Last time we covered how to go about finding your Basic Number and why it’s important to do so. Are you ready for more? Well, too bad.
Luxe Number:
This includes any expenses that go beyond your basic living expenses that would help improve your financial situation or help you reach your life goals. The thing is to be specific with how much you would like to contribute toward this goals if you had the money to do so.
Time It Takes To Do This: 30 minutes–1 hour
Examples:
Emergency Fund: Since a income of a freelancer can fluctuate wildly, having an emergency fund is super important. One thing you can try doing is to have two emergency funds: a “baby fund” and a “mama fund.” A baby fund acts as a buffer between your regular savings account and your main or “mama” emergency fund. You can tap into it when you’re having a slow month. I suggest 1–2 months of income in your baby fund, and 6–12 months of income in your main e-fund.
Debt: Make an extra payment toward your student loans or credit card debt. This is a great opp to put money toward the principal amount. Doing so will lower your monthly payment overall.
Creative Project: Maybe you’ve always wanted to create a large-scale art installation, publish an e-book, or record an full-length album. Put it toward that, yo.
A Vacation: Maybe you want to take a few months off of work to do some soul-searching or work on your passion project. Or to do absolutely nothing.
Big Ticket Purchase: Is it time to replace that jalopy you’ve been carting around in for the past decade? Or want to splurge in a deluxe home entertainment system?
How much should you put in?
I wouldn’t go crazy and try to be overly ambitious; but you can put in a reasonable amount that’s enough to chip away in a given amount of time. You can do some math on when you would ideally like to have enough funds to achieve some of your goals.
Example: You want to go to Berlin next summer. Maybe it will cost roughly 3,000 for the entire thing. So if you save for 16 months straight, you’ll need to save about $200/month.
So now you have your Basic Number + Luxe Number for your monthly budget. Next time we’ll talk about having a Tiered Approach to budgeting and allocating your funds.
