Now that we've begun to move forward as a community from the last few days, I wanted to make a post about shopping responsibly and how I manage my budget. Many people have speculated (and rightfully so, I think) that part of what brought on the issue I described in my last post was out-of-control spending and an addiction to shopping. I don't know how helpful my experiences will be, but I thought I'd share my circumstances and what works for me with regard to budgeting and finances.
I will be the first to admit that I am extremely fortunate, both in my past and present circumstances. I grew up in a family that taught me the value of saving money from the time I understood the concept of money. I have owned stocks since I was in kindergarten and had the interest in my savings account explained to me each year, even if that interest was only $5. As you might know, coaching swimming is one of my major passions and is actually much more important to me than fashion (gasp, I know), and since I was sixteen I have spent the summer coaching a summer league swim team and doing private lessons. I saved most of this money, divided between my personal savings account and a Roth IRA, the latter of which was matched by my parents. When it came time to choose a college, I decided that, for me, having no debt was more important than what school I went to, so I only considered state schools that offered me good scholarships. Scholarships and choosing a state school funded about 95% of my college education, and the remaining extra was paid for by my parents. Consequently, not only did I graduate college with no debt, but all the money I made from previous summer jobs went to savings and my own personal "fun" money. I am very lucky to have this experience. I know that it is not reality for many others, but for better or worse it is my reality.
I followed a similar formula when choosing graduate schools. It was important to me to choose a program that would not put me in debt. My program provides me with health insurance and a stipend that allows me to live comfortably. My tuition is also paid for by my program (though I am not in class anymore -- hallelujah!). Again, I am very fortunate to have this opportunity. I do not focus on saving money because my income will likely increase significantly once I graduate, but to keep good habits I try to ensure that I start each month with slightly more money than I had last month, even if that number is only a few dollars more. I also try to make my savings work for me using CDs, investments and savings accounts. I have one credit card which I use regularly to build my credit score and pay off in full each month. My credit falls into the "excellent" range.
There are also many life expenses that I don't currently have which allow me slightly more disposable income. I do not have children, although I will one day and am planning for this with savings. My parents bought my first car when I graduated from high school, and I still drive it today and plan on doing so until it falls apart on me (I love my car). I rent an apartment, so I don't currently have a mortgage. I don't take many extravagant trips because I don't enjoy them (seriously -- I'd rather go to the beach or a theme park). Although I do not depend on them and have never asked them for help, my parents are also very willing to do things for me and help me with expenses, and for that I'm very grateful.
Part of what has allowed me to be in this situation is good money habits and self-control, and I am proud of not owing anyone anything but respect. However, I don't pretend at all that I have gotten to where I am on my own. I still have a long way to go when it comes to learning how to save and build a secure life for myself and my future family, but I feel like I'm on that path now. It's due to my family teaching me good habits from an early age and the privilege of a healthy, comfortable childhood that I have this experience. I am very thankful for that, and I also try to remember my good fortune and give to those who did not start out so lucky.
My Shopping Plan:
This leads us to how I budget for shopping. I actually... don't have a budget. I know, gasp. I think I can get away with this because I have been taught all my life how to manage money, and I have a very good ear for when I need to scale back and when it's okay to indulge a bit more. I also get away with this because I follow some very strict rules when deciding if I'm going to buy something I don't need. Here they are:
Caveat: All my savings are in a separate bank account. I don't touch that. As far as I'm concerned, I don't have that money to spend. Another thing I do is give myself a "balance limit," an imaginary number below which my checking account is not allowed to fall. If it does, I'm "broke" and cannot buy anything not essential. If I notice my checking account balance has risen significantly above my "limit," I move some of that money into my savings account, after which it becomes untouchable. For all the rules below, assume that this is what I mean when I ask if I have the money for something.
1. Can I afford this? By this I mean, "Can I pay cash from my checking account after all my living responsibilities have been taken care of?" If the answer is no, I don't buy it. End of story.
2. Do I love this? Would I buy it at full price? Would I regret not buying it? Is there a need for it in my closet? Will I wear it so many times on the blog that my readers will get sick of seeing it? Does it make me very, very happy? If the answer to any of these is no, I don't buy it. This ensures I only buy what I absolutely love.
3. Is it worth the price? Before I check the price tag of an item, I ask myself how much I would pay for it. If the price tag is equal to or less than that number, I buy it. If not, I must wait for sales until that happens. If it never happens, I don't get to buy it. There will be something else I like just as much that's worth the price. This is my number one rule I would recommend implementing because it allows me to never regret how much I paid for something.
3b. Do I strongly suspect it will go on sale? A rare corollary to number three, but if all of the above are true and I still think I can get a better deal, I will usually wait it out even if the item is at an "acceptable" price for me. This is optional, and if I'm treating myself I don't always pay attention to it, but I find that I love something even more when I know I got it for much less than it was worth to me.
Okay, these are my rules and how I go about things. I hope some of it has helped you, but remember that what works for me might not work for you. If you have other tips on how to shop responsibly, I'd love to hear them!