Friday, May 27, 2016

You're Not the Boss of Me

A few weeks ago I was at the bar with some friends, drinking a beer and having an intense and lively discussion about... credit card interest rates. It was one of those moments where you realize just how deep into your 30s you are. 

Needless to say, I've been thinking a lot about money lately. Mostly because I'm in my 30s, and if not now, when? But also because for the first time in my adult life I actually have some. Not a lot, and most of it is spoken for, but overall our net worth is inching up. (Make no mistake, we're still in the red. There is, however, a light at the end of the tunnel.) 

This progress, incremental though it may seem, is a big deal for me and Nathan. We've been together nearly fourteen years and for the bulk of that time one or the other has been a student, paying money to a university rather than making it at a job. As you can imagine, this added up. 

Now, however, we both have jobs we like. We live in a city we adore. We've embraced a very frugal lifestyle (with the exception of good beer and decent wine - hey, we're not monks). Financially, things were better than ever, but it still didn't seem like enough. We got paid; bills took most of it away; 10% went into savings; and the rest disappeared, dollar by dollar, until there was none left. When it came to our money, I felt like a passive observer with very little control. 

Apparently, I'm not alone in feeling this way. According to The Secret Shame of Middle-Class Americans 47% of us wouldn't be able to pay for a $400 emergency without selling something or using a credit card. Until very recently, I was one of those Americans. We tried to save and think ahead, but every time we made some progress something would knock us back down. The article speaks to this cycle. "[T]he primary reason many of us can’t save for a rainy day is that we live in an ongoing storm. Every day, it seems, there is some new, unanticipated expense—a stove that won’t light, a car that won’t start, a dog that limps, a faucet that leaks. And those are only the small things."

"We live in an ongoing storm." I don't know about you, but that line was a gut punch. At some point, I experienced a shift in how I think about finances. When I was much younger, I scoffed at money. "Capitalism is the root of all evil! Money is a social construct! Experiences, not things!" I still believe a lot of those slogans, but the fact is I live in this society. I've made certain compromises for the comforts of civilization. One of those compromises is accepting money and its role in my life. This doesn't mean I have to give up my hopes and dreams of being a writer in pursuit of a field that is actually lucrative, or that I need to drive a fancy car and live in a big house. It just means I need to be smart, get out of debt, and live, finally, within my means. For many years, I thought of money as the chains that held us down. Now I think of it as the key that can set us free.

(Related: The Story of a Fuck-Off Fund, which is the most inspiring financial advice I've ever read.) 

Right now, our financial goals are to get out of debt (with the exception of my student loans, because let's be realistic), to replace my car in two or three years when it inevitably dies, to save up a six month cushion of living expenses, and to buy a house before we're forty. (Nathan is 35 now, and I'm 33 - 40 seems far away, but also very, very close.) None of these goals are revolutionary. In fact, most of them are pretty boring. But they feel like a big deal. Each one is a single step closer to freedom.

To help us with our goals (and I promise this whole post hasn't been one long advertisement) we started using You Need a Budget. I'm still new to the software and the method, but I can already tell it's going to change my life. 

I won't get into the nitty-gritty of YNAB, because a thousand blogs have reviewed it extensively. Instead, I want to tell you how it makes me feel, because money really is a social construct and so much of it depends on feelings. 

The first step of YNAB is to assign every dollar in your account a job. I don't think it's a coincidence that "job" is the word they use, and that it implies action. This simple idea - that I can and should put my money to work - was one of those lightbulb moments. Now, when we get paid, I go through all our bills, which are set in stone, and I assign them dollars. I pay credit card bills and student loans and put money in savings. Then I go through all our other expenses, like groceries and gas and all the animals, and I give them dollars, too. Finally, if there's anything left over, I put it toward fun stuff, like alcohol, restaurants, and entertainment. When you use YNAB this way, your budget is a tidy zero, because all your money is spoken for, segmented and assigned. You still have it, of course, and you can shift your budgets around as needed. But having a plan for my money, knowing what it needs to do, makes me feel powerful. My money is active. It's working. 

My dollars have jobs, and I'm their boss.

PS: Want to try YNAB? Use my referral link and we'll both get a free month!