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Guest Writer: The Envelope Budget And Running Away

From guest writer: Flia

Running away taught me a lot. It taught me a lot about trust. It taught me a lot about making my own decisions. It taught me a lot about budgeting my money. It taught me that what might seem like a terrible decision could be the best thing that I’ve ever done for myself.

WAIT! WHAT?

Back up a little bit!

It taught me about budgeting? Believe it or not, yes it did.

And that’s just what I’m here to explain.

I realize that most of you reading this do not know me and so a little background is necessary. Shortly after my 19th birthday, I ran away from home. I am not going to go into details as to why, because that’s not what I’m writing about.

Three days beforehand, I bought a train ticket from Indiana to Utah. That same day, I started cashing out my bank account. My specific bank would only let me withdraw $300 a day. Although you could get around this rule by also using an ATM that was not associated with a bank (such as an ATM at a Wal-Mart).

By the time I got on the train and left Indiana, I had about $1,500 in cash, my backpack, and my duffel bag. And I had a 48 hour train ride to figure out what to do next.

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Forty-Eight hours on a train

About six hours into the trip I was really bored and hanging out in the snack cart where I knew I would be left alone. Because of how bored I was, I was starting to become delusional. That was the point that I decided to budget my money.

It’s not that I’d never done any budgeting before, but all of my previous budgeting had been done on electronic day planners and such. I didn’t have any of that with me so I had to do a little creative thinking.

The first thing I did was brainstorm and write down a list of everything that I would need money for. My list ended up something like this:

  • Travel & Gas (for whoever would be picking me up at the train station)
  • Food (on the train)
  • Food (elsewhere)
  • Lodging (hotel or staying with a friend)
  • Non-Food Necessities (toiletries/clothes/medication)
  • Emergency/Extra

After I had categorized everything, I began to determine about how much (or what percentage) of my money needed to go towards what. Things such as gas money for the friend that picked me up at the station was relatively easy. I looked up the number of miles between his place and the station and back. Then I determined the average miles per gallon on the specific type of truck that he had, and figured in the average price of gas in the area. After I knew how much gas the trip would have taken him, I could effectively reimburse him. All of that math was probably not necessary, but like I said, I was delusional.

Every other category followed similarly.  Food on the train is ridiculously expensive, even the prepackaged snacks. I found the cheapest food with the most nutrients (which was kind of a joke by the way-it is a snack cart-it’s all garbage) and rationed that extremely carefully. Also, because I had spent a majority of my time in the snack cart, I ended up befriending the guy that ran it. He’s a pretty neat guy. And I ended up getting some free snacks out of it too. That was a bonus!

After I had figured out each of the categories and how much money I would allot to each one, I had to figure out how to separate the money physically. It would be much easier to spend responsibly when I could actually have a visual.

NOTE CARDS!

budget20-20istock_000041295790_largeI had a package of note cards in my purse! I never leave home without them. Each budget got one note card. I folded it in half, lined side inward, and on the outside wrote which category it was. The lined inside would serve as a ledger. Every time I spent money from that card, I would subtract the amount that I spent and write in the new total.

And I am not quite sure why I just explained that because you really should already know how to use a ledger.

Any leftover money that did not get spent would go into my Emergency/Extra fund. This money was kept in an entirely separate compartment of my wallet.

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Out of Sight, Out of Mind

Out of sight, out of mind. It would be used in case of emergency, depleted funds, of on something necessary that I would inevitably forget about. For instance, I had no cell phone. I ended up shelling out a little less than $25 for a burn phone and some minutes.

Although I was not out in Utah very long before continuing on to my next place, I still use this method of budgeting. I get paid through a paycard (a bank less debit card) and cash out 85% of my earnings every payday. Savings go into a tin under my bed (out of sight, out of mind) and everything else is separated into neat little note cards in my wallet.

So yeah, I guess you could say that running away taught me about budgeting.

Thanks to Flia for the guest post! The envelope is a basic budget that really gets stuff done. What do you do to keep track of your money? What is your story?

I always love to hear your money ideas, so email me at [email protected]

Flia is a college student studying forensic biochemistry. She is an avid artist and is currently working on multiple commissioned pieces. Although she is now residing in Kansas, she has lived a little bit of everywhere and isn’t overly attached to one particular place. In her spare time, Flia likes to read, practice new art techniques, and baby-sit for family-friends.

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I Got A Credit Score!

Remember my article “Seriously, No Credit Score?” Well. Guess who got a credit score?

