it’s important to acknowledge that not everyone has the privilege of being able to save money. it is a bit elitist to tell people to put money to the side when they are living paycheck to paycheck and sometimes just want to enjoy a nice dinner with their friends that they pay for or go away for the weekend. at the end of the day we all have one life and money is way to enrich that, regardless of how much you have. the nature of saving money is a shadow experience. you can be so far removed from it that you don’t even notice and lose track of why you’re doing it, especially if the alternative is so beneficial now. and this is an important decision you need to make. for me, I’m okay with giving up bit of luxury now so when I’m older i have the means to take care of myself and still experience things that i want. And I’m probably in the minority with this type of thinking and that’s okay.
my personal finance philosophy is for you to do all the work setting it up everything up in the beginning and then creating automation on top of this system so you can afford the ability to forget about it all.
in a month, if you make $4000 you would split your budget like so
use this tool to create your own budget like the table below
| category | percentage | total |
|---|---|---|
| bills | 40% | $1600 |
| investments | 10% | $400 |
| savings | 15% | $600 |
| guilt free spending | 35% | $1400 |
your bills might not be $1600 so you if you are just starting out, i would allocate the left over money from your bills to savings
personal finance involves mastering 2 skills: how to save money & how to spend money. money is the ultimate tool to allow you to live the life that you want. i enjoy going out with my friends so i set money aside from my budget to allow me to do that without feeling guilty about it. you can enjoy hiking so you might set money aside for an expensive piece of hiking/camping equipment.
normal budgeting is built on the cycle of deprivation, where you are denying yourself things but if you hit all your other goals, it becomes just as important to have money that you can do whatever you want with.
4-5 months expenses in cash in high yield savings account
if your company offers 401k, contribute at least enough to get full company match (e.g., 5%) then the rest in your roth. if you don’t get matching, put all of it into your roth ira.