9 ms·

The Golden Rule of Personal Finance

56 points by RickJWagner 4y ago

mattw2121 4y ago
I'm a happy user of You Need a Budget. If the golden rule is "Spend less than you earn", the practical way to achieve that is "You Need a Budget". I use YNAB because it works for me, but I've used paper and spreadsheets in the past. The key is having the budget so you can understand where your money is going. You aren't always going to stick to the budget, but by paying attention and classifying all expenses, you can better understand things going forward and then plan better. I don't care if you make $35K a year or $350K a year, you need a budget.
- onetimename 4y ago
  As a former user who switched to Amex credit cards for all spending, it’s key benefit of automation is ruined. I don’t think it’s entirely YNAB’s fault. But having to manually input each credit card transaction doesn’t make me feel it’s worth the monthly charge. Then it just becomes a spreadsheet. EDIT: that is— the lessons are excellent and the mindset is important. But it’s monthly cost is another issue.
  - mattw2121 4y ago
    (I'm not here to promote YNAB, I promise I'm just a happy user and not affiliated). I use my AMEX for 90% of all spending. No issues importing transactions to YNAB. Sometimes there is a 1-2 delay, but they do import.
    - ljoshua 4y ago
      Lucky! I love YNAB, but I'm glad that 95% of my spending is on my non-Amex cards and accounts, because the Amex accounts only sync successfully once in a blue moon, even after repeated reauthorizations. Any tips?
      - mattw2121 4y ago
        They have multiple import providers. I am set up to use Plaid. If you are using another it could be the cause of your issues.
  - bambataa 4y ago
    Why does using Amex stop you using YNAB? Syncs fine for me.
    - onetimename 4y ago
      Luck I guess. I originally stopped using it when I got an Amex card because of sync issues. Tried it again recently and it was still the same. Maybe I was spoiled with near instant syncing on my debit card, I used to categorize the gas i just paid for before leaving the lot. But again, at 15 a month, that’s a lot of effort for a gui on top of a spreadsheet. The benefit for me was quick transaction logging and categorizing, then a weekly/monthly check up. But with sync issues, those check ups became categorizing sessions, and just took too much time.
- lotsofpulp 4y ago
  >If the golden rule is "Spend less than you earn", If that is the golden rule, then the platinum or diamond rule is to earn at least $x. There exists a lower limit under which certain parts of life are simply not affordable, such as saving for retirement, healthcare, education, children’s education, etc. >I don't care if you make $35K a year or $350K a year, you need a budget. At $35k, I imagine everything coming in is going out. You really just need to focus everything on increasing income. For people in the USA at least. Actually, because of cliffs in the qualifications for government benefits, the rule might be earn less than $x or more than $y, but not in between.
  - trey-jones 4y ago
    Increasing income is what you might be able to do in the future. Spending less than you earn is what you can do right now to keep the hole from getting deeper. The author is correct. It applies at all income levels. When I read the title of the article, I instantly knew what the golden rule was, because it's obvious. If you make $35k, it is still possible. It might not be comfortable, and that seems to be the great success of capitalism in the 21st century: convincing people that they shouldn't ever be uncomfortable, or that they can't be without certain items or experiences that they most certainly can be. Increasing income is great. Literally (almost) everybody wants this. There is high demand for increasing income. The supply is part of the issue, and the cost of increasing income is the next barrier. Bettering your situation takes effort, either to decrease your spending, or to increase your income. Doing both at the same time takes double the effort. The last thing somebody making $35k (or $25k) needs is some provincial yuppie zoomer saying to them "Just make more money lul". It doesn't help anything.
    - lotsofpulp 4y ago
      >It doesn't help anything. My advice is for those at 25 years old working in a fast food place who can read and write English. Their time excessively pruning their budget is better spent learning new skills and attempting to sell their services in a market that pays more. >If you make $35k, it is still possible. It might not be comfortable, and that seems to be the great success of capitalism in the 21st century: convincing people that they shouldn't ever be uncomfortable, or that they can't be without certain items or experiences that they most certainly can be. I do not know what this means. It is possible to live in the forest and forage and be comfortable, everyone was a few tens of thousands of years ago. But surely things like a safe neighborhood, healthcare for you and family, and opportunity for education are basic things that people can be expected to strive for, and that are not really achievable under a certain income in pretty much all populated regions of the US at $35k per year.
- tejohnso 4y ago
  > I don't care if you make $35K a year or $350K a year, you need a budget. That's a catchy thing to say but if someone is making $350K a year and easily saving / investing six figures annually without a budget, telling themn they need a budget sounds a bit absurd. I'd say the further you are from being able to invest / save sufficiently for your long term goals, the more a budget will help you. Admittedly, not nearly as catchy.
  - mathgeek 4y ago
    If you have income automatically set aside for investments and savings, you already have a lightweight budget in the form of "I set aside X% or $Y every month and the rest is discretionary."
