Friday, 25 January 2013

Budgetting, Food and Superfluous Spending

In two weeks time I'm once again going to be living the student life. I will have limited means of earning and, unlike my past studying experiences, I want to focus solely on the task in hand and work maybe one afternoon or evening a week for spending money, rather than fitting in classes around my one, two, THREE part time jobs. This time round, the course I've picked is completely new to me, is very hands-on and is only 6 months long. How I spend these 6 months may determine my future, to some extent.

I've been planning in advance as much as I can so the transition is smooth. Flights, taxi to airport, accomodation (with meals included!), a hotel for our first day, even the addresses of some bike shops and scoping out of mobile phone networks and banks has been done. I'm ready to go. The only problem is that I have limited resources. I have a loan that I took from my Aunt to pay for my Postgrad, which I really want to contribute towards during the come half-year. I also have about 3/4 of the rent I'll need for the trip sorted out.

That means, on top of getting a part time job to sort me out for the extras that crop up/treats and other niceties, I will need to budget budget budget. My boyfriend loves Excel spreadsheets, and I've come to love them too. I intend to make a spreadsheet which details my incomings/outgoings and average spending so I can calculate how much I need and how much I need to work to get it. Simple maths, a good graph and some numbers. The finer things in life :D

I came across a really good article on the finance blog My Open Wallet which is well worth a read.
This lady is my new hero. She details the pitfalls that many young people, of my demographic, on low to average incomes, fall into. For example, eating out and high grocery spending.

I'm going to re-quote an excerpt she took from the New York Times:

The Unaffordable Luxury of Food

Every generation of young New Yorker finds its own way to squander its meager earnings, and this one seems content to spend the money it makes on expensive, curated food with little sense that it is really squandering anything at all.
There is vast cultural support for this exercise, of course. We have long since moved past the vague idea that the personal is political to the notion that the epicurean is essential — for ethical cleanliness, environmental sensitivity and all the rest. Pleasure is mingled with obligation. “I don’t think about what anything costs,” Emily Gerard, a recent graduate of the University of Pennsylvania and a publishing assistant making the requisite salary, told me recently. “I’ll drop $60 once a week at the Greenmarket, which I would never do at a grocery store; I like supporting local farmers.”
We talk a lot about exquisite food but we rarely talk about a corollary to our fixation with it — the financial toll it takes on people who do not in any real sense have the income to afford it. Last week Yaffa Fredrick, who is 23 and a production assistant at MTV, broke down the finances of her passion for me. After taxes, she makes about $30,000 a year, a little over half of which goes to rent. In an especially frenetic dining week before the holidays, she went to Morimoto in the meatpacking district one night, Fig & Olive the next and Spice Market a few nights later, with a drinks evening sandwiched in between at Experimental Cocktail Club on the Lower East Side.
Typically, she told me, she spends about $250 a week eating in good restaurants, which amounts to about $13,000 annually, and this does not include the additional $50 to $100 a week she spends on cooking classes, wine tastings and cheese pairings. Because about half of her salary is given over to food, she works an additional 10 to 15 hours a week tutoring and baby-sitting to supplement it.
It surely comforts modern parents who have spent fortunes educating their children to know that these children are spending money on pork belly and not, for instance, cocaine. But what solace can it offer to realize that $300 a week put into an S. & P. 500 Index fund over the past five years would have provided an annual rate of return of 10.34 percent and grown to $100,354 today? Even saving $300 a week at a 6 percent rate of return would have yielded about $91,000, Mark X. Chemtob, a financial adviser at Ameriprise, said, adding that in both cases, the sums would qualify for a down payment on a starter apartment in New York.

The scary thing is how much I can empathise with the poor fools in this article. I've been there, I've had weeks of eating out several times, living a lifestyle I don't have the income for. I did lose my way for quite a few months after I moved over to London (and it's hard not to), going shopping every couple of days, coming back with more than I needed, letting things go to waste. When I got on top of my food spending, gave myself a shake, and basically just copped on a lot, my overall spending dropped considerably, and now I can foresee a future when I can live comfortable on a shoestring and achieve some solid goals.

It's all about planning planning planning. Don't let the pork belly or £12 cocktails get you down.

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