I read about Frugal February on Reddit, and decided to do it. This was in December. It was perfect: I would use December and January to prepare myself for this personal challenge and discover how much I could be saving if only I were more aware of my spendings.
Since there are exactly 28 days in February this year, it is perfect to split it into 4 weeks. Each week gets its own Frugal February Checklist I made:
But of course, one can't just jump into Frugal February without having planned for it. It would be like going from eating 5000 calories each day to starving for an ill-planned diet. Which would result in general unhappiness and a yoyo back to 5000 calories afterwards.
So here is a list of things I did in preparation for Frugal February in the past month and a half. Most knowledge came from /r/frual and /r/personalfinance. After watching a few lectures on Coursera for personal finance and for this 1-unit class called Financial Literacy at Stanford, I realized that the personal finance I learned from poking around Reddit was much richer and more helpful.
Get a hold of my spending habits
So everything I read on personal finance told me I should start out by finding out how and how much I'm spending money before I could make a realistic budget for myself.
At first I started writing stuff in a journal, by hand. But for some reason that didn't work. I would forget about something, or leave something out, and would be too lazy to find out when or how much. So, against the voice in the back of my head telling me Excel is not badass (probably planted there by friends from Addepar whose goal is to eliminate inefficient Excel use in the financial sector), I made an Excel spreadsheet:
And it wasn't so bad after all! I have a difficult time keeping track of receipts, and I rarely use cash, so I would just log on to online banking, check the recent transactions, and organize them in my spreadsheet every now and then.
On December 25th, I faced the moment of truth, and it was pretty awful:
Why the hell did I spend $562.42 on shopping and gifts? $123.13 on entertainment? And, why, even though I could have eaten at home, where I'm currently living with my mom and sister who are visiting from Korea for a year, I spent $416.67 eating out?
I was living like a King when I was just a student with no savings and a monstrous tuition debt I would need to pay off. Good to know!
Split accounts
The first thing that I was advised to do (by Reddit) was split my accounts. This would accomplish two goals:
1. Manage my cash flow more transparently
2. Put money away where it's not just a click away
I used to only use a checking and a savings account with the Stanford Federal Credit Union, but transferring money between the two was so easy and instantaneous that I would never accrue any money in the savings account. (Or the checking account, for that matter)
I went with Reddit and Mint's suggestion and opened up several savings accounts with Ally Bank, where there is no minimum deposit, no fee, and a 0.95%. I also set up a checking account where I plan to deposit a certain amount every month and make it so that all my bills are paid from there. Appropriate nicknames were given:
Er.. the 100K House was sort of spur of the moment and I might make it something else, however; if I had 100K I would rather invest it than have it sit in a savings account.
Set up direct deposit
The next step would be to set up direct deposit so that I wouldn't be tempted to keep more money in my spending account. I figured that if I cut back on gifting, shopping, and eating out, I could live within $400 per month. Bill pay would get a separate $100 per month for phone bills, Dropbox, and Netflix. I get paid biweekly, so this is the direct deposit form I ended up submitting:
Anything over the $500 I allocated for myself would be deposited in a savings account with Ally, after which I would distribute over the different saving goals depending on the amount of money deposited.
Write and share
The best thing to keep myself motivated was to write about it, and share my plans with friends. I found myself a forum where people share their budgets. It's a Korean website, so most of you won't be able to share, but for those who can read and write Korean, it is 대학생 재테크 카페. That, and I convinced several of my friends to join in on Frugal February!
There are still two full weeks left before February 2013, so it's not too late to start planning. Take this badge and link it to keep up with Frugal February updates!
Hello, I would like to borrow your checklist image for my own blog on FF, if that's not ok then let me know!
ReplyDeleteMy blog: http://tryingtounderstandtheworldaroundme.blogspot.com/
Of course! Good luck :D
Delete