Mariana

Our Favorite Methods for Tracking your Expenses

“Can I afford it?” is a question you may find yourself asking more often than not, especially if money is a constant stress in your life. In this post, we narrowed down three approaches that we have found to be effective in knowing how much money is coming in and how much money is going out each month. However, we encourage you to experiment with different methods (even the ones not listed here) until you find the one that works best for you.

Managing your money on a consistent basis is crucial for your financial well-being. It’s not just about budgeting, but rather understanding your lifestyle expenses, spending habits, and financial priorities. By gaining clarity on where your money is going, you can make informed decisions about:

- What you can and can’t afford.

- How much to allocate to paying down debt.

- How much to save and invest to reach your current and future wants.

Where to Begin

To gain clarity on your lifestyle expenses, start by examining your current spending habits. Avoid guessing and take a close look at your bank transactions and credit card statements. Don’t forget about Venmo or other payment app transactions. While going through your spending you may feel some discomfort and even shame. That’s normal but don’t get discouraged. Even though you can’t change the past, you do have control over the decision you make going forward. The goal at this point is to have an awareness of where your money is going. With that information you can begin to make small adjustments to get closer to living the life you want. Read on for our recommended systems to track spending.

Method #1: Year-End Credit Card and Bank Statement Review

This is the least time consuming method. Gather all your year-end credit card and bank statements (note: many credit card providers will create a year end summary of your annual spending). Then, total up all the expenses for the year to come up with an average monthly discretionary spending number. For example, if you spent a total of $54,800 on your credit card for the year, plus an additional $10,000 paid by Venmo and cash/check, your total spending for the year is $64,800 or $5,400 per month. Now, take a close look at the categories on the year-end summary to gain awareness of where your money is going. Are you surprised by any particular category? Are there opportunities for adjustments?

Method #2: Manual tracking and budgeting apps

While this method may require more effort, it can be highly effective, especially if you struggle with impulse spending or tend to overspend. You can start by using a simple cash flow spreadsheet to manually track your spending and plan for the months ahead. Alternatively, you can utilize budgeting tools like Mint, which automatically syncs your bank accounts and categorizes your transactions. Another option is known as the envelope method, where you assign every dollar a specific purpose. Apps like You Need a Budget (YNAB) replicate the envelope system to help you plan ahead. It allows you to allocate a certain amount to each envelope or category, such as bills, groceries, savings, and entertainment. YNAB is the system I use and can say from personal experience, there is a learning curve in the beginning when using the app. Once you get the hang of it, it really can keep you on track with your spending. Whether you are doing it manually or using an app, consistently looking at the numbers and planning ahead can aid in maintaining discipline and awareness of your spending limits.

Method #3: Pay Yourself First

If you already have a good understanding of how much you should be saving, consider the “pay yourself first” method. Automatically contribute a certain percentage of your income to savings before allocating the rest for spending. You can set up automatic transfers from your paycheck to separate accounts, such as checking and savings, to ensure consistent savings. Once you’re confident you’re saving “enough”, spend the rest as you wish.

Don’t Forget About Non-Monthly and One-Time Expenses

Remember to account for non-monthly and one-time expenses in your lifestyle costs. These may include vacations, car maintenance, kids’ summer camps or other inconsistent items. Plan ahead and set aside funds in a separate high-yield savings account to cover these expenses without disrupting your monthly budget.

Stick to Your Plan

Creating a budget is not a one-time task; it requires ongoing commitment and discipline. Schedule a money date with yourself- we recommend once a month or once a quarter- to check in on your spending regularly and make adjustments as needed.

It’s common to feel overwhelmed or guilty about past spending habits, but remember that no spending is inherently good or bad. It’s about understanding where your money goes and making adjustments moving forward. Experiment with different methods until you find what works best for you, whether it’s manually tracking your expenses, using budgeting apps, or some combination of the above methods. Be patient with yourself and stay consistent, as you work towards better managing your lifestyle expenses.

The FIRE movement: what is it, and is it achievable?

If you’re on the 9-5 grind at a point in your career, you’ve likely pondered retiring early and whether or not that was attainable. Perhaps you’ve stumbled upon the FIRE movement (financial independence, retire early) yourself, whether on social media or through a friend. It certainly sounds appealing to be financially independent at an early age. As a millennial, I watched my parents’ generation work hard for decades and by the time they reached their 60s, they had little energy left to enjoy retirement.

