Budget Status: It’s Complicated

If you’re tired of hearing about my budget, that makes two of us!

Last time we talked about my budget, I tried out a mini-budget to get back on track with my savings. I haven’t been able to save quite as much as I wanted, but I’m still trying to stick with the percentage budget I have in place to save around 20% of my monthly income.

I recently renewed the lease on my apartment, and my rent increased by $100 to $1,300—as if my landlord thinks all the pictures I take of the sunset every night can pay my bills! It wouldn’t have been so bad if I had received it during the day, but when I came home at 10:00 p.m. on a Saturday night, my building manager was in the lobby waiting, lease in hand. If I hadn’t immediately texted the friend I had just been out with and my mom about it, I wouldn’t have believed it myself 😂!

Thankfully, this higher rent doesn’t apply until September, so I have some more time to be anxious about it! With my rent at $1,300 and my air conditioning hiking up the price of my utilities, my total fixed expenses slid in at 49.7%, just under 50% of my monthly income. I had a feeling it would be tight, but I have the peace of mind that after this lease is up, I’ll be moving out to find something better for my money (with a dishwasher, which should no longer be considered a luxury in this economy!).

Before I updated my budget with these increases, I thought I might have to decrease the amount I could save going forward. Thankfully, there’s still room in my budget to allocate 20% to savings. In my latest blog post, I moved money from my SmartyPig high-yield savings account into my brokerage account. I’m feeling comfortable with the amount I have invested for now, so I can shift my focus to building up my savings in SmartyPig and LendingClub to continue taking advantage of the high interest rates.

Since every month is different, with various occasions to buy things for and necessities to replenish, I should probably be updating my budget more regularly—possibly every month. At this point, I’m not sure if it will help or hurt the process in place; if it will make me feel like I have more or less freedom to live my life. Ultimately, my sense of wealth depends on how much time I spend doing the things I love, and that means spending money. It might help to have some foresight when expensive months are on the horizon so that it’s not a surprise when I can’t save enough—I can just pretend it was all part of the plan 😉.

Do you think this view should cost $1,300? Comment below!

Midyear Portfolio Review and Finding an ESG Benchmark

We made it to the second half of the year already, which means it’s time for a midyear portfolio review! Let’s analyze my seven exchange-traded fund (ETF) holdings and determine if any of them will get the guillotine.

My review process involves looking at my portfolio holdings’ performance, expense ratios (how much investing in the ETF will cost me per year) and their As You Sow grades on fossil fuels, deforestation, gender equality, sales of guns and military weapons, the prison industrial complex and tobacco. I have potentially four holdings that could be deleted, but will I be replacing all of them?

All of my holdings are looking good on expense ratios and their grades; they’re all below 0.60% and have grades of A or B. However, three of my ETFs are having “Gender Trouble” (Judith Butler, 1990) with gender equality grades of F. One ETF’s fossil fuels grade slipped to C. These grade changes are all grounds for deletion in my investing strategy. When evaluating my ETFs on their performance, the four with unsatisfactory As You Sow grades were also the worst performers since being added to my portfolio:

I had a lot of trouble finding replacements for these ETFs that fit my stringent criteria for addition. Possibilities included the Fidelity MSCI Information Technology Index ETF (FTEC), with a prison industrial complex grade of C dragging it down, and the Nuveen Winslow Large-Cap Growth ESG ETF (NWLG), with all A’s and B’s on As You Sow but an expense ratio of 0.64% (grade of D).

Many of AAII’s model portfolios have a rule that if there are no suitable replacements for a stock, the stock should remain in the portfolio until one with better prospects is found. I’ve been thinking about implementing a similar rule for my own portfolio, but with a twist. Since I don’t have a certain number of ETFs that I am required to hold in my portfolio, I could delete an ETF without replacing it. My only rule is that I shouldn’t hold more than seven ETFs at once (for diversification purposes), but what if I held five instead?

Based on their poor performance and gender equality grades of F, I will be removing the Global X Hydrogen ETF (HYDR) and the Global X Solar ETF (RAYS) from my portfolio. I won’t be replacing them with anything new at this time, but hopefully when my next portfolio review rolls around at year-end, I can find something worthy. The other two underperformers with grade slippage will be reevaluated at my next portfolio review as well. Maybe they can get those grades up before then!

With my midyear lump-sum investment of $2,000 added to my brokerage account, I will buy more shares of my current holdings and make sure the money is as evenly distributed as possible among the ETFs.

