Please take my financial pulse...

August 27, 2009 9:06 AM

What do 'normal' finances look like for university-educated, aspiring upper-middle class married couples who don't have kids yet and don't truly feel like adults?

Lately, I find that I'm thinking way too much about money - how much I have, how much more I want, what I should spend extra money on, how much I should save... To top it off, I have this lusty money greediness that I just want to go away. It's actually causing me some real anxiety. I think part of my confusion over all this comes from being brought up in a very low-income family. There were no savings, no RRSPs, no family vacations. I have no good example to follow and I can't tell how I'm doing.

I guess what I'm asking for here is a peer evaluation and a point of comparison: am I financially normal? Am I doing ok? Am I missing out on some financial formula for happiness that you know about? Is what I'm feeling here some kind of class anxiety?

Background: I'm 29, female, married, no kids yet. I have a university education and make $36K a year in Canada. After all necessities, bills, debt payments, modest RRSP contribution and modest savings, I have $80/week disposable income that I plan to waste for a while, given that the trade-off for it is quitting smoking.

For now, my husband and I contribute equally to all living expenses but save, pay off our debts and spend our disposable income separately. We are booth happy about this - at least for now. Whoever manages to pay off their debt first will then begin to help the other person and slowly we will merge our finances completely.

I know this is kind of a weird, all over the place question. I'm trying to allay some anxiety by asking this, but I can't quite tell what the anxiety is all about. Anyhow, I appreciate your responses.

posted by kitcat to work & money (21 comments total)

You can't infer "normalcy" on the basis of education and income. What is "normal" to you may be undesirable to another.

As far as whether your personal financial situation is OK, ask yourself this: do you have enough money on a post-tax basis every month to pay your outstanding bills? If your after-tax cash flow exceeds your monthly expenses you are doing better than most.

The next question to ask yourself is: what kind of lifestyle do you aspire to, and can you get to that lifestyle based on your current career/income path? Depending on your desires in life the answer to that question is a simple yes or no. If you find that your present situation will not allow you to live the life you want to live, say, a decade hence, then you need to make changes.
posted by dfriedman at 9:13 AM on August 27

I am absolutely no expert in finance, but I think your finances sound completely normal. I think most people have serious anxiety about money - I know I do - and we all stress about the same things (do we have enough, we want more, we don't really want any, why the hell did I take on this debt, etc...). I think you've got a few things going for you:

1) You're saving a little
2) You're making your debt payments
3) You have some fun money that you're okay with spending (life is short)
4) You live in Canada, which means you probably don't have massive student loans (like myself, for example), nor do you have any crazy medical costs, etc.
5) You have a really mature attitude about your joint finances. Keeping them separate for now is great while contributing equally, and paying off your own debts and then helping each other is - (I hope since this is the arrangement me and my SO have!) the smart thing.

It's a mefi proverb - but its true - It's only money. You need it to live, but it is not life itself.

It's only money, it's only money.
posted by Lutoslawski at 9:13 AM on August 27 [2 favorites]

If your after-tax cash flow exceeds your monthly expenses you are doing better than most.

Truth.
posted by Lutoslawski at 9:16 AM on August 27 [1 favorite]

Is this some insecurity about not keeping up with the Joneses?
posted by jerseygirl at 9:16 AM on August 27

It' not about keeping up with the Joneses. I should have said before, I am not very 'trendy' in my materialism. I like buying books more than anything else. But maybe I am afraid of the Joneses knowing something I don't.
posted by kitcat at 9:20 AM on August 27

You sound pretty normal compared to most of my Canadian friends in your age group. If I were you I'd be looking ahead at your income level and doing everything you can to raise it, and keep that particular graph tilted in an upwards direction. Can you take extra certifications or courses to make yourself more valuable to your work? Are you doing all the typical stuff they recommend (working hard and making sure your boss sees your accomplishments, etc) to make sure your work gives you raises on time and keeps you on track for promotions? I try to look ahead and think of how much money I want to be making in, say, 10 years, and then figure out how my income has to climb each year to get me from here to there.

I also highly recommend passive saving. Open and ING account and set it up to sneak something like $20 out of your regular account every payday. You probably won't even notice the money going, and it'll add up into a nice little chunk over time that you can use for fun, emergencies, or paying down debt. If you get any raises or windfalls, immediately add that amount to the payday siphon, before you have a chance to get used to spending it.
posted by pseudostrabismus at 9:29 AM on August 27

I found that reading personal finance blogs helped curb my anxiety a lot, although it didn't do much for getting me to think about money less. Two Canadian ones in particular are Give Me Back My Five Bucks and Fabulously Broke in the City. When you see what's "normal" for a wide variety of bloggers, you realize that personal finance is really personal and what works for someone else won't necessarily work for you, but it can also give you a lot of ideas as well as a lot of comfort that you're not so bad off.
posted by peanut_mcgillicuty at 9:31 AM on August 27

I recommend Beth Kobliner's Get a Financial Life, allowing for differences between the USA and the Great White North.
posted by brianogilvie at 9:35 AM on August 27

(Lutoslawski: it depends on what you mean by "massive student loans", but it is common for Canadians to graduate $50k+ in debt from one degree, and much more from additional education).

