I've been reading a lot lately about inflation of currency in my quest to better understand more about my money. That is, I am budgeting. I think that the official definition of budgeting is something along the lines of making a plan for your money. I would argue that part of making that plan, however, is understanding what money really is. So I'm not going to get into a boring and possibly politicized rant about what money is. I'm going to talk about paying off student loans.
I'm lucky. All of my student loans were consolidated and locked into a low interest rate. I hate debt. I thought my primary focus for my first year of employment was going to be paying off my student loans. If I would have budgeted to pay them off and lived diligently I probably could have done it too. However, I didn't budget so they weren't paid off in their first year of collecting interest. In hindsight I am glad I hadn't been so gung ho about these loans.
My student loans have a fixed interest rate. Inflation has a predictable rate. My projected pay-off date for my student loans is something like twenty years from now. That is simply crazy. I can't imagine paying the same monthly payment in ten years let alone twenty. I find that a little ridiculous. However, in ten years I am more likely to have more money--not more commodity or value but more money. My payments will be the same, my interest rate will be the same, the actual number of dollars I bring home each month is likely to increase with inflation. Say that today I'm paying $100 a month for my student loan. In 1988 dollars that is about $57. So assuming a similar rate of inflation by 2028, each month I would be paying almost half of what I am paying now. Obviously this isn't very scientific. Any money I could apply to the principal of the loan would be better spent as investments or, considering the rate of inflation, spent.
I am a clean-freak. I admit it. Some would probably consider me clean to the point of being anal about it. I'm better at censoring myself in a shared living situation, but it doesn't mean I don't get upset by messes that could, in my mind, be so easily avoided and/or cleaned immediately. Anyways, I was sick of having to do monthly fridge cleaning sessions and running the risk of upsetting my roommates by my overzealous desire to just trash everything even minutely questionable. So here's how we try to do things now:
- Top Shelf: leftovers, fresh meat, things that need to be used or thrown out soon
- Middle Shelf: eggs, deli meats, packaged foods, things that will generally last a little while
- Bottom Shelf: beverages of all sorts, things that will last forever(relatively speaking)
- Bottom Drawers: vegetables only please
- Side Shelves: Condiments Condiments Condiments, wine bottles, butter in that special butter thing
I think this kind of system can be really helpful and considerate to your roommates in a shared living situation. It adds organization that makes each roommate be thoughtful of the fridge since the space is all shared while at the same time ensuring that things don't get too out of hand with mold monsters
Recently, I've been trying to get my budget under control. I went a whole year making decent money and I had nothing to show for it on my job's one year anniversary. I ended up feeling so bad about being wasteful that I blew my tax refund on a Roth IRA for the 2007 tax year. No fun for me. I had spent most of what I should have been saving on mopeds, beer, and Extreme Pizza.
Over the past two months I instituted a budget system that was very influenced by the Stackbacks system. The way I interpreted it is that I don't care about variable expenses, they're all pretty much optional. I pay myself every week into a discretionary checking account and have to find my own balance between mopeds, beer, and pizza for the week. Some weeks I'm likely to have money left over and some weeks I'm likely to hit zero. The idea is that I don't care about how much I spend on these expenses just as long as they don't collectively break the bank. In the wintery months I'll eat more delicious food and drink more expensive beer. In the summer months I'll ride mopeds more and drink cheaper beer. And who wants a seasonal budget? I want to be on autopilot.
So here's a little flow showing how my budget system works out:
Also I absolutely despise Excel. I would only ever use it if I had to, luckily I've got Numbers. Numbers makes charts and graphs that won't make your eyes bleed. In fact, they'll do the opposite... of bleeding? Whatever. Right now Numbers is being used for all of my budgeting. If you want to start a budget I would highly recommend doing it by hand, whether it is electronically or written down on pen and paper, it will help you get a better handle on what's important to you and how you spend. I've never been a fan of Quicken or any budgeting software because they are all based on systems which never aligned with how I spend. Here's an example of my discretionary expense tracking in Numbers:
I track all my weekly expenses and can see how much I have left for the week, how much I have left for the month, what my actual balance is, and what my projected end-of-month balance might be. You might notice the chart in the lower right corner. This is my favorite. A good looking graph with nice colors that tells me, visually, how close I am to reaching my budgetary limit for an arbitrary category. I say arbitrary because I use categories in my discretionary budget as guidelines, not as set-in-stone figures. That is the whole point of the discretionary account. Spend your money on whatever you want, just don't overspend.
I think everyone who makes money should put together a budget. If you're a cat you might not need to budget. The best part of budgeting is just learning about how you spend money and understanding where it goes. You can draw your own conclusions about what you should or should not do with that information. Personally, I'm a fan of a zero-debt, zero-contract lifestyle, but it probably isn't for everyone.