 

This guy did!
Despite all of the suggestions and thoughts I had, I discovered that the process was a little bit harder than expected.

The Process

First off, applying for credit isn’t as easy as you’d think, I got turned down on a credit card before I wisened up and realized I couldn’t get the best card ever because of my lack of a record. So, I applied for a secured credit card and put about $50 bucks as collateral. MasterCard gave me a $200 limit against my initial deposit, which I intend to utilize for a few things here and there, and then pay it off immediately. This will give me a revolving credit style that is beneficial.

Second, I applied for a line of credit at my credit union. They offered me $100, $200, $500, and $1000 limits, depending on how much I was willing to take on in APR. I chose the $500 option, because I know it isn’t smart to utilize more than 25% of your credit limit. I could make a significant purchase on this limit and auto-set it to pay from my checking and savings at the end of each month.

The third thing that I did was apply for a Credit Builder Loan through my credit union. I locked up $500 of my own money, and I am paying my credit union back that same $500 (it’s basically a forced savings) at the end of the year. I get my $500 back plus most of the $500 I payed them, and I’ll have an entire year of credit payments on my account.

 

Thoughts about each option:

Credit Card: This one is the most fearful for me. If I’m late on payments, or never use it, I easily lose a lot of money, $50 plus $35 (explain these amounts), and it goes on my record. I still have this card in the envelope because I accidentally delivered it to my home address while I was living in Kansas City. I recently returned home, so I intend to start using it now. Cards like this have a VERY high APR, and the first time you mess up they slap you with a fee and your APR goes even higher. If you’re gonna get a card like this, pay it off immediately and put 12 reminders on your phone, your girlfriend’s phone, and your dog’s phone (Yes these exist. http://www.dailymail.co.uk/sciencetech/article-2547788/Even-Fidos-got-dog-bone-Owners-stay-contact-pooch-using-video-phone-pets.html ), and put it on Autopay if you can. (Voluntary Automation :D)

Line of credit:. This is basically the same as the credit card, but because it’s with my credit union, it isn’t as expensive, and it’s linked to my account, meaning they have it on Autopay for the entire amount (or just a percentage if I so choose. Which I don’t.) I might act a little bit intense, but I’m big on not spending more money than I have.

The biggest pitfall with having a line of credit is feeling that you are able to live outside your means. If you do that, and only pay the minimum required payments, you are stuck paying huge interest on your credit cards. If you remember from previous articles, you should have an accountability partner who you can use to keep you from overspending.

Credit Builder Loan: This one is easily my favorite. It’s so simple that only took 15 minutes because it was through my bank . It’s super cheap,  you pay monthly and put it on auto-pay. I can pay early if I want or can pay off the entire balance at any time. The total cost to do this for an entire year is about $35 dollars.

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My actions moved my score from zero to… almost hero

The Results:

Now on to the powerful part. I got myself that credit score. First credit scores are never amazing, and they have a lot of weak points. For example, my score shows that I only have 1  month of history reported. It shows that I have 5 or 6 inquiries onto my accounts. It’s also through Credit Karma, so it’s got some slight sway depending on what I want to use the credit for (http://www.goodfinancialcents.com/how-to-find-your-real-fico-credit-score-free/ Jeff Rose Has a good article about some issue with getting credit scores like this)

He explains in his article that he found his score in the 750’s, and went through a huge process to find a real credit score. After that, his intern figured out his score, and it was low 600’s, but he had no credit cards or credit history.

My issue is the same. I have 1 credit card, 1 loan, and 1 line of credit. Because of that I have a low number of accounts, my average open length of an account is very low, and the amount of hard inquiries that I’ve had in the last few months shows to be 3 for my credit scores. These can be bad signs and reduce my score.

BUT I HAVE A SCORE!

There we go! 669 and 664. 2 of the 3 credit bureaus.

What’s your story about your credit history? Share in the comments below!

 

 

-Jacob Brad Johnson is a Personal Financial Planning student at Utah Valley University who enjoys board games, West Coast Swing dancing, and helping his friends to save money on taxes. He strives to become a Certified Financial Planner designee and help the world to live their dreams and retire with confidence.

SFSJacob (4)

Shout out to Briana! Thanks for helping to edit and reformat this article!

-Briana Beers graduated from BYU with a degree in English and editing. She’s currently a stay-at-home mom who moonlights as an editor in her rare spare time. When she’s not chasing her kids or cleaning three week old food splatters off the light switches, she enjoys reading, baking, and spending time with loved ones.