Using AAII’s My Portfolio tool, I checked how my portfolio would be diversified after removing these two ETFs. I found that my allocations to domestic and foreign stock moved closer to the recommendation from the AAII Aggressive Allocation Model:

Recently, AAII’s lead editor of the Stock Superstars Report (SSR) Matt Markowski wrote about the benchmark used for the SSR portfolio. Choosing a benchmark for my own portfolio has been on my mind for a while. According to the article, “A portfolio benchmark allows individual investors to gauge the relative performance of their portfolios.” Especially in the current investment environment with a lot of red, I thought it would be important to see how my portfolio is doing compared to the majority of environmental, social and governance (ESG) investments.

Most of the ESG indexes I initially found had companies in their top 10 holdings that I wouldn’t touch with a 10-foot pole (Amazon, Apple, Tesla, Microsoft). Many of the indexes I found had more of a domestic focus, but since I have a sizable allocation to foreign stock, I knew my benchmark index would need a global view. Finally, I stumbled on Morningstar’s Global Markets Sustainability index. Morningstar’s transparency made it easy to see exactly what the index holds and how it’s constructed:

Year to date through June 30, 2023, the Morningstar Global Sustainability index is up 14.3%. My own portfolio’s performance isn’t in positive territory, but it’s good to know that it’s possible to outperform while sustainably investing.

Should Young People Still Save for Retirement?

Retirement has been on my mind lately, and not in a romantic way. When I picture my retirement, I don’t necessarily think of what I’ll be doing or where I’ll be—I think of the air quality I’ll be living in and imagine that the vibes will be, generally, bad. I promise I’m not catastrophizing here; I’m just trying to be realistic about the way the world could turn out so I can prepare for the worst. The worst, in this case, would mean that there would be no retirement for my generation and other young people.

I read an article on MarketWatch that discusses how young people should wait to start saving for retirement, in some cases until middle age. The logic comes from the life-cycle model, which is an economic theory of how people consume based on their income. The theory holds that people will save more when they have higher income and borrow more when they have lower income—seems pretty simple, right? Someone who has just started working likely doesn’t have the income to start saving for anything. The usual financial advice given to young people when they start working is to begin contributing to their retirement account as soon as possible, max out their contributions and ensure they are getting their employer-matched contribution (free money!). The article states that, instead, this could do a lot of harm to young people who are just getting on their feet financially and might not be able to afford any level of retirement contributions until they are making a higher salary.

I found this to be a validating point, as I certainly couldn’t afford to start contributing to my retirement account when I was first eligible. Instead, I prioritized building up my emergency savings until I could move out on my own and made decisions based on the kind of life I wanted to have in the present. (Trying fancy artisan cheeses was definitely a higher priority than retirement during this time!)

We save for retirement because we want to maintain a certain standard of living once we are no longer working. This sounds a lot simpler before you decide to crunch the numbers, factoring inflation into your future. Not only are young people worse off financially in the current economic environment, but the latest I’ve found is that millennials now need to save between $3 million and $4 million for retirement. Yes, I laughed out loud when I read that! When I first started working at AAII, the magic number was $1 million for retirement. Six years later, a threefold increase from that number seems to be leaving a huge chunk of the point on the table: Wages have not and cannot keep up with inflation and likely never will. So if millennials are supposed to be saving three times the amount our parents thought they had to save for retirement, how on earth are we expected to keep up with that? (Seriously, do we need to get the aliens involved?)

The MarketWatch article also touches on low-income workers and Social Security, saying that Social Security should be the main source of retirement savings for them: “In essence, the more Social Security replaces of your preretirement income, the less you’ll need to save.” The only downside here is that Social Security may be significantly depleted by the time low-income millennials need to retire.

Much like a minimum wage, I think there should be a baseline salary that everyone deserves to make in order to survive. This could vary based on the cost of living in your area. If we work in order to live under capitalism, then we need to be able to actually live on what we are making from working. The baseline salary wouldn’t necessarily have to be entirely provided by the company you work for, but it could be provided from other sources that are meant to help people, like the government (in a perfect world where there’s no debt ceiling).

Trying to imagine myself with $3 million at the time I retire is harder to believe than many of the works of fiction I’ve consumed. If the cost of living continues to skyrocket with no accountability in other areas of the economy, people won’t even be thinking about retiring, they’ll be too busy trying to survive!

