[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?!]
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.
- 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.
“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?
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.