Getting my clothing spending down to 5%

May 16, 2013 By 21 Comments

I think it was the lovely Adina J that told me clothing should be 5% of your spending (or maybe it was 3%?). Not sure if she heard this rule somewhere or if she made it up herself, but regardless, she is a frugal and fashionable woman so I trust her judgement. And thus my new personal spending rule is this:

Clothing should be 5% or less of your overall spending.

Why this is a good idea:

  • instead of being a fixed amount, a percentage is proportional to my income. Therefore, the more money I make, the more I’m allowed to spend.
  • limiting my spending on clothing will result in more money elsewhere, which means more for debt payments, savings, or important items like furniture.
  • limits will force you to evaluate your choices. If you know you can’t have it all, you will instead select what’s most important. I’m all for prioritizing my wardrobe to keep junk out!

I’ve been tracking my spending for a few years now, and I know I spend more than 5% of my money on clothes. It never feels like I do, because I don’t own a lot of clothes. When I become bored with something, I give it to my sisters or donate it to Goodwill without a second thought.

I remain really dedicated to a minimalist wardrobe. I can just feel when I have too much stuff and it gives me anxiety until I cut back. If my entire closet amounts to more than 4 loads of laundry, it’s time to get rid of stuff.

However, owning fewer items frequently gives me the illusion that I spend less on clothing than I really do. In reality, I spend a ton of money on clothes.

I like expensive items. Fabrics like leather, silk and cashmere aren’t cheap to buy OR keep, but they’re my favorites. Sweatshop-free cotton tees are 3x the price of those at H&M or Forever XXI, and denim made within North American borders will have a price tag that reflects a North American minimum wages.

My clothing budget also reflects regular tailoring, dry-cleaning, and shoe repair expenses, which count towards the 5% total.

For 2013, I was heavy on clothing shopping early in the year. I bought a pair of leather boots early in January and stocked up on my favorite jeans when I went to visit my parents in Utah. These two shopping trips alone account for at least 1/3 of what I’ve spent on new clothes this year! Since then I’ve slowed my clothing spending down, save for a recent stock up on basic t-shirts from American Apparel for summer (using my spending account, so I shopped guilt-free!), I’m hoping to see the percentage drop. To date this is how my spending looks:

 

Screen Shot 2013-05-15 at 7.44.31 PM

total spending so far for 2013

Eep! Nearly 8% on clothes and I still need a new pair of sandals =( How can I bring my clothing spending down to 5% of the pie? Two ways:

1) Cut down spending on clothing (obvious, right?)

2) Increase spending elsewhere.

Now, I don’t want bigger bills to pay and I shouldn’t go crazy and spend more on food, but if I increase my debt payments and investment spending, each of those categories will grow thus shrinking the clothing spending slice of the pie. All around source of win!

So my plan going forward is to slow down — but not eliminate! — my spending on clothing while increasing my debt payments and buying some more stocks. Can’t go wrong there ;)

Filed Under: Budget, Minimalize Tagged With: ,

April 2013 Spending Recap

May 4, 2013 By 15 Comments

Since my old style of spending recaps is getting a little tired and is popping up on other blogs, I’ve been experimenting with some new ways to share my numbers.  Let me know what you think!

April 2013 Spending-1

Filed Under: Budget Tagged With:

How to make a budget you can live with

January 25, 2013 By 13 Comments

I’ve gotten a few emails these past few weeks about how to create a realistic budget. First I feel it necessary to point out that I’m not big on budgeting. My budgeting style consists of automating debt payments and transfers to savings, and then spend, spend, spend whatever is left over until it’s absolutely all gone. Other people like to budget more carefully, but I’ve found if I get too into it, I start to feel constricted and will self-sabotage at the first opportunity.

So when I’m asked, “How much should I spend on…?” my response is, “whatever you feel is right” — but there are suggestions. My personal finance hero, Gail Vaz Oxlade, suggests a balanced spending plan like this:

Screen Shot 2013-01-22 at 1.59.48 PM

Awesome! I think that works for most people.