So where does this leave me and my retirement plans? Right where I left them: My 403(b) account slowly increasing with each paycheck contribution, me still not sure where or when I will ever retire and the peace of mind that I still have time to see if the world doesn’t end before then.

PRISM Step 5: Monitoring Your Allocation, Progress and Life Stages

This is the final post in this initial series. You can read the rest of these blog posts here to learn more about how to use the AAII PRISM Wealth-Building Process!

PRISM is a five-step method for aligning my investment decisions with my goals, created by AAII Journal editor Charles Rotblut. The fifth step details how to use PRISM as a cyclical process that changes as you and your investments age.

The final step of PRISM contains three parts of your financial life to monitor: allocation, progress and life stages. Asset allocation is the process of dividing your investments between different categories like stocks, bonds and cash. Currently, my investment portfolio and my retirement account are pretty much fully allocated to stocks via exchange-traded funds (ETFs), but I have around $80 in cash in my Charles Schwab brokerage account.

Using AAII’s My Portfolio tool, the A+ Investor Asset Allocation Analyzer shows me that the breakdown of my portfolio of index ETFs is a bit off from the AAII Aggressive Asset Allocation Model. The aggressive model calls for 60% invested in domestic stock, 30% in foreign stock and 10% in bonds. My index ETFs round out to 53.5% domestic stock and 46.4% foreign stock, and obviously nothing is in bonds (which, according to AAII founder James Cloonan, is a sound portfolio strategy). I decided to take a look at my 403(b) retirement account as well to see if the average asset allocation of my overall investments could be closer to the aggressive model. My 403(b) has 80.3% in domestic stock and 17.1% in foreign stock. Combined with my index ETFs, my average allocation is 66.9% to domestic stock and 31.8% to foreign stock—definitely closer to the model!

During my next portfolio review at the end of June, I might take a deeper look into my allocation, but for now I’m happy with where I stand.

Next on the list is to check my progress toward my goals. Back in the first step of PRISM, I determined my short-, intermediate- and long-term goals and how much I thought I would need for them. My nearest-term goal is to accumulate $2,000 for the next lump-sum investment in my brokerage account. I’m using my SmartyPig high-yield savings account to track this goal and have about $500 more to go. By my next portfolio review, I should have realized this goal. My goal of buying property in the next three to five years has an estimated cost of $35,000. I’ve been neglecting this goal because the housing market has been ridiculous and, after determining the pros and cons of owning property, I decided that renting is my best option until I feel the need to run away and become a forest witch! Even so, I should be taking more advantage of the 4.25% yield my LendingClub savings account is offering. I currently have around $7,200 and if I can add money more consistently to this account, I could be a lot closer to my goal in the next five years.

The last part of the fifth step of PRISM is to assess any life stage changes that have occurred. Using the Monitoring Your Life Stages worksheet, I determined that nothing has changed, except that I have to walk a lot more to stave off knee and back pain!

Though I made it through all five steps of PRISM, that doesn’t mean I’ll never look at my investments through the lens of PRISM again. When a life stage change occurs, I will need to determine if any revisions are needed to my goals, risk tolerance, allocation and management preferences and apply any of these changes to my investments. PRISM will make its return whenever something dramatic happens to me—I’ll keep you posted!

I read this so you don’t have to! Investing at Level3 by James Cloonan

“The failure of others to take and be faithful to a long view toward investing is what provides the opportunity for you. Don’t let it slip by.”
—James B. Cloonan, Ph.D.

It took me a while to feel ready for it, but I finally read AAII founder James Cloonan’s career-spanning book, “Investing at Level3.” When I started at AAII in 2017, the book was already in the hands of many investors and has been updated with fresh data a few times since. Cloonan demystifies and denounces various theories that the financial industry has historically relied on to conclude that the individual investor doesn’t need a ton of bells and whistles to become a successful manager of their portfolio.

I admired Cloonan for his quick wit. One time when we were chatting, he referenced Oscar Wilde’s “The Picture of Dorian Gray.” I’m sure he saw my eyes light up at the mention; I used to carry my laughably large, 700-page copy of “The Collected Oscar Wilde” around the hallways in high school because it was too big to fit in my bag! Though he founded AAII, he didn’t like too much public attention (introverts unite!). I felt a kinship with him in this regard and respected that he didn’t feel the need to fit into a mold because of his title.

