We were watching Brooklyn Nine Nine (great comedy!) last night and the main character (Detective Jake Peralta) had to face his own financial self. He’s 33 years old and doesn’t have a penny to his name - six massage chairs and DJ equipment – but no money. I’d call that the low end of the financial health scale.
Financial Plot Points
Jake’s apartment was going co-op. So all of the tenants had to show that they were approved for loans or have enough cash on hand to buy their $430,000 apartments by a certain date. Well, Detective Peralta spends more than he makes and definitely doesn’t have enough money to buy his apartment. But his coworker and childhood friend, Gina, lived cheap for years and had enough to buy the apartment and even offered to rent it to him.
He realizes in the end that it’s not a good situation when the admin at the police station is doing better than him. In the end, she buys the apartment and lives in it (Jake’s suggestion), and Jake sublets her current, cheaper place. It’s a win-win for everybody.
What Could We Afford?
This episode got me and Mr. BFS talking. If the place we loved had to be bought all of the sudden for $430,000, could we do it?
A quick look at our assets will tell you that we are betting on a long future. A bunch of our net worth is tied up with our two homes. The rental income from the first one is an ongoing “passive” income source (as you may know, rentals aren’t really very passive). Then we have a large percentage of our savings socked away in retirement accounts like Roth IRA’s and my old 401k, so we can access it at 59 1/2 to live off of or use it to buy an annuity like Annuity Buyer Cashinyourannuity.com if we felt like we wanted a monthly allowance instead.
So, what we’d be left with is our cash on hand and what’s invested in individual high dividend yield stocks. If we sold our current home for the equity cash and used all of our cash and stocks on hand, we would be able to put enough down to get approved for the loan for the rest of the $430,000.
That’s a little odd for me to think about. I think we are doing amazing, but we could sell, trade-in, and cash in everything we have and still not have $430,000. $430,000 is a lot of money.
In the big scheme of things, my husband and I are financially healthy and on track for financial independence eventually. This makes me truly feel for anybody that is trying to do the same around $430,000 basic apartments.
What do you think?
Amy, a BFS newsletter subscriber, left an excellent question in this month’s comment section that spoke to me…it’s a problem that I have too.
I find that even though we are meeting all of our savings and retirement goals, I still feel guilty about spending $250 a month on going out to eat. That averages out to 8% of our net income. Should I feel guilty?
No, I don’t think either one of us should feel guilty about spending our own money the way we choose. So why do we? I think one of the negatives of being a conscious spender is that you become too conscious of all spending. It’s been brought to my attention that I may be a little too money-centric at times.
Money and Me
Even my frugal mom was worried at one point in my life that I didn’t know the difference between being frugal and being cheap. Frugality is spending less or nothing on non-priorities, buying quality that lasts on the important things to us, and saving/investing the extra. Being cheap means spending as little as possible on everything to hoard the rest. The stuff doesn’t last that way and you rarely get to really enjoy the things you really want.
That lesson wasn’t an issue for me. My problem is that I seem to value my future self more than my current one. Every time I look at our spending for the month and things like restaurants suck up a little more than intended, I think about what we could have done with that money instead. Then I have to remind myself that we pay our bills, we save for our golden years, so it’s okay to spend for fun now too.
Breaking a Core Belief
I’m going to do it. I am going to break a personal finance blogger commandment. Here I go…
Lifestyle inflation is okay.
Yep, I said it. It’s okay to spend more than you absolutely have to. We all have different priorities. Mr. Money Mustache spends a minimum so he can stay early retired. He also can use his wealth to renovate his new home. The building of that wealth took sacrifice but now he can choose how to live.
Please note that I am pointing out that living paycheck to paycheck is NOT good. But lifestyle inflation after you can cover the rest and your future is completely up to you. I do still have my own financial line, lol. Padding is just a good idea since it gives you options.
There are no set rules on how you have to live. I want to enjoy my present as much as my future. I don’t need to spend everything we make to do that, but I will stop overthinking every $200 that pops up because I have pets. I won’t shoot myself for eating out to spend more time with friends or because we simply want to stay in without cooking. I am consciously choosing to only worry about hitting our goals before spending any extra.
If that ends up meaning that I work for 15-20 more years instead of just 10, that’s okay. We will not have any regrets. We don’t mind working now that we’ve found something fulfilling. And our older selves that can’t work will still be covered. That is how we have chosen to spend.
