Category: Loans

Under Budget and Overwhelmed: Real Talk on My No-Buy Year Journey

I’ve been dreading updating you all on my budget and how the no-buy year is going, because it’s not going great! However, I want to be transparent with you all about my finances and how I handle the times when I don’t want to think about money. I split my money feelings into two categories below in an attempt to compartmentalize them, similar to how I distribute my savings to multiple accounts so I can see my goals clearer.

Top

  • I came in under budget for May, which after an expensive first few months of 2024 was much needed.
  • I only overspent by about $50 in June!
  • The loan I took out last year to buy a new mattress is finally paid off, which makes some room in my budget.

Bottom

  • Though I’m actively spending on one of my goals—moving—I still have the psychological toll of watching my savings decrease.
  • My new apartment is more expensive, which stretches my budget a bit, and some of my utilities charges for September are unknown.
  • I bought some clothes that I didn’t really need but made my life easier. Clothes were on my red light list for the no-buy year, but I thrifted them to maintain my sustainable strategy in that area.

Whew, I feel better already now that we’re all on the same page. Grace Nevitt, who gave me the idea for the no-buy year, recently posted a video with tips for readjusting and refocusing on the no-buy strategy over halfway through the year (we’re so in sync!). She highlights how she has been engaging more in do-it-yourself (DIY) projects instead of using money to solve a problem—and rewiring that connection in your brain. One example is she wanted pink nail polish and didn’t want to buy it, but she conveniently had a red bottle that she mixed with a white bottle. Mixing them also made the consistency of the final product smoother.

Grace also mentions that she is community sourcing from family and friends and relying more on her “buy nothing” neighborhood group. I’ve been trying to do the same with my family and friends for odds and ends I’ll need for moving, which has taken some adjusting as a Very Independent Person.

Remember Your Why

Grace mentions that we should remember our initial reason for doing a no-buy year. Her “why” is that she wants to save up for a homestead in New Zealand, but throughout the year she started focusing more on her relationship with shopping and overconsumption. My “why” is that I want to save up for my goals and generally not accumulate more stuff (especially since I’m moving, my back already hurts enough!).

Without further ado, here is my budget for September:

Though my rent will be $100 more, I will finally have a dishwasher (please clap!), which will save me time and energy. Don’t tell the dishes, but I’ve kind of enjoyed washing them recently—a whole new level of adulthood unlocked. My new place is also closer to some of my friends, which will cut down on travel expenses. I temporarily stopped one of my subscriptions for a vitamin since I have enough of it to last me a while. My sole monthly subscription is Spotify, which recently increased to $11.99. My whole life in music is on there at this point, so I’m not going anywhere unless they completely change the program.

Most importantly, I thought it was time to increase my monthly savings amount. Now that my loan is paid off and I have a little wiggle room, I increased my savings goal from $500 to $530 to begin replenishing the savings I’ll be spending on moving. Grace emphasizes that if we don’t know what we’re spending on, we can’t see where the problems are and where we need to fix the rules of our strategy. Not only do you have to be transparent with your budget, but also with yourself. I want to focus more on having experiences in the second half of the year. Though experiences are technically on my yellow light list, I still have to live my life to make all this budgeting worthwhile!

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The Carrie Finances: Honey, I Shrunk the Budget

Now that I’m in my 30s and my health app has officially launched me into the 30–39 age group, I thought it was time I rewatched my beloved “Sex and the City” again.

In the first episode of season one, Carrie Bradshaw rekindles things with an ex (who has been resurrected a few times) and her best friend Stanford Blatch says, “Are you out of your mind? What the hell do you think you’re doing?” Carrie replies, “Oh, calm down. It’s research,” after making a “date” for 3:00 p.m. to inspire her next column.

My own research boils down to what mistakes the characters are making with money, and how I can avoid them at all costs. By the time your 30s roll around, you are expected to have certain things figured out. But I’ve learned that this timeline can be restrictive—and, at times, misogynistic. Women have different reasons to spend money. As much as I would love to have a 3-in-1 shampoo instead of mixing three different ones to get my desired results, the majority of products marketed toward women are meant to only serve one purpose. This means we must buy more and more things to stay socially acceptable as we age. (I resent this fact, but the older I get the more I see it happening.)

