{opinion} How I Handle Personal Finance

Let's talk about a subject most fashion (and beauty) bloggers avoid on their blogs: money. What a lot of people don't realize about this particular niche of blogging is that it can be financially damaging. If we let the need for having all the latest clothes and accessories overpower us, it can be pretty dangerous for our wallets.  My vices are designer clothes and vacations - with a bit of rare Harry Potter memorabilia thrown in - which are not cheap. Add the fact that I'm a freelancer, with a variable income each month, and I could have major issues. How do I handle it? PERSONAL FINANCE!

If you google Personal Finance you'll see:

Personal finance is the application of the principles of finance to the monetary decisions of an individual or family unit. It addresses the ways in which individuals or families obtain, budget, save and spend monetary resources over time, taking into account various financial risks and future life events.

There are countless blogs dedicated to the subject and I am by no means an expert, but I'm going to share how I handle my money. If you want to go more in depth and learn other ways to manage your finances I suggest The Financial Diet. To make it even cooler, it's run by women! I also follow Broke Millennial and Frugal Rules among others.

I won't be sharing actual numbers, but I will tell you how I break down my budget and goals.  I don't do this alone, I get help from Mint, Learnvest and Capital One 360.

1. Break Up Your Categories

There are three main categories I consider when budgeting. Fixed Costs, Flex Spending and Goals. Most people try to use the 50/20/30 Guideline - 50% of your budget is Fixed Costs, 20% for Goals and 30% for Flex Spending.

Since my income varies from month to month I have my income set at the lower end of the scale in case I have a slow month. Sometimes I make a lot more, other months I'm right around my estimate. Luckily the times I'm over make up for the deficit when I'm (rarely) under.

Here's what my percentages look like. I'm focused more on goals and keeping spending down:

Fixed Costs

Fixed Costs are things that are the same every month, for me that's: rent, utilities, insurance and cell phone.  You may have more fixed costs.  For example you could have a car payment or a monthly transportation bill.

Flex Spending

Flex Spending is the fun part! Anything else you spend your money on goes here. You can break this up into any number of categories. Mine are: groceries, gas, restaurants, shopping, clothing and personal care (aka monthly massages.) You might want to add in makeup or coffee shops. I also take a bit of cash out each month for little extra fun spending. Sometimes I use it on a clothing item if I'm over-budget or maybe go out for a few more meals with friends.

Priority Goals

Priority Goals are for your future. Of my 4 goals, the most important is Retirement. I have an automatic withdrawal every month that goes into my IRA (You may have a 401K; as a freelancer I am in charge of this myself.) The biggest mistake here is NOT SAVING. Anything you save, even $50/month, helps tremendously over time thanks to interest!

I'm also building up an Emergency Fund. Generally you want to save up 6 months of expenses in case you lose your job, are in an accident or a major expense comes up. Thanks to my main computer breaking* I'll be taking money out when the new Macbook Pros are released and then start building it back up. But that's what it's for, unexpected big ticket problems.
*I obtained a "travel" 13" Macbook Pro for under $300 last year that I'm using in the interim, but 8GB of RAM, a small screen & graphic design don't mix!

Going back to vices, I'm saving for vacations. I have three accounts set up in Capital One 360. I LOVE that they let you set up to 25 different accounts because it helps organize finances even more. You can also schedule automatic transfers so you don't even have to think about it. I'm saving up for my dream safari and building a general vacation fund that I can use for random trips (ex: Florida and my New Years trip to London!) I already finished saving for the third, a trip to Australia and New Zealand, which will hopefully happen next Fall!

Another goal is Student Loan repayment. I paid off my loans very aggressively when I first graduated college and still lived with my parents. This isn't an option for a lot of people, so you'll want to make at least the minimum payments on your loans.

2. Learnvest

UPDATE: Learnvest no longer does budgeting, so now I use EveryDollar as my second tracking app.

I use Learnvest as a basic guideline. It helps me by separating spending into Fixed, Flex and Goals so I can get an overall view of my progress for the month. With both Learnvest and Mint you can connect all your accounts (banking, credit cards, loans) and they automatically pull in your spending. Then you can make sure categories are correct and get started with your budgets! When you first open up your spending in Learnvest you get the overview (below.) Then you can expand each section to get into more detail.

3. Mint

I use Mint to go into more minute details because they allow you to have a lot more categories than Learnvest. What I don't like about Mint is: if you spend in categories that aren't in your budget it doesn't accurately show you how over budget you are. With Learnvest anything extra you spend, even if you don't have a specific budget for it, goes into Flex Spending. That is why I use both sites, when used together you have full coverage.

4. Taxes

Most of you probably don't have to worry about this. But since I freelance, and have no employer taking taxes out of each paycheck. I'm completely responsible when it comes time to e-file a return. I pay them 4 times a year but, to prepare for that, I take 30% out of every paycheck and put it into my designated tax banking account. I always hope that I've paid extra but a couple years I had to pay additional money to Uncle Sam, yuck!! (That's because I don't have much to deduct, unlike most self employed people...oy!)

5. Credit Card Debt

Credit card debt is another thing that I am not currently struggling with but needs to be mentioned. If you have credit card debt it can feel like there's an elephant sitting on your chest. Don't let it defeat you. There are thousands of articles to help you figure out how to conquer your debt. You CAN do it and, once you've paid off that debt, make sure you stick to your budgets so it doesn't happen again.

6. Bumps in the Road

There will always be bumps in the road when you're budgeting. The important thing is to not let it discourage you. I have months where I'm WAY over budget, but I learn from it. Sometimes you just need that pair of shoes or rare Harry Potter book, right? Just don't beat yourself up over small hiccups. But DO be careful not the let it happen all the time.

And always remember, personal finance is about YOU. Decide what matters most to you and budget for those goals and needs.