Broke Millennial by Erin Lowry: Thoughts on Chapter 4

Ch 4 Title: Dealing with the Dreaded B-Word

• The B-word is Budget. Took me awhile to get 😅

The Cash Diet: Studies have proven you spend more when using a credit or debit card. Using a card "makes it simple to forget how much you've spent by the time your bill is due." The remedy is to use cash whenever possible! Whatever is left after you've taken out what's needed for bills, rent, savings, etc is the money you can spend. Lowry's tip is to "divide this number by four and have a fixed amount of cash to use each week."

• I agree using a card makes it easy to overspend. You don't ever see the money you spend until the bill comes (unless you're constantly checking your bank account). There have been several times when I'm shocked by my credit card bill. I also noticed my bill has been increasing.
• However, I still don't think this method is for me. I don't like carrying around cash and coins. It is a good concept though. I really like the 'fixed amount you can spend per week' idea. 

The Tracking Every Penny System: For this one, you have to track every amount spent like the name implies. You can use a spreadsheet or an app or write by hand. Anything work as long as you "track by date, item purchased, and total cost" and have it all summed up at the end. After that, you should categorize the purchases, like food, shopping, bills, etc. Then it's time to "see whether the amount you're spending actually alights" with what you thought you were spending

• Some banks will do this for you depending on how you spend. For me, I only use my credit card, and I only have one card. Therefore, all my expenses are linked to that card. My bank will automatically breakdown the expenses into different categories
• I also tried the Mint app to track expenses at one point, so that's another option.
• As Lowry mentioned, the important part of this system is that you have to analyze it. You can't just record how much you spent. You also have to see what you're spending on. For me, this method didn't work because I didn't bother analyzing my spending. Therefore, I still don't know if I spent $40 on snacks and cafes or not. Gotta analyze with this method!

The Envelope System: Lowry says both using a traditional envelope or a digital version works. It's basically The Cash Diet but with categories. This time, you put however much money you're allowed to spend in categories, ie $50 for food, $40 for gas, etc. The most important part is "never borrow from one envelope to beef up another." Therefore, self control, people!

• Interesting idea. This would work if I used cash, but I pay everything with credit card. If I ever switch to cash, I think this would be the budgeting system for me

Percentage Budgeting: This also breaks the budget into categories. Usually there are three: 50% fixed costs, 20% financial goals, and 30% wants/flexible spending. Ideally, this money is from your net income, "the money that hits your checking account." The ideal version should be your goal, but this isn't always possible. Adjust the percentages as necessary and reevaluate periodically

• I kinda have this down. Right now, I have approximately 50% going to fixed costs. The rest going into the bank and just sits there. So I guess I have the 20% and 30% financial goals and flexible spending? I need to make a more concrete amount that I will designate as financial goals so I don't spend that away. 

Zero-Sum Budgeting: Lowry calls this the "black belt of budgeting tactics!" If you have sporadic income, then you should use this method. That's because it uses "last month's income to pay for this month's expenses." Lowry says this is one of the best ways to stop living paycheck to paycheck and also to pay off debt.   

1. Know your income
• Got this one down! I get a bi-weekly paycheck.
2. Crunch Your Bills and Lifestyle Costs
• List out your expenses. I need to do this. I have a general idea of a total amount, but I don't know about specific categories. Hopefully once I do this, I'll know what miscellaneous spending I can cut out. 
3. Employ Your Dollars
• Make sure every dollar you earn is accounted for. That's where I completely fail. The extra money I have after bills and random spending just sits there. It needs to be categorized into something. That way, I'll know what to do with it!
4. Evaluate Your Spending Categories
• Sometimes the amount you have to spend "eclipses the money being earned each month." I'm 100% sure that isn't my case but doing Step 3 will provide concrete proof. If you do end up spending more, then you have to shuffle your allocations around. 
5. Time to Get Your Penny Tracker On
• Lowry says this is a "crucial element" and that this should be done for several months "to account for any potential outliers." The point of this is to make sure your keeping in your categories. Not going to lie, this part is going to suck for me. As I said earlier, I downloaded Mint to do this, but then I just ignored it. Tracking how much I spend isn't on my list of fun things to do. I'll have to stick through with this. Maybe I should put this on my weekly life updates.........
6. Prioritize Your Categories and Trim the Fat
• Good thing is "food and entertainment are some of the easiest categories to slash." That's a starting point. For me, I did used to go out at least twice a week. However after the whole Covid-19 outbreak, I've stopped going. So I pre-slashed it! Yay me! 
• However, Lowry emphasizes the money saved has to go to another category. Otherwise, the money you save ends up being spend. Totally agree with that. That's what I ended up doing (buying crafts and related supplies). I need to assign it to somewhere else, like retirement or education improvement or something. Idk. 
7. Get A Month Ahead
• The entire point of this budget! For this one, I think I can withdraw from my savings account. I have enough saved up. Of course, I'll need to verify once I actually start this plan, but I'm pretty sure I have enough. 
8. Always Run the Numbers and Adjust Accordingly
• This is where I'll have difficulty. I tend to fall off of things quite quickly. Habits are hard to build and all that. Also Lowry leaves a good reminder to adjust the non-essential categories. If you're spending too much, don't take away from saving and paying debt. Those are important! 

Clearly, there is a lot that I need to do. Tomorrow, I'll check my paystub (fingers crossed I'll remember). That way, I can knock off Step 1. I think I will put this as part of my weekly update or at least pieces of it. The hardest part for me will be Step 2 & 3. Tracking expenses sucks, and I don't really know what categories to have. Oh well, baby steps! We all have to start somewhere.