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Ask HN: Hacker Finances? / How much do you save each month?

45 pointsby flaconover 13 years ago
I have a question related to personal income and budgeting. My significant other and I have been vexed by this so I would love any input.<p>What percentage of your monthly income do you spend on: A. Mortgage/Rent, B. Credit cards / Personal Loans, C. Other expenses ?<p>What percentage of your income do you put into savings?<p>Using myself as an example, of my income over the last 6 months (also my partner does not work and we have 2 children): 32% - mortgage, 20% - Bills and utilities, 10% - loans (school loans, Credit cards etc), 18% - food and dining, 7% - education, 4% - auto, 2% - gifts and charities and only 3-6% into savings.<p>The issue is, we feel like we are being pretty frugal etc, but can never seem to get ahead. It feels weird to be making so much money but still feel like we are living month to month. We have been prioritizing paying off loans, since it makes sense. Home improvement projects seem to get expensive too (all DIY), since we bought an older home and want to make it feel livable.<p>There's this voice in the back of my head telling me that every other person in my position (making a decent salary) has their shit figured out: 1. not overpaying for their living space, 2. socking away tons of money in savings each money, 3. living frugally, 4. plans to retire by 35 etc.<p>I can't help feel a bit crushed having bought into "the system" and perennially feel like I need to be making more money just to keep up.<p>Feel free to share any thoughts or strategies related to this.<p>What hacks do you know to either save money or that have helped you establish some financial security.<p>Addendum:<p>People are providing some really good advice on this thread. I want to outline some additional details.<p>Current Lifestyle:<p>Take lunch everyday to work, CHECK<p>Walk or bike to work, CHECK<p>Cheap Hobbies: Veggie gardening, Meditation, CHECK<p>Buy used stuff rather than new, CHECK<p>Drive older car, CHECK<p>Budget software, CHECK<p>Entertainment.all.first == Netflix.find_by_price($8.99)<p>Entertainment.find_all_by_name(cable, TV, video_games).empty? == true<p>EDIT: formatting, updated percentages, notes

38 comments

olegiousover 13 years ago
I want to give you a different take on frugal living- my grandparents lived frugally their whole lives so that they would have a comfortable retirement. They didn't go on many vacations, they didn't go out, they spent their lives working and saving and thought that everything was set. Then the Soviet Union collapsed- within 2-3 years, everything they worked for their whole lives was wiped away by runaway inflation. They were left with nothing. So they spent their lives denying themselves so that they can have a comfortable old age and came away with nothing as a result.<p>Am I telling you this because I think you shouldn't save for the future? No. I'm telling you this because there should be balance in life- you only live once and you're only young once, balance fun, travel and the more pleasurable aspects of life with saving for the future. You never know what the future hold for your health or for your country.
throwawayuhuhover 13 years ago
32 years old, married, one child (another on the way), living in the Bay Area renting a house.<p>My salary until May of this year was $120k. My wife is staying at home with our son so we're a single income family.<p>Monthly expenses..<p>Rent: $1750, student loans: $225, credit card: ≈$2,000 (paid off in full each month)<p>Savings...<p>We have about $50k in 401k, $50k in a brokerage account, $20k in Lending Club and some mid term savings in the bank around $5-10k.<p>I was having 15% post tax taken out for ESPP and 14% pre tax for 401k.<p>The only loans we have are about $17k for my wife's schooling. We started paying cash for the last 2 years of it.<p>We are pretty frugal in most areas which aren't important to us (don't go out to eat much) but it enables us to be generous in areas we are passionate about (paid $5k for a kid in Ghana to have heart surgery and gave my sister $12k as a gift since they're moving to do medical work in Africa). Our frugality also enabled me to quit my job and bootstrap a startup (going on 6 months at this point).<p>It's interesting because it's normal (I think) to look at others and feel poor. The truth is that no one knows what a person's finances looks like. The guy driving a Mercedes and wearing nice clothes may or may not be doing so well.<p>I wish people were more open about this stuff.
