beatrice's blog

my financial journey

I've been on a journey to get control of my finances for about 18 months now. I've tried spreadsheets, Rocket Money, Mint, and EveryDollar, before finding "the one": YNAB. But early on, I realized that I didn't just need an expense tracker. I needed a financial philosophy. After taking in several philosophies, I've come to my own conclusions.

zero-based budgeting works for me

The YNAB budgeting app is basically just a digital envelope system where you give every dollar a job or an assignment. I take the money I have in my bank today and I tell it what it needs to do. I'm like a director, of sorts, delegating jobs to my dollars. This requires me to be proactive about my money, giving it instructions on what to do at the beginning of the month (when I get paid) rather than looking back at the end of the month and simply documenting what happened (which is what expense tracking was for me).

I've learned that the point of budgeting isn't to restrict spending. The point is to be intentional about spending by deciding what you want to spend on and setting aside money for it. It's been tremendously empowering, and I feel like I have way more control over my financial decisions.

for me, cash = peace

I used to play the credit card game. I had seven credit cards at one point, all with interest rates between 25%-30%. YIKES!

But even more than that was the mental energy. Every time I made a purchase, even a small one, I went through the mental gymnastics to figure out which credit card would give me the most cash back/miles/points for the purchase. And I had to juggle seven different credit card payments every month. For only 1% or 3% or even 5% cash back, I was spending way more than 1% or 3% or even 5% of my time and mental energy trying to juggle it all.

I was also on the "credit card float" (where you don't pay for this month's spending until next month). So I never had an accurate, real-time picture of how much money I really had because I was always paying for stuff on a weird, delayed cycle. The movie tickets I bought on April 3rd? I wouldn't actually pay for that until May 27th. It felt impossible to get a concrete grasp on my financial life because there was such a long lag between borrowing money for a thing (which is what using a credit card is) and actually taking cash out of my checking account for that thing.

So I canceled six out of seven credit cards. I still have one for true emergencies, but I switched to using a debit card for literally everything else.

I've heard a lot of people rail on using a debit card in the modern world, saying it's dangerous and stupid. Everyone is entitled to their opinion, and I don't judge or look down on people who use credit cards. There's no one-size-fits-all approach to anything in life!

For me, here's what my life looks and feels like using a debit card:

  1. I only have to manage one account: the checking account tied to my debit card. I don't have to juggle seven different credit card billing cycles and statements
  2. I see transactions hit my account immediately instead of 4-6 weeks later.
  3. If I don't currently have money set aside to purchase something, I wait until I do. No more putting it on a credit card and saying I'll "figure it out next month"

There are also several precautions I've taken to prevent debit card fraud, including:

two philosophical questions that guide my budget

1. what kind of life do I want to live?

This question has nothing to do with money. It has everything to do with me. What are my personal values and goals? What's important to me, at the end of the day? What makes me feel grateful and excited to be a living, sentient, conscious being in the universe? What do I really want my life to look like, to be?

I want to spend meaningful time with loved ones

Quality time with my friends and family is the most important thing to me. Quality time includes:

I want to prioritize my hobbies

Developing hobbies in this chapter of my life (after spending 12 years earning three college degrees) is very important to me. Here are some hobbies I want to explore:

I want to be generous towards people and work I believe in

Generosity has always been a core value of mine. What's the point of all this if we don't help each other? I want to consistently support:

I want to have enough money for emergencies/unexpected events

I want to live in the peace that comes with knowing if shit hits the fan, I can pay for it.

I want to be debt-free

I don't want to owe anybody anything, especially at outrageous interest rates that make corporate execs rich while keeping me broke.

2. when I get paid, what is my Order of Operations to fund first?

Once I was clear on what's important to me and what kind of life I want to live, I had to create an action plan to make it happen. By using a digital envelope system, I can direct my money in a way that allows me to build the life I want. Hence, my Payday Order of Operations:

  1. Pay for the essentials (food, shelter, utilities, transportation, insurance, etc.)
  2. Fund future expenses. I set aside money every month for future expenses that I know are coming--annual subscriptions, HVAC maintenance twice a year, oil change, annual vehicle registration, etc. This helps me prevent future debt because I won't need a credit card to cover it. And "setting aside money for [insert specific expense]" is more effective for me than "saving for a non-descript rainy day"
  3. Fund the activities that make me feel grateful to be alive (i.e. the items from question 1)
  4. Pay off debt consistently over time. My life is more than going scorched-earth and getting out of debt no matter what it takes (which is what the Ramsey group says to do). Getting out of debt is extremely important for my future, but it's not everything. It's not my entire reason for existence. So the approach I'm taking will take me a little longer and I'll end up paying a little more to the corporations, but for me, the trade-off is worth it. If I went scorched-earth, it would still take me ~10 years to pay off three degrees. And I would miss spending time with my parents in their 60s while they're still healthy, developing deep connections and friendships in my 30s, getting to know myself by indulging in hobbies and "play." This approach may not be right for everyone, but it's right for me, and that's all that matters.