This is the first post of this monthly series. My aim for this series is to show you just how possible it is to achieve big financial goals and pave your way to financial freedom & ownership without having a six-figure income. It’s gonna be a long road, so strap in!
Time to achieve greatness!
Let’s talk about expenses. It’s a constant in all of our lives. Expenses are the few things you might be able to have control over, especially if you are subscribed to numerous subscriptions and eat out a lot (totally guilty of this). Do you have 100% oversight over where all of your money goes? The first part is about tracking your expenses. This is, and will always be the wake up call we need monthly to figure out what we are paying for and how much it’s adding up to.
But if we forget to take a step back and think about what makes us happy, then saving money, and controlling our expenses will just feel miserable. If you have long-term goals, you might come out financially on top, but emotionally you’ll feel pretty terrible. For me I love eating with people. I’m not really frugal when it comes to sharing a drink, and sharing a dish. But, I’ll double down when it comes to hotels and transportation. These are where my priorities lie.
What matters for you? Experience? Food? Luxury items? Where do you fall? Take a minute (maybe a week) and figure out where you want your expenses to go.
What might be helpful for this activity is to track your past 3 months or more into a spreadsheet. More data the better. You can categorize them as: food (eating out vs groceries), rent/mortgage/housing, utilities, transportation (ridesharing/car loan payments), whatever else shows up in your bank/credit card statement as an expense. Some online banking accounts do this for you which you can easily export as a spreadsheet and play around with.
Now onto the juicy part of this article – here is what it looks like for me:
June 2020 Expenses
- Rent: $800.00 (-)
- Credit Card Expenses: $328.00 (-)
- Netflix Subscription: $15.99 – 3.04%
- Groceries: $226.42 (snacks) – 42.74%
- Shopping: $287.27 – 54.22%
Drip coffee decanter | Filters | Four sets of Bedsheets | Digital Airfryer
My credit card expenses are way more than where I want them to be. Ideally, I would be at the $150-200 a month range, but it was my birthday month and I decided to treat myself (I tend to do this in June and December).
I don’t regret spending money of any of these items. They’ve brought me more joy then I thought they could! The Airfryer that we have gets used super frequently and the drip coffee is now a staple in our routine. Do you know the sound Marie Kondo makes when something brings her joy? Yeah, my bedsheets hit that sound. It’s pure joy.
So I was a little out of my range, but I do plan on doing a no-spend September challenge — so hopefully that will make up the difference. Caroline…Happy belated bday.
Expense Grand Total: $1128.00
June 2020 Savings:
Okay, time for the really exciting part of this article. SAVINGS!!! I love talking about savings. As many of you all know I have a goal to reach $300,000 by 11:59 pm Dec. 31, 2024. Haha, every minute counts! Here is an article explaining why this number 🙂
In order to get to this number, I have devised a plan. Unfortunately, Columbia University tuition is NOT cheap. That’s going to set me back about $18,000 — but… we always have a backup plan at Simply Prepared. I came up with a scenario where 70% of my paycheck goes straight into a savings account — and the rest can be used for expenses. Yes everyone, 70%. I’m aggressive.
I could have just had 100% sent to my checking account, but I think there is a psychological aspect to saving. When it’s in another account, and it’s much more difficult to touch that money, it becomes easier and less tempting to use. Those boundaries allow me to stay within budget and go about my business without ever thinking about it. As that wonderful saying goes… out of sight, out of mind.
Let’s check out how the month of June 2020 did…
Automatic & Reoccurring: $2457.22 ← the 70% of my check!
**High yield Interest: $2.89
** Nothing out of the blue for me 🙂 I think the interest from the high yield savings is a nice touch — I’m not reliant on it — but it’s the cherry on the cake — so to speak.
Okay — so, when I was in college I worked a ton. I had three jobs three years in a row. It was exhausting, but also paid off. Through that time I stashed away $400 in a savings account, and $10,000 into a Roth IRA account. If you take anything from this article it’s COMPOUNDING INTEREST. Because my goal to 300K is short term, I need to be super aggressive. But if I just put 10K and let it sit there for 30 years, I’m sure with market rates, it would be easy for it to reach 300K.
The power of compounding interest is like magic. Please take advantage of this when you are young. I know it’s so easy to think, I’ll make more money in the future and just save more then. With inflation, and growing expenses, and procrastination, it can be a really complicated formula for disaster. Do your future self a favor and invest.
**Retirement Account: +7.3% gain
**Individual Stock Account: -3.2% loss
** Not bad for a month’s performance. Haha. I wish the Individual stock account would be positive, but we have bad months, and we have good months. To help diversify my savings (and keep up with inflation), I also invest my money in the stock market.
Stay tuned for a whole article on investing!
Overall Financial Health Pulse
A little background about my Savings ratio. I haven’t contributed to my Roth IRA since I graduated from college. I’ve been paying for my masters degree, so that’s why I haven’t racked up a huge amount of savings. But have no fear… this takes time. With a little patience, I’m sure I’ll be where I need to be by December 2020.
I like to take an addition of where I am overall with all three accounts and have a good understanding of how much I have in total, and if the percentages are where I want/need them to be in order to reach that 300K number. The 300K consists of three things — savings, personal/individual stock, and retirement. With the power of all three working together, it gives me flexibility now, and in the future. (Whispers: Compounding Interest)
My goals for July — don’t spend so much money! I’m hoping to go on vacation sometime in August, so the surplus I don’t spend in July will definitely go to some amazing food in August! Drum roll everyone! I have saved a grand total of $32,053 by the end of June 2020. That means I’m 10.6% closer to my goal of $300,000. Round of applause please! Can’t wait to see this ticker get closer and closer to the 100% mark.
Stay tuned for next months’ update!