Mzover 13 years ago
A major budget killer in my marriage was shopping for furniture/decor together. "Having a nice home" was one of the few things my spouse and I could agree on, so shopping for decor was one of the few ways I got any of his time and attention in something vaguely resembling a positive fashion. (He could only really give me his undivided attention if we were arguing about something. We spent way too much time fighting and this was a major factor in the marriage failing.) I didn't really need more furniture. I really needed some positive attention from him and just couldn't get it. Furniture shopping was the closest substitute I could get, so we did way too much of it, much to the detriment of our budget.<p>I think any relationship based on a "dating" model is at risk of equating relating with "having a good time" ...aka spending money. If you are doing this, consider finding another way to relate to your S.O. Cooking together, gardening together, just plain talking for hours, long walks and other forms of spending time together that don't revolve around spending money per se can do a lot for both your relationship and budget.<p>Edit: I will note I did the stay-at-home-mom thing for nearly two decades. Perhaps that detail will help clarify why I am making this remark.
rwkover 13 years ago
I feel anyone who has any sense feels worrisome no matter how much they are socking away.<p>I got a lot more mileage than I thought I would out of books like I Will Teach You To Be Rich by Ramit Sethi(<a href="http://www.amazon.com/Will-Teach-You-Be-Rich/dp/0761147489/ref=sr_1_1?ie=UTF8&#38;qid=1322026384&#38;sr=8-1" rel="nofollow">http://www.amazon.com/Will-Teach-You-Be-Rich/dp/0761147489/r...</a>). It rubs some people the wrong way, but it has some really good points about automating finances, and just handling companies via some social engineering.<p>Some of the things I think a bunch of people working day jobs are the insane benefits their companies offer. Make sure both your and your significant other are maximizing their 401k benefit(at least to kick in the employee matching and more if you can afford it).<p>The savings accounts should just keep compounding on each other. Possibly toss some other money into a Roth or into the stock market. Also have a rainy day/emergency fund for when the roof leaks and other unforeseen circumstances.<p>If you have a side project, that money should be coming out of your personal spending money. It should be thought of as your hobby and not impede on the family as a whole(this is for day jobbers).<p>Obviously finances get a bit rougher if there is no day job and it is just startups, it gets more difficult. One of the plans I had envisioned was to have an account setup and once it reached a certain percentage of drainage(aka burn rate for funded companies) that was agreed upon in the family, then there would be a meeting to discuss hanging it up and looking for a new day job to refill the fund to try again.<p>If you luck out and get funded and/or someone buys a project, that money should go first to replenish the project fund and then go into emergency, savings, and a little left over to celebrate(vacation, new back door, etc).
throwaway21222over 13 years ago
I made a throwaway, because I don't want friends to know the details of my finances.<p>Your categories (after tax):<p>A. Rent - 10% B. Debt service - No loans, no pending CC debt. C. Discretionary - 30% D. Net (savings) - 60%<p>How do we do it? Well, we make a lot of money (me, $225k, she, $100k, this before tax), so that's one thing. We have no kids. We travel a bit but not a ton because I am something of a homebody. We don't have lavish tastes. And we were lucky enough to have parents that paid our way through college.<p>What I mean by the last thing is that I feel no pressing need to own a house, an expensive car, a boat or a plane. My hobbies are inexpensive relative to my means (computer gaming, reading, skiing). And she and I are of one mind on finances.<p>My advice around saving (from when I was making much less): as a hacker you should be thinking about what you are spending money on. The simplest way to increase your net is to reduce spending on non-necessities that cost a lot of money. That is, focus on the inner loop, the big ticket items, the cars and AC replacements, backyard pools and mortgage payments.<p>I have no idea the scale you are talking about when you say home improvement, but it can easily be a non-necessity depending upon the condition of the house. If you bought a house that requires 35% of your income in mortgage payments AND needs expensive fixups AND you are carrying significant personal debt, you may have overextended.<p>That's not the end of the world, provided that your home improvement costs are efficiently appreciating the value of your house or you are willing to cut on your other discretionary spending. Appreciating your existing assets is a form of saving. But biting off more than you can chew is risky.<p>By living paycheck to paycheck you are running a great risk in the event that anything happens to your income. At a savings rate of 2-5%, it takes you anywhere from 7-17 months to build up a single month of mortgage payment buffer, and that's not including the cost of putting food on the table.<p>I'm not well versed enough in real-estate to say whether selling your house and getting something more manageable is the right choice for you. But I can say, not knowing the composition of your discretionary spending and assuming zero transaction costs, I would probably downsize if I were in your shoes.<p>Of course you could always just start making more money, and that is advice that HN likes to throw out there, but I personally think it's easier to spend less than to make more, especially in the short run.
