Hello ladies and gentlemen! This one is going to be a doozy so buckle up! As I was brainstorming through ideas of how to be of most assistance to you all, I tried to think about what skills or ideas had the most profound impact on my life as I started my 20s. With zero hesitation, gaining control over my finances was the first thing that came to mind. Unfortunately, in school, there seems to be a shortage on quality personal finance experience. Many people enter adulthood with zero idea of how to support themselves without help from the Bank of Mommy and Daddy (BMD). I was one of these people. Of course, I understood general concepts like “I can’t afford to buy this new car”, “Don’t open a credit card and immediately max it out (I did it anyway)”, or “It’s good to have some savings (But not mandatory, right?)”. But I never really minded any of that or knew exactly how to implement it. What Not To Do: My Experience With MoneyMy sophomore year of college, I opened a credit card to pay the security deposit on a house with my then-girlfriend of 3 years. Six months later, we broke up and I moved out into another house with some friends. With my name on the lease of the original house and no one to take my place, I quickly took on two rents when I was struggling to pay one and I had $0 in savings. I used my inheritance from my grandmother to survive. This is the exact scenario I hope to help you all avoid through this series of posts on finances! But worry not, this is a story of triumph not defeat. I managed to work my ass off and stay afloat. My finances were awful for the next year, but nothing near what they were during that 6 month period. In my senior year, I found the holy grail of finance. Enter Ramit Sethi’s I Will Teach You To Be Rich. Although the corny title sounds rather scammy, I had heard the book suggested on a variety of podcasts and, finally, caved after hearing Tim Ferriss’ interview with Ramit ([Episode 371](https://ift.tt/2PbMz0u). This post references several of Ramit’s concepts from the book and I high, highly, highly recommend investing in it. That’s enough about me. Let’s dive in to the nitty gritty of Part I: Building a Budget. We’re going to break it down into 4 easy steps: Building your idea of a rich lifeBuilding your current budgetCutting spendingCreating financial goalsYour Rich Life and Conscious SpendingBefore we bust out the actionable steps to get your finances in order, we need to cover two concepts from Ramit’s book: Living Your Rich Life and Conscious Spending. I’ll just be scratching the surface on these concepts while Ramit takes a much deeper dive in the book. In short, living your “Rich Life” is all about the fact that there is no reason every one of us can’t be rich or enjoy the things we want to enjoy. That means if you want to spend $200 on a jacket, go for it (with the right system in place). If going out and spending $300 on drinks at the bar is a part of your rich life, we’ll put it into your plan. This isn’t going to be another post telling you to stop buying your $7 venti, non-fat, organic, paleo, mocha, java, frappe with stevia and two pumps of sugar-free vanilla. As long as you identify what is truly important to you, there is no reason for you not to have it. The counter to this is “Conscious Spending”. You deserve to be able to spend however much money you want on the things that mean most to you. But to do that, you much cut back relentlessly on the things that don’t matter to you. Example: If your $12 post-workout smoothie 5 days a week is what matters to you, but you could care less what you workout in, then stores like Walmart, Bargain Hunt, and TJ Maxx are where you need to be hunting for deals on clothes, not Nike. And you need to be utilizing as few outfits as possible. As we go into the initial process of building a budget and building your “Rich Life”, you need to keep both concepts in mind. Before we move on, get out your phone, laptop, or a pen and paper and, at the top, write “My Rich Life”. Underneath, write down everything that is a part of your “rich life” no matter how silly it may seem. Once you’ve done that, we’ll move on to building your budget.Building Your BudgetIf you’ve ever sat down a tried to build a budget before, you’ve likely heard to shoot for a 50/30/20 split. That means fifty percent of your income is going to fixed costs like rent, gas, groceries, insurance, phone bills, etc. Thirty percent is going to your wants like going out with friends, video games, movies, books, and other dispensable items. Finally, the last twenty percent is your savings, both short- and long-term. Overall, this is a great guide. But it doesn’t fit everyone. When I first started getting my finances in order, I took my income and applied the percentages to see how much I could spend in each category. After I took out for rent, utilities, car payment, and gas, I had $50 left each month to spend on groceries each month. That’s $12.50/week for those of you busting out a calculator. If you can eat healthy, convenient food for $12.50/week, please let me know how. Between school, fraternity leadership, work, a relationship, and my family, I had little time to prep all my food every week or bargain hunt cheap veggies. So I adjusted the percentages a little to fit my lifestyle. After looking at all my expenses, my budget looked a little more like 60-65/15-20/20. While you’re still in school or just entering the working world, it’s okay for your spread to look like this. As you take steps forward in your career, you’ll be able to get closer and closer to 50/30/20 or even surpass it with 40/35/25. But you have to be honest with yourself about what matters (remember “conscious spending”). To get an idea of where you’re at budget-wise, you have two options: If you’re a card user (debit or credit), you can retroactively track all your expenses from one month and see what you’ve got going on. If you’re a cash user, track your next month of spending by keeping all receipts and using either an excel sheet or an