Help us make our future happy.
October 14, 2010 11:03 AM   Subscribe

Mid-twenties couple living in a big city trying to save up for the future. How the heck to people do it? Help us figure out what we're doing wrong and how to fix it.

How do people do this savings thing? We are totally clueless. Here's what our life looks like now:

Getting married early next year. Both sets of parents are chipping in and paying for the (great) majority of the wedding. Saving up for that isn't a huge deal, but we are attempting to shovel away some money for that every month. We really only have little things left to pay for.

I (female wife) have completed my associates degree in a creative field and am unsure as to whether it's worth more money/time to continue. I have a decent paying job which is tolerable. However, I doubt I would easily find a job like this again. I have less than $1k on credit cards, and I'm paying them off. I have over $13k in a 401k. I will start paying off my student loans (about $15k) in January.

Future Husband (FH) has a bachelors degree and currently works in academia. He is currently weighing two options: go to grad school, or leave academia. If he were to go to grad school, our income would go down, but we're not sure by how much. If he leaves academia, he could easily make twice what he makes now. He has less than $5k total on credit cards, which he is paying off. He has a good amount in a 401k, as well. He has no student loans.

We would like to buy a house in 5-10 (sooner rather than later) years, preferably within the city limits, but not in a crazy ritzy neighborhood. We'd also love to have cash in the bank for our future (or emergencies!). We think we might like to have the babies within 5-10 years, but we're unsure. We have absolutely no savings to speak of, individually, or as a couple.

What our monthly budget looks like right now:

Combined (net) income: Approximately $4k (split evenly)
Rent: $1100
Utilities (internet, electric, gas): $150-200
Cellphones (both have iphone 4s): ~$160
Groceries: $700 (we are actively working to lower this amount, but this has been what we've been spending on average for the last year)
Entertainment (going out, netflix, etc): $300
Currently we have about $200 a month budgeted for "savings" but rarely does it actually get saved.
We also have a safety buffer on our over all budget of 10%.

As stated, we realize that our grocery habits are expensive, and we're actively working to reduce them.

We also realize that our going out expenses could be lower. However, we live in a city, and going out for a beer and dinner can easily add up to $40+, so we need to have a realistic budget for this part of our lives. We don't go out more than once a week normally.

I use to track our spending, but it really doesn't seem like we are spending on unnecessary things. It just always seems like there's something coming up that needs paying for.

Should we be allotting more money into savings? Are we living above our means? How can we start saving for our future? We absolutely love our house, so moving would be really hard for us (emotionally and financially). I feel like I've been a little anal about our spending habits lately, and it hasn't helped.

Should we speak to a financial adviser? Should we continue with our education and be broke for years and years, or man up and just make money? Are we really being idiots about something? Bring us down to reality. Be the bad guy. We don't even care. We need to make this happen. If you have questions, I can answer them.

Just as a note, I have Suze Orman's "Young, Fabulous & Broke" book, but it all seems pretty obvious and/or easier-said-than-done.
posted by your mom's a sock puppet to Work & Money (70 answers total) 38 users marked this as a favorite
So your rent and utilities together is $1300? That's 32% of your income. Should be closer to 25% to effectively save.
posted by roomthreeseventeen at 11:10 AM on October 14, 2010

$700 a month for groceries is INSANE. You need to stop dining on foie grois and gold-plated caviar*. Get yourself a Costco membership for $50 a year, and go to Costco twice a month, each time buying a bulk meat or two (and freeze what you don't use, in sizes that are appropriate for a dinner for two) and some veggies and fruits. On one trip, you can pick up the non-perishables like pasta/rice/sauces etc. It will also help reduce costs for toilet paper, paper towels, pet food, toothpaste/shampoo/soap. Definitely do this and try to get down to $250/month on groceries, and voila, you have $450 extra for savings.

* - seriously though, what are you eating?
posted by Grither at 11:11 AM on October 14, 2010 [3 favorites]

As an iPhone user, the first thing that I saw was your phone bill. Calls from one At&T user to another are free on most plans, so I don't see why your bill is so much each month. Do you text a lot? Have unlimited texting? Have you looked at your cell phone usage to see if you are paying for minutes you are not using? I realize that AT&T includes the ridiculous $30 per month data charge, but I would think the two of you should still be ~$120 a month rather than $160. So there's that.

Yes, your grocery bill is exorbitant. We eat out (well, fast food) WAY more than we should, because my husband travels half the time and the kids have school activities, volunteering, orthodontist and doctor appointments that making planning a meal an exercise in futility most days, but I would think you could save a lot more on your groceries for just two people!

The credit card debt, of course, is killing you both. Some places let you take a loan against your 401K at a low interest rate and then pay it back in, and that would be worth doing if you could pay off the credit card charges completely, which surely have higher interest rates.

$300 a month for entertainment also seems high, since from your grocery budget it doesn't look like you are eating out much. Netflix isn't very expensive. So where is the entertainment money going?
posted by misha at 11:14 AM on October 14, 2010 [1 favorite]

Your budget without the savings only adds up to $2,460 so either you should have $1,540 per month extra or your budget is not accurate. I would start by creating a budget that assigns every dollar of income to a category, including taxes, 401K contributions, debt payments, etc. Then go back and compare your actual spending patterns to that budget and see if there are any areas ripe for optimization.

It is pretty common and sensable advise to build up a small emergency fund first (maybe $1,000, not enough to live on but enough that you don't spend a lot of money on late fees, etc if you have a temporary cash flow problem), then pay down your debt the $0, then start saving for emergencies, a house down payment and children.
posted by ChrisHartley at 11:16 AM on October 14, 2010

Response by poster: Yes, Grither, we are aware that $700 is INSANE, and no we aren't eating foie grois and caviar. We really are actually working on lowering it. Last weekend we got a Costco membership. We freeze a lot of food, rarely (really, rarely ever) eat meat, etc. We're probably closer to $500 a month even before Costco, so we expect it to be lower soon.
posted by your mom's a sock puppet at 11:19 AM on October 14, 2010 [1 favorite]

You will hear lots of suggestions on how to cut expenses, and that's fine. I'm in a similar situation as you (not with a fiance) and I've always found that I've made the most headway on loans/savings/cutting spending when I've taken a part time job in addition to my full time job.

Look at any way you can to bring in another income stream. Can you freelance? Take a couple shifts a week at a restaurant. Take a bartending course - you can make great tips. Deliver newspapers, anything you can do to bring in extra money. The added bonus is that you don't have as much free time to spend money, and when you do have a free night to go out to dinner, you won't feel guilty splurging because you're working so hard.

You don't have to keep this up forever, but I have found that taking an extra job for 6 months or so has helped me to make a big dent in my student loans, save up for travel, and improve my spending habits all around.
posted by Pademelon at 11:21 AM on October 14, 2010 [2 favorites]

First regarding the job stuff-if you want to buy a house in the next 5-10 years and FH can currently make double what he makes no by going to work, I'd do it. Caveat-what will he make if he goes to grad school for two years? Will he then make four times what he makes now? In that scenario, perhaps it is worth it. But grad school costs money and you won't be able to save much of anything while he is there so those will be wasted years from the perspective of saving to buy a house. If he makes a ton more coming out, then it's worth it. If he will go to grad school for very little financial gain, I wouldn't.

Second-groceries.... you know this, but you need to get that number down. How do you shop? Getting organized is really the key to this. To give you an idea, I feed a family of four on less than that every month, and I don't skimp at all. I clip coupons, shop in an organized way once a week, and whatever we run out of during that week, we suck it up and do without. Avoid the grocery store at all costs for anything except the planned weekly outing.

I don't think a financial advisor is the way to go for you because that is more planning on what to do with your money, less on how to make it stick.

Last-looking at your budget-you have not mentioned what is going towards the credit cards every month. But per your budget, you have over a grand outstanding floating around. Are you applying all of it towards the cards? If so, you'll pay those off in no time. If not, where's it going? What do you pay for gas? Car payments? Auto insurance? Can you get rid of one car? Are you guys nickel and dimeing yourselves a bit? Coffee here and there, that kind of thing? I was always really bad about that stuff in my budget-still am, in fact. And that eats up more than you'd think. So I'd chase down that other thousand first to see where it's going, because it doesn't appear to have a home in your budget.
posted by supercapitalist at 11:21 AM on October 14, 2010

I spend what I feel like is a lot on groceries and I still rarely exceed $500. You can cut that very easily.

