01/28/2021: Budgeting for Ramen

Remember getting your first apartment?  It’s probably one of the greatest “growing up” moments we can experience.  Finally!  No one nagging you to clean your room, no one hogging all the hot water, especially no one invading your privacy…and, oh…yeah, no one helping you pay the rent.  Or the utilities. Eek!  The initial rush of excitement and independence is suddenly replaced with anxiety because being a grown-up comes with a little more responsibility than deciding which flavor Ramen noodle you should fix for dinner.

But hey, there’s no need to invite stress to the table!  I remember keeping track of my first bills.  I took a notebook and wrote down all of my expenses organized by due date and then I jotted down my checking account balance. Each time I paid a monthly bill or made a deposit to my account I would readjust the balances to see how much was left over.  You know, for more Ramen!  I was budgeting and I didn’t even realize it.  (Which is great, because if some wise cracking adult would have offered up this helpful tip, I probably would have refused to believe the value.)  I followed this notebook budget for years and today I use an Excel spreadsheet.  However, the concept is still the same and it feels good when there is extra money in the Ramen fund to transfer over to the savings account each month!

Starting your own budget will help you:

  • Plan for expenses
  • Reduce and eliminate expenses
  • Plan for extras and emergencies
  • Save for future expenditures
  • Prioritize spending habits

By making income and expense projections, you can easily create an adjustable budget based on your personal situation.  Once you’ve identified all sources of income, subtract your monthly expenses.  If you have any money left over, you’ll have a surplus that you can decide to spend, save or invest.  If your expenses exceed your income, you know you’ll need to reduce your monthly bills or pick up some extra hours or second job to increase your income.  By consistently maintaining a budget, you’ll develop skills that will benefit your personal finances.

BY THE WAY, START A SAVINGS ACCOUNT

It may feel like a million years until it’s time to retire, but the truth is, it’s never too early to start saving for retirement.  As our good ole buddy Albert Einstein said, “Compounding is the eighth wonder of the world.”  It’s simple; you put your money into a savings or an investment that pays a return.  Then you add that return into your original savings and that sum total earns a return.  It’s a snowball effect that might seem really slow and boring to start out with, but if you stay committed to the plan, you’ll thank yourself when it’s time to retire!

RECOGNIZE YOUR WANTS AND NEEDS

Yeah, I want to drive a convertible…and technically I do need a car to get me to and from work, however that is a “pricey want” if I don’t have piles of extra money sitting around.  It can often be a challenge to label needs and wants, but your needs should receive top priority in your budget.  Food, shelter, transportation and healthcare are usually requirements.  After those needs are met, you can then decide how to allocate your discretionary income.  And, remember, if you have income left over at the end of the month, you don’t have to find a place to spend it.

BUILD AN EMERGENCY FUND

Unexpected emergencies such as a car repair or a root canal can put a dent in your budget if you’re not prepared.  Guess how I know?  Not only are root canals the most UNFUN thing you can do, they also cost a lot more than you might expect.  By adding this as a regular expense item on your monthly budget, you’ll be prepared in the event that unplanned incidentals arise.  Traditional guidelines say to save three to six months’ worth of living expenses in an emergency fund, but it’s truly an ongoing mission.

It’s always a good idea to build habits that will aid in your financial success and keep you in the Ramen.

So, until next time!

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