In all honesty, if there was a support group for spenders anonymous, there are times in my life when I probably should’ve gotten in the car and gone. Budgeting has never been my strong suit, though I’m happy to report I’ve gotten better as I’ve aged (and as my paycheck grew from my earliest post-college jobs). Even though I’m still not going to fall for any arguments that cash in the bank feels better than a brand-new bag or pair of heels (ha!), I was still interested in some tips for making even the most reluctant fashion fiend take a look at her budget. To get started, I gave myself a pep talk about looking my bank account directly in the eyes and contacted money therapist and CPA Holly Nicholas Signorelli.
AMSFTV: What’s the accepted percentage of your income that should go toward non-necessities, like shopping? And can you tweak this number a little if you’re a girl who really loves shopping?
Holly Nicholas Signorelli: It’s smart to start off with 10 percent of your income, pre-tax, going to luxury items. The basic model is 30 percent to household, 20 percent to tax, 20 percent to savings, and splitting the balance between short-term spending and other miscellaneous items like gas, car insurance, and unexpected expenses. What happens to most people in their twenties and thirties is that they’re not saving anything but overspending in the luxury category. As your life changes and other expenses go up, you find yourself in credit card debt to keep up with the standard you set for yourself.
AMSFTV: What areas do fashion-lovers typically take from to go shopping? Is there another section of the budget that’s easier to fib?
HNS: Women take from the savings category because the younger you are, the farther away retirement is and the less you care about setting money aside versus buying a new pair of shoes right now. A lot of small adjustments add up to dollars in your luxury budget. For example, don’t buy a new car. Get a used car that’s only two years old and you can lower your monthly payment by at least 20 percent. That kind of monthly savings can put $300 to $500 in your pocket every month.
AMSFTV: Favorite tips for staying on budget?
HNS: Set up two accounts to link to your main bank account, which is so easy with online banking. When you deposit your paycheck, transfer 10 percent to an account named “luxury” and another 10 percent to an account named “short-term savings.” If you do that every time you get a check, you’ll never have to ask yourself how much you’re OK to spend. What’s in the luxury account is your shopping money.
AMSFTV: What if there’s an amazing sale and you go a little crazy? Avoiding shopping for a few months or paychecks feels like such an aggressive, cold-turkey approach that might not be realistic.
HNS: I don’t think true shopaholics can quit cold turkey, right? Sometimes those things happen, and that’s why you have the short-term savings account. If you need to occasionally dip into that, you can.
AMSFTV: What’s the best savings approach for a short-term item, like a designer handbag, not a house?
HNS: If you want to go all out on a pair of Louboutins or a Chanel bag, the short-term savings account allows you to watch yourself build up the dollar amount you need. I have four accounts, including one marked “travel” because for me, that’s a necessity. If it’s important to you and makes you happy, you should have it. The key is to balance your spending between the accounts and stick to those percentages. The more you make, the more you have in each account. When you make that nonnegotiable is when you really have control of your budget.
AMSFTV: I like that, but saving up for a Chanel bag feels like it would take years and years.
HNS: When I want something, I look at the price and if I can’t get it in a reasonable time frame giving the 10 percent monthly rule, I look for something I’m not using or have gotten tired of that I can sell or something I’m willing to give up. If my other accounts have built up, then I sometimes allow myself to move money from one to the other to satisfy the purchase. But for that, my husband and I decided we’d agree on it mutually, so it doesn’t happen very often. For a budget to work, you have to stick to it!