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So you blew your budget

Despite meticulous, careful planning, I seriously blew my Christmas shopping budget this year. The biggest reason is that family grew on a few sides — like, last year I bought 12 or 13 gifts total and this year I bought 26 just for family. Plus some gifts cost more than expected, and being busy meant I didn’t make as many presents this year as I usually do.

None of those things are bad, but as someone who is very careful and intentional about finances, it does create a bit of a dilemma. Luckily I’ve found a few things that help bridge the gap.

First, the standard disclaimer that I knew everyone’s financial situation is different, which can make well-intentioned gift giving even trickier than finding the right idea. We all want to give something the person will enjoy and feels nice, but don’t want to break the bank or go too extravagant.

For emerging adults in particular, we’re usually considered grown-up enough to be expected to choose/buy gifts for people on our own, but often non financially established enough to be able to comfortably afford that. Which proves a sticky situation this time of year.

Also, I have some issues with the materialism and the contractualism that have seeped into the holiday season for so many of us, but at the end of the day, I still like giving loved ones gift that hopefully make them happy in some way. So we’ll start off with some ways to save when holiday shopping:

  • Gifts in bulk. I hate giving duplicate gifts, but I also have a crap ton of family. My way around this is usually to choose a category of gift and then try to individualize them for each person. For example, personalized ornaments or a batch of sweets with a note about why I’m grateful for them.
  • DIY when wise. Sometimes, DIY can prove more expensive and more time-consuming than just buying, but if you can do it cost-effectively, it can mean a lot to people that you made something for them rather than just going to the store and buying it.
  • Memories over stuff. Connecting a small gift to a memory or meaningful moment can be a lot more special for a loved one than stuff at all. Experiences, photographs, or even their favorite candy bar with a note show that you care about and know them, not just that you can buy stuff for them.

Sometimes, of course, it’s too late to save. Or just plain hard. I could have gone less overboard with Christmas shopping this year, but I’m not sure I could have stayed in budget, and the closer I got the more I’d be unsure if I was getting each person enough (again, the contractualism thing). So what about after the budget has already been blown?

Here are the most useful methods I’ve found for recovering from going over budget:

  • Cut back in other flexible areas (aka fun stuff). I went over budget on Christmas shopping, so I won’t get to eat out for, like, a couple months. I still have to eat and I’m not going to avoid all fun activities, but I am cutting back quite a bit on what was already a small budget (fun spending makes up about 10% of my monthly budget).
  • See if there are areas you can redistribute. I overspent on Christmas this month but needed way less gas than usual. So I moved some funds around in my budget and brought the deficit down a little.
  • If it’s worth it, it’s okay to pull a little from savings once in a while. Savings isn’t meant to be hoarded forever — but it is meant to be used with careful discretion. I try to save 30% of my income every month (and fully realize that isn’t possible for everyone, though saving some is), and try to only dip into it for large expenses like a vacation — still, of course, setting limits on how much. But I put a little less into savings this month so I know that it’s covered, and because I’ve already saved carefully and doing so doesn’t threaten my emergency fund.
  • Don’t compromise what you shouldn’t. Your bills still have to get paid. For me, how much I donate to charity or people in need every month is also non-negotiable, and not something that consumerism (no matter how holiday-themed) gets to threaten. Those things come first, period.
  • Adjust your budget so you don’t do it again. Few categories of purchase are truly one-time things. So if something ends up costing more than you realized, adjust your budget accordingly so that next time you’re ready. In my case, I’ll be cutting back slightly on fun spending throughout the year as well as lowering the budget for each gift to make sure I’m in a better spot next year.

How do you avoid going over budget, and how do you handle it when you do? Let me know in a comment below, on Twitter @ohgrowup, or Instagram @oh.grow.up! Thanks for reading, and have a warm and happy holiday season!

(Photo is a free stock photo because I am definitely not done wrapping gifts.)

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Making a budget 101

Happy Sunday! I’m back with some practical advice, this time regarding budgeting. I’ve written posts in the past about saving or budgeting for gifts or friends, but realize that I haven’t actually talked about making a general budget yet.

Why have a budget? The short answer is because you spend money. Even if you don’t buy much beyond what you need, it’s the best way to make sure you’re on track with savings and building good financial habits for the future. If you like to spend, it’s those reasons plus making sure you don’t overspend. It’s a way to keep yourself accountable — starting as an emerging adult — so that if you ever want to travel, buy a house, have kids, or retire you can actually, y’know, afford it.