    - fassssst 4y ago
      That’s the best way to live, I don’t like micro-managing myself.
      - 1-more 4y ago
        I’ve dieted down to different weight classes for sports and tracking everything is pretty miserable. It works when there’s a single date up ahead. I can’t imagine micromanaging finances like that indefinitely. I’m with you: expenditures are about some number, savings for a house downpayment is about some other number, and that’s enough for me.
    - ehnto 4y ago
      This is more than most people have in my experience, if this is all the budgeting prowess you can muster then you are potentially ahead of the pack already.
    - wisnoskij 4y ago
      That works for you because nothing or anything would work for you. I am in the same boat, a budget would serve no purpose for me other than encouraging me to spend more. For the people who need a budget, they would just run out of money completely before their next paycheck and either get kicked out of their apartment, or dip into their savings.
- stewx 4y ago
  Budgets are not needed if you pay yourself first (i.e., save towards your goals as soon as you are paid) and only spend the money you have left over. Then you can't go into debt and you are meeting all your goals.
  - CGamesPlay 4y ago
    Plans aren't needed if nothing ever goes wrong. What happens on the day you can't pay yourself first? That's what the budget should answer for you.
  - samsolomon 4y ago
    Yeah, the reverse budget. I'm a fan of this. It might not be quite as efficient, but there's almost no mental overhead.
  - remram 4y ago
    That sounds like a budget.
  - wisnoskij 4y ago
    I think this misunderstands the point of a budget. A budget is not primarily designed to develop a growing savings account, tho that is a very good side effect. A budget is designed so that when the rent becomes due on the 29th, or you are hungry and you want want to consume food on the day before your paycheck comes in, you don't discover you have $2.50 to your name. You could put money aside for food every day, and for rent, and utility, as well, and that would be called a budget. IN fact just paying yourself first, is just a really simplistic underdeveloped budget.
  - mattw2121 4y ago
    You literally just described a budget.
- spywaregorilla 4y ago
  I feel like if I needed a budget, that'd be a sign that I'm probably being too careless with my money to begin with.
  - mattw2121 4y ago
    I feel like if I need to do any design work, then I must be too careless of a coder to begin with.
    - spywaregorilla 4y ago
      That's just... a poorly constructed, bad faith comparison. It's very easy to casually save money without budgeting, especially if you have a high income, which you specifically called out as fair game. For me, checking my bank app every non and then and confirming I've got a good looking net savings per month is fine. You seem to be trying to imply that I must believe that any form or preparation is a sign that you can't execute. Which is dumb.
      - mattw2121 4y ago
        As income levels go up, budgeting can be much more casual as you've described. You are still talking about budgeting. You are inferring that I believe all budgeting is an act of OCD.
        spywaregorilla 4y ago
        > You are inferring that I believe all budgeting is an act of OCD. I've said nothing of the sort. That's pretty rude to people who actually suffer from OCD. I don't personally believe checking my net cash flow every few months counts as budgeting but if you do, sure, that's a semantic disagreement.
        wink 4y ago
        I've had this discussion countless times and maybe we've got the same problem in just not thinking in budgets. Then again I've often thought that I simply don't need a budget for X if my spending on X (as analyzed over a year, or five) is so much below of what I would put as a budget if you'd asked me to guess one. Example: If I like buying music, I'd maybe give myself a budget of 30€ for music per month, that's 2 albums. Looking at how many albums I actually buy in a typical year, or in an excessive year - I've never even come close to buying 24 albums in a year. So that thought process might have happened once, 10 years ago and until I start to earn a lot less or albums get a lot more expensive, I'll just buy as many albums as I want, and usually end up with 5-10 per year.
- P_I_Staker 4y ago
  I would like to do better financially, but don't care for budgets. Often, I find that I'm unable to make a purchase, due to those pesky buggers. For example, I'm about to take a trip to Europe, which would never have been possible if I had "budgeted".
  - mattw2121 4y ago
    I've taken many trips and budgeted for all of them. I plan in advance or if I feel like doing something spontaneous, I reallocate money from another budget item or from my discretionary bucket.
  - foogazi 4y ago
    > I'm about to take a trip to Europe, which would never have been possible if I had "budgeted". Curious why ? Sounds like the same thing
    - P_I_Staker 4y ago
      Hey, I might have missed the mark, but it was intended to be tongue and cheek. I don't "like" budgets because they force me to live within my means. Ignore them, and you can do whatever you like! You do have a point though, I could probably bring the cost down and still manage it... this is what budgets are for.
- foogazi 4y ago
  For years I used YNAB and encouraged family to use it too Then I got into FAANG and switched to buying whatever I want and fully pay off credit cards every month UNTIL my wants got bigger and bigger - last minute vacations, concerts, a lot of “experience” stuff coming out of covid lockdowns And now, RSUs are down , I spend more than I bring in each month, started drawing down on cash savings - YOLO - still driving a Camry though I need a budget again