The key to saving is to do it immediately. Set up automatic transfers on payday so that money is never even available to spend.
posted by something something at 11:21 AM on October 14, 2010 [2 favorites]

I have more categories than this in my budgeting, and I think this could be where the confusion comes from. For example, where do things like shampoo and laundry detergent go? In "Groceries"? One thing I did to help myself budget was go through a year's worth of data and rigorously tab things - I had a "haircut and grooming" category for haircuts, shampoo, makeup, and razors; I had a "gym and exercise" category for gym fees, running shoes, and water bottles; I had a "books" category that was separate from "movies" and "cultural events" - all of which were separate from "restaurants". I wasn't able to take a good hard look at what I was doing, and decide where I could reduce, without more granularity.

Once I had the raw data, I first set myself a savings goal - save $X more - and then lookeda t my habits and decided what I wanted to give up. Some things, I wanted to keep - my gym membership, my vitamins. Others, I liked having but knew I could cut out to save more - Supercuts for the haircuts, no more makeup purchases until I'd used up what I had; a hard limit on gaming supplies. I can't give you a specific recommendation without more information, but I think what you need is better information about your spending, so you can look at what is really discretionary and what isn't.
posted by mccn at 11:21 AM on October 14, 2010 [2 favorites]

It baffles me to think about how two people could spend $700 a month on groceries; I seriously hope you'll share what you've been eating, even if only to satisfy my intense curiousity. Are you buying all name-brand, pre-prepared foods? Perhaps the two of you should get a nice cookbook at the library and learn how to cook basic foods from scratch. It could be something fun to learn how to do together, and over time, you'll learn how to make some great, cheap meals.
posted by ThePinkSuperhero at 11:22 AM on October 14, 2010 [4 favorites]

Each month, of a 200-300 automatically transferred into your savings account at the BEGINNING of the month. This ensures you save some money before spending it all by the end of the month.

I feel like your budget is missing things - do you never buy clothing? do you buy your lunches or bring them? the daily latte? ie is it possible you're also spending money on things without really realising?
posted by Kololo at 11:24 AM on October 14, 2010

FYI, i'm pretty sure you'd eat pretty well with a grocery budget of $300 month. Then you'd automatically be able to save an extra $400 (or use that to pay off your debt).
posted by Kololo at 11:25 AM on October 14, 2010

So your rent and utilities together is $1300? That's 32% of your income. Should be closer to 25% to effectively save.

Except routinely in Chicago, New York, and Boston it's said people should expect to spend 30% of income on housing. In large cities, it's just the way it is (and my Boston landlord for my last apartment used 30% when assessing if prospective tenants could afford his rents).

Cellphones (both have iphone 4s): ~$160

OP, you can cut this down by dropping the iphones. I know. Gasp! Horror! But unless you absolutely need an iphone for work (and then you should have work reimburse you for some of it), it's not a necessary expense. My husband and I pay half what you pay for cell phone service.

Entertainment (going out, netflix, etc): $300

You can cut this down to. Do you realize that's $75/week on going out and entertainment? Set a better limit on your weekly entertainment spending. You can easily cut that back to 30 or 40 by going out less or spending less when you go out. When you decide to go out, bring only the cash you will need for the evening --- set that at $50/week and you have $100 more saved each month or $100 more you can put on your credit cards. Leave your credit and debit cards at home (or bring only one in case of emergency and only use it for emergency).

Everything else looks reasonable to me.
posted by zizzle at 11:25 AM on October 14, 2010 [1 favorite]

Do you have a car? Two cars? Could you live with one if you have two? Can you switch or reduce car insurance?
posted by ghharr at 11:26 AM on October 14, 2010 [1 favorite]

Yeah, pay yourselves first. Savings account direct deposit, then pay your bills, and then see what you have for food, entertainment etc.
posted by gaspode at 11:27 AM on October 14, 2010

I agree, $700 on groceries is crazy. Store brand is your friend. Try it, I promise it won't kill you.

As for other things, entertainment can almost always get cut back. Which Netflix plan are you on? Because if it's not the 1 disc at a time/unlimited streaming you can probably move down and not even notice.

But most of all, work on that grocery budget. Right now the one for me and my wife is $300 a month. I'm currently $895 under that because of months where I didn't spend all of the budgeted money.

One quick question. Are you currently living together? I'm assuming so since you have the shared budget, but just in case you're not the grocery bill should partly take care of itself just from living together.
posted by theichibun at 11:27 AM on October 14, 2010

To clarify, your budget seems to add up to ~$3k per month (including the 10% buffer). Is the $4k net income a typo, or is there an unaccounted for $1k?

My grocery bills are lower as everyone has mentioned, but my going out expenses are also much lower. My entertainment tends to involve drinks at home with friends coupled with boardgames, starcraft, movies, etc, and is much lower than the $300 as well. While you might not enjoy my somewhat nerdy pastimes, trying to have fun either at your home or at a friends home can also reduce this aspect of your budget as well.
posted by bessel functions seem unnecessarily complicated at 11:28 AM on October 14, 2010

Personally, I don't think your grocery budget is that out of line, if you're attempting to eat at all healthy and/or somewhat organic. I shop for only myself and can easily spend half that or more, because I buy lots of fruits, vegetables and seafood. Even frozen fruits and vegetables add up quickly, and if you're not filling up on carbs like pasta, then groceries are expensive. On the other hand, if you're buying all processed/convenience food, then you can probably cut it drastically.

But the main thing I see is that you can possibly cut your rent, depending on where you live. To me, $1100 a month for a place for 2 people to live sounds high, if you're in the U.S. You say you want to buy a house, but you also say -

We absolutely love our house, so moving would be really hard for us (emotionally and financially).

Well, which is it? Do you want to live in this nice rental house for the rest of your lives, or do you want to someday own a house? If you want to own in the future, then you may have to sacrifice now, by moving to a cheaper place. Cheaper neighborhood, smaller apartment, etc. Basically, you can't have your cake and eat it, too.
posted by MexicanYenta at 11:30 AM on October 14, 2010 [4 favorites]

If you're not dropping the cash on meat, do you eat a lot of cheese? Fancy cheese? Cheese is freaking expensive, bro. That's the only thing I can think that could possibly make your food bill that high. Eat less cheese.

I don't know which "big city" you live in, but unless it's NY or SF, your rent can be much cheaper. If your lease is up soon, look to moving to a less expensive neighborhood. I live in Chicago, and just a couple miles (heck, a couple blocks) is hundreds of dollars a month difference in rent.
posted by phunniemee at 11:31 AM on October 14, 2010 [1 favorite]

The preceding comments are accurate, but I will add my own. The human race used to survive without cell phones; I can remember those days. I personally have a land line for which I pay roughly $30/month, and no cell phone, as compared to your own expense of about $160/month on cell phones. Do you really need cell phones? My philosophy is, if someone is unable to reach me immediately on the phone, they can leave me a message (and my answering machine which I have used for many years, cost about $25, so that is not an ongoing monthly expense either). I'll call them back. No big deal.

If you are spending $700/month on groceries and also $300/month on entertainment, you would seem to be eating extremely well, and too expensively, as others have noted. There is lots of free entertainment available. The internet has endless entertainment for you, as does the public library, all at no extra cost (I don't suggest cancelling your internet service, that is worth paying for - although with some jobs, it is actually possible to do all your internet related business at work, on a business computer, and avoid even having to own a computer. But that is an extreme case, not for everyone.) If you want to be frugal, it is actually possible for you to entertain yourself for absolutely nothing. Especially since you are a couple, and can entertain each other. Food, also, can be much more economical - and still be both nuitritious and enjoyable. Adopt a more practical diet.

I would recommend that you pay off all debts even before you start to save money; those debts are very expensive in terms of the interest that you pay on them. If you should have some financial emergency before you have saved any money, you still have your credit cards, and can go into debt again if you have to, but hopefully you won't have to.

I can't really advise on the issue of what kind of job and/or education will best serve your interests - that is too complex an issue for me to assess.
posted by grizzled at 11:32 AM on October 14, 2010

We always seem to spend to our means. Saving is hard. The best way to save as has already been suggested is to take out the savings before you see it, to in effect, reduce your means. Have the designated percentage taken out of your check and deposited in a brokerage account or something. Invest it in stocks and securities etc. so that to take some of it out you have to sell something. Increase the threshold for spending this money. It can be hard to do this all at once so perhaps you start taking out only 3% per check, then in a few months it is 6% etc. until you get to where you want to be. You should try to save at a minimum 10% of your gross and more like 10% or more of your net pay.
posted by caddis at 11:35 AM on October 14, 2010

Yes, you are living outside your means. You don't seem to be spending more than you make, which is a huge accomplishment compared to many Americans, but you also spend way too much in certain places (as people have pointed out above).