In the introduction, Cloonan outlines the book’s objectives: 1) To show how most of the investing analysis used today doesn’t cut it for individual investors’ returns; 2) To provide alternatives to these theories that are based in reality; 3) To define and control “real risk” for the long-term investor; and 4) To create a structure for these ideas and empower the individual to ignore the unhelpful noise from the investing industry.

I’m sure you’re wondering by now: “If this book is about Level3 investing, what are the other two levels?” Cloonan defined Level 1 investing as an investor who is acting purely on emotion and “following different advice at different times.” An example of Level 1 investing is everyone who was using Robinhood during the meme-stock craze of 2021. At least it was entertaining! Level 2 investing is the industry standard: a portfolio with 60% in large-cap stocks and 40% in bonds. Officially, Level3 investing uses reality-based instead of theoretical models to increase the individual investor’s returns and retirement income over the long term.

I found the thread of risk that Cloonan weaved through this book to be the most interesting part. Risk is an investing concept that, though I’ve read about it a thousand times, doesn’t register as anything specific in my mind. It all started to make sense when Cloonan wrote, “Every book and article on investing is telling you how to measure risk and the measures don’t make sense in the real world.” Essentially, volatility can be defined as “‘the likelihood of (returns) shifting quickly and unpredictably,’” while risk is “‘the chance of (financial) injury, damage, or loss.’” Volatility seems to be part of the investing process and is more important to the short-term trader than the long-term investor, but risk is more of a bad outcome of investing.

For the long-term investor, Cloonan concludes that risk doesn’t necessarily need to be measured, “we just have to avoid it as much as possible.” He also notes, “In fact, because volatility can add to the return on investment, it can actually reduce real risk. This is because over time additional return will continually increase the value of the portfolio until even in the worst-case scenario the portfolio will be able to maintain a higher value than its lower-return alternative. This is real risk reduction … In short, the long-term investor has almost no risk.”

Two asset classes that Cloonan believed did not fit the Level3 strategy are long-term bonds and international stocks. His case for avoiding long-term bonds “is that they have lower returns over the long run and they provide no significant risk reduction for the long-term investor.” I was relieved to not have to think about bonds because I still don’t understand what they are anyway 😂! Cloonan wasn’t entirely opposed to international stocks, he just didn’t think they should be used purely for diversification purposes.

“Investing at Level3” solidified many of AAII’s teachings I’ve consumed over the years and added more depth to my understanding of risk—it’s nice to know I have one less thing to worry about for my own long-term investing strategy! There was also great attention given to an aggressive investing approach, meaning a portfolio that is mostly allocated to stocks. Cloonan writes, “Going to a more conservative strategy has significant cost, and that cost must be compared with the likely loss from such a scenario.” With this, Cloonan inspires the long-term individual investor to take more “risk” by only investing in stocks, as long as they can stomach it when things turn sour. Here’s to Cloonan’s decades of dedication to educating investors and taking alternative routes to get there.

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I watched this so you don’t have to! Netflix’s How to Get Rich

“The best thing you can do is not make a bad decision.”
—Ramit Sethi

The eight-episode series “How to Get Rich” on Netflix promises to solve people’s financial problems in just six weeks. It follows four couples and four individuals on their journey to understanding money, learning how to spend consciously and taking ownership of their financial situation to “live their rich life.” Huge thanks to AAII’s investment editor Cynthia McLaughlin for recommending it to me!

The show’s creator Ramit Sethi is a personal finance expert who digs into the emotional and behavioral aspects of money to show these people how they can improve their finances. But to what end? The show’s title is, of course, marketing. The end goal isn’t to become a billionaire but to know that what you want to do with your money is attainable with the way you’re managing it.

Each couple and individual has a goal in mind: buying a house, retiring their mother, budgeting for a wedding, starting a business, getting out of debt, etc. One of the biggest hurdles for most of them is learning how to talk about money with their partner, something that requires having the same vocabulary with which to talk about it.

Monique and Donnell, who want to buy a house, have kept their money separate for 17 years of marriage. When Ramit asked about their financial accounts, each had about 10 accounts across credit cards, checking and savings! The first thing he recommended was closing the majority of those accounts to consolidate and better visualize how much money they have. Eventually, the couple gets a joint account for their money, though there’s a learning curve for Donnell. Since he grew up poor, when he has money, he wants to spend it even if he doesn’t need something. However, this doesn’t take into account the couple’s debt they want to pay down in order to save for a house. Now that they have a joint account, Donnell’s spending is on full display, so he and Monique can be more transparent about money than when they kept their finances separate.