- francis-io 4y ago
  I can also recommend moneydashboard.com. I load in multiple banks and credit cards, it will update all my banking transactions via api into a central view. I can set a budget for each type of expense and it all just seems to work.
SanjayMehta 4y ago
My rules were: 1. Always pay off the credit card bill every month. Completely. 2. Mortgage payment < 40% of take home salary. 3. Buy the cheapest new car you can afford and run it as long as possible. 4. Never buy branded clothing unless on sale. 5. Maintenance costs less than replacement. In summary be a cheapskate and ignore the neigbours with expensive doodads.
- jleyank 4y ago
  I am not sure that trying to fix modern appliances is really (or even on paper) cheaper than replacing them. Maybe for the expensive models, but the lower end units seem to be “use 5-10 and replace”. I worry that the fancy/modern car electronics will push cars into this category. Carmaker motivstions don’t align with mine.
  - throwaway6977 4y ago
    Modern appliances are designed with parts that fail easily and are just slightly too difficult, or dangerous, enough to repair on your own. Usually it's a plastic connector of some sort that will have an easily calculable time-to-disintegration measured in years. For instance, I just fixed a 2c plastic clip that pretty much made my microwave unusable by virtue of the door being un-openable. In order to do so, I had to have my fingers about 3 inches away from a bare wire transformer which near totally obstructs what should be a very simple fix. Plenty scary and dangerous enough for me to have to call the manufacturer and find a certified local repairer...
  - cbm-vic-20 4y ago
    If your appliances are low-tech enough, and you have access to YouTube and don't have hand dexterity issues, you don't need to replace or even pay for a service visit. I've fixed a clothes washing machine when its belt seized. That was $17. My refrigerator was no longer staying cold: a $50 controller board clone from eBay works great.
  - bombcar 4y ago
    It depends on the appliance, and yeah, the cheaper ones are often NOT worth fixing if a major component breaks, but ARE worth fixing if it is a minor component/known issue. Youtube is great for this - search "model number" "problem" and if there's a video on how to fix it, it's common enough that the part is probably cheap (think ignitor for a dryer/oven, etc). Friend had an older washer with a giant "timer dial" that was cheap to fix - the new dial cost like $50 and was simple to replace. A similar washer that I had had a single plastic part that held the dial in place break, and the only way to fix it was either bolt some metal strapping around it (which I did) or buy a new faceplate at $350 (+ shipping) - that's half the cost of a SpeedQueen (which I eventually bought when the pump crapped out. The SpeedQueens don't change year to year and they're basically laundromat machines so they're very repairable. If you do decide to replace an appliance, there are people that will take away the old one for free, because they will repair and resell if possible.
jaimebuelta 4y ago
From David Copperfield, by Charles Dickens Annual income twenty pounds, annual expenditure nineteen nineteen and six , result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery
- parenthesis 4y ago
  The Micawber principle. (It seems there are two; the other is "Something will turn up".)
- noneeeed 4y ago
  You've reminded me that I need to watch the Armando Iannucci version of that again, it was such a good film with an amazing cast.
jsw97 4y ago
Don't pay fees.
- SketchySeaBeast 4y ago
  Ironically for stuff like bank fees they require a minimum balance, so you're paying fees because you can't save as much and can't save as much because you're paying fees.
deleted 4y ago
[deleted]
parenthesis 4y ago
"If in doubt, spent nowt" is my principle. You'll soon notice the discomfort of doing without a purchase you do need (so now you can buy it); you won't notice the lack of something you don't need.
helpfulmandrill 4y ago
This is like "eat less than you burn". True but completely unhelpful.
sgt101 4y ago
If you are smart you will spend less than you earn over a long period To achieve this you need a plan. The plan can be responsible and also contain periods of spending more than you earn. This will allow you to invest in your life, and the lives of the people that you love. For example, go on holiday with your kids while they are kids. This could cement relationships (not just with you) that will be really important in their (and your) lives. Another example; do the job that's a spring board, but lower paid than the job you really need. Ok, so you run up some debt - but you get access to your future career. Education is another (more controversial) one. I invested in my education when I was young, but I am from another era and I am well aware that what young people are asked to put in for a doctorate now is just unbelievable. It paid off for me, it may not pay for you.
- themodelplumber 4y ago
  I would add birth circumstances to your pile, somehow. For decades I spent wisely and executed on a plan while donating 10%+ of my gross to the megachurch into which I was born. Everybody in the church, including my parents, said it was an investment. Spoiler: It was not I still wonder how this could have been effectively communicated to me at an earlier age...the church teachings I received were designed to inoculate against outside opinions. When I joined the ranks of leadership myself, I also taught others to pay "God" before paying themselves. By the time I stopped paying, I could have used my own donated funds to retire twice over.
  - kritiko 4y ago