Our generation is strapped with high costs of almost everything and staggering amounts of debt. There isn’t always much we can do about where we landed. But we can do something about where we end up.

As always, the disclaimers: No app or service I mention is sponsored, and I’m not compensated in any way. I only mention specific names because myself or someone I know has found them useful, and hope that others will too. None of my advice is ever all-encompassing. You gotta do what works for you, but I hope this serves as a helpful starting point.

With that out of the way, let’s jump in.

Step 1: Research

Do you know how much your cost of living is? Do you know how much you spend in various categories every month? Those basics are the first place to start. Before I set up my budget for the first time, I had been carefully tracking my spending over the course of several months.* I used that data, plus some info from my parents regarding the costs of food, insurance, etc. to figure out ~about~ how much I needed to account for in various categories every year. Once I had the rough annual cost of each category, I then just divided each category by 12 and ta-da! I had a monthly budget.

Step 2: Setup

I use the free version of an application (I just use the website) called EveryDollar. It’s not perfect, but it’s easy to use and lets me be as detailed or as general as I want. The downside is that unlike apps like Mint — which I tried but didn’t love — you’re responsible for inputting whatever you spend. The good or bad part, depending on your perspective, is it’s not linked in any way to your bank account. So there’s no risk, but it also doesn’t do anything for you except serve as a really helpful, less-ugly spreadsheet.

I’ll be honest. I spend several hours every week budgeting and tracking my finances. But I’m the least stressed about money that I have been since my early teens, so it’s more than worth it.

Below is a loose approximation of my budget, with all the relevant categories. Note that the costs of things per person can vary wildly, so take it with a grain of salt, but I have noted in parentheses what percentage of my income is relegated to these categories.

LIVING

Rent (23%)

Utilities, including wi-fi and phone (3%)

GIVING

Donations (10%)

FOOD

Groceries (6%)

Eating out (3%)

TRANSPORTATION

Gas (5%)

Car repairs, misc. (2%)

INSURANCE

Includes auto, renter’s, health, life, etc. (5%)

SAVING

General (25%)

Specific goals, i.e. car replacement (6%)

[Note that retirement savings is taken out of my paycheck automatically, so it doesn’t appear on this list, but it’s 8% of my gross income]

LIFESTYLE

Clothing, toiletries, haircuts, etc. (2%)

Furniture, household items (3%)

Entertainment, spending money, misc. (4%)

GIFTS

Christmas, birthdays, weddings, etc. (4%)

I realize that’s 101% based on rounding, but bear with me. I also have to spend less of my income on rent than a lot of my peers, which gives me more room to save. But notice all my “fun” stuff — eating out, shopping, etc. — accounts for less than 10% of my monthly budget.

So while I will never say “stop eating out and you’ll magically be able to buy a house,” which is simply not true, I would advise caution and relative frugality with finances. Fun is still allowed! I go on trips and eat out with coworkers. I buy a new piece of clothing if I really want it. But the budgeting part is just putting parameters on how far that can go.

Also I didn’t put a category here for debt, because it runs on a simple rule: Pay it off as quickly as possible. Cut down on fun items, and cut back a little on saving, until debt is paid off at its appropriate pace. For example, credit card debt should be paid off as quickly as possible because it has crazy high interest, but student loans can be paid off more slowly. Being in the black is more important than saving a huge percentage of your income.

Step 3: Adjustments and future planning

I adjust my budget every month. I don’t start from scratch, of course. But if my income is higher from a freelancing project, or I know I’ll be spending more on gas, then I can up one category and lower another, and so on. Everything hovers around the percentages I mentioned above, but it’s completely okay to adjust your budget with your life.

Of the money I save every month, some is for retirement, some is for emergencies, and some is for specific goals like when I’ll eventually have to buy a new car. But a lot of it is just general. Because then, when I want to go on a big trip or if I ever decide to buy a house, I will be much better prepared for having started early.

I know that was a long post, but I hope it proved helpful to you. I want emerging adults, both my generation and younger, to be able to do better than the financial situations we’ve grown up seeing. This is where that starts.

What are your favorite budgeting tools or tips? Are there any questions you have about finances as a young adult? Let me know in a comment below, on Twitter @ohgrowup, or Instagram @oh.grow.up! Thanks for reading, and good luck adulting!

 

*For the spending tracking, I literally just used a Google sheet and tracked notes and amount of all money that I spent or received. It was a little painstaking, but very helpful.

(Photo is a free stock photo because this was way cooler than my ideas.)