Frank recently came into a lot of money by winning a reality show and is spending $200 on brunch every weekend! Even though Anthony Bourdain hated the idea of brunch, calling it a “horrible, cynical way of unloading leftovers and charging three times as much as you ordinarily charge for breakfast,” I love a good brunch, but $200?! Absolutely not. Frank was orphaned at a young age, so the rest of his family showered him with gifts and money but didn’t provide a foundation of financial understanding. He has over $200,000 in student loans and says he will take them to his grave. He already has collectors calling every day, and if he doesn’t pay his student loans, Ramit says, “They’ll start taking money from your paycheck and you’ll never be able to buy a house.” After much convincing from Ramit, Frank agrees to put some of his winnings toward his student loans.

When it comes to investing, Ramit has a lot of opinions. He doesn’t think individual investors should have a financial adviser who is taking 1% of their profits as payment. Even at this seemingly low rate, Ramit believes it is too much to pay an adviser and that individuals can make millions more on their own. Unless you have a large portfolio or a complex financial situation, he thinks you should be paying your adviser an hourly fee instead. One couple, Millie and Christian, are in good financial standing but are making a few “boneheaded” moves with their money. Christian uses Robinhood, to which Ramit says, “Robinhood’s fine, but you shouldn’t be using it.” Robinhood uses a day-trader approach to investing, enticing individuals to make nonstop portfolio moves when they’re better off sticking with the investments they have. The look on Ramit’s face was priceless when Christian said his buddy mentioned “puts and calls,” the language of options trading. Options are extremely risky investments that are best left to the professionals. This is another way individuals can get pulled into shiny things they don’t understand that will ultimately lead them to financial ruin. Ramit declared, “Investing should be boring!”—I couldn’t agree more!

Meanwhile, Millie’s job is unmistakably a multi-level marketing scheme. Once Ramit scratches the surface of how she feels about the job, we discover that Millie was awarded a car at a certain level of sales, but if she doesn’t reach that level every month, she is saddled with the entire car payment. The car payment is $660 per month, but the company writes her a check for $500 per month. At the time, she had failed to reach the level of sales required for the $500 check eight times and had to pay $660, which was not accounted for in the couple’s budget. Even though this seemed like a fulfilling job to Millie, it quickly became a financial trap. Ramit convinces her to eventually find not just a better job, but a career that can support her end of the relationship.

Other wild stories from the show include someone living paycheck to paycheck who has a checking account for their dog but not a 401(k) retirement account and a frivolous spender who gets $25,000 per month in alimony and blows it all on Rodeo Drive. There are many great examples of what NOT to do with your money, but if you end up falling into a financial hole, the show provides ways to reverse that fortune. Money can be a scary and overwhelming thing, but the more you’re able to discuss it proactively instead of waiting until something is a huge problem, the better off you’ll be. Taking action over the small things, like paying one bill, will give you the courage to tackle the big things, like your goals.

PRISM Step 4: Selecting and Managing Your Investments

Read the rest of my blog posts in this series here to learn more about how to use the AAII PRISM Wealth-Building Process!

PRISM is a five-step method for aligning my investment decisions with my goals, created by AAII Journal editor Charles Rotblut. The fourth step of PRISM focuses on how to find specific investments that fit my investing strategy.

Charles emphasizes the need for creating buy and sell rules for my investments. There are lessons containing helpful guidelines for buying and selling stocks, bonds, mutual funds and exchange-traded funds (ETFs). Thankfully, I have already been going about this process outside of PRISM, so I have a portfolio and some loose rules in place for the ETFs I own.

Using the list of Buy and Sell Rules for Mutual Funds and ETFs provided in the fourth step of PRISM, I solidified my portfolio rules.

The first question that caught my eye is related to the ETF’s investment approach. Since my investing strategy is to find sustainable ETFs that aren’t destroying the earth, this is an important consideration for my portfolio.

When I first invested in March 2022, I made notes of the ETFs’ current As You Sow grades in AAII’s My Portfolio tool so I knew why they were attractive investments at the time. As You Sow’s screener grades funds based on their investments in stocks of companies that are profiting from the fossil fuel industry, deforestation, gender inequality, sales of guns and military weapons, the prison industrial complex and tobacco.