    Many religions include tithing as part of their teachings, and the Effective Altruist movement has adopted it. If the funds are directed well, it's an investment into the community and to charity. (And if a disaster befalls you, hopefully the church would come to your aid, so it's a kind of insurance...)
pelagicAustral 4y ago
I’m so bad at this game it’s appalling. I generally scapegoat my lavish shenanigans with the excuse that I’m single, no partner no kids. Live far away from family and in general I don’t think I’ll make it to retirement age anyway.
- shireboy 4y ago
  I scapegoat my over budget spending with the excuse I’m married and have kids :)
quanticle 4y ago
One piece that's missing from this essay is the role of one's friends and family. When I had to replace my car a few years ago, I chose a modest Subaru. I was asked repeatedly by people in my social circle why I didn't chose something flashier, like a BMW or a Mercedes, because I was a software engineer now and "you can afford it, so why not?" Or, equivalently, "What are you going do with all that money, anyway, if you aren't spending it, you should give it to me." The idea that someone else can choose to spend less than they earn is very alien to a lot of people.
- bombcar 4y ago
  You can always imply that 'alimony' or something is taking the majority, most people will quiet down at that point.
  - quanticle 4y ago
    Not when those people are family members. They know damn well I've never been married.
    - bombcar 4y ago
      True, but you can never really satisfy the type of family member who has "ideas" - even if you got a BMW it'd be the wrong type, etc etc.
- foogazi 4y ago
  > because I was a software engineer now and "you can afford it, so why not?" If you can afford it yeah - also live a little, don’t be a miser
  - quanticle 4y ago
    Because I prefer to be able to afford to spend six months to a year out of work. It's the same principle as startups working to ensure their runway is as long as feasibly possible.
MrGilbert 4y ago
I'm really struggling at the moment. Ended a long relationship, went into a higher paying job, and realized how expensive it is to live on your own. My salery is about average in my country (not much, like 10%-ish), and I'm paying off debts. These debts are what's killing me at the moment. Roughly 20% of my net income go into paying them off. Avoid debts as the devil avoids the church. Just don't.
- bombcar 4y ago
  That's the biggest problem with debt, it doesn't change when your situation changes. At least you can cancel Netflix or whatever anytime, but you can't cancel existing debt without bankruptcy.
  - MrGilbert 4y ago
    Also, depending on your country and culture, filing for bankruptcy is an act that requires a lot of effort and (and that's maybe worse) may lead to stigmatization.
TheBestInterest 4y ago
Thanks for submitting my article, Rick. Much appreciated. -Jesse
nunez 4y ago
Sorry; this advice is not helpful. (I originally said "this advice sucks" but realized that I came off too strongly.) (I'm sure the OP is a fine person but I am allergic to advice like this and get a visceral reaction to it every time.) The people I know that spend much less than they earn are either (a) homebodies that are perfectly fine with the "wake up -> work -> come home -> eat -> sleep" lifestyle, or (b) already have way more money than their lifestyle requires. I'm not like the people in (a). I've never been like that. I can barely stay home as it is. And, at least in the US, everything outside of home costs money. And while I get closer to (b) every year, especially now that I track all of my expenses and know where our annual spending baseline is, I'm not there yet. I think there are a lot of people like me. So financial blogger people or SJWs on /r/personalfinance saying "just spend less than you earn, bro" is exactly like people with like 10% body fat or whatever telling overweight people "calories in, calories out, bro; not hard!" (interestingly, many of those people have negative to very negative relationships with food) I mean, you're not wrong, but it's also (a) not very good advice, (b) completely ignorant of people's personal preferences, and (c) makes me think the author is hiding something. My advice is more practical: save progressively, make a goal, and track your spending. I acknowledge that this only works for people that don't already have runaway spending problems, but I think it's much more pointed than "just spend less!" If you don't save, start with something small, like 1% of your income. Some amount that you won't miss. Increase that every month by a small amount. (I do like the idea of having a six month rainy day fund, though I think engineers can get by with less.) By "make a goal," I mean this: you have infinite money. What does your life look like every year? Write everything down, no matter how outlandish, then actually do some homework and figure out how much living that life will cost. Sum everything up, divide that by 40%, and, boom, there's your number. Figure out how to get there, and get there! If you track your spending while making minimal changes, then after a year, you'll know what your annual burn is. Then, over time, you'll know whether you (a) need to make more money to support that lifestyle, (b) whether your burn is increasing too fast relative to your income, and (c) have a better idea of what you need to save to guarantee your lifestyle without making any cuts. You only live once. Why spend it constantly pinching pennies if you don't have to? So that your grandkids can spend your money after you die?
laacz 4y ago
OK, three days have passed, so I'm leaving this comment to hang. This advice is similar to "if you want to lose weight, eat less energy than you can spend". It's true, but it's useless.

