Budgets are Sexy? Budgets are NECESSARY!

by Guest Author -

gold piggy

[Morning! My man 5 AM Joel stops by the blog again today to share his recent thoughts on budgeting through these wild times we’re living in… Maybe it’s a good time for you to touch base with your long lost budget too?!]

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I’ll be the first to admit… I’ve been slacking off on my budgeting the past few years. J. Money would be very disappointed in me :(

It started in 2016 when I changed jobs and got a massive pay raise. Money was falling from the sky! So, I loosened my spending belt… just a weeny bit.

Then, my net worth began growing larger and larger. Not only was I socking away a lot of money, but I participated in the longest bull run of stock market history!

Next, I started skipping some of my monthly budgeting exercises. Instead of rigorously reviewing transactions and matching them to an exact budget, I started rounding my figures up to the nearest hundred or thousand dollars.

By mid 2018, things were going so great that I decided to leave my job to take a sabbatical. Even after 1 year off work, my net worth was still growing! The good times continued through 2019, so I loosened my budget even more.

And then…

Boom! Disaster.

  • My stock portfolio dropped 30+%. (and is still dropping lower as I type this)
  • The tenants in my rental properties lost their jobs and probably can’t pay rent next month.
  • My wife is uncertain of her job security (she’s a teacher’s assistant, not a salaried employee)
  • The companies I’ve applied to work at are no longer hiring.
  • My 6 month emergency bank account suddenly feels ‘thin’.
  • I hate admitting this… but I’m kinda scared :(

Sooo… What do I do now?

Back to Basics:

The reason I LOVE this blog is because:

Budgeting is the cornerstone of personal finance.

I think of my budget like a map. It’s a personal guide to my future wealth. If I follow the map and make good decisions based off of it, it will lead me to financial security.

Without a solid map, I’m wandering aimlessly. I’m treading water and always reacting to the circumstances around me. When times are good, I feel good. But when times are bad, well… this is what I’m experiencing currently. I feel lost.

Some good news though… My map isn’t completely gone, it’s just a little blurry. I need to spend some time dusting it off and getting it back to a clear picture.

Maybe you’re in the same boat?

My Next Steps:

Since I’m stuck at home anyway, what a great time to thoroughly review all my expenses and solidify my budget for 2020. This week I’m planning to:

#1. Do a spending deep dive: I actually already have most of my categories and totals written down in my budget template. But I’m planning to go back through and dig a little deeper into my spending trends the past 6-12 months.

#2. Match my budget to my goals and values: As much as I *think* I’m living according to my values, every time I do a budgeting exercise I find little things that surprise me. I want to make sure our budget this year is both realistic and includes the things my wife and I enjoy in life.

#3. Look for opportunities to reduce spending: Off the top of my head, I can think of 3 ways to cut back some of my regular expenses in this strange stay-at-home time:

  • Pay-per-mile car insurance. Since my wife and I both will be driving probably under 5k miles this year (maybe less?), it’s a great time to look into new quotes for car insurance. Currently we are with Geico for both our cars, but I’ll be calling 2 competitors today: Metromile and Esurance. These “pay per mile” policies charge a base monthly fee, and then charge a few cents for each mile you drive. The less you drive, the less you pay (I’m not sure if these companies are available in every US state, so check before you get too excited!)
  • Cheaper cooking and food. I’m not going back to the ramen days I lived in my early 20’s… but there are definitely some fancy foods I can live without. As for the next 2 months, it’s safe to say that we won’t be eating out at any restaurants, so that’s something I can cut completely from our budget.
  • Cheaper drinks. I have a weakness for craft beer. I’ve already dusted off my homebrew kit and started brewing again! Craft beer usually costs me $2-3 per beer at the store, but I can easily brew delicious beer for 75c – $1 per beer at home. My wife prefers wine, and we’ve found a few wine promotions online with free delivery service!

#4. Run everything by the boss: It’s important my wife and I are on the same page about everything financially. So everything I create around our budget and future plan needs to be OK’d by her. I might even create a $exy powerpoint presentation to keep things fun and interesting :)

I’m already feeling much better just by writing this stuff out! It’s amazing how much the simple act of budgeting makes you feel in control of your finances, instead of behind and helpless.

Bringing $EXY back:

The universe has thrown us an unbelievable amount of change these past few months. We’re in for a rough time, and nobody is certain where the end of the tunnel is.