For comparisons sake, my partner and I make combined per month about $5k. Our rent is $1700 (this actually is a deal considering where we live), our phones are c.$100 (both of us have smart phones), our groceries are c.$300 (and I cook dinner every night, and breakfast + lunch on weekends), and we save about $1500 per month.

It isn't that you are spending extravagantly, but the little things add up. The buying lunch out everyday, the $25 per day you apparently spend on groceries, the having iPhones (or any smart phone). Society teaches us we deserve all these things and that they aren't extravagant, but in reality, they all are. Decide what "special extras" you want to treat yourself to, and cut the corners every where else. If your iPhones are what matter, stop eating out so much, or spend less on groceries.

Most important, save first. I have all my savings transfered out of my checking the day that I get paid, so I can't even think about not saving it. Then I can spend what I have left.
posted by CharlieSue at 11:36 AM on October 14, 2010

Beyond a rainy day buffer, don't save a penny until you pay off your credit cards. Seriously.

Similarly, student loans.

If FH can make twice as much outside of academia, then warm up that resume and go do it. He's an idiot for not. He can always go back to academia once you've achieved your (presumably) shared goals.

One thing I found was that I needed more granular categories than, say, "groceries" to find out where my money was going (I use Quicken, but I assume Mint allows similar). For example, when I carved "groceries" into "essentials", "booze", "luxury", and actually looked at my receipts and categorized, I realized that a bottle or two of good wine a week meant a couple of hundred dollars a month. Steak instead of chicken, ice cream instead of some fruit. Similarly, when I created a "Starbucks" category, I realized how much my ex-wifes every morning, $5+ latte-frothy-something habit cost us a month.

P.S. - Did I mention money issues were one of the biggest factor in my divorce? A little incentive to get a handle on this now.

Ditto, my partner and my child, serious foodies all around, usually looking for best and most interesting ingredients, don't rack up $700 month in groceries, even if "groceries" include booze. Wow.
posted by kjs3 at 11:37 AM on October 14, 2010

Check out All Your Worth, which was very helpful for me. Instead of an "every last candy bar gets written down" budgeting plan, it basically suggests a broad balance for your expenses: 50% for necessities, 20% for savings, and THEN -- and only then, once those two categories have been met -- 30% for extras.

Now, this forces you to be really clear about what's a necessity and what's an extra. Food is obviously a necessity, but with $700 in groceries a month, you are obviously buying a lot of non-necessary food. Are you buying a lot of pre-made food from the deli instead of cooking it yourself? Are you buying name-brands over store brands? Are you buying individual serving-size packs when you could buy the same item in bulk? Are you buying lots of snacks and sweets? Do you go grocery shopping without a list or without menu planning for the upcoming week (or at least a few days)? All of these habits are really easy to get into, but can also spell literally hundreds of dollars down the drain every month.

The thing that's nice about getting things in balance is that it doesn't force you not to do things you enjoy, such as going out to dinner or seeing movies or buying clothes or whatever. It just gives you a very specific dollar amount that can be spent each month AFTER you've A) met your true necessities, and B) put aside your designated amount in savings/retirement (set up automatic transfers if you can, so that the money goes directly into savings and retirement before you ever get the chance to spend it.)
posted by scody at 11:39 AM on October 14, 2010

Response by poster: Just to point out, our combined TOTAL NET income is $4k. $4k /= all available funds for joint expenses and savings. We both have our own bank accounts from which we pay off our credit cards and pay for our personal expenses (like hair cuts, doctor's appointments, clothing, etc.). We also have a joint checking and savings account where we move in shared expenses. We don't pay our credit cards from our joint account. We make our own decisions on how we pay off our individual credit cards. That's what we've been doing so far. If you think it's a good idea to budget that as a joint expense, say so!

I know, I know. The groceries. DUN DUN DUN. Honestly, we couldn't tell you. We make a lot of things from scratch. We rarely ever, ever eat meat. Seriously. We're totally working on this, and I could have said that our real spending was less, but $700 is currently what we have budgeted for groceries on our budget spread sheet. It is not what we are currently spending on groceries. It was like, this was the most we've ever spent of groceries, let's plug that in so we don't get into trouble. Got it? Okay, cool.
posted by your mom's a sock puppet at 11:40 AM on October 14, 2010

Step 1: Put money into your savings account FIRST.
Step 2: Pay bills next.
Step 3: Spend whatever is left on whatever you want (including groceries).
Step 4: There is no step 4.
posted by blue_beetle at 11:48 AM on October 14, 2010 [1 favorite]

I'm surprised so many people think $700 a month is a lot for groceries for two people in a big city! Especially if you're eating a lot of produce, local/seasonal and healthy stuff, it's really not that far fetched. I buy seasonally, prefer the farmers market, and don't buy much meat and definitely spend about that much on food. There is no way I'd ever recommend buying lesser-quality food (imported produce that's underripe when it's shipped, hormone-laden meat and dairy, etc) just to save a few bucks.

I do agree about cutting down on entertainment expenses. If anything, living in a big city should mean more opportunity to entertain yourselves for free or very cheap. Take lots of walks, sit in coffee shops and read books (or do some fun hipster-sighting), attend artsy events at the local community colleges, etc.

Remember that you're young and you're not making as much now as you will later. I was in a similar financial situation at your age, and constantly wondered how I'd ever put aside anything at all. Just within the last few years it's suddenly got a lot better and poof! I have savings. Just keep trucking along. Even shaving $100 off your grocery bill and putting that in savings will add up over time.

Oh, and set up an automatic monthly withdrawal for that $200 a month that rarely gets saved. Out of sight, out of mind.
posted by joan_holloway at 11:54 AM on October 14, 2010 [4 favorites]

Honestly, we couldn't tell you

This seems to be a theme in your budgeting. You have room in your budget for savings, but it doesn't get saved.

Start tracking your spending. Every purchase, every penny. I use a google doc - that would allow you and FH to share and both add to it (from your phones, even!).

At the end of the month, categorize your spending. I agree you need to go more granualr than "groceries". Then each of you should rate how you feel about the amount you spent in each area. If it makes you happy to spend $160 on cell phones and you really enjoy them, it is fine to spend $160 on cell phones. What other people think is reasonable doesn't really matter. If there are areas you both want to cut back, start there.

It also sounds like you don't have a set amount you're putting into the joint account, you're just transferring money when you need it. Figure out how you can have a set amount. Maybe you need more frequent finance check-ins / a set amount that triggers a balance check and spouse check-in? Having a functional shared budget will help each of you budget better for your personal stuff/debt.
posted by momus_window at 11:59 AM on October 14, 2010

Also, you say your using to track spending, but are you using the budgeting features?

Are you paying attention to the alerts when you go over budget? When you go over in a certain area, are you deducting from another area to make up for it? Do you have goals set?

Are all your debts and credit cards listed?

In other words, besides tracking, are you using to its full effectiveness?
posted by zizzle at 12:01 PM on October 14, 2010

Response by poster: From "FH":
I'm in science, so my considering going back to grad school wouldn't mean more student loans; just less take-home pay, in the form of a stipend. It would probably cut our net monthly income by 15%.

Finding the job that pays me what I could be making is far easier said than done. It would probably require a relocation, which would mean FW leaving her job, so we'd break even until she can find a similar one. If we're not relocating, I'd probably have to commute by car every day instead of by bike, like I do now. To top it off, I can't really leave my current job until next summer at the earliest. I'm in a small lab in a small field where reputation matters a lot-- my current boss's recommendation is what would get me another job, and I'd never get it if I left him high and dry by leaving anytime soon.

Re: groceries-- we're now much much better that what's listed in our budget. We're not to goal level yet, though. Still, $700 is probably not the result of a perfect division of expenses; my guess is that it includes more housewares than it should, plus laundry detergent, cleaning supplies, that sort of thing. It's also not an average amount-- it's a peak.

Moving would be tough for a few reasons. There are fixed costs, and they would take a while to balance out. We're not sure we're going to be in this city for too much longer-- even a year is hazy. Plus, we have a dog. Our current location is very very convenient for both our jobs. I don't think it will happen.