56 points by RickJWagner 4y ago

I'm a happy user of You Need a Budget. If the golden rule is "Spend less than you earn", the practical way to achieve that is "You Need a Budget". I use YNAB because it works for me, but I've used paper and spreadsheets in the past. The key is having the budget so you can understand where your money is going. You aren't always going to stick to the budget, but by paying attention and classifying all expenses, you can better understand things going forward and then plan better. I don't care if you make $35K a year or $350K a year, you need a budget.

onetimename 4y ago
As a former user who switched to Amex credit cards for all spending, it’s key benefit of automation is ruined. I don’t think it’s entirely YNAB’s fault. But having to manually input each credit card transaction doesn’t make me feel it’s worth the monthly charge. Then it just becomes a spreadsheet. EDIT: that is— the lessons are excellent and the mindset is important. But it’s monthly cost is another issue.
- mattw2121 4y ago
  (I'm not here to promote YNAB, I promise I'm just a happy user and not affiliated). I use my AMEX for 90% of all spending. No issues importing transactions to YNAB. Sometimes there is a 1-2 delay, but they do import.
  - ljoshua 4y ago
    Lucky! I love YNAB, but I'm glad that 95% of my spending is on my non-Amex cards and accounts, because the Amex accounts only sync successfully once in a blue moon, even after repeated reauthorizations. Any tips?
    - mattw2121 4y ago
      They have multiple import providers. I am set up to use Plaid. If you are using another it could be the cause of your issues.
- bambataa 4y ago
  Why does using Amex stop you using YNAB? Syncs fine for me.
  - onetimename 4y ago
    Luck I guess. I originally stopped using it when I got an Amex card because of sync issues. Tried it again recently and it was still the same. Maybe I was spoiled with near instant syncing on my debit card, I used to categorize the gas i just paid for before leaving the lot. But again, at 15 a month, that’s a lot of effort for a gui on top of a spreadsheet. The benefit for me was quick transaction logging and categorizing, then a weekly/monthly check up. But with sync issues, those check ups became categorizing sessions, and just took too much time.
lotsofpulp 4y ago
>If the golden rule is "Spend less than you earn", If that is the golden rule, then the platinum or diamond rule is to earn at least $x. There exists a lower limit under which certain parts of life are simply not affordable, such as saving for retirement, healthcare, education, children’s education, etc. >I don't care if you make $35K a year or $350K a year, you need a budget. At $35k, I imagine everything coming in is going out. You really just need to focus everything on increasing income. For people in the USA at least. Actually, because of cliffs in the qualifications for government benefits, the rule might be earn less than $x or more than $y, but not in between.
- trey-jones 4y ago
  Increasing income is what you might be able to do in the future. Spending less than you earn is what you can do right now to keep the hole from getting deeper. The author is correct. It applies at all income levels. When I read the title of the article, I instantly knew what the golden rule was, because it's obvious. If you make $35k, it is still possible. It might not be comfortable, and that seems to be the great success of capitalism in the 21st century: convincing people that they shouldn't ever be uncomfortable, or that they can't be without certain items or experiences that they most certainly can be. Increasing income is great. Literally (almost) everybody wants this. There is high demand for increasing income. The supply is part of the issue, and the cost of increasing income is the next barrier. Bettering your situation takes effort, either to decrease your spending, or to increase your income. Doing both at the same time takes double the effort. The last thing somebody making $35k (or $25k) needs is some provincial yuppie zoomer saying to them "Just make more money lul". It doesn't help anything.
  - lotsofpulp 4y ago
    >It doesn't help anything. My advice is for those at 25 years old working in a fast food place who can read and write English. Their time excessively pruning their budget is better spent learning new skills and attempting to sell their services in a market that pays more. >If you make $35k, it is still possible. It might not be comfortable, and that seems to be the great success of capitalism in the 21st century: convincing people that they shouldn't ever be uncomfortable, or that they can't be without certain items or experiences that they most certainly can be. I do not know what this means. It is possible to live in the forest and forage and be comfortable, everyone was a few tens of thousands of years ago. But surely things like a safe neighborhood, healthcare for you and family, and opportunity for education are basic things that people can be expected to strive for, and that are not really achievable under a certain income in pretty much all populated regions of the US at $35k per year.
tejohnso 4y ago
> I don't care if you make $35K a year or $350K a year, you need a budget. That's a catchy thing to say but if someone is making $350K a year and easily saving / investing six figures annually without a budget, telling themn they need a budget sounds a bit absurd. I'd say the further you are from being able to invest / save sufficiently for your long term goals, the more a budget will help you. Admittedly, not nearly as catchy.
- mathgeek 4y ago
  If you have income automatically set aside for investments and savings, you already have a lightweight budget in the form of "I set aside X% or $Y every month and the rest is discretionary."
  - fassssst 4y ago
    That’s the best way to live, I don’t like micro-managing myself.
    - 1-more 4y ago
