Because Monopoly Money Isn't an Option

This week, we are starting on a different note. I am in Lisbon at Web Summit, which is a tech and media conference that each year brings together around 70.000 people from around the world. I am trying to meet here as much like-minded women as possible because WS is supporting women in a huge way and I am sure I’ll make some great connections here.

I’ll write a short recap of it next week, but after one day these are my thoughts:

• AI (artificial intelligence) is going to be a part of our future one way or another

• 70.000 people is a lot of people so if attending prepare to wait in lines a bit

• it is an interesting experience and I would recommend everyone to try and go to a conference of this size if they get a chance, because you meet so many interesting people that you would have not met otherwise

Also, because I am spending the entire week here, this week’s newsletter will be short and sweet.

Back to our regularly scheduled programme.

In today’s edition we’ll cover:

• Different ways to budget your money

• Closing the Gap - Ana Roš - 3 star Michelin chef

• Book of the month - Psychology of Money - part III

LET’S COVER THE BASICS

Let’s stick to the budget

Easier said than done when you see that new coat that just hit the Zara store on Monday 😬 But - I believe in us! And by us I mean me and my wallet.

So why is budgeting even important? There are a couple of reasons.

First of all - if you have any type of budget, you know in advance where your money is going. This creates certain predictability in my opinion and already removes certain fear that we often have about managing the money. When you create a budget, you do it before any spending happens and you can evaluate from a distance, if you’ll be comfortable spending your money on certain things.

BUT - you need to actually stick to it so it does not all end up in your “shoe investment” like Carrie’s did. 💸

With that predictability you are now able to plan for your future goals - house, car, nice vacation, botox, whatever you like. I heard a really good saying that botox is like a subscription service. You need to pay up every couple of months.

Another reason for budgeting is that is keeps you from overspending, because those matcha lattes 🍵 (or shoes) do add up if you are bad at keeping track of them. Trust me, not a nice sight when you see your monthly bank statement and you stare at it with open mouth when you realise how much money you willingly left at a local coffee shop. Nothing wrong with supporting local baristas, but there is a limit.

Two last reasons are very simple. A) everybody needs an emergency budget¹ if something happens and your monthly income can not cover it. And B) Even though the 30s are the news 20s - supposedly 😅 - we’ll all retire at some point and 30s are way closer to retirement than 20s, but still far away to prepare a nice sum of money so you can enjoy life past a certain age.

Let’s now look at 5 different budgeting options that might help you getting started.

• 80/20 rule
  Let’s start with an easy one. 80/20, also known as anti-budgeting, is a method meant for those that do not like tracking everything. You put 20% of your take-home pay into savings. The remaining 80% goes toward your expenses. Easy and simple.

• 50/30/20 rule

  This one is in my opinion a very sustainable way of budgeting. You spend 50% of your monthly income on your needs (rent or paying of your mortgage, other necessary monthly bills to survive, transportation, groceries, insurance - not eating out, that is in the next portion), 30% on your wants (matcha latte, nails, vacation, books, eating out) and 20% goes towards future you - savings for house downpayment or retirement, investments, emergency funds for a rainy day.

• The 60% solution
  60% of your income should go to "committed expenses" (mortgage, food, car payments, utilities, etc.), 10% used for "fun money," another 10% for irregular expenses (your short-term savings), 10% for retirement savings and 10% for long-term saving and/or debt reduction. Define each of the 10% parts so it fits your lifestyle, but make sure you do not skip the savings one.

• Reverse budgeting
  Or pay yourself first is a budget where you start with savings first. Similar to the 80/20 rule but with the difference that those 20% of savings can be more than that. Each month your first put aside money for savings and investments, the rest goes to your monthly expenses and enjoying your life. Best option is to automate your savings, so they go directly to your savings or investment as soon as you get the pay check. Of course to be able to do that, you need to first figure out how much you actually need each month to cover your must haves and decide how much goes into your savings. This budgeting might not be for everyone, especially if the money is tight, so maybe look at other options.

• Envelope budgeting system
  This is a cash based budgeting, but with new banking apps, you can also do it digital. You begin with multiple envelopes, each of which represents a budget category. You then assign a certain amount of cash to each one, based on how much you anticipate spending in that category for the month. Once an envelope is empty, you can't spend any more money in that category until your new budget period begins.

As the title says - Let’s stick to the budget - whatever the budget might be.

But if you are not a fan of any of the rules just stick to this one - spend less money than you make. This is a good start.

GLOSSARY

• ¹emergency budget - cash reserve that's specifically set aside for unplanned expenses or financial emergencies.
  

CLOSING THE GAP

Ana Roš

For foodies that like watching all the food related Netflix shows, she might be a familiar face, because she is featured in their Chef's Table series. And that is her least important achievement in life.

Let’s list just a couple of other accolades she received. It’s too many of them to list all.

In 2017, she was named world's best female chef by The World's 50 Best Restaurants academy.
She received Slovenian chef of the year by Gault & Millau in 2019.
Her restaurant, Hiša Franko, was awarded two Michelin stars in 2020 and in 2023 received the third star and a green star for sustainability.

But the most important thing about her work is the food that she brings to the table. She is a self-taught cook, which gave her the freedom to create her own unique style that does not fit into any culinary school. She always points out that hard work, learning and experimenting is what got her here.

She is also a fellow Slovenian, like I am, so a proud moment for us to have such a great female chef among us.

So if you ever stop by Slovenia make sure to visit one of 3 places where you can taste her food - Hiša Franko in Kobarid, restaurant Jaz in Ljubljana or just grab a pastry in her bakery called Ana.

BOOK OF THE MONTH

The Psychology of Money - part III

by Morgan Housel

In which group of people do you fall?

• those who save

• those who don’t think they can save or

• those who don’t think they need to save

Back when I was a broke student I was definitely part of the second group, because what will 50€ put on the side do any good? However, those number do add up over time. First month is nothing, but by the end of month 5, you already have 250€ in your savings that you did not have before. It’s the little things.

When you get better salary or you start building a business, your income goes up and so does you spending. He argues that when that happens, it’s the ego that is the one spending money.

We spoke today about budgeting which is a way to reach certain future financial goal. But you can also save without a goal. You do not need a specific goal to save.

That flexibility and control over your time is an unseen return on your wealth.

And since this entire book is about the psychology, not about math, he points out one very important thing.

You are not a spreadsheet.
You are a person
A screwed up, emotional person. 

And with that we need to accept that we should not aim to be coldly rational when making financial decisions. We should be pretty reasonable, because that is more realistic and you have a better chance to sticking to it for the long run.

When you look at things from that perspective, you also have to count on things not going to plan. You need to leave room for error. You have to plan on your plan not going according to plan. Because the world is not black and white.

It is very hard to convey the lessons from these chapters, so I highly recommend buying this book. Or, if you prefer listening/watching instead of reading - Morgan Housel was recently a guest on a podcast that I love listening to called The Diary of a CEO. You can find it on Youtube or wherever you listen your podcasts to (Apple or Spotify).

SOME NEWS

• How to Outlast 99.9% of Entrepreneurs. Great read from another newsletter writer that I often read, Justin Welsh. 

• If you want to check what is happening at Web Summit Lisbon 2023 - check their website or Instagram.

• Can Banksy make you rich? Last week’s edition of newsletter.