What is FIRE, and how did it begin?

The movement first began in 1992 when Vicky Robin and Joe Dominguez published the book “Your Money or Your Life.” The book was centered around achieving financial independence by changing your relationship with money in order to live a more meaningful life. Then, in the early 2000s, with the help of the internet, blogs like Mr. Money Mustache popularized the FIRE movement even more. When the 2008 recession hit, many people were looking for ways to change their lifestyles. The traditional way of doing things became less appealing in modern America; working for 40 years, saving some money along the way, and then having a nice nest egg to retire and begin living your “dream”.

Today, there are several influencers online who teach and discuss how to achieve FIRE by spending less and increasing your savings and income via podcasts, blogs, and social media. Some popular sites include Rich & Regular, Our Next Lives, and Yo Quiero Dinero, to name a few.

Is it achievable?

One of the main premises of the FIRE movement is to cut back your spending and be more intentional with purchases. Many proponents of FIRE attempt to save aggressively, sometimes as much as 50-70% of their income. In order to save at this rate, you have to be hyper-aware of the things that you spend on.

Try to hypothetically apply this practice in your life:

Take half of your yearly take-home pay, divide by 12, and that’s what you have to work with every month to pay all of your bills and living expenses.

Could you pull it off? Perhaps. Surely others have been successful in doing so. But I think we can all agree that it takes time, self-awareness, and a lot of dedication to be able to dramatically cut back your expenses. It’s a good exercise, though, to be more aware of how you spend your money. Others that have done this successfully have moved to less expensive cities and replaced going out to new restaurants with inexpensive activities like hiking and beach days.

We live in a consumer culture where we’re bombarded with messages to “buy” all day long. It’s easy to get wrapped up in mindless spending. The FIRE movement makes you question your current spending habits and whether you’re spending money on things that you actually value or just filling a void.

Finding a balance

This hyper-vigilance on where we spend our money is a bit extreme and may lead to depriving yourself now and waiting to enjoy your life later. In a way, it reminds me of dieting culture, and we all know dieting never truly works in the long term because it is simply not sustainable.

You also have to envision what retirement looks like for you. At Xena FP, we think of retirement as more of an evolution to a new chapter of your life rather than the destination. Retiring in your 30s or 40s may sound blissful now, but what are you going to do with the remainder of your life? Achieving financial independence at a young age gives you the luxury of making work optional. In return, you have the freedom to explore new careers or projects that you’ve had an interest in.

Financial independence gives you options; no longer needing to rely on how much you make, and I can get behind that.

The work that we do with our clients at Xena FP emphasizes intentionally living a life that you’re proud of today while saving for your future. Finding a balance between the two takes work through careful planning. If you’re interested in achieving financial independence and retiring early, we encourage you to have a conversation with your financial planner and start thinking about what kind of lifestyle you would want to maintain during retirement.

Estate Planning for Young Professionals

If you’re young, unmarried and haven’t accumulated much wealth, you may think having an estate plan isn’t relevant for you. While it’s true that part of estate planning is declaring how your assets will be distributed if you pass away; it may seem pointless if you’re just getting started on your journey to building wealth. We’re here to tell you that it doesn’t matter if you haven’t saved much yet and that an estate plan is not only applicable when you pass away but also while you’re alive. Think of it as a tool to eliminate stress and confusion in the future by communicating your wishes to your loved ones in the present. And perhaps more importantly, it can dictate what happens to you (and your assets) while you are still alive.

Given the recent disturbing events in America, with Roe v Wade being overturned and talk of marriage equality being next, we are reminded that it’s more important than ever to revisit your estate plan. Here at Xena Financial Planning, we are actively monitoring the Supreme Court/state decisions that could impact our clients. There are a number of steps that we are recommending for our LGBTQ+ clients, as well as couples who expect to undergo fertility treatments. Stay tuned for a blog post devoted to that topic!

In the meantime, here are some documents and other action items to consider at this stage of your life:

Check your beneficiaries

Good news: this is something you can do today and it only takes about five minutes. A beneficiary is an individual or trust that receives the assets upon your death. Log into all your retirement accounts (IRAs, 401(k)s, etc.) and life insurance policies (even if it’s through work!) and make sure the beneficiaries are current. Adding beneficiaries ensures your money will go to those you intend, without having to go through probate, which is both costly and slow.