About the shared accounts-- this is what we do: we take the line-item budget given in the original post, tack on savings and a safety margin of 10%, and call that our shared monthly expenses. We then calculate the sum of our monthly income, and put in the same PERCENTAGE to add up to our shared monthly expenses. What's left goes towards credit cards, individual meals out, haircuts, clothes, gifts. It's not an "as needed" sort of thing.
posted by your mom's a sock puppet at 12:12 PM on October 14, 2010

So your rent and utilities together is $1300? That's 32% of your income. Should be closer to 25% to effectively save.

That was the case, and in an ideal world perhaps it still would be, but with inflation and housing costs I recently heard a figure of 40% being acceptable. If you live in a major city especially on the northeast corridor or I imagine on parts of the west coast, then a rent of $1100 (esp. split between 2 people) is pretty dammed reasonable.

I'm pretty much always living on the edge and have never made a ton of money. My ability to save is minimal, and my tricks are pretty standard. I separate my fixed expenses (in my case my rent, which includes all of my utilities, netflix, metro card, and student loans) from my variable expenses. So I take my net pay and subtract the amount for my fixed expenses, then subtract the amount that I amount that I have to put in savings and divide the rest in 4. Ideally I will take out that much from the bank every week, and once it's gone, it's gone. In reality I'm not usually quite that disciplined. But you know, at least for me there is only so frugal I am willing to be, before I just want to stick my head in an oven. I live in a minimally furnished studio (and it's mostly inexpensive IKEA stuff). I've never had a car, cable or a contract cell phone. I do have DSL at home, and I do have a pay-as-you-go cell phone for travel and convenience, but I spend less per year than I would on a contract phone (even Virgin's $25/month plan). Yeah I'd love to have an iphone, but guess what? You can live without one.

However I sympathize with you on the food front. I don't do costco (well I don't drive and live in a tiny studio so I don't have the space for bulk food) and I try not to eat processed foods, so most of items for which there are coupons don't appeal to me. I go to the farmers market and splurge a little on fresh local produce, then I try to pick up as few other items I need at WF focusing on their 365 brand products and whatever is on special. Once in a great while (like once every 3 months or so), I'll treat myself to a nice piece of steak. I do buy some frozen fish. I'm good about bringing my lunch almost every day, but I also go out and get a latte with one or two former colleagues most mornings. I've decided Suzy Ormand can go eff herself. I live alone, have an isolating and somewhat dull job, and if that latte with friends saves my sanity for the day, it's more than worth the $3.50. I just make sure that I factor that into my grocery budget.

TL;DR: Life is too short. Most people can't be super frugal about everything for long periods of time. Some people splurge on clothes, but count pennies at the grocery store. Some people will pay a bit more than they should for a nicer apartment. I think that's OK, as long as you realize that you have to to cut costs in at least a couple of other areas of your life. For me at least this is a better path than being draconian about everything. Once the savings start to accumulate, you may find that you are loathe to dip into it and do everything in your power to live within your budget.
posted by kaybdc at 12:27 PM on October 14, 2010 [4 favorites]

Saving isn't really a math problem. It's a psychological problem. You have to make the decision to stop spending money. It's not enough to set goals, to track your spending, or to make long term plans. These things can help you, but they aren't enough. Saving means changing your habits - changing the way you live your life every day. Every single time you want to spend money, you have to stop yourself and either spend less than you usually would or not spend at all. The problem is that you're comfortable with your current spending practices. They feel normal and you feel entitled to them. You feel entitled to entertainment, entitled to go out to restaurants, entitled to convenience. Learn to say no to yourself - this is the only thing that has ever worked for me. If I want to save, I can still join my friends at the bar, but I can't drink. I want to, I feel entitled to, it's just one drink - but no. I cannot drink, because I want to save. If I want to save, I can still have pasta for dinner, but I can't buy the expensive stuff at the local grocery store. I have to walk to the other, more distant store I know about where I can get it for half the price. I feel entitled to just buy the stuff that's under my hand at the store that's next to my apartment, but I can't, because I want to save. I am walking down the street and pass a coffee shop. I want a hot chocolate. But I can't have it, because I want to save. I don't enter clothing stores, because I am weak-willed and I want to save. I want to go to a movie, but I don't, because I want to save. I want to order a pizza, but I make myself go pick it up, because I want to save.

Every decision you make every day - tell yourself no. And you will save all kinds of money! You only get what's really necessary. Buy the cheap soap instead of the nice stuff. And stop buying clothing. You're not in danger of going naked. You don't need new makeup either, or new books. You do need a library card, and you do need to walk when you can instead of taking the subway or a cab.

If you can live like this for a full month, you'll see how much you can save and adjust as needed.
posted by prefpara at 12:35 PM on October 14, 2010 [3 favorites]

See the point of a budget is that it accurately reflects your best estimate of costs not some random figures you pull out of thin air because you think you may have spent that much one month. So go through your bank statements and credit card statements and actually work out how much money you do spend - should get to an average of $4k because that's what you say your net income is, unless you are building up debt at the moment.

Then you plot your expenses monthly - go by actuals as per your above analysis.

Then you identify any annual/six monthly/quarterly expenses and smooth them across the year to smooth out your cash flow. But you keep them highlighted in some way. Because that's how much you need to 'save' each month just to smooth out your cash flows, i.e. secure liquidity is adequate for all known expenses - this is not rainy day money, this is just so the car tax you'd forgotten about doesn't bite you when it's due.

Then you work out what you want to save and save it, in addition to the above cash flow smoothing.

As to how you save? Firstly, the chosen amount gets transferred into a savings account on payday and gets forgotten about.

And how do you free up cash to save - hopefully the detailed budget will highlight all manner of things that are not strictly necessary, that didn't make it into your hit and miss budget above and that can be cut/reduced/a cheaper deal found.
posted by koahiatamadl at 12:39 PM on October 14, 2010

The truth of the matter is that making what you're making, it's going to be almost impossible to do any real kind of savings, and the answer to "How do people make this work?" is either "They live in Iowa," or "They just don't."

A net income of $4k a month is a gross income of about $5k a month, so you're pulling in, what, about $60k a year? That's what I'm doing, and I'm not saving a dime, though that's mostly because my student loan bill is in excess of $1000 a month.

My advice to you would be either 1) Find some way of bringing in more income (which is what I'm trying to do), or 2) cut your expenses by 10% across the board. You can do this, particularly in the groceries, cell-phone, and entertainment budgets.

Look, you're living a lifestyle as if you were established professionals. You aren't. Bring your expectations in line and settle on a lower standard of living and you'll find there can be some room in the budget at the end of the month.
posted by valkyryn at 12:48 PM on October 14, 2010 [2 favorites]

One suggestion that no one seems to have made yet: have you tried earning more money? I and just about all my friends have second jobs -- usually a freelance gig or 10-hour/week job in an area that we like and want to develop our skills in. Even if you're only talking an extra $5k per year per person, that can really help to wipe out debt and build your skills. The key, though, is to earmark that money for savings or debt reduction -- don't let it get sucked into the household budget.
posted by ourobouros at 12:53 PM on October 14, 2010

1) Find someone you like and trust and who is young and gainfully employed,
2) Rent out a room to them (assuming you have one available). Charge a little less than they'd be able to find elsewhere so they aren't tempted to move out.

This is what I've done since I bought my house 6 years ago. It's the reason I'm not only not bankrupt, but have decent savings and disposable income.
posted by coolguymichael at 12:57 PM on October 14, 2010

Can people please stop with the "OMG $700 for groceries!!!!"? It's not that much. I + wife spend close to $1K a month on food - with zero on processed stuff, and no meat - and we rarely go to restaurants - maybe once every couple of months. A lot of fruit and vegetables, nuts. A bottle of wine a week. Some supplementish type stuff - whey protein, nutritional yeast, flax seed, plus some vitamins and minerals. Not shopping at expensive stores - Trader Joes and an ethnic market and online (for supplements). The kicker? We really do it very cheaply - if most people tried to duplicate what we do, they'd spend way more (example: apples for 99cents/lb - we rarely spend more on apples, and so on for all fruit/veggies). But we eat with health in mind - 4-5 different types of fruit a day etc. - that's what costs money - having a good diet.