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lotharbotover 13 years ago
Very few people in the high salary range have their shit figured out. Your story is all too common. Just asking for advice puts you ahead of most people.<p>One common hack is called the "debt snowball"; it's advocated by Dave Ramsey. The idea is, keep making payments on all of your debts, but channel any extra money you can into one of your smaller debts. Once it's gone, you get a psychological boost, and you can redirect everything that was paying for that debt into another one. So the next debt gets paid down even faster, and the one after that, even faster.
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anonimoover 13 years ago
Short answer: the "hack" is to set a monthly budget and stick to it religiously.<p>In theory, if your savings account pays 2% and your loans charge 10%, you should put all your money into paying your debt. On the other hand, unless you have a very stable job you'd better have savings of at least 6 months worth of expenses.<p>You probably don't really <i>need</i> most of your home improvements. Unless you have serious problems like water leaks, you can always postpone those improvements to after you've paid your debts.<p>35% of your <i>net</i> income for mortgage is on the high side (average in US is about 33% of <i>gross</i> income). But it's probably not too bad for a family of 4 with only 1 income.<p><a href="http://money.cnn.com/2005/08/26/pf/expert/ask_expert/index.htm" rel="nofollow">http://money.cnn.com/2005/08/26/pf/expert/ask_expert/index.h...</a><p>Your main problem might be in those 45% worth of "other" expenses. You need to break this down into something like:<p>a) essential recurrent expenses (food, commuting, school-related, etc). These shouldn't change much from month to month. And assuming your partner can cook, you shouldn't be spending too much on food.<p>b) non-essential recurrent expenses (cable, second car gas and maintenance, gym, etc). Rank those expenses in order of importance and start cutting them out.<p>c) non-essential one-off expenses (eating out, trips, buying gadgets, etc). Only do these if they fit in your budget in that month (or trimester, etc).
latchover 13 years ago
This varies on a lot of things, especially housing which varies based on location (as does transportation).<p>But...<p>You should have a breakdown of that 45% (you might and you just don't want to share it, that's fine)..it's the biggest piece of the pie, and it's the most likely place to optimize.<p>Also, rather than think in terms of "what % should I save", you should think of it in terms of how much money you need to retire at the age that you want to.<p>You also seem to think of "savings" as putting money aside, which is wrong, wrong wrong. Do you pay more interest on your credit card or mortgage than you get from your savings? If so, you'll "save" more by paying those down first (of course, you need to understand your mortgage to know what you can and can't pay down).<p>Personally, I'd find 80% of my money going into housing and "other expenses" unacceptable. But, I live frugally, I no longer own a car (or the insurance, or the gas that goes with it), I know how to cook, I don't impulse buy (my Kindle 3 is going to last me for years), I no longer own a tv/cable.<p>And I hate to be one of those guys, but I can safely say that giving up a car and tv have caused huge gains in my productivity, health and happiness.<p>To answer your specific questions: a - 25%: but, I live in Hong Kong, where the rent is stupid (but everything else is awesome cheap) b - 0 (CC is automatically 100% paid every month), moving from owning to renting and giving up driving cleared me from any loans...happy days. c - 25% on "other expenses"..which is more of an average due to spikes (like buying a new bed, moving, getting a new macbook).
ChuckMcMover 13 years ago
Generally I've told my kids that if they are carrying a credit card balance across months they living beyond their means. That being said, we've talking about finances and while my wife was much better at these things than I was in school, if you have a couple of thousand dollars in your 'emergency cash' fund (that is so you don't suddenly need to carry a credit card balance) and you don't carry said balances except for long term debt (student loans, mortgages, car loan) and you are able to add <i>something</i> to your savings each month then you are in ok shape.<p>Things that eat at your money are bills {phone, power, sewer, internet, various subscriptions), eating out, and 'impulse' buying (clothes, toys, books, movies, Etc.). You have to be very aware of them to keep them in check. Eating out is particularly insidious, since spending $10/day on lunch is $200 a month. Of course bring in a sandwich and a piece of fruit can feel dorky but don't let that discourage you, people will be more impressed than you know.<p>If you can't motivate yourself to do that for yourself, then do it for your marriage/kids. Nothing sours a relationship like money trouble, and money trouble can come from not everyone in the relationship being on the same page with respect to what things cost or the value of frugality.<p>Camping is a lot of fun and a great way for your family and you to get out without spending a lot of cash as well.<p>Final thoughts. I started contributing to my 401k in 1987. I always put in the max. They told me it would be worth over $3M now. They were wrong. I'm glad I have what I have, but sometimes you have a second great depression. Life is uncertain, do not give up your life so that in the 'future' you can do cool things. Find cool things you can do now and afford (there are lots) and you will be happier.