Advance Health Care Directives

When you turn 18, your parent(s)/guardian(s) can no longer make medical decisions on your behalf. If you were to become critically ill and unable to make major health decisions for yourself, then no one would be able to legally advocate for you. This is where a living will (a type of advance health care directive) would come into play. In this document, you state which medical procedures you would or wouldn’t want, and under which conditions these apply. It might be helpful to discuss any current health conditions with your doctor and how they might influence your health in the future.

Additionally, you would elect a health care agent who would have the ability to make health care decisions on your behalf. This is often a family member, partner or trusted friend who can ensure your wishes are carried out.

Considerations when appointing an agent:

Can you trust them to carry out your wishes?
Are they easy to get in contact with?
Do they live nearby?

Additional considerations:

Creating an advance health care directive does not require an attorney.
You can create one by going to Five Wishes or eForms.
It is always a good idea to add more than one person listed in the event your primary person is unavailable.

Durable Financial Power of Attorney

With a durable financial power of attorney, you appoint a trusted individual, called an agent, to have legal authority over your finances. In this document, you spell out what your agent is and isn’t allowed to do and when they have the authority to act on your behalf. For instance, if you were to become disabled you can grant your agent access to your bank accounts to continue paying the bills. It’s important to make sure your power of attorney is durable to ensure that the document remains in affect if, and when, you become incapacitated.

Considerations when appointing an agent:

Are they organized?
Do you trust them to manage your financial affairs?
Avoid choosing someone who doesn’t have a good record of handling financial matters.

Once the document is fully executed (signed and notarized), provide a copy to the appointed person. If your situation is fairly simple, you can create a durable power of attorney on Legal Zoom or contact an estate attorney.

Last will and testament

A will states how your assets will be distributed after you pass away. Even if you don’t have a lot of assets chances are you may own a car, an extensive sneaker collection, or have kids/pets. If you do not have a will, the state decides what happens to your estate including your dependents. In the will you appoint an executor who will be responsible for properly executing your wishes and distributing assets accordingly. You can also establish guardianship and other wishes regarding children and pets.

Considerations when appointing an executor:

Do I trust this person to make sound decisions?
Are they organized, emotionally stable, patient and trustworthy?
Will this person deal with my beneficiaries fairly and competently?

Considerations when appointing a guardian:

Is this person able to take on the responsibility of raising children (or pets)?
Do I trust this person to make sound decisions with regards to parenting?

If your estate is complex (dependents, assets in other jurisdictions, multiple properties, etc) you should contact an estate attorney. If your situation is simple, you can create a will using Legal Zoom.

Additional considerations

We strongly suggest that you use a password manager to store account logins.
Keep an inventory of your digital assets, investment accounts, where legal documents are stored and who has access to what.
Revisit your estate plan at least every 10 years or when significant life events occur.
Write out your funeral and burial wishes or discuss your preferences with your loved ones.

Don’t wait until you’re older or have accumulated assets to create an estate plan. By planning ahead, you eliminate stress and confusion for your loved ones that will occur if you were unable to make medical and financial decisions for yourself. It’s much better to have control over what happens to you, your belongings and your dependents. So why wait and risk the chance of giving that up?

Tech companies with unique employee benefits

Given the great resignation, people increasingly want to work at places that not only offer flexibility but also for a company whose values align with their own. Tech companies are facing a shortage of qualified workers, and have upped the ante with a host of new benefits to entice top talent.

Tech companies are well known for their nontraditional perks of employment, like ping pong tables, free food, and modern offices. They’re also known for generous salaries and equity compensation, but what are some unique benefits beyond that?

Here are some tech companies to work at if you value…

Travel

If traveling and creating experiences with family/friends is a significant priority for you, then finding companies that offer travel perks may be best for you.

Google gives its employees the option to take a sabbatical, work remotely, and covers travel insurance for personal trips.
Airbnb offers a travel stipend of $2,000 per year along with a generous vacation policy.
REI offers their employees 30% off their trip if they book with REI Adventures.
MOZ encourages its employees to go on vacation by covering vacation costs of up to $3,000 annually.

Starting a family

If you’re planning on starting a family, taking time off to recover and bond with your new child is essential. While the government only requires companies with 50 or more employees to offer 12 weeks of unpaid family leave, tech companies are known to go above and beyond those limits.