To OP: watch things like Starbucks. We spend about $100 a month on Starbucks, Coffee Bean etc. It's not the big items that get you - it's the dozens of little things here and there, $20 here, $9 there - it all adds up. That's what I found when I analyzed our budget - your thrifty instincts kick in when you are looking at anything above $50 - say that $600 camera; sadly, your instincts are dormant at $15 or so - and eventually you find out you spent $500 on small incremental purchases here and there. Cut out the small stuff!
posted by VikingSword at 1:02 PM on October 14, 2010 [3 favorites]

Yeah, you need to each do your own personal budgets (using real data) and then do a joint budget (also based on your actual spending data) from that since the amount of money that can go INTO paying for these expenses is dependent on what you spend on your personal, non-tracked expenses. Otherwise you get a budget like this one, where spending + taxes + savings doesn't equal income, and you can't really wring any answers out of that because it doesn't make it clear what you need to keep your total spending under, and it also ignores a bunch of personal expenses that you could quite possibly cut down on to save money.
posted by phoenixy at 1:21 PM on October 14, 2010

Oh, also--you don't say whether you are currently putting money into the 401(k), but unless you are planning on something like filing bankruptcy or are getting an employer match on your 401(k) funds, you should prioritize building up an emergency savings account with 3-6 months of savings before contributing to your retirement funds. Otherwise you end up having to withdraw from your 401(k) in an emergency and then you have to pay a 10% penalty and it's just icky and you will feel dumb.

(If you aren't getting an employer match on the 401(k), consider a Roth instead--since it allows penalty-free withdrawals of the principal it's a retirement account that can double as an emergency savings fund in a pinch.)
posted by phoenixy at 1:30 PM on October 14, 2010

None of your expenses are, on their face, unreasonable (I won't do a pileon with the groceries). Your problem is that you guys don't make enough money. I really don't think that $300/month on entertainment expenses is out of line-- sounds like going out to dinner twice a week with a movie every now and then. However, on your income level, you just can't afford that. Stick to less expensive family-restaurant-type places and free cultural/music/art events. The question is whether you feel that this sort of lifestyle is tolerable over the long term.

Unless your fiancé/future husband both loves academia and is in a field with good salary prospects post-PhD, his best bet is probably to leave academia for greener pa$ture$.
posted by deanc at 2:05 PM on October 14, 2010

Look into couponing. For this you need to google around and find websites that will help you find the best sales and what coupons to use with them. I use but they might not be right for your area-but if you have a look at them you will see what I am talking about. If you find the right site the site will do most of the work for you.

Also is an excellent blog with lots of info on what you are asking.
posted by St. Alia of the Bunnies at 2:09 PM on October 14, 2010

Hi! I'm future you! My husband and I recently realized we were spending a disastrous amount on groceries just to eat healthy. After some new habits like meal planning, we now eat for less than $300 a month while shopping pretty much religiously at Whole Foods (Yes, that's Whole Paycheck) for health reasons. (Major food allergies just make shopping at WF easier) Organic, awesome food and neither of us spend all day cooking either. For what it's worth, here's what we did:

1. Decide on a sane amount for groceries/housestuffs. No, don't think about this too hard! So you're spending $700 now. Next month, you're spending $300. And it's going to be awesome. Take out $300 from the bank. In cash. This is important.
2. Every Saturday morning over coffee, take a peek at your favorite food blogs/cookbooks/whatever. Take a peek at the weekly ads for your grocery store of choice. Get out your pen and paper.
3. Write out each day of the week, and pick a meal for most days. Don't forget to schedule in a "leftovers" day or a special night out when you won't need to cook! You're already not eating too much meat, so that will help. Meat is expensive. Try to pick one "gourmet" meal a week then fill in the rest of the week with meals that take cheaper pantry staples. Stick to simple recipes with fewer "special" ingredients and more pantry staples.
4. Make a grocery list for what you'll need. Don't forget to check the fridge first to see what you already have.
5. Shop! Stick to the list. If one of you sees something delicious, you're required to answer one question first: "What night THIS WEEK are we going to eat this?" If there's no room in your plan, then it can wait until next week's trip. Shop ONLY for this week's meals.
6. Don't forget to buy generic and keep an eye out for sales.
7. Stick to the plan! Next week, if you have any leftover goods, work them into the next menu.

Even shopping entirely at Whole Foods and Farmer's Markets, we manage to average $50-$75 a week. And we still can find room for meats, cheeses, gelato, all that good stuff.

It's amazing what a plan has done for us. It's great! If us WF yuppies can do it, you can too. Good luck! :)
posted by ninjakins at 2:10 PM on October 14, 2010 [12 favorites]

It looks like you're doubling/tripling up on things. You can get a lot more bang for your buck. To wit:

iPhone == entertainment
iPhone == internet
internet == entertainment

Ditch the iPhone. That's nearly $2,000 a year. Also, your entertainment expenses are crazy. Does "going out" (under "entertainment") include meals? Is that in addition to your grocery item?
posted by Civil_Disobedient at 2:26 PM on October 14, 2010

Here's some practical advice that might help (rather than my earlier diatribe). You said that you're current savings goal is $200 per month but that you rarely achieve that. Until you further analyze your budget and trim the fat, save $100.00 month. Have it deducted directly from your paycheck and put it in an ING account (or some other account where you won't have easy access to it). Make it non-negotiable. I think even if it were only $50.00 per month, but you did it each and every month--no exception-- it would establish a healthy habit of paying yourself first for savings. I wish that I had done this when I was younger, even when I was dirt poor, even if I had only managed to save $10.00 per month. As your pay rises, try not to change your standard of living too much, and put the additional money into your savings. Allot 20% of any tax return or other windfall as "fun money" and either bank the rest or throw it toward your debt.

Pay more than the minimum on your credit cards every month, but don't go crazy. It does you no good to attack them aggressively one month, only to have it blow up in your face because you've run out of money and need to use them again. Plenty of others here will disagree, but I think that, given the rather moderate amount of credit card debt that you have, it would be better for you to pay them off gradually, leaving yourself enough extra for an emergency fund so that they won't have to use them. This will reinforce the saving as a non-negotiable habit and will keep you from pulling out the credit cards "in an emergency."

I consider these as middle-of-the-road doable strategies. The results won't be as dramatic as a draconian austerity budget or dramatically increasing you're income, but it's very doable, which will hopefully translate into success.
posted by kaybdc at 2:26 PM on October 14, 2010

Okay, it seems like you don't have a real budget per se, you have a "how do we split joint expenses" plan. Which is fine if that's all you want it to do for you, but if you want to figure out budgeting and savings, you need to take a look at that ~$1500 every month that goes towards miscellaneous expenses and debt payment. Include that amount in your budget. Budget a certain amount for debt payment and an amount for individual entertainment/meals and an amount for miscellaneous/unpredictable expenses and whatever else. You can bunch some of those categories together if you want to have more individual choice (i.e. combine individual entertainment with debt payment and decide how you each want to balance that, or whatever)-- heck, even though I wouldn't recommend it, you could keep them all bunched together in the same pot at an amount pretty close to what you're currently spending. But at least put a dollar amount on it and track it and do your dardnest to stay within it.

Otherwise, if your plan is "and then the rest of the money goes to everything else," you're pretty much setting yourself up to be running out of money at the end of the month with not much left to save and no idea where it went.
posted by EmilyClimbs at 3:19 PM on October 14, 2010

nth-ing the notion that $700 is an insane amount of coin to be spending on groceries. When my now-wife and I started living together, I lost my job soon after and started receiving food-stamps. We fed ourselves on $200 dollars in food stamps a month, and we ate like ROYALTY. Even now that we're both gainfully employed, we only spend $250-275/month once you throw alcohol in there, but that number is further shrinking now that i'm brewing beer at home. We shop at a combination of upscale Whole Food-esque stores, farmers markets and discount grocers. It's doable, and it's not that hard.

I've had this exact conversation with many of my friends of the same age bracket; my biggest suggestion is don't avoid meat entirely or even downplay it. Over at our local health food store you can get a whole chicken for appx $2.50/lb. Boneless, skinless chicken breast costs 5.99/lb from the SAME BIRD. You'll pay about the same amount for 2 chicken breasts as you do an entire chicken, but you get waaaaay more and the combinations of food you can make with a chicken and 1-5 other ingredients are infinite. When we buy one chicken, it works its way into at LEAST 4 dinners, and 2 lunches, oftentimes more than that because we make stock from the leftovers.

I don't normally like most of her books, but especially for startes I highly recommend the Alice Waters book The Art of Simple Food, if nothing for the section on building a pantry and some basic cooking techniques to be used with low cost cuts of meat. There are also numerous blogs out there on how to eat well, for not much money.

