Thursday, February 28, 2013

Budget for Your Dreams

At the age of fourteen I started working during the summer at a local bakery. I would wake up at 5am; put on a pair of Patagonia waterproof shorts, a sports bra, a t-shirt, throw my hair up in a pony-tail with a baseball cap; at 5:15am I was on my bike, and I arrived at work a few moments before my shift. I was the bread slicer for a local bakery. From 5:30am to noon I would slice hundreds of loaves of bread, bag them, tie them, and organize them for distribution or purchase. It was hard work, but I enjoyed being around new people, and I also enjoyed collecting paychecks—cultivating a strong sense of independence that has informed every life decision made since. 

My parents were very hands-off with my pay. I opened a checking account all on my own. I deposited my earnings and started paying for things with my own checks (yes, I am old enough to remember the days before debit cards). I started spending. A lot. Clothes, dinners with friends, concerts--so much was in my realm of possibilities as I had money to play with. Therefore, money was play. With every birthday my pay increased, and when the summer post high school graduation arrived I was making $700 a week that I would spend in entirety before receiving my next pay check.

Fast forward to my late twenties and I’ve learned the value of the buck the hard way: lack of means and living paycheck to paycheck--not play, not play at all. But lessons learned bring on the motivation to change. Over the past year I’ve not only researched money management, but have strategically created a financial plan for myself that includes both short-term and long-term savings. When I’ve a large goal in place I budget for it, and adjust my current spending and investments to save for the larger goals rather than purchasing with credit (debt is a dirty word in my book—not because I don’t have any, but rather because I do carry a rather large load of student loans—six digits worth before the decimal).

Here is an example with some numbers:

The Goal: $6,000 saved in 6 months.

The plan: Chart out the months with paychecks highlighted. From each paycheck realistically set what you can save. For this example (based on a real life situation of mine), I’ve stopped contributions to my 403B retirement funds and applied that money that would be deducted from my pay to the savings line; I also calculated rent for five of the months (I was able to work out a rent free situation), then calculated what I could cut from my regular spending (PB&J lunches and hot dogs and peas for dinner are not that horrible) and added my  normal savings contributions from each paycheck ($50) to that line as well. Adding up the savings from each paycheck, I over achieved my goal.

Savings seems daunting, especially when you’re a young professional with your own set of expenses and debts to take care of. Creative and strategic planning can set a pleasant tone. Achieving financial goals is motivating, rewarding, and fun—nothing beats a glass of champagne in celebration of overachieving your personal goals! It resonates with my streak of financial independence cultivated earlier in life—I’m just more thoughtful, frugal, and forward thinking these days. 

© Habit & Style, 2013

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