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groanerover 13 years ago
My monthly breakdown:<p>- $1000 renting a room in my parents' house (utilities and wi-fi included!)<p>- $50-100 my contribution to groceries and household purchases<p>- $50-100 transportation<p>- $10 cell phone (it's prepaid and I'm a recluse who prefers to communicate online)<p>- $100-200 miscellaneous discretionary stuff that I don't really track (e.g. restaurant meal, a new pair of shoes, a sale on Steam, yet another USB stick, etc.)<p>At this rate I socked away about $30k annually into my "I have no idea what to do with this but maybe someday I'll figure it out" fund. Another half that amount in pre-tax retirement savings. So far I've only watched the balance slowly shrink in my brokerage accounts.<p>I assure you that I do <i>NOT</i> have my shit together, though. You can probably imagine the quality of life I have when discretionary spending is less than 5% of budget.<p>Considering that you have kids and a house to take care of, I can't even begin to imagine how much of a difference that 45% "other expenses" would make. But you're really going to have to offer more details before anyone here can make suggestions on how to possibly trim some fat there.
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cawover 13 years ago
0. Retirement savings - 20% in Roth 401k<p>A. Mortgage/Rent ~1/3 of residual income + electric + internet. It's more expensive per foot than what I could get, but I live within walking distance of work, so no fuel or commuting for work. I can literally leave work and get home in 5 minutes. I put value on that and the free time it allows me.<p>B. Credit cards / Personal Loans - $250/mo car loan, pay off CC each month. No student loans because I worked all throughout college and managed to find a scholarship or two. I put everything on my credit card and pay it off at the end of the month. 2% back AMEX FIA retirement card, so I get a 2% discount on everything I would be buying anyway, and I don't have to figure out point multipliers and how stores are categorized.<p>Contrary to most advice here, I have a brand new car. Why is that? I moved 1000 miles away from my friends and family, so in the mean time I have no support network should I get I have problems. Thus the warranty and free roadside assistance has value to me. My reliability requirements on the car were fairly high, so I was looking at 2007+. Once you add in the car loan, I was easily within reach of the new car. I got 0% financing on the new car, vs ~3% on a used model, and I get really good gas mileage. Now I can keep meticulous care of my new car and keep all the service records and know exactly how it's maintained. New cars aren't necessarily a bad purchase, you just have to keep them longer to amortize the value. My insurance is about $600 more per year on a 2011 vs the 2001 I had prior, but I'm still under the magic age of 25 or 26. I keep good coverage though, higher than the state required limits.<p>In summary: in a given month, I don't see 20% of my pay, as that's contributed to a 401k. I pay ~50% of the remainder, split between rent/utils and other expenses, leaving me with the rest for non-retirement savings.
latchover 13 years ago
If I could come up with 1 question to ask people in order to find out whether they save enough or not, it would be:<p><pre><code> What type of product are you using to save your money? </code></pre> People who answer "a savings account" or "I invest with some guy" probably aren't saving enough, because they don't understand the fundamentals of personal finance.
sardonicbryanover 13 years ago
I save 30-40% of every paycheck (not including 401K), but I live at home and don't pay any rent (also no loans), have no wife/kids, no mortgage and my work offers free lunch and dinner.<p>One thing that helped me save more though, was creating a spreadsheet that I update every weekday with all of my account balances (through Mint). I have some formulas built in that basically then calculate when I will be able to afford a down payment on a home. <a href="http://twitpic.com/7i78rb" rel="nofollow">http://twitpic.com/7i78rb</a><p>I put both Mint and this spreadsheet on the list of default tabs that get opened when I open Chrome, and the minute every morning I spend updating it and seeing the date it spits out really keeps me on top of my spending and finances.<p>Translating my current financial picture into a concrete date for a goal also helps make things more real, and motivates me a lot to save more.