I'm in a similar situation in most respects, and my biggest anxiety is knowing that my monthly RRSP contribution is piddling because the majority of my income goes to paying student loans. I also am able to save only a very small amount each month, so I have nowhere near the 6 months living expenses that financial "gurus" in the media generally advise. Ideally I would be maxing out my RRSP contribution every year and building up more substantial savings in cash... but it's just not realistic for me now, nor will it be for many years to come. I am lucky in that my employment is about as secure as it could be (permanent government job with good benefits and pension in a field not likely to suffer from cuts in the near future).

You don't mention your housing situation, but my wife and I plan to use whatever is in our RRSPs for a downpayment on a first home at some point in the future, as you can pull money out without paying tax (as would normally be the case) so long as you replace that same amount over the next n years. Beyond that far-off prospect... we just try to do our best to avoid falling further in debt while simultaneously saving what little we can.
posted by onshi at 9:35 AM on August 27

The question was sort of all over the place, but I think you're normal-ish and doing okay especially in this economy.

That $80 a week you're going to waste is $4160 a year. And don't get me wrong, if you're contributing well to paying your debt and saving, bravo. You deserve to have some fun money. But you might want to look at it in the larger picture. If you saved even half of that 80 bucks, you've got two grand at the end of a year. Is that a vacation? A needed upgrade in the house? A bit of a nest egg for future plans?
posted by jerseygirl at 9:36 AM on August 27 [1 favorite]

The next question to ask yourself is: what kind of lifestyle do you aspire to, and can you get to that lifestyle based on your current career/income path? Depending on your desires in life the answer to that question is a simple yes or no. If you find that your present situation will not allow you to live the life you want to live, say, a decade hence, then you need to make changes.

Seconding this. It is your own goals, and whether you are getting closer or farther towards those goals, that you can gauge your own success. "The Jonses" is a meaningless concept; if you want to feel better about yourself, you can tell yourself you are doing better than they are, and vice versa. Basically they're just your peers, and only you know who your peers are.
posted by meowzilla at 9:37 AM on August 27

A lot of others are addressing the anxiety issue, so I won't bother. I'll just answer your question. That's why you came here, right?

My wife and I are recently married. I'm 25 and she's 27. I have a graduate degree and she has a bachelor's. We're in a pretty similar situation. We make decent money, and are slowly paying off my student loans and my car. She's fortunate enough not to have any real debt beyond our mortgage and we pay our credit card bills off completely each month.

We live pretty well, going on at least one nice vacation a year and dining out a couple of times per week. We both contribute to 401k plans and put some money (though not as much as we should) away each month for future vacations and just general savings.

Compared to my friends, I think we're above average when it comes to financials, but not tremendously so. We try to make the right decisions when it comes to money, but overall I'm a saver and she's a spender.

One of the things that helped me the most to relieve financial anxiety is to put some money in a savings account, open my 401k/RRSP and fund it and set up those accounts to automatically deduct from my paycheck, so that's there's no chance of me spending that money before I put into savings. I also read Smart Couples Finish Rich, which has helped. I don't follow it verbatim, but it helped put things into perspective. Also check out some personal finance blogs like I will teach you to be rich and The Simple Dollar.
posted by JuiceBoxHero at 9:42 AM on August 27

Also from a low-income family, so I can relate to feeling unsure of where you stand, and also to the 'greedy' feelings. When your family lives so long with nothing to spare from cheque to cheque it's only natural that money matters take on greater urgency.

I also have gone full circle, where we are now back to deficit finances and no room in the budget. So natch, my advice is to keep saving as much as possible; turnabout is impossible to predict. I'm very glad I've kept my spendthrift ways. Without them our recent downturn could have been much worse.

As for how you're doing, it all sounds good to me. The only thing I'd add is that if you own your house you need to have a repairs/emergency fund in addition to savings. The savings is there to buffer the day-to-day expenses; something separate (and equal or larger in amount) is needed for the days when the water heater goes, the roof leaks or the furnace conks out.

We kept our finances separate as well, until recently. IMO it has more advantages than disadvantages.
posted by Hardcore Poser at 9:53 AM on August 27

My wife and I are currently going through a similar phase. We look at three factors to gauge our progress:
1: Do we have a positive through-put? That is, are our expenses covered with money left over?
2: Is there an income increase in the foreseeable future and in what time frame? Is my income going to increase in six months? A year? Five years?
3: Are our debts getting smaller or larger?

