I can’t think of an intro so let’s just hop into it- welcome to “How to Be an Adult” with your resident supplier of tangentially related admission knowledge: Grant Cushman. Now I know as counseling professionals we are inundated with an excess of wealth. I hear it all the time: “Grant, I have Heisenberg levels of money from all of this admission counseling. What should I do with it?” Fortunately, I’ve thought about this a lot and I’ve found that the absolute best answer to this question is…BUY A BOAT!
Boats are awesome for several reasons, none of which I will go into because I’m clearly joking.
But really though- times are tough, money is tight, and personalized coffee mugs are cheap. It’s easy to lose track of your finances when it’s so much more rewarding to make it rain on Amazon (but only for Prime-eligible; asking me to wait five days is, quite frankly, insulting). With so many wonderful gadgets available with the click of a button, it’s really no wonder why spending habits of the young and tech-saavy have reached such absurd levels. And that’s why today I’m going to show you how to create, manage, and organize a budget so you stop buying Swiss army knives shaped like credit cards (true story).
Creating a Budget
Like almost all things in life, there a thousands of different ways to create a budget system. Some prefer a more simple approach while others revel in dividing their spending into categories and subcategories so they know where every penny is going. Let’s take a look at a few examples (ranging from relaxed to extensive methods):
The 50-20-30 Rule
This system is for those more inclined towards a certain ‘laissez-faire’ style of living. This budgeting principle is based around allocating a certain amount of your finances towards three different categories: needs, wants, savings. According to this rule, 50% of your expenses should be going towards your essential expenses (housing, transportation, utilities, and groceries), 30% should be going towards everything else (i.e. internet, entertainment, shopping, pets, all you can eat buffets, etc.), and 20% of your expenses should be going towards saving funds (Roth IRAs, 401ks, savings accounts). While not perfect, this method will provide a great point of reference as to whether or not your baller lifestyle might benefit from reeling it in a bit. For example, if you’re taking home 2,000 dollars a month (post-tax) and your rent is $1,000 a month, then maybe it’s time to rethink your priorities and try to lease out that high rise, Kobe. You can learn more about the 50/30/20 rule here.
I’ve talked about Mint before in my previous series, Tech Tuesdays, but it bears repeating. Mint is a personal financial amalgamation service that allows you to combine all of your different accounts into one simple interface. Needless to say, Mint is a powerhouse of money management. Unsurprisingly, it also provides a fairly robust budgeting feature:
Basically, you create the upper limit of what you want to spend monthly in each subcategory and Mint will automatically label and categorize your purchases based on where the purchase was made. For example, if you spend 50 dollars at Ralph’s (or Fry’s, Albertson’s, Safeway, Vons, King, etc.), Mint will automatically realize that you are buying groceries and will subtract 50 dollars from your grocery budget.
While this sort of automated budgeting sounds great in practice, it’s easy to lose sight of what you’re spending and how close you are to reaching the upper limits of your budget. That’s why I trust most of my budgeting needs to a program called…
You Need a Budget
You Need a Budget is for those of us who want to really stick our head in the dirt and get our faces dirty (or whatever colloquialism is used for ‘get serious’). You Need a Budget (YNAB for short) is an application that provides an easily customizable and intuitive spreadsheet that allows you to individually track every single purchase you make.
Before you can use YNAB, however, you will have to do some research on your own financial tendencies and set limits for yourself. In the example you can see the person set their monthly budget to 850 dollars a month. Obviously, this limit will be excessive for any single person but you will need to investigate how much money you are able to spend a month on each expense and then purposefully set an upper limit. Then, throughout the month, you will need to manually insert (in your smart phone or computer) each transaction and categorize it appropriately (rent, gas, groceries, etc.).
Now I know what you’re thinking: ‘woah, woah, woah, woah, Grant, you’re telling me I have to record everything I buy?’ Yes, you do (and stop staying woah so much, Joey Lawrence). While other applications exist that will automatically track your spending based on what you’re buying (i.e. Mint), that sort of recording takes the accountability out of the hands of the budgeter and makes it easy to consistently go over budget. If you’re forced to track everything you buy throughout the month, not only can you see in real time how you spend money, but you can also see how close you are to going over your budget. The whole ideology of YNAB isn’t about making sure something else is tracking your money, it’s about making sure that you are tracking your money.
While it takes a huge amount of buy-in, YNAB is, in my opinion, the best personal budgeting software out there for people who want to take a step forward towards more responsible finances.
Well, that’s it. Hopefully you enjoyed my writing as much as my mom does. See you all in a fortnight!