Back to the Original Question
Amy, do you honestly think the $250 a month on eating out is well spent? Do you enjoy it? Does it make your month $250 better? If so, then I’d stop feeling guilty. It’s a conscious choice. If you feel that you rather have that $250 for travel, savings, or anything else, then you should consciously change how you are spending it now. You won’t feel guilt once you decide whether you are happy or not with your choice. Prioritize and spend based on that.
How about you? How do you need to spend or save to live without regret?
My husband and I found Downton Abbey through Netflix and jumped in about a week ago. It’s general plot follows along with an Earl’s family in Britain in the early 20th century. The character development is enticing to me and the historical and political intrigues keep it from feeling like a simple soap opera. But as the personal finance geek that I truly am, I just couldn’t help zeroing in on the money aspect of it all. It’s showing that all of the money in the world doesn’t give a life purpose.
During World War I in Downton Abbey, everyone assisted in whatever ways they could. But after the war was over, that purpose seemed to vanish for a few of the main characters. This family has true wealth and power, but the end result is still that everyone is just looking for their life’s purpose. Money provides options. Money provides comforts. But money doesn’t provide a person with the meaning of life. That is up to us.
So for today, I’m putting aside my conversation about my consistent pursuit of financial stability. Let’s talk about what drives us…
Helping Each Other
So, how do we all find our purpose(s)?
I don’t have the answers. I try to follow my gut. Generally, helping others makes me feel “right”, so I make sure to make it a part of my life. This blog gives me a place to talk with you all and a way for some of you to reach out to me, so I consider it a priority. Laughing with friends and cuddling with Mr. Pug also feels right. So the purposes I strive on may not seem grand, but they can lead to sustainable contentment. That’s my main goal.
I seem to write out my thoughts for the day, hit publish, and then reply to those of you who add your 2 cents. But let’s really help each other out. For today, please feel free to chime in below to each other. Let’s really look into ourselves and share. If you have something to say to another commenter, reply. If we all bounce ideas off of each other, maybe someone who feels lost can be supported. If we can all use this space to simply help, maybe this can be a refuge of sorts to find ourselves. Or at least to make a human connection, which can be tricky occasionally.
Have you found your purpose(s)? Still searching? Any advice to the rest of us?
You may have noticed, but I am not a frugal blogger. I blog about frugality once in a while, but I am more a fan of solid budgeting based on prioritization. That means that I still spend money, I just try to spend it on whatever will make me the happiest on average currently AND in the future.
That said, I’ve been splurging a little too frequently lately.
- I had a nostalgic holiday and decided to buy “Lady and the Tramp” on Bluray when I saw it for $14 on Ebay.
- Everybody complimented a winter hat I have that looks like a panda, so I decided to buy 3 more animal hats with ear-flaps for a total of $16 – one each for my husband (duck), my Little Bro’ from Big Brothers Big Sisters (dog), and one of our Canadian friends (moose).
- Crocs were on sale and my husband and I wanted a new pair each, so I splurged the $50 total.
- I’m on Weight Watchers Online again, so I justified spending like $25 on fresh fruit in the last 2 weeks. I really could get by fine with $8 a week of bananas and apples. The constant supply of tanangelos and grapefruit aren’t really necessary.
Overall, no one splurge is going to hurt us. Heck, we can afford all of them. I’ll even admit that I don’t regret any of the purchases above. But I have decided to stop spending on anything not actually needed for the rest of this month. I rather $100-ish a month didn’t just disappear because of our whims.
Conscious spending truly is what is sounds like. For the next month, I’ll just keep asking myself, “Do we really need this?” before throwing it into my online or physical cart. If we don’t actually need it, it’ll get set aside and written into a waiting list. If I still have anything on the list that we really want in March, we’ll reconsider it then.
With necessary expenses popping up like the brake switch on my car getting replaced, I’ll feel more comfortable if we can get back into monitoring ourselves as closely as in 2010 when I started this blog…
Do you have to refresh your conscious spending habits once in a while? Any interesting splurges lately?
The following is a post from Joe Foley, a personal finance blogger and the author of ‘We Got Outta Debt’, the story of how his family paid off $68,000 in a little over 3 years. His new book, “Retirement for All Ages” is due out in January.
