My Personal Finance Confessions October 30, 2009

I have a confession to make.  I’m not a perfect person.  I know.  It’s hard to believe.

But seriously.  I know there are so many rules that you’re supposed to follow when it comes to personal finance.  And I think I do a pretty good job at following most of them.  I spend less than I earn.  I transfer money automatically to my savings account every month.  I contribute to my 401(k) up to the company match.  I fully fund my Roth IRA every year.

There’s one thing that I don’t really do.

I don’t budget.

There.  I’ve said it.

I was talking to a friend the other day, and she was lamenting how her mother was so impressed with her sister, because her sister budgets and has a vacation fund.  This friend was unemployed, but had been staying above water thanks to her savings that she’d built up.  She wanted recognition from her mother on this fact.  I commended her!  I’m very impressed by her high level of savings.  I assured her that, once she got back to work, she could start a vacation fund if that’s something that is important to her.  And that’s when my admission came out.  I told her that I don’t have a budget, either.

Why don’t I have a budget?

I don’t have a budget because it would be really boring and not very useful.  I have many consistent expenses every month (rent, utilities, car payment, student loans payment, etc.) which I know will happen each month.  Most of those costs are pretty non-negotiable, though I would consider paying more towards my loans to lower the principle.  The expenses I have every month that aren’t exactly the same each month are things like food (grocery store, lunches, dinners) and gas.  But in those cases, I have a total that I try to stay under.  I keep my grocery spending under $100 a month, and also keep my dining out to once a week, maximum, (and trade-off who pays with my boyfriend when we go out), and try to keep those expenses below $100 as well.  I’m trying to cut down on how much I spend at the cafeteria (i.e. trying to bring my lunch more often, buying cheaper options) but I try to keep my expenses in the cafeteria below $30 a week.  Yes, when you add up all this money over a year,  it’s quite a bit of money.  But I like going out to eat every once in a while.  And I need to have groceries.  I tend to spend less than any of the budgets.  But I don’t actually budget the money, i.e. figure out what money I have available to spend, then divide it between all of my expenses.  And I’m not really sure where I can lower any of my expenses (outside of the variable food), since I rarely go shopping.

So, am I making a big mistake by not budgeting?  I know where my money goes by tracking my expenses (after the fact) with Mint.  But I don’t plan things out.  I just inherently know my limits, and try to avoid spending money when possible.

How do you budget friendship? August 23, 2009

I got an email today with a question about budgeting/saving/paying down debt and its possible impact on friendships:

Dear Stephanie,

So I have this friend who is a great guy and everything, but is obsessed with paying down his credit card debt. Now, that’s all well and good, but he seems to be willing to sacrifice his friendships in order to do this.  He won’t go out to eat to celebrate friends’  birthdays, yet somehow he finds money to spend on fishing gear.  Also, his wife doesn’t seem to have any say in money matters, other than she is not allowed to spend money.  I have invited her to hang out several times, both on excursions that cost money ($4 movie matinees) and ones that are free (trips to the beach), yet she always turns me down. A mutual friend actually asked me if I don’t get along with her.  Should I say something?  How do you budget friendship?

Thanks!

I think I’ll start out with my view on this, but I encourage others to weigh in.  I’d like to help her figure out what to do (and what not to do!).

Money matters are always tricky topics…unless you’re among friends who love talking personal finance, it’s pretty much off the table.  I think if I had been asked by the guy in question, I would say that he should let it be known that he’s going to be laying low for a while.  When you’re on a tight budget, you have to consider how often you want to go out, vs. how much money you can spend.

Since I don’t know the whole story, it would be wrong of me to assume certain things about this guy and his wife.  It’s possible he’s really pumped about paying off his debt, and is doing anything he can to reach that.  I find it odd that the wife is seemingly not allowed to go for free trips.  It’s unclear if he has budgeted his fishing gear spending, or just buys it whenever he feels like it.

I’m not sure if the woman who wrote in should do anything, or if it’s really a case of “none of your business”.  If the wife was my friend, I’d want to make sure things were okay for her.

So, my advice to the questioner:  Tread lightly.  Money is a tough topic, and it’s possible broaching the subject might create a rift between you and your friends.  I’d reach out to the wife, and see if she wanted to vent about things.

So, my fellow personal finance folks, what do you think?  How do you budget friendship?  What advice would you give the woman who wrote in?

Thanks!

A trip to the Wrentham Outlets August 3, 2008

So, I may have lived in Boston for almost 6 years, but I have to say, I’ve never been to the Wrentham Outlets.  I’ve been to outlets before, ages ago, but I hadn’t been to the ones that are south of Boston.  Well, I knew that I needed a wardrobe update; my friend Melissa offered to help me with a mini “What Not to Wear” trip.  Except I had to spend my own money.  And I only bought clothes at 2 stores.  And she didn’t make me throw all my old clothes away.  But other than that, it was like the show!  (okay, so maybe it really wasn’t much like the show at all).

I’ve known for a while that my wardrobe needed some improvement.  And now that I’m earning a steady paycheck (I got my first paycheck this week!), I feel a little more comfortable spending money.  Most months, I don’t buy any new clothes/jewelery, and most expenses go towards food, rent, transportation, and the like.  So, I tend not to spend money on extra things for myself, except for dinner out with friends or something like that.  And I also really have an aversion to getting rid of things (what if it fits? what if I need it? I paid for it, I can’t get rid of it!) so, I have a closet full of plenty of free tshirts from dorm events and clothes I’ve had since middle school.  And that’s really not the kind of clothes a 20-something should be wearing on a day to day basis.  Really, I’m just too cheap and lazy to buy new clothes for myself.  And I think I’m so afraid to make any purchase without another person’s opinion.

And so we drove out to the Wrentham Outlets.  So that was a bit of a trek, which meant using up a bit of a tank of gas.  Which is of course counter to saving money.  But I think overall, I managed to buy a lot more for the money I spent.  Overall I spent about $300.  Yeah, that’s a lot.  I spent $200 at Gap on 10 pieces of clothing (khaki slacks, jean skirt, tops), and then another $100 at Ann Taylor Loft for two sweaters and 3 pieces of jewelry.  I guess that means I got things that were an average of $20 apiece.  Could have done better (maybe gone to cheaper stores, but could end up with less quality pieces), could have done worse.  But I think that these are all key pieces for my improved wardrobe.  They’re all relatively solid, basic pieces that can be dressed up a bit with accessories.  My next step is likely to look to see where I can find some cheap but good accessories to pump up the outfits I’ll have.  That and sort out my closet, eliminating (and donating) the clothes that I really should stop wearing.

I’ve come to grips with the fact that I spent quite a bit of money.  But this is because I rarely actually go shopping, and it’s all clothes that I need for work and life as a more mature and put-together looking woman.  I guess the last time I went on a big spending spree for clothes was about a year ago.  Well, looking at my walletproof history, it looks like I’ve spent ~$80 on clothes in a few different months.  But most months in between I spend nothing.  So that’s my justification.  Whether that’s the right thing to be doing, I’m not sure.

How have you all been doing on your budgets?  I know wellheeled was working on cutting out clothing purchases.  And what do you think?  Am I justified in buying all these new clothes?  Or am I a crazy spender like the rest of Americans?