If you brought your grocery bill down to 250/month, you'd be saving just shy of 6k a year.
posted by furnace.heart at 3:34 PM on October 14, 2010

I was never able to get a handle on this until I tracked our actual purchases. ALL of them. We did this by having a joint debit account, and using that for everything (well, 95% of everything, but that was close enough for our purposes). Then I went through our statements, line by line for a year, and assigned the line items into categories. Then we looked at the categories.

I don't think other people can tell you what you should cut. I don't think $700 a month is crazy to spend on groceries, but I do think your cell phone bill is crazy. Opinions differ and it doesn't matter very much what I think. You need to make your own decisions, but to do that properly you have to have the data available.
posted by Kwine at 3:42 PM on October 14, 2010 [1 favorite]

My husband and I are pretty close to your income (bring in around $4,500 per month with some windfall months and some leaner ones) and pretty close to your outflow in most areas (rent: $1400, food: $600, utilities: ~$100). We are able to save $1,500 per month minimum with a few hacks.

Savings comes first. Period, no excuses. It gets transferred automatically before we're able to touch it. And anything leftover gets saved as well. (We're currently using this savings to pay down student loan debt aggressively; planning to pay off ~$35,000 in one year. After that, it'll go towards home/future.)

Cell phones can probably get cut back -- we both have smartphones as well, but we pay less than $100 per month combined. Look into family plans, work/school discounts, cutting down to a lower tier voice and/or data and/or texting plan. The 'average' plan sold by cell phone companies is WAY more service than you probably need. You're in a new contract so it's probably not worth switching to pre-paid or anything, but you can drop your data, voice and texting plans down with AT&T and they usually won't extend your contract.

Where's your eating out category? Is that the same as entertainment? Is alcohol included in there? Breaking these things out into specifics helps you really figure out where to cut back. Maybe 90% of your entertainment category is really alcohol -- maybe your groceries category is really 30% household items like lightbulbs and detergent. I think your budget and/or joint expenses plan is not complete. We have over 30 categories in our budget, to make sure everything gets accounted for. What about clothing? Laundry? Travel/transportation? The more specific you can get, the more accurate of a picture you'll see. I wonder how well you're really tracking your spending, too, if one of you says the $700 is an average amount for groceries over the last year, and the other says it's a high watermark. You can't do a lot with bad data.

As others have said, most of personal finance is not a math problem but a behavior problem. Money will not save itself, so having a $200 budget line item for savings but making no effort to put that money into a savings account means your balance will never go up.

The good news is that, on paper, I see a lot of possibility for you to save. You have some categories you can cut back in, and your income has a lot of upside. You're not in a situation where the alternative is to move back in with your parents and apply for welfare -- you're not even in a situation where you have to cut back much, if at all, if you just make the savings automatic.
posted by peanut_mcgillicuty at 4:05 PM on October 14, 2010 [2 favorites]

I'm going to sign on with the "kill the credit card debt" crowd. Do it aggressively.

There's a huge psychological difference between "I'll just add a little to the credit card debt this month" and "I'll go into debt this month". You're a lot less likely to rationalize doing the latter.
posted by gurple at 4:08 PM on October 14, 2010

I have nothing to add about budgeting, I'm terrible about it too. I just popped in to tell you about Southern Savers. I haven't paid for razors, shaving cream, deodorant, laundry soap, toilet paper, ...... for well over a year. Once you get it down it becomes a bit of a game and all of your savings can go straight to...savings!
posted by PorcineWithMe at 4:35 PM on October 14, 2010

The truth of the matter is that making what you're making, it's going to be almost impossible to do any real kind of savings, and the answer to "How do people make this work?" is either "They live in Iowa," or "They just don't."

I agree with this, with a few caveats. This has to be the bottom-line approach: you can sweat and curse to find the small savings in your current budget, or you can put a lot less effort into, and get much larger rewards out of, raising your income. Most of the people "making this work" are doing it by earning more or getting financial support from family (more adult people than you would imagine support their lifestyles with allowances, gifts, "loans" that don't need to be repaid, and inheritances); it's a lot harder to do it through raw thrift, and probably impossible without cutting things that you would really miss (eg your nice apartment).

But the caveats are very real, too. Biggest, I think, is that your current "budget" allows you so much slippage that you are spending everything without having to question anything. You need to tighten things up in a big way, and do some serious tracking of the money. You need big categories (eg "entertainment") but also broken out into subcategories (eg "bars," "date nights," etc).

And you need to get a lot less fuzzy on the future planning. He's thinking of going back to grad school? Don't get hand-wavey about a possible "15% cut" -- call that department and find out what the normal graduate stipends are, whether they are for 9 or 12 months, is insurance included, etc, and then make plans with real numbers. There's a big difference in your budget if the stipend is a crappy $14,500, compared to a much more generous $25,000 with lots of goodies included.

Lastly, I think you would get a lot out of perusing the archives of the Get Rich Slowly blog (written by a mefite). The very real-world, gradualist approach discussed there is one that will work for you.
posted by Forktine at 5:02 PM on October 14, 2010 [2 favorites]

I'm going to sign on with the "kill the credit card debt" crowd. Do it aggressively.

Back in the day, as suggested by my accountant brother... every time you charge something, take it out of your bank account balance as if you'd written a check, because it is money spent. Then, when you get your bill, you know you have the money to pay off the full balance. Carrying charges are death to saving.

On the grocery thing, maybe you could have one or two "poor days" a week where your goal is to spend the absolute minimum on food. It can be fun, coming up with meals that qualify (e.g. a big pot of veggie chili that you immediately divide into portions for freezing, no snacking allowed).
posted by Short Attention Sp at 5:19 PM on October 14, 2010

Yeah, you know how I and the other poster up there mentioned Southern Savers? If you use your coupons smartly you really won't ever have to pay for dish soap ever again. I'm serious. Please investigate it-it's a great hobby. Like hunting without having to kill anything. :)
posted by St. Alia of the Bunnies at 5:31 PM on October 14, 2010 [1 favorite]

Other people have specific line item suggestions, whereas I have slightly more general advice that I guarantee will help :) --


Yes, instead, keep it in your pocket at all times. Keep it in your bank account. Move it to your savings account. And... that is all. Everything below just expands on this advice.

What helped me not spend money: a really good reason not to spend it. Once I was working two jobs. My second job paid nothing and was horrible. Every single decision became "is this worth 10 minutes of that hell? No, I'd rather quit 10 minutes sooner." At the end of the day, I'd look at the $48 still in my wallet and feel very happy. I counted my cash all the time and treasured it. Sick? Perhaps. Successful? Yes. I really cut my expenses during that time. For no other reason than that I walked around thinking "there is no way I'm spending $6 on that." Money became worth a lot to me. Similarly, right now I have a big expense I need to find a way to afford. It could use all my money, or more. So, I try to spend next to nothing. I created a tiny grocery budget and try to leave with change. At the end of the week, I take whatever I managed not to spend and move it to the special fund. In the meantime, I walk around the grocery store using my phone as a calculator trying to figure out how to stay full and happy for $30 or whatever. And really, it makes sense that you need a reason not to spend all the money available to you. Because if you can, why not buy $8 organic blueberries in January? They are delicious.

A comment now on attitude: I long feared scarcity. But scarcity, at least at this level and when chosen like this, isn't so bad. It is empowering. I thought it was fun to spend money, but it is more fun to take your life into your own hands. Each "no" is a victory over temptation, a declaration of independence, and a step toward your goal. You also discover unexpected resources and spending power. There are so many examples: the apple tree up the street, coupons, the extras after the work party, the big bag of dried beans in the pantry, those "decorative" hanging hot peppers someone brought you from New Mexico, the cheap markets, happy hours with all-you-can-eat snacks, free movie night, volunteer activities that are free entertainment and feed you, and a variety of delicious lentil and potato dishes. You need a reason to look for them, and that's why this tightly-constrained budgeting makes your life more like a game.

A suggestion for getting started: it's the 14th, so paychecks likely arrive tomorrow. First, take everything but $7 in your account right now and put it into a new savings account. You can live on $7 until midnight. Then, when paychecks arrive, add up your incoming bills, the minimum you need for commuting, and $40. Move all the rest to that savings account and for the remainder of the month, live off of that $40 for food and entertainment, or find a way to cut bills or create more money. If $40 isn't right, whatever amount you pick, make sure that it is low enough that you will second guess every single expenditure ("the bridge toll is $6 now??") and primarily eat the food you have in the house.

