I have a confession to make. I’ve been trying to write this post for a long time. It’s been rattling around in my head for days. I kept thinking about how silly it would sound for a person who talks about finance all the time to contradict what the gurus of personal finance tell you to do. Heck, it’s even in my tagline; budget, invest, achieve success. I can probably only claim two of those directives. I invest, and I work to achieve success, but I have to confess, I don’t have a budget. ::GASP::
Where Brooklyn At?! Where Brooklyn At?!
Before you click off the page, let me explain myself. I never grew up with a strict budget. I barely got an allowance and as soon as I had some money I went directly to the corner store and spent it all. My parents fell in love in the city of New York. He was from Harlem, she was from Queens. At the time, my mother was a senior in high school and working on getting out of school. By graduating high school without kids, she accomplished what seemed impossible for girls her age. My father had recently given his life to the Lord and he was working at the Church of God in Christ where they met. He had graduated high school already and was working on trade school to become HVAC certified so he could gain employment working on centralized air units and electricity.
When my parents married and had me in Brooklyn, they were already one child deep. They started having children directly after the wedding. My older sister is just two years older than me and five years after I was born, my little brother would arrive. My mom and dad lived as most new parents do, working hard to give their children the best of what they didn’t have. I remember going to Coney Island, Hershey Park, and the Botanical Gardens. At least, I remember from the pictures we took. What we did was not important; I remember growing up in a loving household. My mom raised us as a stay at home mother while my dad worked. It was a very traditional household in the “Leave it to Beaver” definition. We were not rich, and, based on what I know now, we were probably closer to lower middle class in terms of income. But that never mattered to me; I knew my parents loved me and did what they could to make my childhood great, and it was.
My parents gave me the best head start they could. After a few years of living on the mean streets of Brooklyn – and by mean streets I mean freezing weather – my dad got a job offer in Georgia and we packed our bags to move to the South. My mom taught me to work hard at my studies and my dad would help me with anything I did not understand in my math classes. Each afternoon my mom would meet us as we got off the bus and sometimes she would have Rice Crispy treats waiting for us! As I got older, I started to want money.
You Got ‘Designer Shoes’ Money?
The one thing I will never forget is when I first asked my mom for something extravagant. For this example, let’s use a trip to Disneyworld.
Me: Ma, can we go to Disneyworld?
Mom: You got ‘go to Disneyworld’ money?
And that was the end of the conversation. I learned that in order to have something you had to have money. Then I learned that I didn’t have the money for those things I wanted. But later I realized that it was my parents that were unwilling to spend money on those things I asked for. But I have to add that I asked for some pretty extravagant things. (For the record, we did finally go to Disneyworld when I was about 14.)
Then I found out that my school friends were getting an allowance. Finally! A way for me to make some ‘go to Disneyworld’ money. I asked my mom if I could have an allowance and she told me she would talk to my father. A few days later, my sister and I were taking on extra chores and making 5 dollars a week. Sweet! My dad taught me how to tithe the first 10% of my income and I was allowed to spend the remainder. And each week I went to the corner store and bought candy and icees.
WAIT A MINUTE!
Right now you might be thinking that my first experience with an allowance would have been a perfect time to teach me how to budget every penny. And you might very well be correct, but this is my story, not yours. Just sit back and relax.
So the whole allowance thing lasted a few weeks before I noticed that my parents started paying me in IOUs and just getting me what I asked for based on how much I should have been paid in allowance. Eventually the IOUs even stopped and I had nothing to show. No savings, no cool gadgets. Just old candy wrappers and icee sticks.
Stirrings of an Entrepreneur
A few months later my sister and I started to complain, cautiously, about how we should get an allowance blah blah blah. So my dad decided to teach us how to make money instead. This is when the entrepreneur bug bit me. He drove us to Sam’s Club which is a large warehouse with bulk items. Toilet paper for a year, canned food for a month and almost any item you could think of, even candy. He gave us our last allowance and told us if we wanted more, we would have to make it. So with about 20 dollars each, my sister and I bought our first box of candy. As soon as we got home, we opened the candy and started eating a piece. After all, we purchased it with our own money. But my dad quickly stopped us. “Figure out how much you can make from this box. And don’t eat your profits. You have to be able to buy another box to make more money.”
