want?

It’s time to make some goals. Think 5, 10, 15+ years down the road and figure out what you really want and how you will get there. The larger the expense, the more you should plan ahead. If you want a house 10 years from now, you should probably start saving more now to prepare. The key here is to understand where you want to be so you can start working towards those goals and not be caught without savings when you really need them. Play with the worksheet we provided. Flex different numbers and see how much money you should be left with each month (remember that unexpected expenses can and DO arise, so you should plan for those as well).

Make It Happen!

A recurring theme across the Adulting page is the phrase, "It's not when, it's how." Many of life's luxurious are viewed as unattainable by the average young adult. They seek approval for every decision and even when the numbers or facts tell them it is a viable option the voice in the back of their heads says, "I'm too young, people my age don't [insert life goal here]" or "I mean I COULD do that, but I have to think of the future,". Success in life is not the same definition for each person. For some, success is being able to travel the world, for others it could be having a strong relationship with your family, or like it is for myself - never having to think twice about getting guac on my burrito. If you prioritize those aspects of your life, budget accordingly, and achieve little victories on the way to your overall goal, these previously implausible scenarios become more and more common. Along with this philosophy comes another crucial mindset to develop, it is not WHEN you can or should do something, it is HOW. Adulting is the art of solving problems with creative solutions, thinking on the fly, and learning from your mistakes. The solution to your problem may not take the form that you originally envisioned, but if you identify your priorities, maintain your risk profile, and make informed decisions with a rationale backing, you'll find that Adulting can be less of a 'learning experience' and more of a 'living experience'. Here's to the little victories on the way to YOUR definition of success.

If you have any questions about the worksheet, feel free to reach out to us on Instagram (@howtoadult2020), Twitter (@HowtoAdult2020), our website (https://www.howtoadult2020.com/), or email us at info@howtoadult2020.com