When I started tracking my spending at the end of March, I was trying to figure out how I could be budgeting and still overspending. A lot of money went to my short-term goals, but there was still not enough room in my budget for what was needed. I got some new cleansers for my skin, trying to figure out my latest flare up. I was going more places and doing more things, which was good for my mental health but not my bank account. I still struggled to find balance and maintain my no-buy strategy for the year.

Later in season one, Carrie exclaims, “My new shoes shouldn’t be punished just because I can’t budget!” Once I saw the damage of March, I knew April could not be a repeat if I wanted to stay on track with my savings. When I broke my spending down by category (transportation, groceries, restaurants/coffee shops, clothing and pay later payments), I was able to see where the problems were. I managed to reduce the amount I spent on transportation by more than half in April. So far in May, I have been avoiding spending any money on transportation since I know that I have some activities planned for later in the month.

For my May 2024 budget, I am allotted $233 per week. My utilities have been steady with a mild start to spring, and I’m almost done with my monthly loan payments (as of publishing this, only three more to go!). So far, I have come in under budget, but I want to make sure I can keep this momentum going.

When I reflect on how hard it has been to both live my life and not buy things I don’t absolutely need, I think about how I used to spend all day at the mall when I was 12 years old and only spend around $20. Of course, this was the early 2000s, so everything was cheaper back then. The economy was good and even in my naive state I had some semblance of a community. The park, the public library and other places where you can be part of a community and not necessarily spend all your money are considered “third places” outside of home and work. The mall, a café, a bookstore and the gym are also on this list but have become places geared more toward spending money than interacting with others.

You could argue that tipping your barista gives back to the community, especially if you’re a regular at your coffee shop. But this still relies on spending money in order to build a community, instead of using the resources we already have to make connections with people.

Social media could also be considered a third place, but I’m not seeing much community there lately. If anything, social media has gone so far as to replace community with buying things in the way our outside world has monetized every interaction we have with others. In the same way, this transactional way of thinking can hinder us from getting together with others when there is no monetary incentive. Think of a friend charging you for having a home-cooked meal at their house even when they invited you over or sending you an invoice after hanging out in one of those public third places. Yikes!

Grace Nevitt, who gave me the idea for the no-buy year strategy, recently posted a YouTube video about how to discuss it with your loved ones. I never really ran into this issue since I announced it on the blog for everyone to see! But she cites the level of American consumerism and how ingrained it is in our society as part of why she thinks a no-buy year is important. If we can train ourselves to not feel the need to buy something just because it’s new, or because we feel like the world is doomed, maybe we can connect with each other in more meaningful ways than capitalism currently allows.

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Financial Goals to Accomplish by Age 30

If you’re reading this on the day it comes out, I have officially turned 30. I’ve been ambivalent about turning 30 for a while now, wanting to stay 27 forever (unfortunately, I never found a vampire to make that happen). The last time I felt I hit a big milestone was when I turned 19. At the time, I was in college and co-running a YouTube channel with my best friend Ilana. I filmed a video about what people can do when they turn 19, the most exciting of which was being able to drink legally in all of Canada! Inspired by this, I looked at the most common financial goals people should achieve by the time they turn 30. Of course, everyone will be on a different trajectory, but I always find benchmarks helpful when it comes to money.

1. Build and Replenish an Emergency Fund

The decade of my 20s was all about saving, and I’m so thankful I was able to focus on this goal. Building an emergency savings fund is the first step you can take to achieve financial independence. A common guideline is to have at least six months of living expenses saved in this fund, but you can work up to this. I have my emergency fund in my regular savings account that is attached to my checking account. This means it’s not earning me much interest, but that’s quite literally the price I pay for this money to be easily accessible in an emergency. If you end up tapping your emergency savings, be sure to set up a plan for building that fund back up to the amount you maintained before. Whenever your financial situation changes, you should reassess this amount to make sure it will still cover six months of expenses.

2. Pay off Debt

Once you have money saved up for emergencies, you have increased your net worth and also your ability to pay off debt. If you were trying to pay down debt before building up your savings, you would slip further into the red, and it would be difficult to get yourself out of debt in the future. It’s best to focus on your high-interest debt first—anything above 6%—since that interest will compound and add more to your debt if you don’t get it under control. Examples of high-interest debt could be on credit cards, personal loans and private student loans. Federal student loans are usually lower-interest debt, along with mortgages.