What I am certain of though is this: If my map and plan is clear, I will exit from this hard time in a good financial state. I’ve done it before, and I can do it again. It all starts with a basic budget, ruthlessly followed.

Budgeting:

“Easy to do? Ridiculously so. Easy *not* to do? Tragically so.”

– Jeff Olson, The Slight Edge

What about you? Have you strayed from your budget the past couple of years? Or are you rock-solid and ready to attack 2020?

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Joel is a 34 y/o Aussie living in Los Angeles and the guy behind 5amjoel.com. Every morning he gets up at 5am and sends a short positive message to friends, family, co-workers and strangers from the interweb. He last shared a fun game with us on the site that you can find here: Stock Market Game.

{ 23 comments… read them below or add one }

1 Adam March 30, 2020 at 8:27 am

Oh man, this is in SO much flux right now. We haven’t had a baseline for a very long time — we blew $1k on a weekend in Indianapolis earlier this month, last month saw us finish paying for a bathroom remodel, we were in Merida for two weeks in January… and just when things started to get back to ‘normal,’ all this (*waves hands*) happened.

Our jobs are stable and we’ve got a lean year of expenses in savings — so we’re deliberately hemorrhaging money. Our favorite local coffee shop temporarily closed two weeks ago so my wife just bought a $25 gift card online and tipped $50 on it toward their employee fund, we’re ordering more takeout than we usually do, that kind of thing. As long as we keep putting money into the retirement plans and don’t dip into savings we’re not too concerned about where it goes. We can revisit down the road when our hourly neighbors are back on their feet. Budgeting can wait.

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2 Joel March 30, 2020 at 9:32 am

Great to hear you have stable jobs and a hefty savings account. Even better to hear you guys are sharing and giving to those less fortunate in this hard time. Nice!

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3 SWFL Financial Coaching March 30, 2020 at 9:04 am

I am pretty rock solid with my budgeting. My wife is, too.

This is a great time for everyone to go through their budgets (or start one) and decide if each item is necessary or not.

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4 Joel March 30, 2020 at 10:02 am

Agreed. It’s funny, some things that I thought were “necessary” in my budget a few months ago I’m not feeling quite the same about moving forward :)

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5 Mimi March 30, 2020 at 10:39 am

Man did this hit home! Funny you should talk about getting back to budgeting . . . I just spent the last week updating, modifying and having lots of fun with this spreadsheet. I know I’m a geek, and wear this title proudly, but spreadsheets are the bomb! My families jobs should be fine, but just in case I made a bare bones budget, a lean budget and saw where we had drifted off course the last six months.

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6 Joel March 30, 2020 at 11:21 am

Haha you should definitely be proud of your geek status :) For me it takes about 20 minutes to input the numbers and data, and about 3 hours to format, color-code and make it all look pretty. Like a work of art!

Glad to hear your family and jobs are all OK. Take care!

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7 Tushar Agarwal March 30, 2020 at 12:26 pm

In times like this, a proper budget with a well financed emergency fund becomes a saviour. I am a salaried guy so I can still live on the pay checks. But I do feel for the contract labourers feeling the heat because of lockdowns.

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8 Joel March 30, 2020 at 3:42 pm

Yes this situation will put a lot of people’s emergency funds to the test (including my own). Some of my contractor friends say they can ‘stretch’ their emergency fund to last a few more months than planned. Cutting discretionary spend in the budget helps with this.

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9 Paul March 30, 2020 at 2:36 pm

I don’t budget anymore. I put away in savings/retirement and party with the rest…. Honestly I kept failing at budgeting so this works for me, and you know who I blame 100% for my failures in budgeting…………..Carole Baskin!!!

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10 Joel March 30, 2020 at 3:16 pm

Haha that’s in our Netflix queue but we haven’t started it yet.

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11 J. Money March 30, 2020 at 4:02 pm

I got one more episode to go…

Don’t want to finish it and have it all be over :)

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12 Gene Roberts March 30, 2020 at 4:09 pm

I feel incredibly lucky right now.

I’ve got a decent cash stash. My job is considered necessary so it doesn’t look like I’ll be out of work any time soon. Even if I were, I’ll continue to get paid for quite a while. I totaled up all my saved paid time off and it comes to about $20k (minus taxes, of course). I figure that is about 3 months of regular pay. All emergency funds don’t have to be in a bank account.