That’s your net income, by the way. Don’t make a budget with your gross income. You don’t get to spend your gross, you only get to spend your net.

Personally when I look at that pie chart, my thoughts are: 35% is way too much to spend on housing, and 15% is also way too much spend on Transportation. 15% is not nearly enough to put towards your debt, and 25% on “Life” doesn’t sound fun at all.

This is a chart representing ALL MY SPENDING for 2012:

Screen Shot 2013-01-22 at 1.49.22 PM

I use a program for my Mac called MONEY 4 made by Jumsoft to track all my finances. It is available for download from the Mac App Store for $39.99 — pricey, but well worth it!

Now, I have a few more categories than the Gail way because I like to be a bit more detailed, but ultimately, I know where my money is going (this chart actually isn’t a great representation because it leaves out all my Savings which are labelled as “transfers” in my money-tracking program and therefore don’t register as “spending” — you can see I did buy a few thousand dollars of stocks though under “investments”! I save 20-30%+ of my income any given month).

If you’re thinking it looks like I’m having a lot of fun, you’re right — but that’s because I’m not paying for a car and living in a cheap apartment, so I don’t need Gail’s generous 15% and 35% for those categories, respectively. Instead, I pay what I have to and then I can use what’s left over to boost my debt payment and have a little more fun.

Long story short, you do what’s best for you!

Note that best for you doesn’t mean neglecting savings or dragging your debt out over 40 years. That’s not what’s best at all — that’s actually probably the worst possible thing! Likewise, your budget shouldn’t be about maxing out the suggested categories. If you can afford a $1,200 apartment according to the pie chart, don’t go out looking for that if a $900 one will do the trick.

Secondly, don’t worry what other people are doing. I spend an obscene amount on food because I like to cook and bake, and enjoy going out to eat 3-4 times per week. This isn’t a bad thing, this is just something I value and am willing to put a bit more money towards.

Lastly, recognize that your budget will change over time. Once my debt is gone, I’m hoping to roll that whole pie slice into more savings and investments. Additionally, I committed to spending less than $4,000 on personal travel in 2013, which should cut down that Life category significantly. Furthermore, as my income increases I’m hoping that my lifestyle doesn’t inflate at the same pace, so that should change the balance as well.

How do you make a budget?

Filed Under: Budget

May 2012 Spending Recap

June 15, 2012 By Leave a Comment

So this is SUPER delayed but I thought I’d get it out of the way before I start doing trip updates! With the exception of travel spending, I feel like May was pretty average:

 

Bank Charges – mostly currency exchange fees from transferring USD from PayPal.

Bills – all the usual fun: rent, electricity, internet, laundry, netflix, and my cellphone (which has since been stolen). Now that the days are getting longer, my electricity bill is going way down so that makes me happy!

Clothing – I bought a shirt, a scarf and a pair of TOMS. I also got a pair of jeans, but I used gift cards I had for Anthropolgie to get them. This spending was kind of fun because I sold 2 dresses of my own which paid for the shirt & TOMS I bought — so basically only the scarf ($15) really cost me money out of my paycheque. It was a pretty good way to turnover my wardrobe for spring! Regular dry-cleaning and mending of my clothing is also part of this category though, so that’s what adds to the cost.

Debt – Looks small because I changed my payment from the 30th of the month to the 1st, so now what normally would have counted as May’s payment is actually going to show up in June’s spending report. All part of making it automatic.

Food – A ridiculous amount of this is alcohol. Every sunny day was spent on a patio (as it should be!)

Investment – normally this wouldn’t show up in here but I tried deleting it and it just made things worse. I bought some stocks in May with money from my savings, so it shows up as “spending” but really it’s cash that has been set aside for the past few months. Ignore!

Job Expenses – this hasn’t actually been spent yet, I just set it aside for later. I’ve hired an artist to design my blog banner, so this is his payment.

Liesure – iTunes, I think.

