Chatting Money

In the last post, we ballparked how much money you’ll make in your life – and it’s most likely in the millions. So that rocks! How on earth should we think about spending that money? What makes sense?

Getting familiar with what you’re spending today is a logical step in getting to know money. If you think about managing your weight, you think about how much you eat, and you try to exercise right?? I’d bet most every woman reading this blog could tell me approximately how many calories it takes to lose a pound – put it in the comments, I’m curious if that’s a fair assessment. If any of you go to spinning class, you probably know how many calories that burns. And how many calories are in a burger. I know for example, walking a mile burns about 100 calories. Conveniently, there are about 100 calories in a glass of champagne, so my personal goal before sipping a flute is to walk or run a mile. (Incidentally, there are slightly fewer calories in prosecco, like 80 total, so I can LOSE weight if I walk a mile and have prosecco instead of champagne. That’s just living the dream, I think).

Why on earth do we know this stuff? Quite simply, we’re generally trying to keep our weight on track, our goal is to lead healthier lives -a great strategic goal. To achieve that goal, we look at the tasks or decisions we can make daily.

Thinking about money the same way is a darned good idea. Let’s say Jenna makes $2500 in a month (my theoretical Jenna appeared in the last post too. I should actually meet someone named Jenna). Now ideally, you should always think about taking care of yourself first with your income – by that I mean saving for yourself, in a savings account and a retirement plan (like your 401k or 403b at work, or an IRA – *see below for translating confusing acronyms). But how do you save that much, if you have to pay rent and a car payment and loans and buy food and coffee?

That’s the fun of it – you’d never say “I can eat whatever I want, and figure out if I gain weight later”, right? By the time we’re adults, we know how much generally we should eat. We want to get to the same place with spending – you should generally know how much you can spend on what things in your life. The rule of thumb is “20/50/30”, which means 20% goes into savings or retirement, and then 50% goes towards necessary costs you HAVE to pay, and 30% is for spending on whatever your heart pleases! Let’s do some math:

• $2500 is Jenna’s monthly take home pay
• $500 (20%) should go into her savings account, or some into 401k/IRA, some savings. Or it gets invested – how fun is that!! – coming back to THAT in later posts
• $1250 (50%) is spent on MUST pays, housing (rent or mortgage), transportation (uber or train tickets or car payments), bills like utilities and insurance and things you must pay
• $750 (30%) is up to you! That’s pretty sweet, dinners out, pedicures, coffee breaks, new clothes, all comes from this bucket.

If your MUST pays are more than 50%, then you can take from the 30% fun spend, which just means a little less fun. If you have school or credit card debt, let’s get that paid for!! Honestly, I’d love to see you pay that our of your fun pay – but some financial guides have that come out of your 20% savings. But girl, that means you’re not gonna get as much wealth as soon if you don’t save/invest!!

You think it’s doable?? Where are you coming out in your life, are you at least putting 20% into savings, and spending only 80% of your paycheck on daily life? If you have no idea – which makes sense, how would if this conversation has never come up – then look at last month. Jot it all down, include EVERYTHING you spent, see where you land. Do you have areas that could be adjust? Like spending on Hulu AND Amazon AND Netflix, could one of them go? Could you go out to dinner 1 less time in a month? Maybe bring your lunch to work 1 more day a week? Share how you found some changes to make in the comments below, let’s chat it up.

OK, not everyone is there yet. If you’re not saving 20%, start gradually shifting to that. Next month take $10 out of the “fun spend” into the savings, next month $15. You can get there!! I’m gonna go for a walk and have a glass of prosecco.

*Footnote: A 401k plan is the section of the tax code (that’s why it so odd sounding) that states you can have an retirement account set up by your employer, where you can save money without having to pay any taxes on that money. So it comes out of your gross paycheck, before taxes are withdrawn. If you work for a non-profit or school, it’s called a 403b – again the section of the IRS tax code we will never read. An IRA is an Individual Retirement Account. Your employer has nothing to do with this one, absolutely anyone can open an IRA, and you put money in it like a savings, BUT when you file your taxes, you get to deduct anything you contribute up to $6000 – and yep, I’m actually linking to the IRS site. Wanna know more? Put questions/comments below.