I’ve saved HARD the past few years especially, and my losses in the market have been minimal. I should still be on track to retire at 55 in 5 years.

My main concern is my 85 year-old mother that lives with me (hasn’t been out of the house in 2 weeks). That, and I seem to be the only one in my family that knows what the terms “budget” and “savings” mean. I expect to get some calls and am trying to decide where my limits for helping are.

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13 Joel March 30, 2020 at 6:11 pm

Congrats Gene. All that hard work and savings is truly paying off! It’s great that you’re still on track to retire and the economic mess won’t derail you.

You’re a saint for looking after your Mom. We are in a similar situation with my wife’s 90 y/o grandma. She’s usually outdoors and very active, so it’s very difficult staying still at home. I came across a few “100 things to do while in quarantine” articles, but tbh that list only entertained her for a few days. We are taking it day by day.

I trust you’ll find the right mix in helping your family. Ultimately, everyone will walk away from this experience with lessons learned, some harder than others, and hopefully make better financial choices and changes afterwards.

Take care,

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14 Nita March 30, 2020 at 7:57 pm

I never let go of my budget but like you I had large allowances. Just last weekend I realised I not only have to follow the budget but also significantly tighten it.

I got a raise this month. I’m government, so I knew when, but given how convoluted the formula to calculate your take-home pay is, I did not know how much. Let’s say the word disappointing came to mind. I was counting on the raise for some breathing room.

Not gonna happen. But there are a few silver linings: first, I can’t lose my job, and I will get non-liquid net worth by burning through the mortgage instead of paying rent (interest is much less than my former rent), so if I don’t sell at a loss, that’s just delayed money ; and also, I can’t be fired and have good insurance.
But saving liquid money, is simply going to be impossible if I’m not disciplined. And I’d like not to need years before having a good financial cushion.
So, budget it is. Hope I can balance that and reasonable happiness.

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15 Joel March 30, 2020 at 9:13 pm

You definitely can balance a tight budget + happiness. There are 1000’s of examples of people doing this… Living frugally and happily. You can do it!

The thing I love about building home equity is it’s kind of ‘out-of-sight, out of mind’. A slow process over many years, but the day you move/sell, it’s nice to realize your savings in full fruition.

Awesome you can’t be fired. I’d love a job like that ;)

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16 Francis March 30, 2020 at 10:30 pm

We’re mourning the loss of the high water mark in net worth, that’s all.
I didn’t sell a thing, so I still have all the shares waiting for my future self to do something interesting. We’ve never waivered from tracking our spending. Cutting things that we no longer value and spending on the things that we do has been the ongoing plan.

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17 Joel March 31, 2020 at 9:48 am

An excellent plan indeed!

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18 Kathy April 2, 2020 at 5:58 pm

I no longer closely watch my budget like I did when I first started learning about personal finance and budgeting. It has become second nature for me not to squander money, but I have also learnt to spoil myself a bit. A few years ago I was developing my farm in my home country and did not allow myself or visit home any fun for four straight years. It was brutal, but I met my goals and have now loosened the budgeting strings. However, I still save a sizable amount every month. I am grateful that I have a secure job a well and pension.

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19 J. Money April 3, 2020 at 6:35 am

That’s the sweet spot right there – when it’s ingrained in your *habits* like that! Good job! (And for treating yourself now too – that’s also important to do when you’re able! :))

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20 Steve Crowder April 6, 2020 at 10:31 am

With all the changes happening around our personal and financial lives, it’s important to get back to basics on the budget. Thank you for your post and advice.

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21 Joel April 14, 2020 at 5:46 pm

Cheers Steve. Yeah, whenever I feel lost or uncertain it’s helpful to go back to the beginning. For me, it starts with a black and white budget.

I hope your family and friends are all OK and staying sane. Be safe!

Joel

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22 Linh April 7, 2020 at 12:10 am

Budgets are definitely not sexy, but agree that it’s necessary. That’s why I let my husband do it. Ha. As long as I only spend on necessary items like food, gas, and wine, then he is able to make the budget work for us. It is amazing how sticking to a budget helps us feel more secure about not only our financial future but that of our two kids, who hopefully will go to college one day. Thanks for the reminder Joel.

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23 Joel April 14, 2020 at 5:51 pm

Love that you included wine as a necessity! I’m in the same boat – we have a hefty alcohol budget for our family. :)

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