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I learned how to budget in the second grade, and my first budgeting lessons came from my parents and a set of mason jars: 10 percent for savings, 10 percent for God, the rest for fun. Put it in the jar, give it to the church and the rest to Delia*s.
But I never really grasped that saving 10 percent was just a base: With the other 80 percent, I was in spending free fall. I saw it, I wanted it, I bought it. Immediately. Granted, I wasn’t working with huge swaths of cash in second grade, but I could never understand why my sister could save up enough to buy a videogame. Hey here’s the secret: It was because she was budgeting.
Budgeting! What the hell? I’ve always leaned more towards spending whatever was in my wallet without really thinking about what I needed for the future. It’s a cash-now, not a cash-then, strategy, and it really sucks. In terms of lifelong money mistakes, training yourself to believe that what you have on hand is, well, what you actually have on hand is up there with racking up a ton of credit card debt or not paying into your 401(k). It’s a hard habit to break.
Sometime in late 2012, back when I was still salaried, but not long before I moved to regular freelance, I decided enough was enough. I picked up my copy of YNAB (which I’ve discussed here before) and made a pact—a deal. I would be better. And I did get better, in some ways: I’m never surprised when bills are due. I’ve got an emergency medical expenses fund. But I wasn’t perfect. I had no money for my goals, for my own pleasure; for skiing or travel. I was still wasting it away on pointless purchases.
I decided diving full-time into variable-income freelance work would be a great way to hustle those budgeting skills into top-notch shape. But unless your constitution is pure and your drive is immeasurable, quitting something (like endless, thoughtless, unnecessary spending) cold turkey inevitably leads to a relapse.
I’ve never been a huge spender in the typical understanding of the affliction. My extravagances are small: Drop-off laundry service; good restaurants; second rounds; third rounds; drugstore makeup. I don’t have credit card debt anymore. I’ve managed to make it, somehow, without falling into a pit of debt and abject failure.
But budgeting—that specter, that demon. I could never understand why surprises were hard, like a series of $200 medical bills, the yearly maintenance fee at the gym, plane tickets home for Christmas and renter’s insurance, which every year I forget about until the day it comes due. And even when it came to irregular luxuries I could never afford: I couldn’t imagine how I would ever own a couch or take a trip. I wanted to build a wardrobe of high-quality clothing, stop churning deals at Forever 21 and H&M, but had no idea how anyone ever managed to drop more than $100 on a jacket.
I guess I assumed that every purchase was an impulse purchase, because every purchase I made was an impulse purchase. I never understood the concept of putting money aside for that couch or that trip into an imaginary bucket that would someday be big enough to withdraw from.
There’s the secret, though: Spending is saving. I couldn’t have that trip, that couch, that jacket, because I wasted that money on cocktails and glitzy, crappy $20 dresses. And when your budget suddenly restricts, becomes unpredictable, well—for me, it’s a recipe for anxiety-induced impulse spending.
When I told my boyfriend what I was writing this article about, he said, “You’re so great at budgeting!” I then stared at the Xbox 360 I impulse-purchased on Black Friday because I had just gotten so, so tired of worrying about money. I used money I’d been putting aside for taxes.
Listen to my words, not my actions.
Budget based on your lowest possible income. At first I budgeted based on expectations, not reality: What I would make if I worked 40 hours a week, five days a week, forever, no accounting for exhaustion, sickness, travel times. I even thought I would work half-days every other Saturday. (Hahahaha.) After a few months, I rejiggered my budget so I accounted for the basics with the lowest monthly amount I’d made so far. That includes payments to my 401(k) and to my emergency fund, in addition to rent, utilities, student loan payments and groceries. Then, anything I earn on top of that is gravy. I’ll rejigger this if I start to find myself earning consistently more money.
Segment your money. Keep your extra money out of your prying, gimme-now hands. How you do this is up to you: Some people open separate accounts for savings. Others literally put dollar bills in envelopes. I use YNAB (it’s a cult, but one that saves your money and sanity instead of slowly siphoning it away drip by drip), which lets me key things into categories. It’s all in one big pile in the same account, but when you’ve keyed in every dollar to something specific—YNAB calls this “giving every dollar a job”—it’s harder to move them around. Sure, I can easily pull money out of my Cat Health savings goal to cover an extra cocktail, but then if my cat gets sick and I can’t afford the treatment, I deserve to have my eyes scratched out.
Pick your favorite luxuries and put money aside. If you save up money for a guilty pleasure, it feels much less guilty. I get it—this is the hardest part (I want it now!), but also the most rewarding. Let’s say that you are really, really into hang gliding and all you want in your life is to hang glide, all of the time. But hang gliding is expensive! Here’s the dirty trick: People around you, with those expensive hobbies? Sure, some of them just make a ton of money, and good for them. But some of them make it a point to put money aside for indulgences. Budget it out just like you would a savings goal—I even give you permission to throw it in the same “necessities” pot that is budgeted from your lowest possible income. Throw in $25 a month, or $10, or $50—whatever you can afford. When you’ve got a surplus, give it some extra money. That’s the best thing about freelancing: You might be living on a shoestring 90% of the time, but sometimes you’ll fall into a pile of money because you worked your butt off just a little bit harder than usual.
I make my luxury spending savings (I’m saving up for an upcoming ski trip) my first line of defense against unplanned spending: If I go over budget on, say, bars for a month, I pull the balance out of my trip savings. It’s a good reinforcer.
Make room for happiness. Tying into my previous point, most freelancers spend a lot of time at home. I am on an intimate, first-name basis with my mailman and my cats. I don’t get out much. Being alone, inside, so often can be incredibly exhausting and isolating, and if you want—nay, need—that mythical $5 daily latte that every personal finance article ever tells you to cut out, DO IT. Go there right now and buy it and talk to someone who is a real person and not a character in your Animal Crossing town. I’LL ALLOW IT.
Oh my God do not spend from your tax account. I repeat: Do not be me. I spent my first freelancing months vacillating wildly between “I have saved too much! I am sacrificing my monthly income!” to “I am saving too little! I will owe the IRS thousands of dollars!” No matter your current attitude, do not dip into that super-tempting pile of money you should have stockpiled (you are saving money for taxes, right?!), because you want to pay off your credit card, buy an Xbox, or do any of the things I stupidly dipped into my tax money for.
You’re going to screw up. It will be okay. Maybe you aren’t an impulse spender. Maybe you’ve carefully budgeted forever and ever, and you forgot to budget for a car payment, and in an instant it wipes out everything you’ve done. Or you’ll forget to invoice for a project, and just miss the cutoff for a December payment, and all of the sudden you’re out $800 you’d counted on. That you needed. Or maybe you just slipped up and accidentally bought an expensive dress or bike helmet or whatever.
Everything will be okay, as long as you take a deep breath, make sure you’re still covering the basics, and accept that mistakes happen.
Which is the most important rule of budgeting, anyway.
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