During my first portfolio review at the start of 2023, I came up with some rules for my ETFs’ As You Sow grades: In order to add an ETF to my portfolio, it must have mostly grades of A and B—with the exception of gender equality, which can have a grade of C. I made this distinction after much in-depth research about sustainable investing and determined that gender equality is the most common holdout on these kinds of investments. The corresponding sell rule to this is if any of the ETF’s As You Sow grades worsens to C and/or the gender equality grade falls to D then the ETF’s sustainable objective is no longer valid for my portfolio strategy and it should be kicked to the curb.

The next guideline is regarding expense ratios. An expense ratio is the cost investors pay for a fund’s portfolio management. Since I am mostly investing in index ETFs, the expense ratios on my investments should be relatively low.

In my first portfolio review, I determined that I did not want to invest in an ETF with an expense ratio of 0.60% or higher. I also noted that I was looking for expense ratio grades of C or better, but I am now rethinking this rule. If my buy rule is for an ETF with an expense ratio below 0.60% and corresponding grade of A or B, the equivalent sell rule is if that expense ratio increases above 0.60% or its grade falls to C.

Below are my very official buy and sell rules:

As I continue my investing discoveries, I will add to this list and share it with you all. Follow along with me as I venture through the PRISM Wealth-Building Process and solidify my financial plan for the future!

One-Year High-Yield Savings Accounts Update

Shortly after I last discussed my high-yield savings accounts, interest rates increased again and haven’t showed any signs of slowing! On October 6, 2022, LendingClub increased my annual percentage yield (APY) to 2.85%; later that month on October 26 it reached 3.12%; and by the new year, we broke 4%! As of mid-March 2023, the APY is 4.25%—12 times the national average, according to LendingClub. For perspective, LendingClub was offering a 0.65% interest rate back in March 2022 when I opened these accounts.

My SmartyPig high-yield savings account is not getting as much love, but the interest rate is holding steady at 3.50%. When I opened my SmartyPig account, the interest rate was only 0.70% on my savings. I started a new goal with SmartyPig to have $2,000 ready to invest in my Schwab brokerage account by June 30 to correspond with my next portfolio review. Unfortunately, my SmartyPig goal didn’t come with a higher yield as it did the first time I set this goal back in the fall.

In total, I’ve made over $175 across these two high-yield savings accounts in the last year. Meanwhile, my investments have lost money since March 2022. When going through my transaction history to see how much I made on my savings, I saw the huge differences in interest payments that were a result of not only the increasing yield but also the compounding interest I’m making on my savings. The interest I’m being paid increases because there’s more money in my account to make interest on (like magic!).

Back in October 2022, I calculated my net worth for the first time. Since then, I performed a net worth checkup on a quarterly basis. My net worth has gone up by roughly $2,000 each quarter, which is directly attributed to how much I’ve been putting away in savings. If I wasn’t saving on a regular basis, and specifically if I didn’t have these high-yield savings accounts to make the most of my money, I wouldn’t have made as much progress on increasing my net worth.

Before writing this, I moved the $580 I have allotted for monthly savings into my regular bank savings account. Now that I can actually see the difference my savings are making to my overall wealth, I’m feeling more motivated to save. My goal isn’t to make the most money I can, but to be disciplined with the money I already have. As the many financial voices I have in my head keep telling me: Pay yourself first! It pays off.

The Carrie Finances: Using a Mini-Budget to Get Back on Track

This week’s blog post is dedicated to my coworker and friend, Derek Hageman. Derek passed away over the weekend after battling cancer. He was a big supporter of this blog and having him in my corner was the greatest honor. Derek was the most positive, humble and reliable person I have ever worked with. May his memory be a blessing.

The malaise and overspending of the holidays have passed, the days are getting longer (albeit wetter) and it’s time to update my budget again!

Whenever I come back to my budget, it forces me to confront every aspect of my financial standing: How much am I spending? How much am I saving? What’s the discrepancy between those numbers and the budget I have in place?


February was an expensive month. I have a lot of Pisces friends, so birthday gifts (and attending fabulous parties) were my top expense. In addition, grocery shopping has become unbearable! Not only are prices creeping up every time I go, but my favorite things can’t seem to stay in stock. Whole Foods, if you’re reading this, my fatigued body relies on your lemonade Vitamin Water dupe to survive at this point 😂.

