Today’s lunch topic was simple. Should I buy the Louis Vuitton rain boots?
According to popular savings methodology – maybe.
In the simplest form, take your salary. Now subtract your basic needs (food, water, and shelter).
Got that number?
Now you divide using the 20/30/50 rule.
Fifty percent is for long term financial goals (think 401K, a home, etc). Thirty percent is for short-term financial goals (think a summer vacation, a pretty dress, investing in stock, or having an emergency fund). Now that 20 percent, that’s your disposable income – for things like charity, your new lipgloss, and a Bumble date to Beauty and The Beast.
When you analyze your budget (ugh, I just cringe thinking of it), you can sort your finances by seven categories:
Which of these do you value your return on investment on? When you categorize your budget, you being to see that you spend where your values are.
The above categories are from my co-worker. I made different categories for my lifestyle:
Think does a $12 sandwich really give me a return on investment than a $2 peanut butter and jelly sandwich? Will you go for the Banana Republic jeans or trade them for Guess jeans?
Seriously, what is the return on investment from your wardrobe?
Well, for bloggers, it might be more because they can create a brand from their style. Your style might also signify your status and position i..e you may not want to wear yoga pants to the office.
Calculate the ROI on Your Wardrobe:
You calculate the ROI on your wardrobe by taking the cost of a piece of clothing and dividing it by the number of times worn. So, for example, I bought my first coat when I was 19 years old and you know how much it cost? $50. Do you know how long I’ve had it? Since I was 27. Do you know how many times I wore it? Well, almost every day from January 2011 – April 2011 (my first time living in Chicago). Just looking at that time period alone, the cost of the jacket was .55 cents per wear. And, I continued wearing the same coat when I moved from Florida back to Chicago, so my ROI was actually negative.
That’s not a bad ROI for my time and my savings.
Below is the coat – still in good condition years later after the original purchase date:
Other ROI Considerations:
Seriously, though you can buy cheap goods, you can buy good quality, but I think ROI is more than the cost and how many times you wore the garment. It’s also how it makes you feel, if it fits your lifestyle (don’t do lunges in a pencil skirt), and if it’s weather appropriate (I hope you aren’t wearing suede in spring).
You can apply ROI to all areas of your life including your budget. But, it’s kind of shocking when you think of how much you spend on things. Because where you spend your money and where you spend your time shows you what you value.
And based off my current purchases – an increase in Uber’s to stay out of the cold and buying pants and coats – I value warmth and stylish comfort. To balance that, I gave up alcohol and going out to lunch.
Are you just starting to think about your finances and savings? It can be intimidating.
Mint.com – money management tool
How to be single and save for a home – advice from a Chicago entrepreneur
According to a recent Bustle survey of more than 1,000 millennial women, more than 50 percent of people said they never discuss personal finances with friends, even though 28 percent reported feeling stressed out about money every single day. That’s why Bustle launched Grown-A$$ Finances, a series that gets real about what millennial women are doing with their money, and why — because managing your money should feel empowering, not intimidating.