I am not very good with money, but I heard the first step to fixing a problem is admitting you have a problem in the first place. For a while, I didn’t understand how my reckless spending was hurting me. It took me this long to recognize it, because my spending habits didn’t negatively affect me until this year.
I grew up with the privilege of having two parents provide for me. I had the stability of the same childhood home. I am an only child; I never went without any necessities and was even able to have a few luxuries. Throughout college, I was fortunate to have a transitional period where I could slowly take on my expenses with my parents helped financially. When I graduated college, I was lucky enough to find a full-time job with benefits and got used to acquiring a steady paycheck every two weeks. I never made any outrageously extravagant purchases, and if I did go over my budget, I was able to make up for it in the next payment. This method allowed me to spend more money than I should have been, but not so much as to sound any alarms or have me face any real consequences.
My financial situation changed when I decided to move halfway across the country to Los Angeles. This decision was one of those big city moves where I arrived with no job, no place to live, and just a little bit of savings. Although I was well aware that my spending habits would have to change once I was living in Los Angeles and definitely while I struggled to earn a decent income, I was naive to think that my habits would change just because I knew they had to. I know I should exercise every day, but it doesn’t mean I do. While taking a substantial financial risk, I was always stressed and anxious about my financial situation, and I didn’t feel in control. All my stress and anxiety caused me to go into denial. I would spend money at the same rate just hoping that I would get a higher-paying job that would get me out of my debt. I noticed that feeling overwhelmed caused me to spend more, and then immediately feel guilty and ashamed that I had been so irresponsible. But once I got a steady, reliable income, once I completely maxed out my credit cards and spent all my savings, I had no other choice but to reevaluate my budget.
As a 2018 new years resolution, I started an Excel spreadsheet for my budget. I laid out all my money expenses and kept track of what I was spending. I struggled the first couple of months and had no plan on how I was going to pay off my credit cards or even how I could afford my monthly costs. With no idea of how to plan for the future, I decided to look to my past. I went a little crazy with the spreadsheets, creating one tracking my income and expenses for each year since 2015 (my first year out of college), my current credit card debt, and my savings goals. Then, I used all this data to create and write a comprehensive financial plan. Outlining a budget based on the past three years became a huge task. Maybe I spent too much time focusing on how I handled money in the past instead of focusing on my money goals for the future. But all this data allowed me to understand my financial situation and how I have handled money, so I know how to improve going forward. I feel happy that I have an account of my financial history that I can build and have later in life.
I believe that everyone should have a budget, but it will differ from each person. For me, I found using an app didn’t always fit the structure of my budget and didn’t hold me accountable. Building something from scratch on my terms and having to input my purchases manually works better for me. I let my expenses shape how I organized my budget, and I was able to slash my spending while I’m rebuilding my financial situation.
I break down my costs to a weekly, monthly and yearly rate. Breaking down a budget by month seems pretty typical. Most expenses like rent, utilities, and insurance are monthly payments, so this is where I started. However, I wanted to see how my costs added up in one year. As someone who has always earned hourly wages and has yet to get a salaried job, I was able to visually see how much I was making in a year and how much I was spending. I was able to put a value on numbers and gave me a reference point for when I fill out the “what is your desired salary?” question on job applications. It also made me realize that when those “treat myself” purchases add up, and now I can consider how many times I went over budget last year when I have the opportunity to make those purchases.
Breaking my expenses down by week is something I started doing once I started receiving weekly paychecks and needing to remove any unnecessary spending. Knowing my budget week by week gives me a clear view of where my paycheck is going that week and kills any impulse to overspend on certain things. One constant I found in my expense history was that I would overspend on food by eating out a lot or picking up extra snacks. By knowing how much I can afford to spend on food each week, I now stick to a weekly food budget and hold myself to the allowed amount. I only let myself go to the grocery store on Sundays, which makes me create a detailed list of what I need for the week, and it takes away any temptation to buy unnecessary snacks throughout the rest of the week.
I think I procrastinated creating a budget because I was afraid of the truth of my finances. Ignorance is bliss, and it feels freeing to be able to purchase things without categorizing them or having to see the consequences of those purchases through numbers. Spreadsheets and budgets are black and white, no gray areas. Your income is what you make and determines what you can afford. I was scared of having that number define me. But now that I know that number and understand what I like to spend and how much future purchases are going to cost, I have the incentive to increase my income whether that is through side hustles or a new job entirely.
Creating a budget and a financial plan has given me control over my finances. It’s scary and can be overwhelming and stressful at times. I wish I could go back to drinking Starbucks and ordering things from Amazon and doing Sephora hauls. Someday I’ll be able to do those things again, once my income can support it. Until then, I am going to enjoy the broke, twenty-something, L.A. lifestyle, because I came here to build a life for myself from the ground up and become a better person for it. This part does suck, but the change in me in the way I approach my finances, my career, my goals, is priceless. Or so I hope. I might have to keep you updated on that.
Becky Sweeney is 24 years old. Currently, she is a blogger and freelance writer.
Image via Unsplash