Tuesday, August 27, 2013

Saving Money: Create a Budget

For this post, I'm straying from my pictures and diary of what I've been doing in Japan. We're talking about financial stuff today!

You're in a new country with a steady job and let's face it, you have a list of places you want to go, things you want to do, foods to eat and clothes to buy. And let's not forget your apartment that needs to be furnished! But wait, you haven't forgotten about paying rent, utilities, insurance, social security, phone, cable/internet and other bills right? Somehow that paycheck looks a little smaller than it did before you added all of those factors.

My parents have always been very frugal, wise and smart when it came to spending money. They could afford to buy a lot of things, but rarely did because they decided to invest in their children and to save up for their retirement in the future. I owe everything I've learned financially to them because of their lifestyle. Coming up here, they encouraged me to try new things and to create new experiences, but also told me a piece of advice that they have used throughout their lives: Live below your means. Just because you can afford to buy that new speaker system doesn't mean you have to get it. Would you die without it? What's the worst thing that could happen if you didn't get it?

Upon hearing their advice, I decided to create a budget for myself. My dad told me to "always pay yourself first" when you get a paycheck. That means, you pay the things you need to: rent, utilities, etc.- things that you have to pay. Another thing that should be in there is money for your savings and Roth IRA (Individual Retirement Account). I took these into consideration and made my own budget. I started with the salary that I make every month and then added categories for things that had to be paid at the top: social security, health insurance, rent, utilities, phone, and internet. Those are all fixed prices (utilities will vary depending on your usage of water, gas, AC, etc.) Adding a miscellaneous category for any home repairs or additions (ie. cups, hangers, a new microwave if yours dies, etc.) was another thing I added. After looking at the amount I needed to pay, I would write down how much money I had left for every category.

After those came things that were also important such as transportation (we get reimbursed for that, but I wanted to add it to keep track) to get to and from school as well as groceries because no one wants to go on an empty stomach.  These numbers may vary depending on your lifestyle. For an example, if you need more food than others, then your groceries category may be higher than others.

Once I made sure I had enough money for those, I added categories for my savings and Roth IRA. These are essential for everyone else and myself so I made sure to put aside a substantial amount for both of them. If you haven't started a Roth IRA yet, I highly recommend that you do. Starting to save up for your retirement while you are young will only help you in the future. The most you can deposit into your Roth IRA for the 2013 year is $5,500 so you cannot deposit no more than $458 a month.

Lastly, I added a category for trips and my "leisure spending". Being in a different country, you will undoubtedly want to travel and putting money aside specifically for this can help you keep track of how much more you need to save for that two week vacation to Korea. Leisure spending includes eating out, shopping, transportation to places other than your school, drinking, etc. So if there is something that you really want to buy that is a bit expensive, save up for that special purchase :)

I hope this proves to be somewhat useful for you all! Sorry for such a long post. I'm very grateful to have parents who taught me so much about saving money. Thanks Dad and Mom! :)
And remember to "live below your means"



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