Hmm. Now we actually had to do some math. My sister and I were about 8 and 10 at the time and had already learned the basics of money math. We realized that if we ate two pieces and sold the rest, we would have enough to buy another box of candy and we would have 5 dollars left over! We were amazed. But now we had to sell our candy. My sister and I had plenty of friends in our apartment complex and we mostly sold to them. Our candy prices were cheaper than the corner store so it was an easy sell. We sold our first box in a few days and we were ready to go back to Sam’s Club to buy more candy. But my parents only visited Sam’s Club twice a month. My sister and I realized that we would need to stock up to have enough candy to last through two weeks. It took us a month or two but eventually we had enough candy stocked to sell through two weeks and we had money left over. Each week, I would go to church with my family and pay my tithes. But I didn’t save a dime. My expenses ate the remainder of my profit. And the more money I made, the more I spent.
About a year later, my mom and dad saved enough to put a down payment on a house in a small but growing county in Georgia. My mom took a waitressing job while we were in school and saved all of her tips towards the down payment. My dad took a night job delivering papers to earn extra money. The house was built from the ground up and there were still plenty of bugs that were reluctant to move. When we visited to see the progress, we saw a bat sleeping in the arch ceiling. And when we finally moved in, we found scorpions trying to make their way into the basement. My sister and I still had our stock pile of candy ready to sell. One morning we reached up into the closet to grab the bag and found ants! Our entire inventory was ruined! My mom ignored our pleas to lend us money so we could buy more candy. She didn’t want any more bugs in her new house. Our business had ended.
Minimum Wage Raise, Still No Savings
By the time our candy business ended, I was almost 13. I was already making money babysitting for neighbors and I was just biding my time until I could work a real job. I started out at McDonald’s at the age of 15. I worked the morning shift on the weekends and some weekday nights. I started to buy designer clothing. What a waste! I once spent $45 on a shirt. But I was still making it financially. I didn’t have any bills and I was able to spend money on fun activities with my friends. Because of my hard work, I was able to land a job making 7 dollars an hour. Minimum wage was $5.15 at the time. I had to save money for my senior year expenses; pictures, cap and gown, yearbook, etc. I was able to save for these short term expenses but I still didn’t have any long term savings. I made it to college and started working again. I still didn’t know how to manage my money.
Present Day: Budget, Loosely Defined
Fast forward to today and I still don’t have a budget! But many things have changed since my childhood.
- I have learned to pay myself first, after tithing of course.
After reading the book The Richest Man in Babylon, I learned that I should pay myself first. I should always put aside at least 10% of my income for long term savings. Based on my beliefs I put aside 10% as a tithe first and pay myself second.
- I have learned to have emergency money.
Ten percent saved is really the bare minimum and you should have some emergency money so you don’t have to dip into your savings. I use the 1% rule. My emergency money should equal 1% of my annual income.
- I have learned to have fun money.
Budgeting is boring if you don’t get to spend your money on something.
This is what happens twice a month when I receive my direct deposit.
- 8% has already been automatically deducted from the pre-tax amount and invested in mutual funds
- 10% is taken out from the pre-tax amount for tithes
- 2% goes towards replenishing the emergency money if needed, after that it goes to my Betterment ETF account.
- The remainder goes to monthly bills and whatever the heck I want to do until the next paycheck. I don’t use a credit card for expenses; I use cash/debit instead.
So, I guess if you really look at it, I do have a budget. It may be in the loosest definition of a budget, but it’s there.
Am I a fraud? I don’t have every penny planned out. Some budgets restrict entertainment spending versus necessary spending. I find that to be too restrictive for me. I still use a spreadsheet to track exact amounts that were spent, and Mint to keep up with expenses. Should I be thrown from the personal finance blogger camp?
What about you? Do you really have a budget? Did your parents teach you how to handle money? What other money lessons from your childhood have you carried forward to this day?
Photo courtesy Max Shirley Photography
I am a pool shark
I will always be a nerd
Share your confessions in the comments… if you dare!