My advice to you, then, is to resolve to not spend money, regard your growing savings account as your reward, and embrace this new discipline as fun and empowering. But the second two are optional. Even if you sink into feeling miserable, at the end of six months, you'll still have a nice savings account if you at least do the first item ("do not spend money").
posted by salvia at 5:56 PM on October 14, 2010 [6 favorites]


Okay. After reading these, and seeing that you use (that's a good start), I think I see one hole in what's going on here.

You say that you track your spending with Mint -- but Mint has one bit flaw, and that is when it comes to cash. You either have to break down every last little tiny cash transaction after you pull cash out of the ATM and painstakingly enter it all in under that one cash transaction, or you just say "fuck it" and let it ride.

I also notice that you have a budget -- but you still aren't' sure where your savings are. But you also say that you developed your budget based on "what do we think we spend" or what's the most we think we spent."

I tried doing things that way too, but what finally helped me the most was taking a pad and paper and recording everything I DID spend. Every last penny. Cash or check or credit. For about a month. If it was money and it left my person and went to someone else, for any reason, I wrote it down.

THEN at the end of the month I tallied everything. And that's how I finally discovered that while I may have indeed budgeted $80 for transportation to and from work, and I did indeed buy that 80-buck metrocard, I did NOT account for the upwards of TWO HUNDRED DOLLARS I was also spending each month on cabs because of all the "oh, I don't feel like taking the subway this morning" I was doing.

Try observational data. If you're like me, something that was hiding somewhere easy to overlook will jump out at you and you'll go "yow, I had no idea" and that will be one very good first place to start.
posted by EmpressCallipygos at 8:56 PM on October 14, 2010 [2 favorites]

I spend what I feel like is a lot on groceries and I still rarely exceed $500. You can cut that very easily.

You realize that $700 is for two people, right? That's $350 per month on food per person, which isn't really that bad if you're eating healthy food that you make yourself. If there were two of you, you would be saying "We rarely exceed $1000".

I want to recommend the (ridiculously-named) I Will Teach You to Be Rich book (named after the blog). The name is ridiculous, and sometimes the blog is a bit sales-y, but it's got a lot things that I think are geared toward you:
  • It's geared very well toward young people, in ways including the language, the expectations about your financial situation, etc.
  • It's very no-nonsense. It doesn't baby you or mince words. It's very informally written and digestible
  • It focuses on big wins and the idea that you should spend your money on the things you really enjoy.
  • The advice is simple, and doesn't get into arguing over details. For example, he presents two strategies to repay your debt and then says "Just fucking pick one and do it. It's not that important which."
  • It's very practical-oriented. Even if you don't agree with everything it says, you can use it as a jump-off point.
One thing I think you should focus on (this is so rarely recommended when discussing personal finance) is making more money. $4000 between two people is not a lot (sorry, not trying to make you feel bad.) If you the I Will Teach You To Be Rich blog, he has a lot of tips, ideas and case studies for ways to make more money. Again, the focus here is very practical. He doesn't say "Hey, you should freelance", he says "Okay, here is a 5 step process to follow in order to start freelancing", or "Here's how you find your first client". Again, you may find the whole thing a bit smarmy, but there's really some good information there. He also uses what seems like extreme examples in his case studies ("how so-and-so makes $20,000 /month doing literally nothing at all"), but again, you can take his suggestions and apply them to your life in smaller ways, or at smaller scales.

I'm not a shill for this guy, but I really think he's got a good take on personal finance, and would encourage you to give him a chance.
posted by !Jim at 9:33 PM on October 14, 2010

0) 401ks aren't for for-profits. That's a 403b. Minor distinction, but potentially indicates FH works for a for profit academia in a big city.

1) You aren't the kind of people who are supposed to own iphones, on contract. At least not yet. The obvious thing to do here is go back in time and murder the salesperson that put you on that plan. I know data plans are fun, but lets face it, academic dude: campus has free wifi, so between home and work, you're pretty much covered.

2) 700 is crazy food budget. Don't budget for some unplanned but possible peak future expense. Figure out what caused that peak and plan for it separately, or eliminate it. You may need to save receipts to tease out food expenses from other household goods. The government publishes data on what the average American citizen spends on various kinds of food, but, like all great government data, I can't find it today. $500 sounds closer to reasonable, so hopefully there's 200 right there.

2) 300 dollars a month in entertainment. This is separate from cable and internet? Ouch. Half of that is fine dining. Is the other half alcohol and tobacco?

4) This isn't a budget. It's a poorly educated guess. You've got 200 in budgeted savings that magically disappears by the end of the month, and 200 in food that's not being spent. You've got no insurance premiums listed, no transportation, no gifts, no taxes and no health care. Go back, and try again. Pull up bank statements for 3 or more months, preferably a year. Your goal here is to plan for the average monthly expense of everything, and then start pushing those down. That means you start saving for six month car insurance premiums, car repairs, etc.

5) Stop using credit cards incorrectly. The best way to use a credit card is to never pay interest by paying it off monthly, so that effectively the bank loans you money for free. The next best way is to finance large important purchases you can't swing without it; the sort of stuff you used to buy on installment plans. The worst way is to make the minimum payments, and accidentally miss a payment once or twice. You have credit card debt and retirement savings? That is literally buying money high and selling it low. You know where this leads.

6) Start responding to our nation's income tax system with deductions etc to bump up your net pay. Fix your withholdings so that you aren't loaning Uncle Sam money interest free--he's already got great rates, and use the extra to pay down the cards. That house you want a downpayment for? Consider contributing to a Roth IRA, which is post-tax but earnings are tax free. The contributions you make are withdrawable any time and after five years the earnings can be pulled out for a downpayment on a first house.

You can go back to school, or you can stay in your current jobs. But you'll have to live on student budgets either way.
posted by pwnguin at 9:34 PM on October 14, 2010

Also check out the cashback credit cards some companies are rolling out lately - instead of rewards points it puts the money back on the visa as credit.
posted by lizbunny at 10:14 PM on October 14, 2010

Can people please stop with the "OMG $700 for groceries!!!!"? It's not that much.

In my experience, I disagree. We spend about half that for a family of *six* in a fairly expensive area. (Basically, only buy stuff when it's on sale for significantly less than the going rate. Stockpile when stuff is really cheap/free after coupons. This takes discipline and time, so many people don't like to do it. But it works.)

However, the point isn't really whether I think it's a lot. You (the OP) want to save money. You've posted some figures on what you're spending. People are going to find the easiest ways to do that from their experience.

But you know what? It doesn't really matter what we think. It matters what *you* think. Is $700 sacrosanct? Fine, carve out other stuff, then. You get to make the decision.

But make no bones about it--you do have to *make* that decision. And "I don't know" doesn't cut it. Only when you know where every cent is being spent can you make decisions about what is important to you. You can choose to keep spending on whatever wild stuff someone else might think is a waste--but for every dollar you spend, it's a dollar that you can't spend somewhere else. As long as you actually know how much is going in, how much is going out, and what your priorities are you'll be fine. But you do actually stare these figures in the face and then remember them every time the money comes out. If you want to spend money on some stuff (or save money) you do in fact have to decide what not to spend money on.
posted by RikiTikiTavi at 10:18 PM on October 14, 2010

Some excellent advice in this thread already. Wanted to repeat what the above poster said that it doesn't really matter what you could be saving money on as much as what you want to save money on, and ultimately what matters is your collective decisions.

My advice is to take a look at your past spending and ask the both of you whether it was something you really enjoyed/needed and whether those can be replaced by less costing alternatives. I think it's rare for people to spend money on purely unnecessary things; rather money is spent on things that could have cost less. (Try cooking your own gourmet food for work lunches, buy a decent coffee machine instead of coffee shops, etc) If you don't recall or care about something much after you ate somewhere or bought something then the general rule of thumb is that you can do without it or with a less costing alternative. Don't skimp on things if they are really important to either of you, but don't spend on things that aren't important to you either.

For longer term questions, engage in some educated guesstimation. Does FH really see a future for himself in academia, or in industry? Would going to grad school up his earning potential or personal happiness? Would one or both of you want to take time off your careers to raise kids in the future, and if so how much money would you need to save or earn in 5-10 years time?

Of course these longer term questions aren't really answerable but hopefully they can give you some idea of how to approach things.
posted by everyday_naturalist at 2:58 AM on October 15, 2010

It's been mentioned above, but it looks like you don't really have a budget at the moment, you've got a rough estimate of what's happened in the past.