If you know Country Music, the title refers to someone who looks back at his life at age 17 and wants to give him some advice . In this case, it refers to what I’d like to have read from myself while in my 20’s. I’m a little (a LOT) past the target reader for this site, being that I recently qualified for AARP. However, once you survive life this long, you can’t help but pick up a few things along the way. And what I’d wished I’d known then… well.. that’s what this is about. So please indulge me, as David has allowed me to write this letter to me.. um.. you.
“Retirement? Me? I’m only 25.. I’ve got time.” That was me, Day one of my first real job, when we talked about this thing called a 401k. The 401k had only been around a few years when I started work (I told you I was old), and if I had paid some attention in my Economics class, I might have been able to realize this “Compound Interest” thing could really help me. But nope, I skipped that day.. or maybe the whole week.. So, I decided I needed the $35/wk I could put in my 401k for more pressing things. Like food or beer. (mostly beer).
So what’s in this letter to you? Some things I know are pressing for people your age and some things to look out for from someone who’s been there.
Create a budget.
Does “Budget” sound stifling or restrictive? Go with “Spending Plan” if you prefer. Whatever you call it, devise something where YOU decide what to do with your money. You’re the ‘Boss of your Money’. Knowing what you have coming in and knowing where it needs to go is the basis for your Spending Plan. This is your number 1 priority! Without a Plan, you can’t figure out how to get where you want to be, or how to get there!
Feel free to use these resources you can use (all Free)
Once you’ve gotten a Spending Plan together, you’ll be able to tackle the rest of your Financial Life.
Student Loan Debt
A recent report shows that the average graduate of 2012 is carrying a Student Loan Debt of $27,000. Unfortunately, That is still a HUGE amount of debt to start your post-school life off. Hopefully, you’re carrying LESS than that.. but, regardless of how much you have, all is not lost.
You may be able to reduce or eliminate the repayment of your federal Student Loan. But, like many things in life, there are some strings attached. According to the Associated Press, ¼ of Graduates may be eligible for loan-forgiveness programs. Your 4 main options are:
Become a public school teacher in a low-income area.
Apply for the Income-Based Repayment Plan.
Get a public service, government or non-profit job.
Join the military
If any of these sound interesting, talk to your Student Loan Provider.
Make no mistake, paying off the Student Loan Debt should be your #1 Priority. Probably #2 priority as well. I carried my loan with me for 10 years. And it was ‘only’ $6,000. I realize that’s the cost of 2 textbooks today, but back then, it was money!
How does this affect Retirement? Obviously, it decreases how much you can contribute to your 401k. My recommendation is to focus on the Debt, but also contribute to the 401k. Remember, time is on your side. Remember that ‘Compound Interest’? Here’s what I missed.
When you start your job, or when you read this, is the perfect time to start investing. As a young investor, time is on your side to having your investments grow. For example, if you start at age 30 and can contribute $15,000 per year, at 7% return on your investment, you’ll have amassed $1,000,000 by the time you turn 55. Take a look at this spreadsheet for the example. (Feel free to make a copy of it for your own use).
If you have Student Loan Debt, that $15,000 a year is probably too much to contribute, and that’s fine. Just start the contribution. Play with the numbers in your Spending Plan and the spreadsheet above to see how well you can do. For example, $50 per paycheck ($1,200/yr) at 7% return would give you $16,580 after 10 years. If you work for a company the matches, all the better! The point is, start early and let Compound Interest work for you!
I know this is easier said than done, but even though you’re no longer in college, you need to live like you are. With the monstrous Loan Debt you carry, frugality is your friend.
If you have a good relationship with your parents, see if you can move in with them. IF you do this, it will save you a ton of money. Have an exit strategy before asking. You are more likely to get a ‘Yes’ if you say “Mom, Dad, I need to pay off this student loan debt, so I’d like to move in for 1 year to help me pay it off”. Set a date as both a goal for you and a promise to them.
Before you go to the grocery-store make a list of things you need to buy. There are plenty of great apps out there for grocery lists. We use Our Groceries to allow us to create grocery lists on our phones (iOS/Android) and share them with others. Have a plan of what you are going to cook, what you are going to eat for breakfast and what you have to take with you for a lunch.
Do not step into the grocery-store hungry. I guarantee that you will buy things you don’t need if you’re starving.
Start drinking your own coffee. Starbucks is nice, but a cup at home is maybe $.50/cup, over the $2.00 for a Regular Venti.
