Over Budget: Car Trouble and Stress

It’s mid-June and, friends, one thing is clear: I’m going to go over budget this month in a few categories. Shout out to work stress, soy covered car wiring (explanation below) and my emotional health (or lack thereof); the sources of my overspending.

As you all know, I budget using the YNAB (You Need a Budget) software, which articulates a fundamental rule that budgeters “Roll With The Punches”. The rule encourages budgeters be flexible and address overspending as it happens – by pulling from other categories or accessing savings – instead of being discouraged and giving up.

Before I go any further, I acknowledge that most of my overspending was squarely within my control and that not everyone has the flexibility to “redirect from other categories” when they need extra money. I am aware that sometimes going over budget means going [further] into debt for absolute necessities. (I remember those days well!) However, I encourage folks to not let one bad month discourage you from pursuing financial health! Much to my chagrin, financial freedom is often a two steps forward, three steps backward type of journey.

Having said all that, I know that the money available to me is finite, and when I overspend in one category, YNAB has taught me that I have to (i) be flexible and not be discouraged (ii) as illustrated in the photo below, cover overspending with money from another category or newly earned money (cash-flowing).

Photo from YNAB

When deciding which category to pull money from, I try to pull from my discretionary categories – such as clothing, fun money or dating – first and actively avoid pulling from savings goals or unrelated sinking funds. I also exercise caution when “cash-flowing” since too much spending in June can disrupt July’s budget and my annual savings goals.

Having said all that, let us dig into where I went over budget in June and why. Let’s also talk about how I used the appropriate sinking funds to cover the overspending.

Car Repairs. I received a dashboard alert about my car cameras and since the car is still under warranty, I hustled over to the dealership to have it looked at. A cursory glance by a service technician revealed that six wires in my car had been chomped on by a pest. (Note: A later google search revealed that this is not uncommon in newer cars due to soy-based wiring insulation that car companies rolled out to be environmentally friendly). Unfortunately, all of these wires had to be replaced for safety reasons; repairs that were not covered by my warranty. 😭 The bill was a discouraging $1156.00. While I was able to cover some of the repairs with $350 dollars from my car maintenance sinking fund, I was still ~$800 short. I pulled the extra $800 from my car replacement sinking fund, which I started contributing $200/month to when I paid off my car. Having to pull from these funds was not the end of the world but I’ll need to replenish the used funds, which means that meeting my savings/investing goals for the year will be a little bit more challenging.

Dining Out and Lunch at Work. The second and third spending issues stemmed from a lack of time or desire to cook at home during the first two weeks of June. My personal time has been significantly eaten away since both of my teammates are out on parental leave this month and so, it’s been just me – with the assistance of outside counsel – handling much of our workload. In addition to the late nights, the heavy workload has been quite stressful and has left me feeling down and I have no energy to meal-prep.

Given this new reality, I made the affirmative decision this week to rest on Sunday instead of meal prepping and gave myself permission to eat lunch at work and grab takeout for dinner (Shake Shack for life)! Obviously, this required me to re-calibrate my budget to account for the shift in priorities. The result was that I moved $100 from my grocery budget and split it between my “dining out” and my “lunch at work” budget. So far, I’m still staying within my $260.00 “food” budget overall but the breakdown between subcategories is different. I will need to consider adding more money to this category when I get paid, but am hoping to keep the food budget under $300.

Full Disclosure. Since I no longer have any non-mortgage debt and I also have a significant “buffer”, after I scheduled this post, I decided to top up my grocery category and my food budget expanded to $310 for the month.

How are you all doing with June’s budget? Everything on target? How do you adjust when you overspend? How do you avoid the guilt?


Investing: It’s Never Too Late to Start

I was 25 years old when I read my first personal finance book. And, as I shared last week, it was only then that I started thinking seriously about my money and, more precisely, what I should be doing with it.

While answering some of my fundamental questions, the book also made it apparent that I needed more education on the subject of money, so I asked my friends questions.

  • How much should I be saving?
  • How do I “save” when I don’t receive a paycheck?
  • What is this retirement crisis everyone is talking about?

My friends were uncomfortable talking about their personal finance progress – or lack thereof – and instead recommended a hand full of personal finance blogs as the basis of my education.

I pored over the recommended reading but quickly became discouraged. I was a law student with a very negative net worth and, based on the compound interest charts I’d reviewed, I’d already waited too long to start investing. Like any reasonable person, I closed all the tabs I had opened on the subject and ignored the matter until the following year.

The time for financial procrastination came to a halt when I started my first post-law school job, where I noticed that no one else seemed befuddled by what to do with our “Big Law” dollars. I spent much of my orientation hunched over a pile of financial documents and calculating the required payments on my debt. Two frustrated days later, there was no avoiding it, I needed to get it together.

I targeted some low hanging fruit – understanding my 401(k) investment options and deciding how much to contribute from each paycheck. In the interest of starting off strong, I followed the direction of a mentor and contributed 10% of my salary. Having not received a paycheck before that election, I literally never noticed the difference.

What did you invest in? In terms of investment strategy – I had none. I invested my 401(k) into a “target date fund” – a professionally managed fund invested in stocks and bonds that became more conservative as the “target date” (my retirement date) approached – until I got a better sense of how I should otherwise invest. A couple of years later, I shifted those dollars into a less expensive (as measured by the expense ratio) group of funds which better aligned with my long-term goals.

You are a professed member of the #dfc; did you pay off your debt before investing in your 401(k)? No. I am “Dave-ish” (meaning I don’t agree with everything he says, particularly with regard to investing) and did not feel comfortable not contributing to my 401(k) while I paid down my debt for four reasons:

  • I was straddling two tax brackets and received significant tax benefits by contributing to my 401(k);
  • I wanted the benefit of compounding growth and wasn’t sure how long my debt free journey would take;
  • My debt was low interest and therefore investing was a more efficient use of my dollars; and
  • I didn’t want to give up free money by not contributing at least enough to get the match my company provided.

Instead, I ignored the 10% of my salary which went to my 401(k) and planned the rest of my life (and debt repayment) around the 90% of my salary which remained after I got paid.

Are you maxing out your retirement fund? Today, I still contribute 10% of my salary to my tax advantaged retirement accounts I receive a company match on (i) 100% of the first 3% of eligible pay and (ii) 50% of the next 3% of eligible pay. I also receive a matching contribution of 3% of my salary no matter how much I contribute. I have taken full advantage of this matching program (an effective 7.5% match) since the day I started, resulting in my saving approximately $40,000/year in my 401(k) since I started.

How about you? Are you investing in your 401(k)? Are you earning your matching dollars?