Seconding !Jim's suggestion of the I Will Teach You To Be Rich blog, which currently is very focused on entrepreneurial stuff but has some fantastic savings and basic info in the archives.

I did the same thing EmpressCallipygos did and recorded every single cent I spent for a month. It's no way to live long-term, but as a limited-time project to help you understand where your money is going, it's golden. Your current estimates have a big hole of about $1000 dollars. Where's it all going? You mention separate accounts for personal spending like clothes and haircuts and so on, which is great, but these items need to be accounted for in the budget too so you have an accurate picture of what's going on.

If you keep track of *everything* for a month or two, I guarantee something will jump out at you as being lots more money than you really want to spend on that item. Why cut back on something you enjoy, when there's probably something you don't even notice or care about that you can drop easily?

And finally, once you've got an accurate picture of where your money's going, decide how much money you have for each category. When your paychecks come in, automatically deduct your savings into a hard-to-get-at account, automatically deduct an appropriate percentage to your bills/rent account, and then feel free to spend the rest on food and entertainment and haircuts or whatever. If you run out of money by the end of the month, you've still saved and still got your bills covered, you'll just have to eat tinned beans for a bit.
posted by harriet vane at 3:59 AM on October 15, 2010

Sorry, looks like the archives at I Will Teach You To Be Rich have been cut off to just the stuff that he's focusing on now. But the book will still have excellent information.
posted by harriet vane at 4:10 AM on October 15, 2010

I'm going to link to a comment I made in another thread about balancing saving and paying down debt, recommending a zero-based 'buffer budgeting' approach, and a piece of software called You Need A Budget that has saved my financial bacon countless times over the last few years. It's got an iPhone app too. Good luck.
posted by Happy Dave at 6:44 AM on October 15, 2010

Coming back in to say: call AT&T about those iPhones. You've already got them, and if you're like me you are probably addicted to your phone for the first time in your life, but you can *definitely* save money on that phone plan!

Just call AT&T and tell them that you are considering changing to another carrier and dropping the phones, and let THEM do the work of finding a less expensive monthly plan for the two of you, which they will do, because they want to keep their customers hooked.

AT&T relies on brand loyalty (it certainly doesn't stand on the quality of its coverage). So, yeah, call them and get them to help you out.
posted by misha at 9:34 AM on October 15, 2010

I think that tasty, quality food is a first priority expense because we are mortal animals. I'd lose the phones before skimping on food.

You might benefit from a more structured savings plan. My wife and I saved for our down payment by taking out a loan that was placed in a one year term deposit with the lender. When we did it, the interest on the loan was actually lower than the return on the investment. It laid out a strict schedule of monthly payments and a clear goal. At the end we had a good chunk of cash (and possibly an improved credit rating).
posted by bonobothegreat at 9:36 AM on October 15, 2010

Response by poster: Thanks for the input so far! Just some notes/updates:

We have ONE car which is registered in another state and paid for completely by FH's parents. We're lucky. We only have to pay for gas, and we don't drive often.

Our budget is much more detailed than the information I provided here, which unfortunately leads a lot of folks to fixate on the fact that our budget seems to be very vague/bad. It's a fairly complex spreadsheet, and it would obviously not transfer well over to plain text. I've lumped a lot of categories together and provided estimates for those categories for you to see. I appreciate the harsh judgment, honestly; it was what we asked for. However, I just wanted to clear that up. Our budget is not as vague as you might think, though perhaps it is as bad. Our main problem was that things always seemed to "come up" that took away from our savings, not that we were spending savings on ridiculous things.

I agree with a lot of folks that our cellphone bill seems high. That number was an approximate number based on the first two bills. We're only on our third bill (we just combined plans over the summer), so we're still working on figuring out what that'll really be. We are huge lovers of our phones and will not be giving them up. It would probably be worth while to call AT&T to negotiate some lower prices, since I've been a customer of theirs for almost 8 years (as of next week!), and we're already on their cheapest family plan.

We really, really are working to get our groceries down, I promise. We may even create an extremely LOW budget for that and make a game out of it, as some have suggested. Taking cash to the store is a great idea. We're excited, and I know we can get quality, healthy food for cheaper than $700/month, or even $500.

For now, we've decided on a few things:

-We're giving up on our separate personal accounts, and we're just going to put everything into our joint account. We're creating a strict budget even for our personal spending. We really want to be accountable for everything, and that's the only way we think we can do it.

-We ARE going to work on reducing our credit cards, and if we're good, they'll be gone in less than a year.

-We're also going to continue to put away $200/month for our wedding expenses, and I really believe in us!

-From here on out, I'm saving every receipt so that throughout the month we can put in the "real" total dollar amount spent on everything in our budget. For example, we'll have groceries: $300 and then in a cell under November: $273.37, which is what we actually spent in November. We hope that lets us get a more detailed grasp, and it'll help us remember what we spent last time so we can find the cheapest places.

-We're also dividing our expenses up more. Instead of just "groceries", which would include food, hygiene products, paper products, and cleaning supplies, we're going to have separate categories. Again, more details=easier to save.

Well, I think that's it for now... if I think of other things, I'll update.

Keep the great wisdom/criticism flowing!
posted by your mom's a sock puppet at 2:00 PM on October 15, 2010

Since we're in the middle of a recession, how using that as an excuse to skip the fancy wedding? I think it's a silly goal for anyone struggling to save money. Let go of the childish notion that it's your "special day". That's a fantasy crafted by the wedding industry (the people who make those disney princess dresses and big cakes). It's your life together that's important.

Have a small ceremony, a family dinner and trip to a domestic get-away (like in the old days, when people went to Niagara Falls). Put the money towards your down payment and throw a big party in your new house to celebrate beginning you new life together. As a parent, I'd much rather put money towards my child's house than throw it away on a lavish wedding ceremony.
posted by bonobothegreat at 4:14 PM on October 15, 2010

There are plenty of ways to have a nice wedding on a budget. Let's just help these lovely folks save some money and let THEM decide what they are saving FOR.
posted by St. Alia of the Bunnies at 7:01 PM on October 15, 2010 [3 favorites]

wow. so many responses. tl;dr. you say you have a car, so i can pretty safely assume that you're not in nyc. as a data point as part of a young couple nyc these are my thoughts:

1. sure, $700 is a lot in groceries, but you're not eating out a lot, and in a big city, things are often more expensive, even the basics like bread and eggs. can you live on ramen? yes. but you could also move to kansas and save money.

2. without knowing the city, can't tell you if your rent is too high. in manhattan, monthly rent is usually 1/30 - 1/40 of your annual income

3. at what rate are your savings accounts earning? what rate are your cc's at? student loans? i have a crazy amount of student loans charging anywhere from 5-10%, and my savings options are only making 3-4% max. so it doesn't make sense for me to save while carrying a balance of debt.

4. being young, in academia, and living in a big city in this era means not saving. as a side note -- why buy a house? in a lot of american cities, it makes more sense to keep renting. stop striving for this false "american dream" of home ownership (as 2008-present has shown, it doesn't really work out well for a lot of people).

Reassess your goals - do you really need a big wedding and house in the big city with a hefty 401K and no credit card debt, or is that an ideal that you have been conditioned to strive for?
posted by melissasaurus at 7:09 PM on October 15, 2010

Response by poster: We're actually having a fairly "small" wedding, as in, inviting fewer than 100 people, expecting around 75. As I said, our folks are paying for 95% of the cost. We'll have less than $1k to pay for on our own, which isn't a huge deal. No worries around our wedding, mkay? We are aware that the wedding industry is insane, and we're doing pretty well to avoid most of that crap. We're not even getting a wedding cake.

Our rent is a pretty good deal. We have a house in decent neighborhood. We love it, and $1100 is a really good price. Yes, we could find something a little cheaper, but we'd loose out on the great neighborhood and the newly remodeled house. We're choosing personal comfort over saving money, but being happy staying home every day in a house we love makes not going out easier. Also, out landlord doesn't raise our rent every year, so that's pretty good, too.

We'd like to eventually buy a house because we are both big into customizing our personal space, and that's fairly limited as far as renting is concerned. We're not interested in the white-picket fence ideal. We want a house that will be truly ours in 30 years, not just in deed, but in the way we've designed and changed it over the years. We're happy renting for as long as it takes, and we are obviously not going to take unnecessary risks to buy a house.
posted by your mom's a sock puppet at 9:22 AM on October 18, 2010

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