If you haven’t read part 1 of Never Budget Again, we recommend doing that now before you read on. These two posts build off of each other.
Our Conscious Spending Estimates
Hannah and I have evaluated and discussed what we love to do and what we don’t care to spend money on. Committing to intentionally live and spend a life true to ourselves, we have forecasted what our RICH life would look like. Hannah makes delicious, healthy lunches for me to take to work and because I don’t love going out to eat lunch every day, we expect our food budget to be a bit lower. We already have everything we need in our minimalist capsule closets, so we don’t expect to spend much money on clothes this year either — other than the occasional clothing article to replace anything that gets old or damaged over the course of the year.
Many of these other expense categories are even easier to forecast. You know your rent, your cell phone bill, your approximate utilities costs, etc. Again, this table below is NOT actually our personal conscious spending plan — we are both working full-time so our monthly salary is a bit higher, and since there are two of us, our rent is also a bit higher as well. The categories below are 100% the categories that Hannah and I use to forecast our monthly expenses.
This leaves us to the category Hannah and I love most! Fun money (or better known as dates)! Basically, any experiences or adventures we want to have together. We go to Broadway shows, ride jet skis around Manhattan, take a trip to the Top of the Rock, go to Yankees games, frequent all of the best popular restaurants in the city, travel wherever and whenever we want, and… you get the point. Nothing is off limits. Sure, we’ve forecasted that our dates and adventures will cost $500 each month, but we’re pretty loose about this projection. And we definitely don’t care how much we go over our forecast. In fact, we’d be happy spending $500 each WEEK if we wanted! But this is unrealistic and doesn’t represent a forecast of natural spending, so we project only $500 each month instead.
And $50 each month for vacations may seem incredibly low. But remember, Hannah and I use credit card points to finance all of our travel and vacations, so this could essentially be $0 instead. In fact, we just booked two round-trip flights to St. Martin for FREE using one credit card’s signup bonus. That’s $940 of value! And we’re about to book an 8-day over-water bungalow stay to the Maldives that can range as high as $14,000. For FREE. Peaked your interest yet? Check out our course if you want in.
So, what are we offering? We are providing you the materials to become a minimalist on the stuff you don’t care about and a maximalist on the experiences you can’t get enough of. Sounds like a pretty unfair trade to me.
You know the first two steps for conscious spending: forecast expenses and practice awareness of your spending. The third step in the conscious spending cycle is to evaluate your spending habits and adjust your forecasts accordingly each month. Odds are you didn’t nail your spending estimates on your first try. Many people use Mint to track their spending. I don’t really like Mint. Everyone gets animated about how functional it is and all of the information it shows you. But if you pay attention, it categorizes your crap wrong and you end up hardly ever looking at it because Mint is so convenient and does such a “great” [crappy] job organizing and displaying your spending.
If you want a better option that allows you to actually track your spending, we recommend YNAB. Haha kinda contradictory to everything you’ve read in this post – YNAB stands for You Need a Budget. We don’t use it for its budgeting capabilities, but it has a really good user interface to help you see exactly what you’re spending your money on each month.
What You Need to Do Now
So here’s what you need to do this week:
- Sit down and think about what expense categories are in your life. You can use our categories as a baseline.
- Understand what your personal minimalism looks like.
- Based on your priorities, forecast what you will spend each month. These should be hard, factual numbers. For example, you could say: This year I have 2 dentist appointments, one optometrist appointment, and five medicine prescriptions to pick up. Each appointment costs me $50 and each prescription costs me $10. So I can expect $200 of healthcare expenses this year. If I stay conservative with my estimates, I may have an emergency, so let’s push this $200 estimate to $300 instead ($25/month). Repeat this for each category!
- Stay true to yourself. Have some friggin’ self-control to not go to McDonald’s every day or J.Crew every week… So that you can have NO self-control on that vacation or weekend you’re stoked for.
- At the end of each month, reflect on your spending from that month. If you were looking at your spending habits from a third-person perspective, would this month’s expenses reflect who you are and what you value? Would others be able to tell what you love most from your monthly expenses? If not, you need to go back and understand what makes you feel rich so you can start living. Start over.
The key to conscious spending is coming to understand yourself. Once you know what type of experiences create a full life for you personally, then can you accurately project what your conscious spending plan should be. You can usually tell what someone’s priorities are by the way they spend their money.
We don’t ever stress about how much we’re spending. And neither should you.