Budgeting - 2

Tax Withheld (23%)

This is somewhat high, and I think you can adjust this with your employer so that less of it is withheld. I tried doing 0%, and getting all my money, but come tax time, I would have to pay taxes rather than getting refunds. So I use this tax withheld thing as a built-in robustness factor, where I overpay taxes, and get some returns come tax time. I know one can say that I’m missing out on potential investments, and also that I can only afford to do this cause I make a decent amount, and yes, that’s true. But my philosophy was to simplify my life, to the point where I can afford it. 

 

Automatic investments

I automatically invest 400 dollars every week towards my personal investment account / individual retirement account. I would invest in a 401k, but I am currently not offered that option by my employer, so I’m not doing that. But if I had the option, I’ll try to max out on 401k  before putting any money on a personal investment account. The priority of my savings would be the following:

1. ROTH Individual retirement account (IRA) - $6,000 per year max

2. Health Savings Account (HSA) - $3,550 per year max (I’ll explain this later in insurance)

3. 401k retirement account - $19,500 per year max

4. Personal investment account

This is for tax purposes, since I’ll save on taxes for number one through three. Note that I am doing this because I don’t see any huge expenses till I retire, and I want to retire early. But if I had a shorter-term goal for saving, like a trip or a wedding, I wouldn’t put it in a retirement account. 

 

But what if I want to buy a house? If you’re a first-time home buyer, there is a thing you can do where you can withdraw up to $ 10,000 for your down payment from your IRA. You can also `borrow’ from your 401k up to $50,000 dollars, or half of your 401k. 

 

Car Payment

So I have trust issues. I bought my first car at a sketchy dealership, an old but `luxurious’ Volkswagen Passat, with leather heated seats with pretty colors. I had a girlfriend back then who wanted me to get a car, so I bought a car, just for her. Ironically, as soon as I broke up with her 6 months later, the car started leaking all kinds of fluids. So I had to sell that car for less than half the price, after I put in thousands of dollars in repairs in the first place.

 

So when I moved for my new job, I was stressed out looking for used cars, and screening them and everything. I just had trust issues, and I feel like every used car person I was talking  to was trying to screw me over, and that something grave was wrong with this car. This is probably one of my most unwise choices, but I bought a brand-new car. It’s not an expensive car, a Honda Civic, but buying it new I paid quite a bit, which is a 5-year car payment of 400 dollars a month (that’s after a $ 3,000 down payment). Shit that was my rent back in college.  Ideally, I would not have a car (which was possible in college), but it is impossible to work in Knoxville, Tennessee without a car, so I had to buy one. 

Insurance

My renter’s insurance is negligible - about 7 dollars a month. But my car insurance is over $ 100 a month - mostly because I have a newer car, but also because I have a short driving history. 

 

This sucks, and I was able to lower it from $160 a month to low $100s by having them track my `driving habits’, and getting an A+ (my dad will be proud). Many insurance companies will have tools to track your driving habits to give you a discount, and I highly recommend having them. One sort of hack is to not drive a lot. Although they make it sound like they check your driving habits (and they do, like hard breaks or late-night driving), I believe (and equally unqualified people agree) the majority of their algorithm is just`how much you drive’. This is purely my guess, but the less you drive - the less likely you are to be in an accident, so you get a better grade. So when I got the little device that tracks my car, I plugged it in, and rode the bus to work for a while, and carpooled a lot. I was caught hard breaking a couple of times, but I ended up with an A+, which, I’m guessing, is because I didn’t drive a lot.

 

I will write more about insurance later on, on what the terms mean, and what affects your rates and when to use insurance.

Rent + Utilities

I live in a two bed two bath with a roommate. Like all great roommates, I met him on craigslist and he’s been terrible (this could be another book). Every month, I pay all the bills, including rent, and send him a Zelle (venmo for major banks, I think) request for the amount, along with an excel sheet of the cost breakdown. He sends me the money, and we cruise along with our lives, and not address things that annoy us about each other. 

 

To be honest, I like having roommates. It can be annoying sometimes, but mostly I think roommates provide me with something to fall back to. For example, when I go on a business trip, I can ask him to water my plants, or get my package. I also know that I’ll get really sloppy when I know no one is watching, so the presence of a roommate sort of keeps me in check to live less sloppily. I think the benefits far outweigh the costs, but hey, if you value being alone and washing dishes naked while singing Queen, by all means.

