If you’ve logged in to your learnvest.com account recently, you may have noticed a few small changes we’ve made to your budget and inbox. Specifically, we’ve re-named two sections and re-organized a few folders to better align with the budgeting structure that we believe works best: fixed costs, flexible expenses, and goals.
The "Essentials" Section is now "Fixed Costs."
Fixed costs are regular expenses that don’t vary from month to month– things like your rent or mortgage payments, car payments, and utilities. Fixed costs also include things like gym memberships and Netflix subscriptions, because you’ve committed to paying them every month.
The beauty of having section for fixed costs is that all the recurring expenses in your budget can be easily accounted for in one place. When you also account for recurring monthly goal contributions– things like credit card and student loan payments, retirement contributions, and savings contributions, something a little bit magical happens with your budget: it gets very simple.
Take a look at what we mean:
The "Lifestyle" Section is now "Flexible Spending."
Flexible spending is meant for expenses that do vary from month to month– things like your groceries, eating out, entertainment, and shopping. One week you might have friends in town and eat out every night. Another week you might buy groceries and cook. And another you might eat samples at Costco and splurge on a leather jacket with the money you saved. The point is that this money is flexible - you can spend it however you want, as long as you don’t go over the total amount in your budget.
To better align with this framework, we’ve also moved a few folders around:
The “Groceries” folder is now in Flexible Spending - this is because while food certainly is an essential expense in any budget, how you spend on food is flexible. Sometimes it might be groceries, sometimes it might be take out, sometimes it might be fancy restaurants. Note: If you previously deleted or renamed this folder, you may see that we’ve added it back. If you’re happy with your system, you’re welcome to delete it.
The “Subscriptions” and “Insurance” folders are now in Fixed Costs - any expenses that you’re already committed to paying each month are considered a fixed cost because you need to account for it in your budget every month. We’ve also made sure that things things like your LearnVest subscription, Netflix, and Hulu are in your “Subscriptions” folder.
I think I get it… can you explain it more?
We call our approach to budgeting the “One Number Strategy” because after you’ve accounted for your fixed costs and goals, you really only have to track that one flex spending number to stay in budget. As part of the Action Program, every client gets a custom budget (complete with a flex spending number) from their LearnVest Planner. (You can learn more about our approach in our Budgeting Class if you're curious before your first call).
I liked the way it was before. Why did you do this?
We’ve grown a lot since we launched our online tools in 2010, and our Planners are helping thousands of you make progress on your money in the Action Program. As we build out smarter and more powerful dashboards and tools for our clients and Planners, we want to make sure that they align with our approach to money as much as possible. We think this framework is incredibly useful, and we encourage you to give it a try. But if you’d like to rename or move your folders back to how they were before, we certainly won’t stop you! You can also delete a folder if you find it superfluous to your budget--just be warned this will unfolder any transactions currently categorized in said folder.