Do not buy something you can possibly borrow. Libraries are another best friend.
Depending upon where you live, this could be a tough one. If Mass Transit works for you, use it. In some areas, like where I live, buses do run, but we have very small routes.
If you need a car, go as cheap as you can until the debts are gone. Obviously, safety and reliability are important too. But do you really need a Acura or BMW?
Technology (or “Back when I was your age”)
Today, technology is much more ingrained in how we live than when I was just out of college. Cell phones were strictly Science Fiction. Now, I’m not saying get rid of your cell phones. However, if you aren’t already on your parents plan, see if they will add you onto their plan. It’s a much smaller cost for you.
We had an Atari 2600 as a gaming system. Today, you’ve got a ton of options. Resist the temptation go buy the latest PS-whatever or X-Box. Yes, it’s entertainment, but those games can really add up. I’m not suggesting you sit in the dark and read old, borrowed books. Or play solitaire with cards (yes, the game existed before computers). I am suggesting that any entertainment be a line item in your Spending Plan.
And this relates to retirement how?
There is this thing called ‘Social Security’, which I’m sure you’ve read about recently. As far as our Retirement Planning goes, we’re not figuring Social Security benefits into our plans. Unfortunately, my expectations of Social Security for future generations is grimmer. And so the planning and savings fall upon you. Science Fiction author Robert Heinlein coined the phrase “TANSTAAFL” which means “There Ain’t No Such Thing As A Free Lunch”. I’ve always taken that to reinforce that people need to take care of themselves, and not rely on others to bail them out.
My point here is that once you’ve slayed the Student Loan Debt Monster, and begun saving for your retirement, the better off you will be in your retirement years. It’s not too soon to start saving for retirement. And if you’re Debt Free, you’ll have so many more options available to you. Start creating your future today.
If you’ve made it this far in the article, I’d love some input in either the comments below or on my blog. I’m putting the finishing touches on my next book “Retirement for All Ages” and expect it to be released exclusively on Amazon by the end of January.
If you’d like to be notified when my new book is published, please follow this link to my page where you can let me know!
Hi everybody! I’m Lindsey from This is How I Roll, which is a lifestyle blog that has a little bit of everything on it. I write anything from reviews to personal stories about my unique lifestyle of being an active and spunky girl in a pink wheelchair. Crystal has graciously allowed me to guest post today to help expand my readers because I’m a fairly new blogger. I hope you visit me soon! Okay, on with today’s post…
Crystal’s Long Sidenote: I haven’t “known” Lindsey long, but I can tell you that she is persistent, stubborn, and is looking to blog long-term despite that crappy period in the beginning when you don’t have many readers and even fewer commenters. This woman has been coping with Cerebral Palsy her whole life, but the rigors of blogging is what she gets super worked up about. That is woman you should visit and read. Her blog isn’t all about CP- it’s a little of everything with a healthy dose of personal finance (like mine, lol). But you can tell that her regular ways to deal with hardship make her a lady worth getting to know better.
Our First Home
I have some exciting news to share with you – my husband and I have recently been approved for our home loan!!! We are beyond excited because it is our first home, and we are finally going to be able to stop throwing our money away on overpriced rent. Most importantly, I’ll have a home that is completely accessible for my needs, which is something I’ve never had.
We are moving in the spring, when our lease is up, in order to save money before we move. As you probably already know, saving money is not an easy feat. I have to give my husband and I props, though, because we have done a really outstanding job with our budget. How? My husband and I basically live like minimalists and are squirreling away every penny possible! No, here is how we actually have been able to reduce our monthly spending to prepare for our new home.
Budgeting LIKE A BOSS (and yes, this is Crystal picking these sub-headers, lol)
When we first started budgeting, we determined what the absolute necessities were. For example, the rent, renter’s insurance, electricity, car insurance/car maintenance, gas, and so on. Then we determined the things we needed, but were also variable in cost. Let’s take gas, for instance: we can’t control the price of gas, but we can control how much we use the car on the weekends.
After that, we looked at our utility bills and minimized all of those plans as much as possible. To be honest, the only bill that we were able to whittle down was the cable bill–everything else was already at the most minimal price. The only variable utility bill that we have is the electric bill, which we minimize by only having things, like lights, on when they are being used. Unfortunately, that’s pretty much all we can do to lower the electric bill. We haven’t become so desperate to use candles for lighting yet, but ask me again in a few months!
