By Shelby Chamber
A major part of surviving in a city like Los Angeles is keeping one’s finances at bay. There is a price to pay for living in a bustling cultural center where you have only to look out the window to see the beach, the mountains, two Starbucks and an AT&T store. But with the right combination of of budgeting (cringe) and willpower, you can subsist and partake in all that the second most expensive US city has to offer.
Put The Smack Down
The first step is to set rules for your money, and to stick with them. The best way to do this is to get everything down on paper. Save receipts for food, utilities and splurges to actually see what you spend each month. Finance experts recommend that you either use a simple spreadsheet or personal finance software to track all of your spending and income in order to actually see how much you waste on caramel macchiatos.
Basic Necessities
Next, you have to realistically determine what you absolutely must spend on electricity, gas, food and your rent or house payment. There is a pretty self-explanatory “one-third” rule for how much of your net income should go toward rent, which will obviously be trickier to stick with in LA. If you can spend less than one-third, then great; more money for crepes and sushi. Spending on a house is obviously different because it is an investment, so you can spend more–and there are additional expenses to factor in, like homeowners insurance and property taxes.
Savings
Then there’s the matter of savings. Ten to 15% of your income should go straight to savings, and you can set up automatic transfers through online banking to force you to do the right thing. While interest rates aren’t great right now, by putting your savings into a CD for a specified term; you can make more interest than in a regular savings account.
After paying down debt, there are also retirement savings to consider. For this, most turn to Individual Retirement Accounts, also known as IRAs or Roth IRAs. Based on your income, you can sock away a regular amount that will bring you over the required minimum, sometimes as low as $100 or $200 a month, but less than the maximum contributions allowed based on your age. It might be morbid to start saving for retirement before your first wrinkle, but I wouldn’t count on Social Security holding out after the Baby Boomers have had their way with it.
Just For Laughs
I’d talk about stocks, but what could I say at this point in time, really? Er…buy low and sell high.
OMG, I Have to Have That!
The last item to budget for: whatever you don’t need but can’t live without. Look at what you’ve spent on clothes, movies, birthdays, going out, then realistically set an amount you will allow yourself to splurge with, and do not stray from this amount. This may sound like advice for a youngster with their first credit card, but I’d venture that even some seasoned money makers don’t regularly come face to face with their fringe expenditures.
DIY=H-E-L-P
Finally, be wary of “money drains.” You’ve heard it before, but it bears repeating. According to Yahoo Finance, most Americans spend close to $400 a year on coffee and bottled water alone, and almost $2,500 on lunch–all things you can get at home for substantially less. The twenty minutes it will take you to prepare will be completely worth it in the long run.
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