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“Hey man, you want to go out to dinner and get some drinks with the crew this weekend?” “I can’t, I’m on a tight budget this month.”

Is this anyone’s favorite response? Of course not, and because we’re more inclined to still try and keep up with friends despite needing to be on a budget, it has led us to a situation in which the U.S.’ savings rate was a dismal 2.4% at the end of 2017. The U.S. savings rate is the lowest it has been in 12 years, with July 2005 being the record holder with 1.9% dating back to 1959. (Source: U.S. Bureau of Economic Analysis)

We all want to enjoy life, while still having the money to take care of our basic needs. So then, how can we enjoy a dynamic social life while still being on a budget? The simple, yet annoying answer is… we can’t. However, we can develop strategies to help prioritize goals, and still take advantage of using our money for fun. Budgeting is essentially a balancing act. Often times, I ask new or prospective clients to rank things in terms of importance. Whether it’s a vacation or saving for a new home, I need to understand what is really important first. Once you are able to start assigning ranks to things, it helps create a clearer picture of WHERE your money SHOULD be going. At InvestEd., we like to use a 65/20/15 budgeting approach.Here’s the gist of it.

  • 65% of your budget should be going towards necessities. These are essential to our livelihood and should be treated as the #1 priority.
  • 20% of your budget should be going towards investing in yourself. I always like to note that this is NOT treating yourself.
  • Lastly, 15% of your budget can be for discretionary. This is finally the FUN MONEY!

If you read financial articles, a lot of them may suggest between 10-20% of your budget should go toward investing in yourself and your future savings. 20% is a best-case scenario, but still, the majority of individuals are not even saving the 10% as a minimum suggestion, so something needs to change.

Those of you who have met with me know that InvestEd has its own budget sheet that we use with both prospective and current clients. We do this because it’s imperative to at least understand where your cash is going.Even individuals who have a surplus amount of money monthly can be doing things to better improve their financial situation. I know it isn’t easy to have to limit your outside entertainment, and I am not suggesting you give up going out completely, but if you are struggling to develop your own cash flow and you want to save for things, then you’ll have to start somewhere.You can feel free to reach out to me for a copy of the budget sheet if you want to get started!

Now for some, using a detailed budget sheet or spreadsheet might seem daunting or just not the route you think will be most effective for you. That’s fine, the important thing is that you find a method that works for you so that it’ll be easier for you to stick with it. If you find it really difficult to keep track of every little thing in a spread sheet, you’ll soon find that you’ll probably give up. A method that has personally worked for me is that I literally give myself an allowance.I have two separate bank accounts set up with different banks. When I get paid, a flat dollar amount goes to one bank account, and I have a debit card for this account so I can access it; this is my “fun” money. The second bank account receives the rest of the money from my paycheck and is used for all my necessities as well as investments, and I do NOT have a debit card for this one. I chose not to have a card because this prevents me from accessing this account easily and possibly making an unplanned purchase. I would physically have to go into the bank in order to do so, and come on, who wants to do that, right?

When it comes down to it, if you are a great, meticulous, spreadsheet “filler outter” then I applaud you, it takes a lot of work a dedication, but I am just happy because it WORKS for you.If you want to use my personal methodology, then I am also happy, because you see that it WORKS for you. I like to bring up the analogy that if an employer has two different employees, one that needs one single alarm to get up in the morning and one that needs 12 different alarms, they don’t care as long as the employee is on time!I am the same way with my clients; I just want a system that works for you because budgeting is the key to one’s financial stability.As always, I invite you to come in for a complimentary one on one meeting with me even if it’s just to help you establish your budgeting strategy. My hope is that it will lead to us working together for the long run and helping you reach your ultimate goals.

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