“Don’t buy shit you don’t need.”
Truer words have never been spoken.
During my first few years of teaching, Minnesota would administer 6th graders a statewide writing test. The students were required to write an essay choosing a topic from a predetermined list. After the papers were finished, the teachers had to gather all pre-writing notes and make sure that the students had included their names on the forms. Going through one of the tests, we found one that was written beautifully. It was organized. It had a thesis and strong supporting details. The student explained how their neighbors had lots of “junk” in their yard that they never used and it looked terrible. He mentioned how they never had money to buy things they needed.
His closing statement was the truest thing that I’ve ever read. “Don’t buy shit you don’t need.”
Budgeting 101.
As you begin your teaching career, there are three rules that you have to establish. I have these three rules on my board for my 6th grade social studies students.
Rule #1 – Earn money
This rule should seem easy enough. You make money. The key to this step is that your income should grow over time. As you progress in your career, you should get steps each year. You should also examine how your district handles lane changes. This is something you should look into doing as soon as you are set in your position. Hopefully within the first 5 years of your career. If you don’t, you are leaving a lot of money on the table. You may add to your income by coaching sports, supervising groups, etc.. You may also pick up some work in the summer, BUT be sure to read this post(backlink) before you do.
Rule #2 – Spend less than you earn
This is the rule that seems to elude most people. It sounds really easy to do, but trying to keep up with everyone else is the most American thing you can do. It’s also the dumbest thing to do when it comes to trying to become financially free! By trying to keep up with others, you could end up spending more than you earn by using credit cards. Credit card debt in America has reached all-time highs. And your debt is definitely an emergency according to Mr. Money Mustache, the guru of Financial Independence. Read about proper credit card use in this post.
Start this process of spending by laying out your necessities such as housing, vehicle, and food. These are necessities and usually your biggest monthly expenses. If you can lower these bills, you will be starting out ahead.
An especially dangerous area for many people is vehicle payments. Monthly payments to debt obligations are the devil. Literally… They will drag down your budget to the point of causing you great stress. Ask yourself if you really NEED that new vehicle. What value will it add to your life? Many in the “Financial Independence” community believe that you don’t even need a vehicle and you should just bike everywhere. The T.A. and I don’t believe that idea is reality for most people. If it is, great! You are way ahead of the game. But think about the purpose of your vehicle. A newer vehicle will cost you more in monthly payments and insurance. We will talk about the impact of a new car in a future post.
The next step is to examine your insurance, cable/internet, and phone bills. These bills fall in between the need/want areas. They can balloon in cost very quickly. The big key to this is to shop around for a better deal when possible. I was able to lower my auto insurance by $100/month and double my amount of coverage by switching companies last summer.
The final step is to examine your wants to see if you they are costing you your financial freedom. Restaurants, fast food, chicken wings, etc.. All of these things can derail your future. An easy way to track this spending and budgeting is to use a software program or app. There are many of these things available today. I used Microsoft Money and Quicken in the past. The T.A. and I both use You Need a Budget (YNAB) to track our spending and set budgeting goals. An important step that you will need to do each year will be to analyze your spending to make sure you are not succumbing to lifestyle creep. We also use Personal Capital to keep an overview of all of our accounts. It does a great job of giving a snapshot of your overall net worth and progress.
Rule #3 – Save the rest
This is where automating your paycheck is important. There are many different accounts you can put your extra money into. Retirement, savings, taxable. All have their pros and cons. The key is that you are putting your extra money into these accounts on a monthly basis. Have portions of your check directly deposited into these accounts so you aren’t tempted to spend them.
As I mentioned in a previous post, I have $200/month sent into a savings account that takes some work to withdraw money from. I’ll admit. I’m like most Americans. I like the dopamine rush you get when buying something new. Buying new things actually gives off a chemical in your brain! Automating that savings makes it much easier and much more effective!
The goal of budgeting is to give yourself financial security. This means you are no longer in that paycheck to paycheck cycle of just making the minimum payments on your debt obligations. Once you break that cycle and get your finances in order, you will be able to build your savings and create that financial security. Then you can move on to working on that next step, which is financial freedom and financial independence!
But remember that lesson taught to me by a 6th grader, budgeting can be very simple.
“Don’t buy shit you don’t need!”
KEEP STACKIN!