app like Mint or Clarity.Cutting SpendingIt’s time to get ruthless. If you’re anything like me, after putting together your budget and using Mint or Clarity, you saw how unsustainable your financial situation is. Remember when we discussed spending extravagantly on the stuff that matters and cutting back relentlessly on the stuff that is less relevant? It’s time to be honest with ourselves again. When you examine your spending tracker, it’s likely something sticks out to you and make you think, “I spend that much money on that!?!” But don’t worry, we’re not going to immediately jump back to medieval times and live with the lights off, bathing in a nearby creek. We’ll take baby steps. First, identify your biggest source of unnecessary spending and set a reasonable goal for spending less on it in the next 2-4 weeks. If you found that buying a case of beer every few days is setting you back, cut back to one case for the week. Then one 12-pack for the week. All the while, experimenting with other, cheaper beers. Don’t get me wrong, I’m a craft beer guy too. But if you’re pounding 24 every few days, you’re past the point of drinking as a hobby. Another good place to cut back here and there is groceries. Experiment with various recipes and try buying mainly whole, real foods found on the outer rim of the store, not in the center aisles. Invest in an instant pot ($60-$80) and cook whole meals in there for the week. By buying large quantities of whole foods and cooking for the whole week, you’ll feel more accomplished and healthier which leads to more energy and confidence. You’ll also save a lot of money on groceries and food by not eating out as often. Before moving on, try out the steps above. Identify your biggest source of unnecessary spending and come up with a plan to slowly cut back. **Also, hop on Pinterest and find a few cheap, easy recipes that sound incredible and make them over the next few weeks.** Setting Goalshttps://ift.tt/2udDHQx you haven’t checked out my post on making S.M.A.R.T goals, I highly suggest you hop over there after finishing this! It is a much more in depth look at how to properly build goals so that they get done. When it comes to building financial goals for cutting spending, there are two approaches: the big stuff and the small stuff. Focusing on the big stuff means cutting expenses and organizing your budget based on the large expenses. This means figuring out how to save money on your rent, cable, car, etc. Focusing on the small stuff is more dialed in. This looks like cutting out a cup of coffee each week, not adding queso to your Chipotle, or buying reusable Ziploc bags (Bonus: This one’s much better for the environment). While, the small stuff is very effective and comes with it’s own bonuses. It can also be very taxing on the psyche. Having 100 different things to remember when shopping that end up saving you $50/month is not a great return on investment (ROI). If you choose to take the small stuff route, try finding one-and-done options like the reusable Ziploc bags or investing in a coffee pot to make your own coffee. Focusing on larger expenses will cut more off of your monthly expenditure and, typically, only has to be done once. This looks like negotiating a decrease in your rent by offering to not smoke or have animals. Or getting a decrease on your cable bill by finding a lower option and asking your current company to match the price (Pro tip: It is much more expensive for companies to get a new customer than it is for them to keep a current one; they’ll want to keep you). Ramit has several scripts for these exact conversation on his [website](https://ift.tt/2vFBM60). It is also important to set savings goals, the important part in these goals is to approach them systematically and not get overwhelmed by the size of them. For example, thebalance.com recommends having 1x your income saved for retirement by the age of 30. With the average income of people in their 20s being around $40,000, this can be pretty intimidating. But let’s break it down. That’s $4,000 a year for our 20s which is $333/month. This rate is much more manageable. I know it sounds impossible for those of you still in school or working part time, but as your income increases your savings rate will increase. Do not think that you need to be saving $333/month at 21 lest you be screwed when you hit retirement! Be sure to be realistic and time-oriented. Save enough that you can live your rich life, but also put a “due-by” date on your goals. For more steps regarding setting up goals that stick, I highly recommend checking out my post on S.M.A.R.T. goals or searching YouTube for a video on S.M.A.R.T. goals. Once you have cut spending and are saving all you can, the only direction to go is up, meaning increasing your income. There are a multitude of ways to do this from negotiating a raise, to finding a higher paying job, to starting a side hustle. I’m going to cover all of this in a separate post as the information is way to broad to be covered here. ConclusionGaining control of your finances is no meager task. It can be scary, stressful, or feel impossible. But the freedom that comes from it can be life changing. If you’re feeling overwhelmed, just hang with me here. Start with the few steps in this post and keep an eye out for the rest of the guide. We’re going to cover it all: credit, increasing income, retirement, all of it. Once you’ve applied even just the simple steps from this one post, you’ll already be light years ahead of anyone else who is still being controlled by their finances. Our 20s are tough. But only if we do it alone. Let’s figure them out together. TLDR: Budgeting should be easy. You just need to be honest about what's important and cut back relentlessly on what is less important. Additionally, setting goals will keep you on track and accelerate your progress. This is all information that can be found on a post at my site: 20s.life via /r/Adulting https://ift.tt/2SIjXy4
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