      I’ve dieted down to different weight classes for sports and tracking everything is pretty miserable. It works when there’s a single date up ahead. I can’t imagine micromanaging finances like that indefinitely. I’m with you: expenditures are about some number, savings for a house downpayment is about some other number, and that’s enough for me.
  - ehnto 4y ago
    This is more than most people have in my experience, if this is all the budgeting prowess you can muster then you are potentially ahead of the pack already.
  - wisnoskij 4y ago
    That works for you because nothing or anything would work for you. I am in the same boat, a budget would serve no purpose for me other than encouraging me to spend more. For the people who need a budget, they would just run out of money completely before their next paycheck and either get kicked out of their apartment, or dip into their savings.
stewx 4y ago
Budgets are not needed if you pay yourself first (i.e., save towards your goals as soon as you are paid) and only spend the money you have left over. Then you can't go into debt and you are meeting all your goals.
- CGamesPlay 4y ago
  Plans aren't needed if nothing ever goes wrong. What happens on the day you can't pay yourself first? That's what the budget should answer for you.
- samsolomon 4y ago
  Yeah, the reverse budget. I'm a fan of this. It might not be quite as efficient, but there's almost no mental overhead.
- remram 4y ago
  That sounds like a budget.
- wisnoskij 4y ago
  I think this misunderstands the point of a budget. A budget is not primarily designed to develop a growing savings account, tho that is a very good side effect. A budget is designed so that when the rent becomes due on the 29th, or you are hungry and you want want to consume food on the day before your paycheck comes in, you don't discover you have $2.50 to your name. You could put money aside for food every day, and for rent, and utility, as well, and that would be called a budget. IN fact just paying yourself first, is just a really simplistic underdeveloped budget.
- mattw2121 4y ago
  You literally just described a budget.
spywaregorilla 4y ago
I feel like if I needed a budget, that'd be a sign that I'm probably being too careless with my money to begin with.
- mattw2121 4y ago
  I feel like if I need to do any design work, then I must be too careless of a coder to begin with.
  - spywaregorilla 4y ago
    That's just... a poorly constructed, bad faith comparison. It's very easy to casually save money without budgeting, especially if you have a high income, which you specifically called out as fair game. For me, checking my bank app every non and then and confirming I've got a good looking net savings per month is fine. You seem to be trying to imply that I must believe that any form or preparation is a sign that you can't execute. Which is dumb.
    - mattw2121 4y ago
      As income levels go up, budgeting can be much more casual as you've described. You are still talking about budgeting. You are inferring that I believe all budgeting is an act of OCD.
      - spywaregorilla 4y ago
        > You are inferring that I believe all budgeting is an act of OCD. I've said nothing of the sort. That's pretty rude to people who actually suffer from OCD. I don't personally believe checking my net cash flow every few months counts as budgeting but if you do, sure, that's a semantic disagreement.
        wink 4y ago
        I've had this discussion countless times and maybe we've got the same problem in just not thinking in budgets. Then again I've often thought that I simply don't need a budget for X if my spending on X (as analyzed over a year, or five) is so much below of what I would put as a budget if you'd asked me to guess one. Example: If I like buying music, I'd maybe give myself a budget of 30€ for music per month, that's 2 albums. Looking at how many albums I actually buy in a typical year, or in an excessive year - I've never even come close to buying 24 albums in a year. So that thought process might have happened once, 10 years ago and until I start to earn a lot less or albums get a lot more expensive, I'll just buy as many albums as I want, and usually end up with 5-10 per year.
P_I_Staker 4y ago
I would like to do better financially, but don't care for budgets. Often, I find that I'm unable to make a purchase, due to those pesky buggers. For example, I'm about to take a trip to Europe, which would never have been possible if I had "budgeted".
- mattw2121 4y ago
  I've taken many trips and budgeted for all of them. I plan in advance or if I feel like doing something spontaneous, I reallocate money from another budget item or from my discretionary bucket.
- foogazi 4y ago
  > I'm about to take a trip to Europe, which would never have been possible if I had "budgeted". Curious why ? Sounds like the same thing
  - P_I_Staker 4y ago
    Hey, I might have missed the mark, but it was intended to be tongue and cheek. I don't "like" budgets because they force me to live within my means. Ignore them, and you can do whatever you like! You do have a point though, I could probably bring the cost down and still manage it... this is what budgets are for.
foogazi 4y ago
For years I used YNAB and encouraged family to use it too Then I got into FAANG and switched to buying whatever I want and fully pay off credit cards every month UNTIL my wants got bigger and bigger - last minute vacations, concerts, a lot of “experience” stuff coming out of covid lockdowns And now, RSUs are down , I spend more than I bring in each month, started drawing down on cash savings - YOLO - still driving a Camry though I need a budget again
francis-io 4y ago
I can also recommend moneydashboard.com. I load in multiple banks and credit cards, it will update all my banking transactions via api into a central view. I can set a budget for each type of expense and it all just seems to work.