 

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Saving, not owning, up to yourself

One of my friends who is now a “gym-rat” was telling me about how his brother tagged along with him to invigorate his body with some work outs.

My friend has been at it hard for several years now, and I’d say though he’s definitely not Arnold Schwarzenegger, his bod is mod. He was expounding how his brother was quite upset after a few weeks. I can imagine the conversation going like this.

“Ugh. Why do you lift so much more than me!” the newcomer said.

The response, from my practical and no-need-to-hide-truth friend to his brother: “I’ve been at this for two years. How can you expect to be as strong as me after two weeks?

How can you expect to have as much savings as your friend who dragged you along to visit their CFP® counsellor. How can I expect to have as much experience and knowledge as the man who hired me as an intern for the summer? He has 40 years of experience. The principles of finance are the same as weight lifting. Judge yourself based on where you are now. The best place to start, is where you are currently standing.

Resisting the impulse to compare yourself to others is a difficult one, and one that requires a ton of practice, patience, and of course failure from time to time. It’s like learning to ride a bike; you start with training wheels and, if you’re me, still end up falling off the monsterous thing and splitting your chin open on that random rock that’s in your driveway (I’m still bitter about that if you can’t tell).

Speaking of bitter, you can’t hold past mistakes against yourself either. You made a bad choice in taking out that auto-loan. Fine! You’ve never had credit in your life and can’t even pass a check to get an auto-loan. Fine! You’ve tried four fad diets and *shocker* none of them worked.  Fine!

Here is where you start: Stop comparing yourself to others! Start comparing you to yourself and others who are at the point where you are.
Example: In my financial counselling class, where am I compared to these other kids with similar experience?
Bad Example: Walking into a room of M.D’s, where am I compared to these professionals with 30 years of brain surgery under their belt about identifying which nerve may or may not completely paralyze the patient permanently?

Let’s compare this to our financial selves. You’ve heard a thousand times that you need to start saving for yourself… I wrote down 10 of them when writing and then deleted them; you don’t need to hear it again. Why? Because you don’t need to own up to anyone else except you for your actions.

Napoleon Hill said it best,

“The right sort of actions require no embellishment of words. One of the most common mistakes is making excuses to explain why we do not succeed. Unfortunately, the vast majority of people in the world —those who do not succeed — are excuse-makers. They try to explain their action, or inaction, with words. When you succeed, accept the congratulations of others with good grace; when you fail, take responsibility for your actions, learn from your mistakes, and move on to more constructive things. When your actions are appropriate in every circumstance, you will never feel the need to explain them with words. Your actions will say all that needs to be said.” -Napoleon Hill (NapHill.org)

If you are doing the best you can, no explanation is needed. But just like building a credit score, it is time to start building your financial experience. You choose how you are going to start saving, then start doing it!

Remember, the best time for change is when things change for you.

New college student: I’m going to build my credit score by dropping $50 on a secured credit card so I can have revolving credit go on my record.

Go out of state for a summer internship: Start working on them biceps and fat legs with that special Planet Fitness $1 down $10 a month deal you saw. (This isn’t much to do with finance, but it’s so true for me right now)

New job after graduation: I’m going to open a second bank account and put 10% of my wages into that so I’m saving.

Job change: I’m going to do better by maxing out my company 401(k) contributions  that they match.

Moved across the country with your three children: We are going to start putting aside that $400 a month we’re saving on rent and save it for our children’s tuition in a 529 Savings Plan.

Shia LaBeouf proclaimed it best,

Don’t let your dreams be dreams
Yesterday you said tomorrow
So just do it
Make your dreams come true
Just do it

Some people dream of success
While you’re gonna wake up and work hard at it
Nothing is impossible

You should get to the point
Where anyone else would quit
And you’re not going to stop there
No, what are you waiting for?

Just Do It

Start saving, Just Do It. Start dancing, Just Do It. Step toward your goal and feel alive, Just Do It.

When you make a choice, don’t explain it to anyone. Don’t own up to anyone.

Own up to yourself.

 

 

-Jacob Johnson

Student of Financial Planning at Utah Valley University
Member of UVU’s student chapter of the FPA Association
Intern with Searcy Financial Services

  • Guest editing and creative writing advice from my good friend Rebekah White! Look forward to more of her powerful skills in making writing legible! Maybe next time I’ll even put some of her contact information in here.