Budgeting is tough without a clear example. Follow along and use my monthly budget as inspiration for your journey.

Let’s take a look at my monthly budget

My budget breakdown relative to my monthly net take-home pay with commentary:

• Net Rent – 26.1%
  • We locked into a long-term lease so we will stay at the same rental rate until at least July 2023. We live in a studio apartment w/ dishwasher + in-unit washer/dryer (score!).
• Utilities – 2.2%
  • Includes Wifi, Water, Gas, Electricity. We split general utilities across the tenants where we live. This is partially out of our control.
• Grocery – 2.7%
  • We buy groceries on sale and produce in season. We have great options around us.
• Dining Out – 4.6%
  • This is one area for improvement. We do a weekly lunch with friends that adds up quickly! Tho we host friends over, potlucks are not nearly as successful as we’d hope. Very new yorker where we do most of the food. Friends bring the booze (we do not drink alcohol so not the largest advantage to us)
• Vacation + Fun – 4.6%
  • This is more of a moving target / holding-fund. Would be nice to save for a vacation and am working out if I need to budget it in monthly or set aside from my “leftover cash” account.
• Shopping + Gifts – 2.7%
  • From Birthdays to Holidays, my family’s love language is gifts. This mostly means sending food or flowers to those I love. The occasional experience gift as well. I do enjoy thrift shopping or buying household gatchets. I try to keep this at a minimum.
• Misc. + Other – 1.8%
  • Transportation (MTA Cards, Occasional Ubers, CitiBike Memberships) to casters for planters. Anything that doesn’t fit above goes here.
• Investments (Leftover Cash) – 55.2%
  • Goal is to get this to 70% within the 6 months

Two Ways to Increase Cash for Investments / Savings

Firstly, I must emphasize that knowing and doing are two very different things.

There are two levers to increase the amount leftover in your budget to set aside to invest or save (the math here will never change).

1. Increase Take Home Pay (Money-In)
2. Decrease Spending (Money-Out)

This step is before focusing on your investment returns and that math. This is making sure we have money leftover to play with.

My short-term plan to meet my long-term goals

Taking the above approach, my short-term plan is:

1. Increase My Take Home Pay, &
2. Decrease My Spending

Putting aside my ambitions to one-day open up a cute coffee shop with my best friends, I know right now my ambitions in the long term are to amass enough capital (aka cash money) to build my own real estate portfolio. That said, I know I’m not there yet.

How I will Increase My Take Home Pay

Again, two ways I see myself increasing my take home pay in the short term:

1. Negotiate my current salary
2. Get a new job with higher overall pay (key point: for the same workload/benefits)

Each can be its own blog post but in summary:

• Negotiating a salary raise is limiting to about 5-9% off current base salary UNLESS you negotiate for a title change which can lead to a 10-20% pay increase.
  • Pros: you continue on an existing network of goodwill, know the company/systems in place and can be pretty efficient to take on new projects/add value.
  • Cons: People may not adjust well to a new title change, depending on how junior you are and how senior this new title may be, people may not treat you with the same respect that this position would demand at a new company. Learning/growth opportunities after this may be limited or may take longer as it’s not usual for individuals to get consistent title changes and/or material pay-raises on an annual basis unless there are other circumstances such as good economic growth or unforeseen people changes that create unplanned opportunities.
• New jobs present opportunities for outsized salary growth and a fresh start; typical pay adjustments can come from monetary and non-monetary changes: better benefits, work environment, projects, growth prospects. From what I can see, new companies come with new salaries. For example, every offer I’ve received has been at lease 15% and up to 50% pay increases.
  • Pros: Fresh start and opportunity to grow from new leadership teams; Increase pay and growth opportunity
  • Cons: The unknowns. Needing to re-establish relationships, work systems, and rapport. Change is hard and with new jobs comes the whole cycle again.

How I will Decrease My Spending

As mentioned above, my main area of focus is on reducing spending over the course of 6 months to hit my 70% savings rate goal. Below are a few points on how I plan to achieve this goal:

1. Groceries – reduce by 1%
   • Plan is to grow a majority of our own vegetables / perishable goods
   • Starting plants from seed = cheaper
   • Primary Vegetables Include: Cucumbers, Tomatoes, Lettuces
2. Dining Out – reduce by 3%
   • Limit dining out to happy hours or special occasions
   • If dining out, eat beforehand and order appetizers/sides
   • Do not order drinks
3. Vacation + Fun – reduce by 3%
   • Look for free events in the city
   • Outdoor events that are free
   • Save up for expensive events that require payment
   • Dates with husband at home learning new skills
4. Shopping and Gifts – reduce by 3%
   • Either no gifts or utilize vacation spending to do fun things with people on their birthdays
5. Misc + Other – reduce by 2%
   • Limit spending on Miscellaneous Items to less impulse purchases and see if there is a free alternative way to do things
   • If necessary, take away spending from Grocery or Dining Out to compensate for any unexpected fees

Want More? Read about the start of this journey here.

Want to read more, but not from me? Here’s an article I found fascinating from the blog Early Retirement Extreme.