SanjayMehta 4y ago

My rules were: 1. Always pay off the credit card bill every month. Completely. 2. Mortgage payment < 40% of take home salary. 3. Buy the cheapest new car you can afford and run it as long as possible. 4. Never buy branded clothing unless on sale. 5. Maintenance costs less than replacement. In summary be a cheapskate and ignore the neigbours with expensive doodads.

jleyank 4y ago
I am not sure that trying to fix modern appliances is really (or even on paper) cheaper than replacing them. Maybe for the expensive models, but the lower end units seem to be “use 5-10 and replace”. I worry that the fancy/modern car electronics will push cars into this category. Carmaker motivstions don’t align with mine.
- throwaway6977 4y ago
  Modern appliances are designed with parts that fail easily and are just slightly too difficult, or dangerous, enough to repair on your own. Usually it's a plastic connector of some sort that will have an easily calculable time-to-disintegration measured in years. For instance, I just fixed a 2c plastic clip that pretty much made my microwave unusable by virtue of the door being un-openable. In order to do so, I had to have my fingers about 3 inches away from a bare wire transformer which near totally obstructs what should be a very simple fix. Plenty scary and dangerous enough for me to have to call the manufacturer and find a certified local repairer...
- cbm-vic-20 4y ago
  If your appliances are low-tech enough, and you have access to YouTube and don't have hand dexterity issues, you don't need to replace or even pay for a service visit. I've fixed a clothes washing machine when its belt seized. That was $17. My refrigerator was no longer staying cold: a $50 controller board clone from eBay works great.
- bombcar 4y ago
  It depends on the appliance, and yeah, the cheaper ones are often NOT worth fixing if a major component breaks, but ARE worth fixing if it is a minor component/known issue. Youtube is great for this - search "model number" "problem" and if there's a video on how to fix it, it's common enough that the part is probably cheap (think ignitor for a dryer/oven, etc). Friend had an older washer with a giant "timer dial" that was cheap to fix - the new dial cost like $50 and was simple to replace. A similar washer that I had had a single plastic part that held the dial in place break, and the only way to fix it was either bolt some metal strapping around it (which I did) or buy a new faceplate at $350 (+ shipping) - that's half the cost of a SpeedQueen (which I eventually bought when the pump crapped out. The SpeedQueens don't change year to year and they're basically laundromat machines so they're very repairable. If you do decide to replace an appliance, there are people that will take away the old one for free, because they will repair and resell if possible.

jaimebuelta 4y ago

From David Copperfield, by Charles Dickens Annual income twenty pounds, annual expenditure nineteen nineteen and six , result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery

parenthesis 4y ago
The Micawber principle. (It seems there are two; the other is "Something will turn up".)
noneeeed 4y ago
You've reminded me that I need to watch the Armando Iannucci version of that again, it was such a good film with an amazing cast.

jsw97 4y ago

Don't pay fees.

SketchySeaBeast 4y ago
Ironically for stuff like bank fees they require a minimum balance, so you're paying fees because you can't save as much and can't save as much because you're paying fees.

deleted 4y ago

[deleted]

parenthesis 4y ago

"If in doubt, spent nowt" is my principle. You'll soon notice the discomfort of doing without a purchase you do need (so now you can buy it); you won't notice the lack of something you don't need.

helpfulmandrill 4y ago

This is like "eat less than you burn". True but completely unhelpful.

sgt101 4y ago

If you are smart you will spend less than you earn over a long period To achieve this you need a plan. The plan can be responsible and also contain periods of spending more than you earn. This will allow you to invest in your life, and the lives of the people that you love. For example, go on holiday with your kids while they are kids. This could cement relationships (not just with you) that will be really important in their (and your) lives. Another example; do the job that's a spring board, but lower paid than the job you really need. Ok, so you run up some debt - but you get access to your future career. Education is another (more controversial) one. I invested in my education when I was young, but I am from another era and I am well aware that what young people are asked to put in for a doctorate now is just unbelievable. It paid off for me, it may not pay for you.

themodelplumber 4y ago
I would add birth circumstances to your pile, somehow. For decades I spent wisely and executed on a plan while donating 10%+ of my gross to the megachurch into which I was born. Everybody in the church, including my parents, said it was an investment. Spoiler: It was not I still wonder how this could have been effectively communicated to me at an earlier age...the church teachings I received were designed to inoculate against outside opinions. When I joined the ranks of leadership myself, I also taught others to pay "God" before paying themselves. By the time I stopped paying, I could have used my own donated funds to retire twice over.
- kritiko 4y ago
  Many religions include tithing as part of their teachings, and the Effective Altruist movement has adopted it. If the funds are directed well, it's an investment into the community and to charity. (And if a disaster befalls you, hopefully the church would come to your aid, so it's a kind of insurance...)

