I’m writing this up by request, though I don’t think there’s anything particularly new about the way I do money; on the other hand, there are probably a lot of you reading this who haven’t yet caught up on the (subtracts from 2012) eight years of How Nicole Does Money internet content out there.
Not that I would recommend looking it up, either—even though the Tumblr on which I used to share weekly financial updates was kind of essential in launching my freelance career. (Or at least the personal finance side of it.)
But how do I deal with money these days, especially now that I’m earning well over what I need to cover the basic costs of living?
For starters, I’m still trying to keep myself at an average of $2,500 in personal expenses every month, or $30,000 for the year. (Those would be post-tax dollars, which essentially means I need to earn $1.30 in freelancing income for every $1.00 I spend on, like, rent.)
I’ve been capping my personal expenses at $2,500/month ever since I started using YNAB, which did in fact completely change the way I viewed my finances. It didn’t change the way I did money, per se; it just changed the time horizon through which I viewed my income and expenses. With YNAB, I could see exactly how far my net worth might take me if I never earned another dollar in my life—which made me want to see how much of my future I could get my savings and investments to cover.
And of course I was always going to aim myself towards FIRE at some point; I’d been interested in the idea ever since I graduated from college and found a copy of Your Money or Your Life at the library. I know I’ve told this story before, but that was the book that made me start tracking every penny I earned, spent, and saved—a habit that has stuck for (subtracts from 2004) sixteen years.
I didn’t realize when I began tracking my money that I would not be able to turn my telemarketer earnings into a stable income that derived primarily from U.S. Treasury Bonds; by the time I figured out how much interest rates had changed since YMOYL was initially published, I decided I’d continue to track my income and expenses just in case. This took me through the year I was on food stamps, the year I saved my first $10K, the year I got myself into $14K of credit card debt, the year I became debt-free, and the year I earned six figures as a freelance writer.
The ledger moved from a physical notebook to a customized spreadsheet to Mint, then to a different spreadsheet, then back to Mint, and now to YNAB—but it still exists, and I take a look at it every morning.
So… basically I track my income and expenses, and I try to keep my personal expenses at $2,500/month.
I also maintain a $10,000 emergency fund in cash, tucked into a high-interest savings account—which, these days, is 1.70% APY.
Then I invest any money that doesn’t go towards personal expenses or my freelance business (or taxes, a lot of it goes towards taxes).
It sounds so simple when you put it that way—and I have been putting it at some variation of “that way” for a while.
Billfold readers might remember, for example, that I committed to living on 50% of my income until I paid back my parents the $14K they loaned me to cover my credit card debt (this was, I always feel like I have to mention, an unsolicited loan—though it’s also a reminder of how family and privilege and everything else fits into financial decision-making). The idea that the majority of my money won’t be spent on my day-to-day life was a mindset I signed up for during my telemarketing days, when I told myself that if I got $500 together I could rent a black-box theater for one night and put on a play that I would cast and rehearse in a public park (yes, I was very young and very foolish and had no idea what was involved in artistic production of any kind). Even the $14K of credit card debt wasn’t spent on, like, me; I got into financial trouble trying to make it as an independent musician, and I didn’t even have the good sense to put that debt on a business credit card where the interest would have been tax-deductible.
Now that we’ve covered that aspect, I also have to remind you all that I got darned lucky with my current career (and, as noted above, some of that luck was absolutely due to privilege). I also took some financial risks, like choosing to make the minimum payments on my credit card debt while I worked as hard as I could to pick up freelance articles and crank out 5,000 words a day. I could have gotten another office job (I’ve had plenty of office jobs) and made more money than I earned during my first two years of freelancing and content writing. But I saw that I was earning more money as a freelancer month over month, and that I was rapidly building and expanding my client base, and I wanted to see how far I could take that.
And then I just combined my freelance earnings with my inherent frugality and love of, like, tracking stuff.
And it helps that I live alone, in a beautiful-but-small apartment in Cedar Rapids, and do not have any children.
Is this what you wanted to know? Is there more stuff you want to know? Do we want to get into the way I choose my investments or how I meal plan or how I live in Iowa without a car?
Keep asking questions, and I’ll keep answering them. ❤️