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Women & Money Series: A Budget You Can Stick To

21 September 2009

Meet Nary Mary.


Nary Mary is the whiny, pesky, rationalizing, justifying, oh-so-convincing voice in all of us that encourages our feel-good spending, discourages our feeble attempts at financial planning, and enables our bad lifestyle habits.

Nary Marys tend to rear their ugly heads just as we’ve finally made the commitment to be serious about our money. Financial planning is one of those things – like exercising – that causes immediate pain without offering us an immediate pay off in return. That’s the perfect environment for a Nary Mary.


Nary Mary: You don’t have to work out tonight. It’s 10pm. You’ve had a long day. You can always go tomorrow.

Nary Mary: Sure, that pair of shoes is expensive. But it’s ON SALE. Think of how much you are SAVING by not buying it at the original price! Looks like a steal to me.

Nary Mary: You don’t need a budget. You’re already saving more than your friends. Besides, you’re only 23 years old. You’ve got a long way to go before you have to think about retirement. Hey, look! Gossip Girl season premier is on TV. Don’t you have some ice cream in the fridge? Mmm, chocolate.

You get the point.

It’s easy to allow yourself to be lulled into a sense of complacency by your Nary Mary. After all, financial planning is scary & intimidating, and going at it alone just seems too overwhelming. Besides – are  you really ready to face the facts of your financial situation? The warm cloud of denial is way more comfortable.

I totally get that. I don’t have a budget or much of a savings account, and I definitely don’t have a retirement plan. Although I make okay money, I still manage to spend almost every cent of my take home pay, and I’m too scared & embarrassed to figure out why.

Nary Mary: But you don’t MAKE enough to save. You’re barely getting by as it is. Anyways – financial planning is for people who have money.

But Nary Mary, the thing is,  people without money are precisely who should be the most vigilant about financial planning. How do you think rich people got rich to begin with? Not by blowing their pay checks  on things they couldn’t afford. A solid, realistic financial plan is your best bet if you’re serious about increasing your net worth. When I say ‘net worth,’ I’m not talking about your income. Income is how much you take home in salary every month. That number will depend on your luck, the state of the economy, and where you are in your career. None of those factors are things I can control. Wealth, on the other hand, is the total sum of all your assets, including your cash flow, which is usually generated by an income. Unlike income, our wealth is something we can control. If you plan well, you can cultivate your wealth (remember – assets) even as your income stalls. Wealth accumulation can be a wholly separate process from income generation. That’s why super rich people can stay super rich even if they’re not pulling in a salary.

Hell Yeah!

Hell Yeah!


This, for some, will be the most painful step.

Go over your past two months’ credit card(s) & bank account(s) statements and divide every transaction into three categories: Must, Trust, & Lust.

(Seriously, grab a pen and do this)

Must: These will be your fixed expenses. Your rent & utilities, student loan payments, car payments, and health care premiums all fall in this category.

  1. NO MORE THAN 60% of your take home income should fall into this category. Rent + utilities, generally speaking, should not be more than 33% (or a third) of your salary. If it is more than a third, you need to move. Or, get a roommate. For me, a third of my post-tax salary comes out to be about $700/month. Luckily, I can make that by sharing a 1 bedroom apartment with Pat and no heating bill.
  2. IF YOU LIVE AT HOME, the 33% you’d otherwise be spending on rent should be going STRAIGHT INTO YOUR SAVINGS ACCOUNT. No excuses. If not to save money, then why the hell are you living at home?

Trust: This represents how much you put aside in your savings & retirement accounts. Don’t worry if you don’t have any yet – I don’t either.

  1. 10% of your take home income should automatically be deposited into your savings account. YES, you CAN afford it. Put that money aside & forget about it. You won’t be tempted to spend money that you don’t “have” anymore. Even if 10% isn’t very much, know that the habit of saving is far more important than how much you can actually save. You won’t always be as broke as you are right now, but if you don’t cultivate a habit of saving, your wealth is never going to change.
  2. 10% of your PRE-TAX salary should automatically be deposited into your retirement account. More on retirement accounts in the next post, but the thing to keep in mind with retirement is that it’s not how MUCH you put in that matters, but WHEN you start. According to Adam Bold of The Bold Truth About Investing,

A 25-year-old woman earning $30,000 who puts 10 percent into her retirement plan and earns an 8 percent return will have $839,343 by age 65 – even if she never gets a raise. The same woman, starting at age 30, will have only $558,306.

Starting 5 YEARS earlier will mean $281,037 more in retirement funds.    How many pairs of shoes can you buy with that much money?

Lust: This is all other spending. Yes, food falls into this category. So does clothing, overdue credit card payments, vacations, home improvement, etc. Any spending that is discretionary, we’re going to consider a lust.

The expenses that make up this category should NOT be more than 30% of your take home pay.

Tally up your totals in each category and see where you stack up.

My fixed expenses aren’t too burdensome because my rent isn’t expensive, but I find that I’m not able to save because my living expenses – the Lusts – are eating up the rest of my salary. Which doesn’t make sense to me because I don’t feel like I spend that much money…. Until I am confronted with my credit card statement. Numbers don’t lie, folks.


For others, this will be the most painful step.

Nary Mary: All the steps are painful. Lets spend $4 on a mocha at that cafe you like so much…

Shut up, Nary Mary. $4 mochas add up.

That’s why we need to set limits for our spending. Write down how much you plan to spend, and give yourself some cushion.

  1. Food  – groceries & eating out. Be realistic with yourself about how often you eat out, and the kinds of foods you tend to purchase. I have evening classes twice a week, and it’s all but impossible for me to pack a dinner in addition to breakfast &  lunch. A budget doesn’t mean you have to give up everything – just that you can’t have everything, all the time. The easiest items I’ve found to slash are coffees. $4 every day for a month – you do the math. Okay, I’ll do it for you. That’s $1460 a year. How many retirement dollars are you giving up for those mochas?
  2. Leisure – watching movies with your friends, going to shows, A’s games – whatever you like to do for fun.
  3. Household Items – toilet paper, aluminum foil, ziplock bags, you get the idea.
  4. Clothes, toys, makeup – everything you want to buy all the time, basically.

I’ll say this again: GIVE YOURSELF SOME CUSHION. Going over budget because you underestimated your expenses is a bad feeling.

What if your clothes/toys/makeup budget is 60$ a month, but you want something that’s $180? Put aside $60 every month until you save $180. Do not spend money you DO NOT HAVE, unless it’s a health expense. If you have to see the doctor, you have to see the doctor. There’s nothing you can do about that. Hopefully, with good budgeting, you will have enough in your savings to cover the occasional unexpected expense.


Think about the major expenses you will have over the next year. Is tuition due? Do you need a new computer? A $350 ticket home for Christmas? Look at your Lust budget, figure out how many months you have to save, divide the number of months by the amount you need, and be prepared to put that amount aside every month until you have enough.

I know. Adulthood sucks.

Keep a bank ledger in your purse or backpack & write down every purchase you make over $1. Mark next to it M (must) or L (lust). Every Sunday night, go through your ledger, tally up everything you’ve spent so far and see where you are in your budget. Are you meeting your goals?

When you run out of money in a particular category, STOP SPENDING. Going cold turkey is only way.

Do not allow your Nary Mary to rationalize away purchases that you know you shouldn’t make. It’s -not- reasonable to “make up” for those speakers you want by buying less food this month. The “less food” strategy is a favorite of Nary Marys and it never works. You’ll just get hungry & cave.

Good luck, everyone! Share your budgeting tricks & pitfalls in the comments.

– Shiyuan

NEXT POST: Your Torrent Guide to Retirement Accounts

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