3. Maintain a Good Credit Score

Not only do you need to get yourself into a good credit score range (above 670), but you also need to keep that credit score up while you live your life. Your credit score can change at least once a month, but this can vary depending on how many lines of credit you have. You can keep your credit score up by paying your credit card bills on time, keeping your card balances low and only applying for lines of credit that you need. Over the last year, my credit score has stayed within the range of 770 to 780, which is considered “very good.” Maybe I’ll try to sneak into the “excellent” range (800 to 850) during my 30s 😉.

4. Start Saving for Retirement

I know most of us young people don’t even want to think about retirement half the time, but if you are actively contributing to a retirement account, you shouldn’t have to think much about your balance. The best thing to do once you choose your investments for your retirement account is to rarely check it. I know this sounds counterintuitive, but unless you have concerns about your account not making enough or you want to reconsider how your portfolio is allocated, it’s best to just let your investments ride their gains and only periodically check your balance.

One rule is to have at least half of your current income in your retirement account by the time you turn 30, but I’m not sure how achievable this is in practice. Especially with inflation, millennials and Generation Z are struggling to even hit what is considered the minimum. It might be more reasonable to shoot for having one-third of your income saved for retirement by age 30. For example, if you’re making $45,000, this would equate to $15,000 in your retirement account. I can honestly say that I have less than one-third of my income in my retirement account right now, but I have multiple savings and investment vehicles that together would cover this amount.

5. Know Where Your Money Goes

This is just a looser way to say “budget,” but by age 30 it’s important to know how much money you are spending relative to how much you are making. You probably have a general idea when you look at your bank account and credit card statements, but if you still feel a dark cloud over your head when you think about your finances, it might be time to break out the spreadsheets and take a closer look at the numbers. I yo-yo between finding my budget helpful and hurtful, but the truth is there’s no emotion that I’m not projecting onto these numbers. On their own, they’re just numbers. The sooner you face them, the better off you and your money will be.

6. Begin Investing

If you haven’t started investing, there’s no time like right now! For me, the hardest part of investing so far was the beginning. If you’re struggling to figure out where to start, it’s helpful to determine how much money you have available to invest. If you want to go for something easy that won’t take much of your time, put that money into an index mutual fund or exchange-traded fund (ETF). It won’t beat the market’s return, but it will ensure that you have investments making money for your future.

How Do You Score?

By age 30, I have pretty much everything I need for financial stability. Out of the six goals, I would say I have achieved five and a half, for 91.7%, or a grade of A–. This means I have places I can improve in my 30s, so I’ll be focusing more on my goal of saving for retirement and optimizing my budget. If you’re turning 30 soon or you recently turned 30, how many of these goals have you achieved? What has been the hardest one? Let me know in the comments!

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The Year of Financial Thinking: 2023 in Review

“Life changes fast. Life changes in the instant.”
—Joan Didion, “The Year of Magical Thinking”

It’s that time of year for everyone to compile their end-of-year list of tax and personal financial moves. AAII’s Tax Guide is now online for those who want to get a head start. My check-in is going to be a little different, with emphasis on the personal.

1. What goals did I achieve this year?

The year 2023 was not an easy one for most. I began the year reviewing my portfolio and my credit card habits, thinking I would be able to conquer the overspending of the holidays and get myself back on track. Though this didn’t happen immediately, I successfully did my taxes for the first time since I started investing. Taxes were my biggest anxiety about investing, because we all know nothing related to the government is easy. I managed to not commit tax fraud, and I no longer dread what 2024 tax season will bring. I also reached a behavioral goal of mine: looking at my brokerage account so infrequently that I saw it in positive territory more often than not.

2. What surprised me about my finances?

In 2023, I discovered that saving consistently is more important than saving the “right” amount each month. I became a little competitive with myself, so when I couldn’t put away the full amount allotted for savings in my budget, I still saved as much as I could from what I had left over. Because of this, and higher interest rates, I am significantly closer to reaching my short- and intermediate-term goals through my high-yield savings accounts than I was at the beginning of the year!