As a result, I wasn’t able to save the right amount last month, and it made me consider lowering the percentage of my income I’m putting into savings. However, I recently found this article by Allison Baggerly on her site Inspired Budget. One of my favorite takeaways is #8, the “mini-budget.” Whenever unexpected expenses come up, or you feel like you don’t have enough money to make it to your next paycheck, Baggerly suggests writing a mini-budget to keep you on track. Going more in depth about the mini-budget, she says, “Budgeting is less about the math and more about your flexibility and willingness to stick with it even when you overspend.” Couldn’t have said it better myself!

Since we’re nearing the end of March, I already set up my full monthly budget for April 2023:


My total fixed expenses are still under 50%, and with a bit more monthly income my savings amount increased to $580. When I considered lowering the savings percentage from 20% to 15% of my income, the amount I would be saving (about $440) felt significantly less substantial. The thought of having an easier amount to save made me feel worse, like I had failed to even consider my goal. Worse still, it reminded me of something Carrie Bradshaw would do—making excuses for herself instead of taking control of her life. (Of course, Carrie wasn’t living through a period of skyrocketing inflation, so we have some leeway here.)

With Baggerly’s advice, I know it’s better to try to reach my goal every month rather than give it up or change it. Still, I thought it would be a good exercise to create a mini-budget for myself to account for the time until my next paycheck.


Baggerly says to start with my checking account balance and determine how many days until the next paycheck hits. Next, I subtracted the expenses I knew would be taken from my checking account before April 7: my monthly payment at the dentist, my rent and my internet bill.

Little did I know, I had already been running these short-term mini-budgets in my head around this time of the month. Once my last paycheck of the month hits, I break out my phone calculator app, subtract all the many things we pay for to live on this earth from my checking account balance and ask myself: Can I put the right amount in savings this month?

As of right now, I’m $95 short on my leftover amount, but the good news is that I will be able to put at least $580 in savings once I get paid again on April 7. Since I’m behind, I might transfer even more to my savings account this time in an effort to catch up. By sticking with my budget, I’m able to hold myself accountable and not give up on my savings goals—even when I’m not able to meet them!

PRISM Step 3: Identifying Your Investment Management Preferences

Catch up on my journey through the AAII PRISM Wealth-Building Process! Read my first two blog posts in this series here.

PRISM is a five-step method for aligning my investment decisions with my goals, created by AAII Journal editor Charles Rotblut. The third step of PRISM focuses on the kind of oversight I want for my investments and helps to identify what type of investor I am when it comes to the level of involvement in my portfolio.

Charles mentions the importance of understanding constraints I have on my investments that could help determine how my portfolio will be managed. These constraints include how much time I want to commit to managing my investments, how interested I am in the details of what I’m investing in, my comfort level with selecting holdings, how much I feel supported by the education and resources at my disposal and what my plans are for the future of my portfolio.

I went through the worksheet provided to discover which of the investor types I identified with: fully hands-on, partially hands-on, index investor, fund investor, combo hands-on/works with a planner, bolt-on or adviser investor.

I want complete control over what I’m investing in, but I’m currently only investing in index exchange-traded funds (ETFs). Usually, those investors who want full control over their investments are picking individual stocks. My desire for this control is rooted in my environmental, social and governance (ESG) investing strategy: I don’t want to invest in big corporations that are treating the earth or humanity like garbage. The only other constraint I have is that my 403(b) retirement account is through Vanguard, limiting my options exclusively to Vanguard mutual funds. At this point, I’m still not comfortable investing in individual stocks. So, am I a fund investor?

It turns out that I identify closest with the index investor, since fund investors are investing in actively managed funds—meaning there is someone in charge of the fund making investing decisions. Index funds track a specific index, so there’s not as much investment turnover as there is with an active fund. This also keeps the cost of owning an index fund lower than an active fund.

Do I want a financial adviser? Now that I know what kind of investor I am in this context, I know that I don’t necessarily need a financial adviser to help me with index investing. I think about this every so often, as my parents always rave about their adviser. If I were more interested in active funds, I might consider working with an adviser to help me select some investments. The worksheet asks specifically what I would need professional help with, and the only thing I haven’t done on my own so far is estate planning.

The thought of even having an “estate” sounds pretty farfetched at this point! However and whenever I get to that stage, I know it will be best to work with someone who actually knows what they’re doing.

Given what I learned in this step of PRISM, I might consider adding some active ETFs to my portfolio some time in the future for more of a blended approach. That way, I could have a bit more involvement in what I’m investing in if I care to spend the time doing more research.

Follow along with me as I venture through the PRISM Wealth-Building Process and solidify my financial plan for the future!