After determining the cost of our monthly necessities, we figured out that the bulk of our savings would come from lessening our spending on groceries and gas.
Using Credit Cards to Keep Track (we cc users need to stick together, hehehe)
One thing that helps us keep track of our budget is using our credit cards for much of our monthly expenses because the site has a pie chart showing where we’re spending our money. Also, we get rewards back from using a credit card for our utility bills. By the way, we never carry a balance on our credit cards–there’s nothing that bugs me more than having to pay interest!
With that being said, we use my husband’s credit card to pay for gas, groceries, all other car expenses, electricity, and any other expenses that come up throughout the month. With my credit card we pay for the cable/internet, security alarm, both of our phones, and Netflix. All of these are fixed-rate bills, and combined is around $300.00/month. Since the expenses we pay for with my credit card are pretty much at a fixed rate, our main mission was to lower my husband’s monthly credit card balance.
His credit card balance would fluctuate anywhere between $1,200.00 and $1,800.00 a month. We were determined to get his statement balance under a thousand dollars, so we could put that money towards savings each month.
Showing My Hubby the Light…
I am thrilled to say that his statement balance was $700.00 last month!!! We were so excited that our hard work and sacrifices paid off in the end. More than that, however, we should be able to keep the balance this low as long as we keep our budget the same, but we’re expecting some fluctuation.
Our biggest savings came from doing away with eating out and eating fast-food. I have to tell you that this was a big source of conflict between my husband and I because I don’t see the logic in spending so much money on fast-food when the enjoyment of eating it is, at most, ten minutes then you poop it out the next day.
Bearing this in mind, against all of my protests, my husband ate fast-food every day for lunch. His lunches averaged $9.00 a day, so let’s do the math. There’s five days in a work-week, so on average, he spent $45.00 a week on lunch. There’s 52 weeks in a year, so that’s averaging $2,340.00 a year. If he retires when he’s 65 and continued to buy his lunch every day, he would have spent $56,160.00! However, it would probably be a lot more than this because the cost of food will only increase with time.
After seeing this and realizing that he was spending $200.00 a month on lunch, he has seen the “error of his ways” as he puts it. I’m happy to tell you that we have resolved this conflict, and he promises that he will never be so foolish with money again. Like I said, this was a very sensitive subject between us, and I was willing to go to the mat with him on this issue.
Please don’t misunderstand me, though, I think eating fast-food in moderation is fine, but every day, c’mon! With everything said and done, I’m extremely proud of my husband for taking his lunch with him to work every day.
It Can Be Fun
I know this may seem odd, but scaling down the grocery bill has been kind of fun. Maybe it’s because we stay home so much now in order to save money. Whatever the reason, it’s fun because we play “How Low Can We Go” at the grocery store, which is a game we made up where each week, we try to lower the grocery bill more than last week’s balance! Maybe we’re dorks, but it’s actually quite fun and liberating.
Before we started saving for our house, we would spend close to $200 a week on groceries for two people and two cats. Since we have tightened our belts so snugly, our weekly grocery bill has been: $46.05, $70.56, $75.57, $77.68, $67.63! We feel like such champions when we’re in the check-out line every week.
We have been able to lower our bill so drastically by planning our meals out for the week, only buying what we absolutely need instead of buying what we’re running low on, buying the generic brands or less expensive brands, and using in-store coupons. Our two cats are even sacrificing by eating a cheaper brand cat food! Hey, they’re getting a new house, too, so they have to suffer right along with us in the meantime!
Pausing on the Extras
Other than all of that, we don’t do any extraneous spending, we only eat at home, and we minimize our fuel consumption by being home bodies on the weekends. One other thing that’s kind of extreme is that we’ve decided not to exchange gifts for Christmas, our anniversary, and birthdays until we get the house. We feel as though the house will be our belated gift for all of those things this spring!
To everyone on a similar extreme budget, just remember to keep focused on the end result. All of the hard work and sacrifices will be worth it in the end! If you have any other suggestions on how to save money, please let me know. I love hearing from you, and I will take all the help I can get right now!
I will be doing some more detailed posts on how I’m saving money on food and personal care items on my blog soon. I hope to see you over on This is How I Roll; thanks again for letting me guest post, Crystal!
Please take a look at the fun quiz below about your budget from Josh Haynam at Interact! They make it easy to make a quiz for bloggers like me…
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