3. How did my relationship with money change this year?

Before this year, I had a lot of fear around money: running out of it, not saving enough of it, spending too much of it on rent and retiring with only enough for cheese and crackers in my later years. It took a while, but I discovered that money is malleable. When I wanted to make a large purchase but my usual means of spending weren’t available to me, I got creative and built room in my budget to take out a loan. Likewise, I lowered the goal amount I will put in savings until the loan is fully paid off. I granted myself so much freedom in this decision, and it enabled me to improve my current life while still improving my future.

4. What would make me and my money happier in the new year?

Now that I have my finances in consistent good standing, it’s time to take advantage of good ol’ compounding. By staying invested in the stock market through index exchange-traded funds (ETFs), the money my investments are making will continue to make money on top of that. Gaining more traction on my goals is my top priority for 2024, even if it means cutting back on spending in some areas. Though I am doing well on my short- and intermediate-term goals, my long-term retirement goal could really use some more attention—and money!

How was your 2023 in finances? Though it was a rough year for humanity and the majority of stocks, what are you looking forward to in 2024?

Budgeting While Paying Down Debt

Another budgeting blog post, already? Yes, I regret to inform you that I’m getting extra cozy with my budget this fall. Now that my rent is too high for my liking and groceries cost the same amount of money as going out to dinner, it’s time to get real.

I’m also revisiting my budget since a few things have shifted in my expenses and income. My power bill is still going to be in the $40 range in October (the email came through yesterday, thanks to ComEd’s impeccable timing), but I got a call from Xfinity with an offer to lower my monthly internet bill for the next year! I’d rather look up the phone number of who’s calling me than actually answer the phone, but I know when Xfinity calls that it means money, honey! My internet will cost around $61 per month instead of $72, with no change in service. At this point, I’ll take any discount I can get.

My utilities for October still come out to just over $100, but with a lower base price for my more expensive utility, I know I’ll have more breathing room in the winter months.

I checked in with the budgeting zeitgeist for any new tips surfacing and stumbled on this article from the Good Trade. One of the hacks suggests asking your utility company about budgeting plans: “If you have very high electricity bills in one season and very low bills in another, reach out to your utility company to see if they offer budget plans. During a particularly cold winter in a basement apartment surrounded by concrete, our heat bill came out to nearly $400. We were able to pay closer to $120/month through a budgeting plan, rather than $400 chunks in the winter and $80 bills in the summer.”

My most expensive power bill in the summer has been close to $60, while the low end in the winter is around $20. This isn’t quite drastic enough for me to be on a budgeting plan, but if the horrors persist and costs increase over time, it’s something I can keep in my back pocket. It just strikes me as another thing that falls on the individual to take action in order to live comfortably, rather than the companies with the money and services making things easier for their customers from the get-go.

Another piece of advice from the Good Trade is to “make checking your budget a ritual so that it doesn’t cause you stress.” The article recommends having your budget with a side of wine or dessert to trick yourself into enjoying the process. Reviewing your budget more often also increases your tolerance for dealing with it. I wish I could say the same for grocery shopping, but I still have to mentally prepare myself before leaving the house and make sure I don’t accidentally spend $80!

The main reason I need to redo my budget is that I recently took out a loan to buy a new mattress. (It was so worth it, and I’m sitting on it as I write this—getting my money’s worth!) Since I’ll be paying it off each month for the next year, I added the loan payment to my fixed expenses:

Much of the budgeting advice I have found pushes you to prioritize paying down debt whenever you can, and I intend to follow it. Especially since my monthly loan payment will be coming from my checking account, I have to literally be tighter with the purse strings to ensure I have enough funds without overdrawing.

Though it’s not included in my monthly budget, I received a sizable one-time payout from being involved in a litigation claim with a skin care company. I used the brand’s platform that analyzes your skin and recommends corresponding products to treat acne, discoloration, etc. Apparently, my biometric facial data was stored by the website and exploited elsewhere. In addition to the payout, I received a voucher that can only be redeemed for buying the company’s products. I put this payout directly into my emergency savings account and will be sharing the skin care wealth with friends and family. Stay tuned for a post where I figure out how taxes work on this income!