We're a middle middle class young (mid/late 20s) married couple that doesn't feel all grown up yet. We don't have really excessive "keep up with the Jones'" lifestyle. I mean, I dump some money into a car that I'm working on and my wife has a lust for kitchen equipment. I feel like we could be more excessive, but we're pretty satisfied and we can still put some money in our savings account every month. That $80/week disposible income figure is pretty good and that's pretty similar to us, give or take. Our savings aren't huge yet, but we could cover a small emergency and, if there was a catastrophy, we'd probably rely on a credit card. I think that's pretty typical for where we're at.
We currently answer 1: Positive 2: Yes. Six months and 3: Smaller.
posted by Jon-o at 9:55 AM on August 27

Your situation resembles mine (I'm 30), and I'm not too worried. Any impatience I have with my respectable-if-not-lavish salary stems from the fact that I can't afford to fund all my life-improvement projects (mostly involving continuing education and industrial-quality tools) at once.

I've realized two things since I left university: 1) debt payments put a serious cramp in your style long after you've left the lean years behind and 2) spending your money in big chunks (a decent bed, a down payment on a house, a vacuum cleaner that actually works) gets you better quality of life than spending it in a steady trickle... even on books. So you might want to consider throwing as much money as you can at your debt and savings now while you're young and compound interest is in your favor.

I've found wesabe, especially its cash expenditure tracker, to be very helpful in giving me a clear picture of my financial situation and behaviors. Playing with its many gadgets, graphs and tools will also sate your current obsession with thinking about money. Personal finance blogs (aggregator here) are full of good advice and candid discussions and can provide a calming sense of perspective on your own financial situation.

Good luck!
posted by stuck on an island at 10:01 AM on August 27 [1 favorite]

I have not found that the popular online tools (Wesabe, Mint, etc.) work particuarly well with Canadian financial institutions.

Still, just keeping track of all of our various debts -- government student loans, bank student loans, credit cards, lines of credit -- in one well-organized spreadsheet helps dial down the financial anxiety a little bit. Being able to review everything at a glance, especially with respect to due dates and payment amounts, has been a good way to let go of that stress when it starts to build up.
posted by onshi at 10:26 AM on August 27

You sound pretty normal and that you have things under control. My wife and I are handling things similarly except that instead of contributing equally to the living expenses we each put 3/4 of our paycheques into a joint account. The joint account is used for bills, mortgage payments, dinners out, etc. Fortunately, we're both making pretty decent money right now, so we're saving a lot and getting some badly needed work done on the house.

I spend way too much, though. I go through the 1/4 of my cheque plus I have a couple of part time jobs that don't go to the joint account. Thanks for your question because looking at my finances again is definitely in order.

One thing I would recommend, no matter your financial situation, is the tax free savings account. There's no reason you shouldn't be taking advantage of it. If you don't have one, get your bank to set one up.
posted by ODiV at 10:33 AM on August 27

I think what you are experiencing is related to future plans and/or crisis avoidance thinking, which is great. My wife and I started seeing a financial planner a few years ago (33 now) when we started to experience some longer term worries and thoughts for the first time together. Granted our cash flow situation is a little different, but within the first year the guy had helped us reprioritize such that our credit cards (that had balances +10 years old) were paid off, and the beginnings of a small fun account were started. We had tried to do this on our own but we both had different ideas of what to do - a third party was great to have say "this is what you should do."
posted by Big_B at 10:50 AM on August 27

I think this anxiety stems from not knowing what you should be doing, or feeling like you're not doing what you should be doing. A really good personal finance blog, I Will Teach You to Be Rich (see above), broke it down to a series of action steps. The value of this is that it's a clear roadmap that you can look at and say, "here's where I am, here's what I do next:"
1. Establish 1k in an emergency fund.
2. If your employer offers a 401k match, contribute enough to get the maximum match.
3. Pay off all high-interest debt (~7% and above)
4. Grow the emergency fund to cover 3 months of living expenses.
5. Max out Roth IRA (is there a canadian equivalent?)
6. Pay off all remaining debt/save for financial goals.
7. Save/invest.

You're spending less than you're earning. Kudos. Take that surplus, and allocate it down the list. Already did #1? Put the money to #2. Already did #2? Put the money to #3. Etc. Go through this process every time you get a paycheck. Soon you'll be building net worth and kicking ass!
posted by dualityofmind at 3:06 PM on August 27

Im in a similar situation (23, degree, DINKs) in a similar economic climate (UK) I earn 21K (37 CAD) and I have about £140 left over after rent, bills etc. I contribute 200 a month savings and have no debts (apart from student loan but this comes out of my paycheck so i dont miss it).

I would say you and I are about right, although alot of friends my age have support from their middle class parents still (Im upwardly mobile but my parents are working/lower mid class and now I have more money than them...)

Im a bit younger than you and I am making more than about 99% of my peers I would say. Seems to balance out by about 25.

Probably this is not useful but might be!
posted by Neonshock at 6:01 AM on August 28

Read _Personal Finance for Dummies_ by Eric Tyson. It's an awesome overview of everything you need to know.
posted by Jacqueline at 12:39 AM on August 29