 

I personally think that a two-person apartment works the best. When it’s three, I usually observe a weird alliance forming between two people against the third roommate. So even numbers. Also, I think a two-person apartment makes the most sense in terms of cost-space balance.

 

Also, I’m not sure if it’s a tip, but if you live in those weird areas where the rent price fluctuates daily, and is governed by an algorithm, try doing some research to sign the lease at the right time. For example, when I was moving for my new job, I noticed that all the apartments in the area used this one algorithm. So for two weeks, I checked the price fluctuation daily and saw what the ranges were. I was able to sign the lease at $ 850 a month for a two bed two bath (yeehaw). It currently costs about $1,160 a month. (hackerman)

 

Groceries

I have a weekly grocery list. I buy the same thing every week, so it’s always in and out in less than 20 minutes. I am not a big fan of cooking new things or trying new foods, so I have a weekly meal plan that I stick to, and I just do that every week. I have everything, stick them in an instant pot, and press buttons. It’s boring, but it’s efficient. If I get too bored of the food, I’ll eat out once in a while. But mostly, I’ll make a ton of food, and microwave it and eat it. More on this later.

 

Subscriptions

I have amazon prime and spotify.

 

Amazon prime is to fuel my book addiction, and watching movies. I honestly think I can do without prime but it’s just a piece of luxury I give myself. A weird hack on Amazon prime for students: if your school has multiple pseudo names for email domains, you can get multiple Amazon student prime accounts. For example, your email can be @univ.edu and @university.edu. If both works, you can technically get two prime student accounts. 

 

Spotify is quite expensive. It’s $10 a month, which is about the same price as amazon prime. I have it so I can listen to music and podcasts. Mostly for the podcasts. If you’re a student, I think it goes down to $5 a month with hulu. All that tuition finally paying off. 

 

Other than these two, I would occasionally be enrolled in a coursera or udemy, to learn new things that excite me. These can be sometimes costly, but I think it’s a worthwhile investment to myself. I would usually finish a course within the 7-day trial to avoid the payments, but if I find some course extremely valuable, I’d pay. They go about $50 a month.

 

I intentionally do not have netflix because I know I’m going to be always watching that. It’s like an alcoholic not going near bars. I know I’m vulnerable, so I just prevent myself from such situations.

 

Incidentals

Now this is for incidentals. Usually I would go out on a date, or eat with friends. I don’t do that quite much because I’m sort of antisocial, and I much rather enjoy staying at home reading or writing a dumb book about myself. Usually I would not go over this amount, so the remainder is just left in for later buffers. 

 

Most of the values in my budget are overestimated. I know this may sound like a rich person thing, but I like to overestimate my budget, build in that robustness in the budget, that engineering barrier. I think it’s more of a mindset. This way, if something goes wrong (like getting more matches than usual on Hinge..?), I will have extra resources to pull from. 

 

Before I end this section, you might be thinking: damn man, so you just want us all to be unhappy and living really shitty lives? So even if I make enough money I shouldn’t get the BMW and still drive my Honda Civic? Cook shitty meals while I can be eating out in a fancy restaurant? Sacrifice everything for a potential future? Well, yes, but not quite. Especially given the catastrophic event we’ve had like the 2008 financial crisis and the 2020 coronavirus outbreak, where investment portfolios almost halved in value, it’s easy to fall into the mindset of `YOLO’. If that is your belief and philosophy, you do you boo. But let me say this: maybe we’re focusing on the wrong things. We are nudged to believe that spending money to have money is happiness - that higher the price, the better the value - the more we spend, the happier we become. I’d like to suggest perhaps an alternative - that, maybe we should find something else more joyable. I personally find stability and freedom more valuable than being able to buy expensive things, because after a certain point, I think those things cause more problems than benefit. 

 

One thing I’d like to emphasize is to always have a safety net. If you don’t have a safety net, you will be forced to take out loans for your emergency costs, and that loan will have high interest. Save a little today to save a lot tomorrow. It will also just give you more peace of mind.