Personal Care – usual spa services plus I stocked up on new make-up from MAC. I had a lot of empty containers and then a friend of mine gave me even more, so through MAC’s recycle program I was able to get two free eyeshadows and a lipstick! I then bought replacement eyeliners and mascara because I basically ran out of everything all in one day. I also picked up a new shade of nail polish and some nail polish remover from Sephora.

Travel – I removed what was reimbursed by work so this represents only my personal spending in Vancouver and what I’ve pre-paid for my trip to Europe (which I am now on!)

Filed Under: Budget, Spend Tagged With:

Help a reader: how can you save up money and minimize debt during school?

May 8, 2012 By 27 Comments

Julianne emailed me about funding her college education in a way to minimize debt and graduate with some financial assets. I’ve pasted her email below and followed it with some of my advice, but I’d love for you guys to comment if you have anything to add! As you know, I’m not a financial advisor of any sort, so my response is expressly my own opinion. Other perspectives are welcome!

Hi Bridget,

I’m about to transfer into a college that is going to cost me a LOT. I need to apply for a $20,000 loan for the first year alone. I sincerely hope I don’t actually need that much, but the amount is based on what the college says I will need. I only have about $1,000 saved up currently. I’m feeling lost about where to start or how to start planning properly so I have a decent amount saved up by graduation and don’t have $40,000 worth of student debt. I’m already 23 (so I feel like I should be saving for retirement currently) and I recently opened a savings account with ING, but the APY available to me is 0.80%, not 2% like you advertise (I’m guessing this is because I’m in the US and not Canada?). I also have a checking/savings account and credit card with Wells Fargo and that’s it. Do you have any advice, starting tips/pointers, or maybe links to relevant posts? I’d appreciate it so so much.

Thank you so much,
Julianne

Hi Julianne,

ING in Canada is offering some better rates than they are to US customers, but even my savings account has recently dropped to 1.6% so who knows where it’s headed. In the years I’ve been banking with ING, it’s fluctuated from as high as 4% to as low as 1.2% so I wouldn’t worry as much about the rate — save to have savings, not to make money!

As for my advice to fund your education:

1) Keep your saved $1,000 as an emergency fund. Don’t use it towards tuition or living expenses or anything right now, because it’s possible you will need it later.

2) Work part-time. Some students are hesitant to work during the academic year because they’re afraid their grades will suffer, but truthfully you need to do something other than just study. Furthermore, working part-time doesn’t have to mean 25hrs/wk, it can be as little as 5hrs/wk. Not only will this give you a break from school and put extra money in your pocket, if you can find something related to your degree, it might be a worthy addition to your resume.

3) Save some of your student loans. You’re hoping you won’t need the full $20,000 and chances are you won’t. Budget out how much you will need for living expenses, add an extra $100 or $200 for a bit of a cushion and bank the rest. Online Savings Accounts are a great place to put your money because they usually have lower fees than traditional brick & mortar banks. The first thing I did when I received my first student loan payout was invest $1,000 into mutual funds. I continued to put $50 in every 2 weeks afterward — and am still doing so 3 years later! Mutual funds are a great starter investment because their less risky than individual stocks but offer more growth and return (mine even pay dividends at the end of the year) than a simple savings account.

4) Don’t worry too much about retirement. Yes, it’s true the earlier you start the more you’ll have, but if you don’t have the cash to spare right now it can just end up hurting you. I’m not sure all the tax laws in the USA, but in Canada it’s pointless to contribute to retirement funds when you have a very small income (like that of a student!) because you’re in a low tax bracket, but when you withdraw the money as a retiree you’ll be at a higher tax bracket. Never pay more taxes than you have to! If mentally you can’t get past not saving for retirement (and if that’s the case, I totally get it), start with something small that you won’t miss like $25/mo.

Readers, what advice do you have for Julianne? What advice do you wish you’d known about student loans and the cost of education when you were borrowing to pay for your education? How do you suggest she cut costs and save money so she doesn’t graduate broke?

 

Filed Under: Budget, Save
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