My first ever budget happened around the age of 21, and I began a regular discipline of budgeting thereafter. Since my parents and grandparents (and scholarships) paid for my college tuition, I only had to cover basic living expenses during college, which as a college student (who also happened to be an RA) were dirt cheap.
When I graduated from college, I moved in with my parents for a few months while I searched for full time employment. Actually, I was employed full time, but it was as a night shift "manager" in a warehouse where the other night shift employee (yes, singular) sometimes showed up. The company was so backed up, that they would take me for as many hours as I was willing to work provided that I showed up no earlier than 2PM. I usually left a little after midnight.
Unfortunately, after the afternoon shift left (usually the overtime folks were out by 5PM), the lights went on motion sensor. If I stood in one place too long (which happened a lot because I was processing returns), I had to quickly run from one end of the warehouse to the other to get the lights to flip back on.
Anyhow, during those months at home, my expenses were just above zero because my mom was so happy to have me doing some cooking and cleaning around the house (she was recovering from cancer and needed rest). During this time, my budget looked like this:
Money on Hand (as of graduation): $7000
Insurance (1 year): $612
Gas (per month): $100
Interview clothes: $1000
Junk food from convenience station: $.79 per work day (Diet Coke).
For three months I didn't deviate from this budget (other than to pick up a few items from the grocery store at my parent's request) despite the fact that I was now earning real money (or at least real to me, I was probably on track to earn close to $40K if prorated over the year).
Hey! How did I get all this money?
After a few months of living at home, I found a full time, day job that didn't require me to run across warehouse floors to keep the lights on. I gave my parent's my one month notice (provided that I found some roommates), and I quickly found a place to live within biking distance of my new job. When I moved out, I was shocked by how much money I had in my bank account. Despite the recent car purchase, I had well over five figures in my bank account.
I decided to make up another budget, but this time I added the advanced element of cash flow. My budget looked like this:
Net Income per month: $3200
Bus Pass $25
Bike Stuff $50
My after tax budget came to a around $1000 per month, and my net income was about three times that amount. When I realized just how much money I had coming in, and how little I needed, I was pretty stoked! The things that were off limits to me on my limited budget were suddenly "on limits." I took my little sister out to eat to explain the good news to her (of course I picked up the tab).
When she asked what I was going to do with all the money, I told her that I could do whatever wanted! And I did!
I started eating out a bit more, and I started planning a trip to Spain (which I never took), and I started a lot of new hobbies: camping, snowboarding, cross country skiing, broomball, ultimate frisbee, volleyball and more.
I couldn't see it then (because I still had money in the bank, and I still was getting my employer's match for my 401k, and I was still able to pay my bills without worrying about checks bouncing), but I was flailing in a sea of money. It's not that I was budgeting incorrectly. My budget was just fine, but my budget was completely disconnected from my goals.
I had a lot of money and more coming in every two weeks, and I had no idea how to use it. I knew it probably wasn't wise to spend $500 a month on leisure activities, but I also didn't understand that I could make my money work for me. After all, the money that I did have was mostly piling up in a checking account.
Why wasn't my budget working?
A budget is a tool that tells your money where to go. It is easily the most effective tool that I can think of for planning and executing expenditures if one condition applies. The condition is this: You must have a goal for your money.
When I first started budgeting, my goal was simple. Survive, and get through an unpaid internship. The next year, my goals were equally simple. Pay for school and buy a new (to me) car.
By the time I got my first job, my goals remained simple. Survive, pay bills, and enjoy life. The problem was that the requisite amount for meeting these goals was so much lower than my actual income that I felt like I should blow my money on things that wouldn't make me happy, which I did to a certain extent. I didn't realize that I could get my money working for me to unlock more opportunities than the typical American life.
Even though it seems like I'm looking with derision at my 22-25 year old self, I'm totally not. My early twenties were characterized by a sense of not knowing exactly who I was or what I was supposed to be doing with my life, but that characterizes most people in their early twenties. The fact that I had no financial goals didn't indicate a problem with my intelligence or a lack of moral fiber; it indicated that I was a normal human being who had a lot to learn about life and finances.
At least I got a few things right
Although financial goals were obviously not my forte, I did manage to make it through the next three years without becoming a complete financial train wreck. Here are a few things that I did right:
I committed to giving generously to causes that I believed in. I can't imagine trying to learn this discipline now; it's much easier to learn when you're young (not that I'm old, but let's be honest, I'm not on YikYak).
I understood that I should live on less than I earned. Not that it was overly tempting for me to live beyond my means, but at least I learned this early on. I don't think I would have been so lucky if I had more of a taste for restaurants, if I loved travel more, or if I lived in a coastal city.
I stockpiled a lot of cash. Not that this is a great "investment" strategy, but over the course of the next three years I would (with my husband) pay for a wedding, get out of underwater from a condo to lower our rate by 3 points, buy a small (and cheap) house with cash, and have a baby. It turns out that I had a lot of mid-term financial goals.
Would I give up this learning experience for a few more dollars today?
I absolutely would not give up this learning experience for any reasonable sum of money. The transition to "full adulthood" was padded plenty by my loving parents who not only enabled me to graduate debt free from college, to live in their home while I searched for a career, but also let me flail around a little bit while I tried to find my own footing.
The financial flailing was a gift for me; I had to learn to think like a grown up instead of like a child, and that means looking beyond the next few months. I think that without my experiences, I never would have learned that.
And unlike so many in my generation, my flailing took place with too much money instead of too little. I hope to also give this gift to my own children whether their earnings are too much like mine, or too little (like so many of my generation).
I'm a wife, a mom, an employee, and a personal finance nerd who is devoted to spreadsheeting my way through life.