josscrowcroftover 13 years ago
Oh my god, read "The Millionaire Next Door"<p>I used to be on the same treadmill - making more money than I could spend but somehow spending it all - now I make less (since stopping freelancing, oddly enough), and yet save more.<p>I put between 10% and 30% of my income into savings - never less than 10% and sometimes more than 30% (as far as I'm concerned, that 10% doesn't exist except to be taxed upon - I can't spend it).<p>Bear in mind I'm in the enviable position of not having a mortgage - but I do have debts to pay and so it's a constant weigh-up asking myself "is this money going to make me more by being saved vs. going to debts?"<p>It sounds like you're covering everything else FIRST, then putting what's left into savings. How about putting 10% into savings first, then allowing the rest to be spent on everything else?<p>This only makes sense if you have plans to invest it wisely.<p>Read that book!
gujkover 13 years ago
Why the heck are you saving any cash when you have credit card debt, and how the heck did you get a mortgage with 50% back-load debt ratio?<p>You need to cut back on your spending, and with rent our your too-expensive house or walk away from your mortgage.
wickedchickenover 13 years ago
"Without a jot of ambition left<p>I let my nature flow where it will.<p><i>There are ten days of rice in my bag<p>And, by the hearth, a bundle of firewood.<p>Who prattles of illusion or nirvana?</i><p>Forgetting the equal dusts of name and fortune,<p>Listening to the night rain on the roof of my hut,<p>I sit at ease, both legs stretched out."<p><pre><code> Ryokan (1757-1831)</code></pre>
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kamaalover 13 years ago
Ok, this is going to be a little big. Firstly before giving you out details on how I manage my money. Let me first let me tell you I'm an Indian, currently staying in Bangalore. This is important to understand the economic background from where I come.<p>To give you a brief background, I come from a relatively poor backgrounds. And trust me poor in India translates to very poor in USA. My dad was a cab driver and mom a teacher at a school. Me and my sister are the only kids parents have. They slogged their whole life to get us decent education. Throughout my teenage and childhood, I witnessed first hand how difficult life gets without money. Many a times we didn't have money even to pay for my school fees. We used to stay at relatives place in a small room. The whole family in a hall. We used to get clothes probably once or twice a year. I still remember I didn't wear shoes until I got my first pay. The first month I had borrowed my Uncle's shoes. Until even 22, The only clothes I wore were either borrowed or donated. During my pre university college and engineering, I've survived on scholarships. I used to get around 2 rupees a day to live on. Given that, I used to be able to eat my lunch only once a week. That is all could afford. If there is anybody who knows what hunger is, its me. I've seen first hand, how it feels to see some one eat stomach full in front of you, while you just look at them and hope you had gotten that opportunity to eat that meal.<p>Coming to how I managed my finances and came out of all this.<p>a. Firstly my dad, got himself a cab of his own. This was a risk we took. He used to drive nearly 24x7, he got rentals more frequently. More importantly he was able to get a lot of personal clients who were ready to pay a little more for the excellent services he offered. One great thing about my parents is although we live in near hand to mouth conditions. We saved money and invested like no one. And we used to do that very frequently.<p>b. Gold savings, Making a routine habit of buying a little gold helped our family a lot. Over years, Gold prices have gone up real high in India. I helped us sell of a lot of ornaments we purchased to buy real estate later. Incremental investments are crucial.<p>c. Disposing Gold at the right time, to buy real estate not in the city. But closer to the city. Keep an eye on the real estate market. There are always opportunities to buy cheap properties, which are not good now but will be good in the future. In fact the whole concept of an investment is to work towards a future prospect, not current.<p>d. Get yourself a good savings plan. A penny saved is a penny gained. Know how much is sufficient for you X years from now and plan accordingly.<p>e. Learn to live content and frugal. Differentiate between needs and wants. You don't need to keep changing the iPhone model every year. That's waste of money. Don't fall into mindless consumerism. Especially buy a get 2a free stuff kind of things. Learn how you can cook at home, avoid hotel meals. They are neither healthy nor economical. Occasional family outing is Ok, but frequent ones spoil you. Don't fall for show off, know what you need and stick to it. People's perception don't matter.<p>f. I don't have/take any loans, credit cards, dues as a life principle. Interests are the most dangerous thing. They make your life miserable. Get out of the debt as soon as you can and don't go into it ever again.<p>g. Don't buy stuff you can't afford.<p>h. Get your self endowment insurance policy. The things that allows you small investment over years. Covers you for life, but yet gives you a huge sum of amount at some period. This also takes care of your retirement planning.<p>By Gods grace,I am in good conditions now. By merely learning how to manage my monthly salary well. Thanks to my dad for teaching me this. Small expenses, savings matter a lot. Over time they get multiplied. Its in your hand to manage your money.<p>If you earn 100 rupees, sure enjoy 40 rupees. Save 30 rupees and invest 30 rupees. Incremental savings and investments matter a lot. This is the most important thing you must remember. Don't bother about what others are thinking or doing. You plan for your future. No one is going to help you when you are in trouble. So save and invest whatever you have.<p>Above all work hard, work your life off. Going far requires making sacrifices and undergoing pain. Show up on time, do the right thing and a little extra than others. Take the occasional risk and make right decisions.<p>If you can do all this 12-16 hours a day. Success is inevitable. Its karma. You will be ahead of at least 95% of the crowd.