Netflix offers the longest paid family leave (52 weeks) out of all the tech companies. You’ll have to be an employee for 12 months in order to take advantage of this.
Spotify and Adobe offer 26 weeks of paid parental leave.
Google, Amazon, and Microsoft each offer 20 weeks of paid parental leave.
Twitter offers breast milk shipping. If you’re traveling for work and need to ship milk back home, Twitter’s got you!
Both Google and Facebook offer an on-site clinic & mother’s room, and free on-site laundry.
Facebook gives its employees a $4,000 baby bonus for each new child and a $3,000 reimbursement for child care.
Google will reimburse you up to $40,000 of surrogacy fees; one of the highest amounts compared to other companies.

Want to see what other tech companies are offering? Check out this list of parental leave in tech. Other common benefits include fertility support, such as egg freezing, adoption assistance, and surrogacy fee reimbursement.

Financial wellness

Carrying student loan debt can feel like a huge financial burden and may be stopping you from achieving your other goals. Luckily, it’s becoming more common for employers to offer student loan assistance to retain talent.

Google will help you with student loans by matching 100% of contributions up to $2,500 per year. The amount will be applied to the principal balance, making an even more significant dent in the loans.
Doma offers an even higher contribution towards your student loans of up to $5,250 per year.
Slack offers legal services at no cost. This benefit is huge if you have yet to complete your estate planning documents or need to make updates.
Duolingo offers a mortgage benefit of up to $10,000 for your first home in Pittsburgh.
Google offers a one-on-one financial coaching program.
T-Mobile offers a coaching program called LiveMagenta. They also provide gender-affirming services, including surgery and autism coverage, including Applied Behavioral Analysis services (ABA).

Giving back

If giving back either with your money, time, or both is important to you, here are some benefits to factor into your charitable planning strategy.

Google and Apple employees receive a 100% match of charitable contributions up to $10,000.
Microsoft and Linkedin match charitable contributions up to $15,000.
Netflix will double your charitable contributions up to $20,000!
Salesforce employees are eligible to take up to 7 days of paid volunteer time off per year. They also have the ability to win a $10,000 grant to give to the nonprofit organization of their choice (if they rank as one of the top 100 volunteers).
Microsoft and Apple employees receive $25 per hour to volunteer.

Other unique benefits

Google, Linkedin, and Microsoft offer on-site car washing and detailing. You can go into work with a dirty car and leave looking fly.
If you just got a new pet and want to take some time off, Reddit offers one week of paid leave to spend time with your new pet.
Need assistance completing all your errands? Slack offers concierge and errand running while you work.

Tech companies will offer extensive benefits and perks to retain top talent and stay competitive. If you’re evaluating job offers, make sure to look at the full benefits package. You can use this information to compare competing offers during your negotiations.

Source: Levels.fyi

Organizing your financial life: Beginner’s guide

Last month on our IG Live, Danika and I talked about negotiating job offers, why you should do it, and how to go about it. In case you missed it, you can view it here.

Now that you’ve landed your dream job, advocated for yourself, and got the salary you deserved, what now? First off, way to go. Great job!

Take some time to celebrate your success in a meaningful way and set aside some time to organize your finances. Yup, you read that right, celebrate and finance in the same sentence.

Getting your financial house in order is an act of self-love. What better way to celebrate than setting yourself up for long-term success? It’s not going to happen overnight. So give yourself some grace, and if you’re reading this, you’ve already made that initial step of seeking guidance. Below, is a 6 step guide to begin organizing your financial life.

How to get started:

Step #1: Know your financial flow

“Budgeting” gets a bad rap, but we think it’s vital whether you’re just scraping by or earning six figures. If you don’t know where your money is going, how can you make the most informed decision with everything else?

I’m not going to sugarcoat it. Budgeting is a huge challenge for most people. Danika writes about this phenomenon and how to handle cash flow here. You may also find it surprisingly empowering to know exactly where your money is going.

Be kind to yourself. Don’t judge yourself for the financial decisions you may or may not have made. Instead, ask yourself if your past holds you back from building healthy financial habits moving forward? If someone ever does shame you about how you spend your money, especially if it’s a financial professional, it’s time to reassess that relationship.

Action steps:

Have a recurring money date (alone or with your partner if you have one). Set an hour aside. Pour the tea. Pick out the playlist. Spend time looking over your spending history from the last few months.

Ask yourself these questions:

Is there anything you spent money on but don’t enjoy?
Is there anything that looks off (i.e. an amount that is too high/low or doesn’t make sense)?
What is one small thing that you can do today to improve my spending picture?