All of these changes led me to make the tough decision of lowering the monthly amount I’ll be putting into savings until my mattress is paid off. My monthly expenses are now over 50% of my income, so something had to give (in September, they were just under 50%). I determined my savings amount by subtracting the loan payment from what I was previously saving per month and rounding it down to $500. However, I have been able to build up my emergency savings with the payout, so anything I save going forward will be allocated to my high-yield savings accounts that are making me more money than my regular savings account.

The more familiar I get with my budget, the more I realize that everything is temporary and in flux, and there’s always something I can do to make the numbers work for me. Now that I have a few different investing vehicles to take advantage of, it makes me feel less trapped by this monthly loan payment. I have the freedom to save a little less since I was consistent with my savings. My present self would like to thank past Anine, and you all, for encouraging me on this journey. I hope it inspires you to get your finances in order so you can do the things you love!

Check out AAII’s Education Hub to increase your investing knowledge and learn how to prioritize your goals with the PRISM Wealth-Building Process.

I Took Out a Loan

I did a scary adult thing and I want to tell you about it. I decided to take out a loan for a large purchase, even though it was my last resort. It all started when I offered to give my grandpa my old full-size bed for when he moved into a new, smaller place. For a while now, I’ve wanted to upgrade to a queen-size bed, but didn’t feel I could justify it until I moved. Who would take the old bed? How would I, just a girl, move an entire bed into my current apartment?

When the date was set for my uncle to take my old bed to my grandpa’s new place, I started frantically looking for mattresses in a box that would be easy for me to maneuver. My parents gave rave reviews of their mattress in a box, but as I searched around, I noticed something glaring: None of these websites took Klarna, my primary pay-later option that splits larger payments into four and charges to my credit card every other week. However, they all offered Afterpay, which I knew did not take Discover (my only credit card). If I wanted to use Afterpay, I would have to connect my checking account or use my debit card. This defeated the purpose of making a big purchase; I wanted to be able to add it to my credit card balance so I could pay it off over time instead of having it directly taken from me.

I even went to Klarna’s website to see if any of the mattresses I wanted were available at the source, but all I could find were cheap alternatives that wouldn’t fly. I wanted a good-quality mattress that I could have for a while, and I was willing to shell out a little extra for it. But I didn’t want to be saddled with payments I couldn’t afford—I had to find something that struck a happy medium.

I chatted briefly with my mom about it, mulled it over for a couple days, then made my decision: I would take an Affirm loan and pay off my mattress on a monthly basis over the next 12 months. The money would come directly from my checking account, but I wouldn’t have to deplete my savings all at once to pay for it. This gives me the advantage of continuing to save for my other goals while paying off the mattress. But I was still nervous about not having enough money in my checking account at the time the payments would be processed—the fear of overdrawing loomed, so I had to take action.

The minute my loan was confirmed, I opened my phone calendar and added each monthly payment as an event on the day it will be due all the way until 2024 when the loan is paid off. This both solidified the dates in my head (thankfully, they’re all on the seventh day of the month) and gave me the peace of mind of knowing exactly when the payments would be taken so I could ensure my checking account had enough funds.

On the last payment, I added a note for my future self:

Affirm gave me the flexibility I needed to pay smaller increments of the full purchase amount over a longer time period, but the catch is that, unlike with Klarna and Afterpay, I will be paying some interest. However, I will not be paying compounding interest (which would increase over time), according to Affirm. On my loan confirmation email, I can see exactly what I’ll be paying and what the charges are—and nothing about that amount will change!

Essentially, I am paying around 2% interest on the entire purchase, but the amount of interest decreases with each monthly payment:

When making this tough decision to take out a loan, I found that it was still the most cost-effective and reasonable way for me to buy the mattress I really wanted (Nectar hybrid mattress, if you’re interested—great for side sleepers!). The mattress was also on sale the weekend I bought it; I didn’t want to wait and possibly open another credit card that Afterpay allowed when the mattress price would likely go up and I would be spending more anyway.

I will be adjusting my budget accordingly to incorporate this monthly loan payment, another behavioral finance hack that should help me visualize how much I’m spending so I can continue building up my savings. If anything goes wrong, I’ll keep you updated on the process! But for now, no news is good news 😅.