Pay Dirt is Slate’s money advice column. If you have a question, you can send it to Athena and Elizabeth here. The column offers anonymous advice on financial matters. In the latest letter, a professional in their late 30s seeks guidance on budgeting.
The person explains that they have recently received a significant raise and now have the opportunity to save money. However, they are struggling to create a budget. They find it difficult to determine the number of expenses they should include and how far ahead they should plan. They mention various expenses with different frequencies, such as haircuts, plane tickets, and gas.
The person wonders if they should track every small expense, like a $2 vending machine snack, or account for items that need replacing but have no set schedule. They feel overwhelmed by the complexities of budgeting and worry that any budget they create will either exclude important expenses or become too intricate to follow.
In response, the advice columnist assures the person that budgeting doesn’t have to be overwhelming. They explain that expenses can be divided into two categories: fixed and variable. Fixed expenses, like rent and bills, remain consistent month to month. Variable expenses, on the other hand, fluctuate and change.
The columnist recommends using the 50/30/20 budgeting method. With this method, 50% of income goes toward fixed expenses, 30% toward variable expenses, and the remaining 20% toward savings and debt repayment. This approach provides flexibility while still prioritizing savings and debt reduction.
To address the person’s concerns about random expenses, the columnist suggests creating sinking funds. Sinking funds are savings specifically set aside for future expenses, such as travel or clothing. This way, there will be consistent funds available for unexpected events without disrupting the overall budget.
In conclusion, the columnist encourages the person to use a budgeting method that they can reliably follow and adjust as needed. They wish the person good luck in their budgeting journey.