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trustfundbabyover 13 years ago
Savings are huge and I think you should be putting more away each month. Liquidity is underrated.<p>Do this, stash 5% more of your money in your savings every month and try to live off the rest, keep doing that till you repeatedly have to go into your savings to finish out the month and you'll know how much you can absolutely not do without.<p>Also try not to use Credit cards. I haven't had one for years and I only spent what I had, now that I have one and pay the balance off each month (trying to rebuild my credit) I find that I spend about 20% more each month than I have to simply because I know I can cover it.<p>Hope it this helps.
kbobover 13 years ago
Retiring at 35 is an unrealistic goal unless you either inherited a bank or want to live under a bridge. Since you have one income and two kids, saving 3-5% is pretty good.<p>The easiest way to save money is to have it deducted from your paycheck and routed into a tax-advantaged account (e.g., 401(k)). There's no temptation to spend the money since you never see it. Your savings grow faster since the interest is not taxed. And your employer may match your contributions, which is free money.<p>If you're in an early-stage startup, that doesn't apply, of course.
ww520over 13 years ago
Housing cost is one of the most expensive expenses. Living several rungs down in housing than you can afford generates lots of saving. In your case, mortgage is already at 35%; tax, insurance, and maintenance are probably another 10% to 15%. That's a big chunk of your expenses.<p>45% on others look a lot. Can you break it up? Hope you don't have expensive cellphone plans or cable or etc.<p>Also supporting 3 other people with one income can be tight. Children are expensive to raise. See if your SO can work, even parttime. That would help out a lot.
chubsover 13 years ago
My 'hack', as you put it, is to work on iphone apps on my laptop whilst on the train (2hrs/day). Makes the trip go faster, and supplements my monthly income by 50% at this stage.
jfruhover 13 years ago
One hack that I definitely find useful for saving money is to create different savings accounts for different purposes and putting a set amount in each on each month. For instance, I have a vacation savings account that I put $300 into every month; it becomes a repository of of cash I can use when I travel, and I can spend it in big bursts when I do. If that $300 month just sat there in my ordinary savings account, I'd probably find something else to spend it on.
cornyover 13 years ago
Here's my system:<p>As a background, I have no debt right now but I did also use this system when I did. I use my credit card for everything I can (to earn points) and pay it off every month. I have several savings accounts with ING Direct that I use for various large regular or upcoming expenses, plus an emergency account.<p>I have a hard time budgeting so rather than keep track of all my purchases, I just keep track of my accounts. I built a simple app (but you could probably use Mint.com or a spreadsheet) that displays the balance of each account. Accounts include: savings accounts, credit card, and retirement account. When I had a student loan that was listed here too. I rent but if I had a mortgage I would include the amount owing as a loan account and the estimated equity in the home as a "capital" account. All of these balances are totalled up and I can see my overall net worth (it's rough). When looking at this view, my goal is ultimately to raise the overall interest earned across all accounts.<p>I also have a spreadsheet which acts as a checklist for my savings goals. A prioritized list of goals runs down the side and each column is a month. Every month I try to check off each goal. They are prioritized like so: * Credit Card (balance = zero at least once) * Chequing Acct. (Min. balance = $x) * Taxes (x% of revenue set aside) * Retirement ($x set aside) * Vacation ($x set aside) * Downpayment ($x set aside until I reach $x) * New Car ($x set aside until I reach $x)<p>I have an emergency account, but if I didn't it would be near the top of this list, probably just before retirement.<p>Any large, non-necessary, one-time purchase is considered months in advance and added to the bottom of this checklist. Only when I've enough money saved will I purchase it. Them's the breaks.<p>This checklist is easier than a regular budget. As long as my goals are realistic and I'm completing them, I have nothing else to worry about. If I regularly have trouble completing goals I can adjust the goals and/or my spending. I check in with these two documents about once a week.<p>In terms of specific advice for your situation I would say... focus on eliminating your credit card debt before all other savings or debts. When that's done, make minimum payments on your student loan and build up a decent emergency fund. And only when that's done, split your payments between student loan, retirement savings, and other savings.