pelagicAustral 4y ago

I’m so bad at this game it’s appalling. I generally scapegoat my lavish shenanigans with the excuse that I’m single, no partner no kids. Live far away from family and in general I don’t think I’ll make it to retirement age anyway.

shireboy 4y ago
I scapegoat my over budget spending with the excuse I’m married and have kids :)

quanticle 4y ago

One piece that's missing from this essay is the role of one's friends and family. When I had to replace my car a few years ago, I chose a modest Subaru. I was asked repeatedly by people in my social circle why I didn't chose something flashier, like a BMW or a Mercedes, because I was a software engineer now and "you can afford it, so why not?" Or, equivalently, "What are you going do with all that money, anyway, if you aren't spending it, you should give it to me." The idea that someone else can choose to spend less than they earn is very alien to a lot of people.

bombcar 4y ago
You can always imply that 'alimony' or something is taking the majority, most people will quiet down at that point.
- quanticle 4y ago
  Not when those people are family members. They know damn well I've never been married.
  - bombcar 4y ago
    True, but you can never really satisfy the type of family member who has "ideas" - even if you got a BMW it'd be the wrong type, etc etc.
foogazi 4y ago
> because I was a software engineer now and "you can afford it, so why not?" If you can afford it yeah - also live a little, don’t be a miser
- quanticle 4y ago
  Because I prefer to be able to afford to spend six months to a year out of work. It's the same principle as startups working to ensure their runway is as long as feasibly possible.

MrGilbert 4y ago

I'm really struggling at the moment. Ended a long relationship, went into a higher paying job, and realized how expensive it is to live on your own. My salery is about average in my country (not much, like 10%-ish), and I'm paying off debts. These debts are what's killing me at the moment. Roughly 20% of my net income go into paying them off. Avoid debts as the devil avoids the church. Just don't.

bombcar 4y ago
That's the biggest problem with debt, it doesn't change when your situation changes. At least you can cancel Netflix or whatever anytime, but you can't cancel existing debt without bankruptcy.
- MrGilbert 4y ago
  Also, depending on your country and culture, filing for bankruptcy is an act that requires a lot of effort and (and that's maybe worse) may lead to stigmatization.

TheBestInterest 4y ago

Thanks for submitting my article, Rick. Much appreciated. -Jesse

nunez 4y ago

Sorry; this advice is not helpful. (I originally said "this advice sucks" but realized that I came off too strongly.) (I'm sure the OP is a fine person but I am allergic to advice like this and get a visceral reaction to it every time.) The people I know that spend much less than they earn are either (a) homebodies that are perfectly fine with the "wake up -> work -> come home -> eat -> sleep" lifestyle, or (b) already have way more money than their lifestyle requires. I'm not like the people in (a). I've never been like that. I can barely stay home as it is. And, at least in the US, everything outside of home costs money. And while I get closer to (b) every year, especially now that I track all of my expenses and know where our annual spending baseline is, I'm not there yet. I think there are a lot of people like me. So financial blogger people or SJWs on /r/personalfinance saying "just spend less than you earn, bro" is exactly like people with like 10% body fat or whatever telling overweight people "calories in, calories out, bro; not hard!" (interestingly, many of those people have negative to very negative relationships with food) I mean, you're not wrong, but it's also (a) not very good advice, (b) completely ignorant of people's personal preferences, and (c) makes me think the author is hiding something. My advice is more practical: save progressively, make a goal, and track your spending. I acknowledge that this only works for people that don't already have runaway spending problems, but I think it's much more pointed than "just spend less!" If you don't save, start with something small, like 1% of your income. Some amount that you won't miss. Increase that every month by a small amount. (I do like the idea of having a six month rainy day fund, though I think engineers can get by with less.) By "make a goal," I mean this: you have infinite money. What does your life look like every year? Write everything down, no matter how outlandish, then actually do some homework and figure out how much living that life will cost. Sum everything up, divide that by 40%, and, boom, there's your number. Figure out how to get there, and get there! If you track your spending while making minimal changes, then after a year, you'll know what your annual burn is. Then, over time, you'll know whether you (a) need to make more money to support that lifestyle, (b) whether your burn is increasing too fast relative to your income, and (c) have a better idea of what you need to save to guarantee your lifestyle without making any cuts. You only live once. Why spend it constantly pinching pennies if you don't have to? So that your grandkids can spend your money after you die?

laacz 4y ago

OK, three days have passed, so I'm leaving this comment to hang. This advice is similar to "if you want to lose weight, eat less energy than you can spend". It's true, but it's useless.