Step #2: Take advantage of your employee benefits

If you’ve just started working at a new company, you’ll be eligible to choose your benefits. However, keep in mind that after the initial 30 days or so, you can’t make any changes until the next enrollment period; pick wisely.

Action steps:

Obtain your employee benefits booklet and all necessary information to make an informed decision. Don’t hesitate to reach out to your employer for clarification or seek out professional advice.

Enroll in the 401(k) and contribute at least as much as the company matches (free money!) One of the fastest ways to build wealth is by taking full advantage of your company’s match.
1. If you have a 401(k) from a previous employer, consider consolidating it into the current 401(k). See Step #6.
Evaluate the health insurance options. If the plan offers an HSA, consider choosing a High Deductible Health plan. Why? Read here.
Opt into life insurance, short-term disability (STD), and, most importantly, long-term disability (LTD).
Check to see what other perks you’re eligible for. Some companies offer access to legal help and even financial planning! Other unique perks we’ve seen include reimbursements for fertility treatment, health club costs, and travel stipends, to name a few.

Step #3: Build a rainy day fund

Emergency savings is a must-have and is non-negotiable. It can make a big difference in handling life’s unexpected moments without moving further away from your financial goals.

The rule of thumb is to set aside between 3-6 months worth of living expenses. However, if you’re single, we recommend aiming for the 6-month mark as you don’t have the buffer of a partner’s income.

You don’t have to fund an emergency reserve all at once. Start putting aside a small amount each month until you hit the target. If you have high-interest debt, you should still fund your emergency savings. The last thing you want to happen is an unexpected expense where you don’t have the cash on hand and have to put it on your credit card, resulting in more debt payments.

Action steps:

Open a high yield savings account earmarked for emergency savings. Then, start putting aside as much as you’re able to until you hit your target.
Automate savings. Consider setting up an automatic transfer to the emergency reserve each month.

Step #4: Break the debt cycle

If you have significant credit card debt or other consumer debt, you’ll want to devise a plan for paying it down. There are multiple ways to go about paying off credit card debt. Some key ways include:

Stop using your credit card(s). Shred it if it’s too tempting seeing it in your wallet. Use debit cards for purchases moving forward until you get a handle on your debt.
Come face to face with your debt by making a list of the account(s) that carry a balance. Note the balance, minimum payment, and interest rate.
Look at your budget and determine how much more money you can allocate towards the monthly payments. Ideally, you will pay off anything with high interest as aggressively as possible.

Action steps:

If you carry a credit card balance, stop using your card.
Make a plan to pay off your high interest debt. If you don’t pay more than the minimum, your debt will only increase.

Step #5: Set your money intentions

You can afford anything but not everything. Get clear on what you want and why you want it. It’s okay if you don’t know precisely what you want yet. Be flexible and understand that goals change all the time. Values, on the other hand, tend to change less frequently. Start by deciding what truly is essential to you.

Action steps:

Write down what your goals are. Be specific and determine whether they are short-term (less than 5 years) or long-term (5 years+) goals. Ask yourself these questions:

What’s important to you?
What do you value?
Where do you want to be in 5-10 years?

Make a plan to invest towards your goals. Whether it’s buying a house, starting a side hustle, or simply growing your net worth, start saving as soon as your emergency reserve is fully funded.

Step #6: Keep track of your account(s)

Making sure you know where all your accounts are might be an obvious point. However, life gets busy, and before you know it, thirty years have passed, and you can’t recall where that 401(k) from your first job out of college is, or that you even had one to begin with. If you get into the habit of organizing your finances now, your future self will thank you.

One easy step you can complete today is to start a finance folder (physically or electronically). Label it however you want; Finances, My Rich Life, Financial Stuff. I labeled mine S.H.I.T.: Salary, Home, Investments, Taxes. The point is to have fun with it. Finances don’t have to be boring unless you want them to be. Store any financially related document in there. Think tax returns, insurance policies, estate documents, budgeting worksheets, etc.

Action steps:

Set up a secured online folder to store all your financial information.
Know where all your accounts are and make sure you have access to them. I strongly suggest using a password manager like 1Password or LastPass to keep track of login and passwords.
Consolidate 401(k)s from former jobs into your current 401(k) or a rollover IRA.

Getting your finances in order is an excellent way to set yourself up for future success.