Locke1689over 13 years ago
Any money put into savings beyond petty cash for emergency situations is money lost if you have debts. The interest on your credit card debt is going to be at least an order of magnitude greater than any interest you're going to get on savings or investments. Pay off your debt first, save later.<p>The real answer is that you need to break down what is in that 45% because that's where "non-essentials" are going to be.
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Flikoover 13 years ago
I haven't had to budget anything hardcore yet just food, tuition, toiletries, and entertainment but it might be better if you find out what you can be frugal about.<p>An example would be that I pretty much live off a diet of beans, rice, vegetables with the occasional pizza thrown in and it helps me save a lot of money in a given week. This isn't really hard for me though because I love beans, rice, and vegetables.
nicholasreedover 13 years ago
I am notoriously bad about saving money. I spend about 15% on rent, 15% on food (mostly eat out), 10% on entertainment (netflix, xbox, etc.) , 20% on friends/family, and then "invest" the rest in different projects (outsourcing, marketing, books, etc.). In any given month I maybe manage carry across 200-300 dollars.
ww520over 13 years ago
Here's a long thread on household spending habits. The guy makes 250K but has no saving. Interesting to see both sides. See if you can identify some of the problems. <a href="http://www.fatwallet.com/forums/finance/1133777/" rel="nofollow">http://www.fatwallet.com/forums/finance/1133777/</a>
phamiltonover 13 years ago
My wife and I are in school still, have a newborn, and only I work part time.<p>Rent is 20%, utilities/cell phone 5%, food is 10%, entertainment is 5%, charitable donations 10%, clothes/shopping is &#60; 5%, tuition and health insurance average to 15%, and we save the last 25% each month.
darkxanthosover 13 years ago
I save about 20% per paycheck and next year I plan to up it to 30%.<p>I rent, my girlfriend pays 1/3 of that I pay 2/3. 1.5% to student loan (my only debt). I spend a lot eating out and I like my electronics but my savings is pretty good so I shrug. :)
pathikover 13 years ago
I spend around 10% on rent, 10% on food, 5% on booze, 10% on gadgets, 5% on other expenses and another 10% on very high risk investments. I have no debt and I'm single, so I save almost 50% each month. PS: I live in India.
xarienover 13 years ago
The spouse and I are both a tad into 6 figures<p>20% housing (includes mortgage, insurance etc)<p>2% Vehicles (both paid for, this is for gas and insurance)<p>5% student loans<p>10% Child Care<p>5% medical<p>5% gifts to parents<p>25% living expenses<p>6% 401k<p>~22% into non-retirement investments<p>Will be cutting back on quite a few of these categories come 2012 as we fall back to 1 salary.
loegover 13 years ago
Uh, I spend about 5% on rent, another 5-6% on drugs, and go out for food occasionally. No other expenses. I don't, um, save, though, so you might want to listen to someone else.
analyst74over 13 years ago
I don't get this thing called early retirement. You only have one life, stop worrying and start living!<p>Let me ask you this, if you do save enough and can retire at 35, what would you do then?
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cpercivaover 13 years ago
I put into savings whatever I have left at the end of the month. I don't worry about it too much.<p>Tarsnap is my retirement savings plan.
brcover 13 years ago
I'm not going to be able to calculate the figures easily for myself, but they are out of whack at the moment for a variety of reasons. In the past I have managed to have periods where I saved 40% of my income, and currently I'm probably going backwards by about 10% per year due to an expense/income disparity. Principally for me this is mortgage related but not yet enough of a problem to go nuclear and dump the house.<p>First thing to thank yourself for is for even recognising that you have an issue. Most people live in denial right up until they are on welfare of some sort at an old age.<p>Second thing to realise is that expenditure always rises to meet income. There would have been a time in your (maybe recent) past when you lived on less income, and were probably happy enough. So the solution is rarely to try and increase your income. It's to get control of your spending.<p>So here's my tips, although at the moment it's a case of do as I say, not as I do.<p>You've got to prioritise your spending. I've always said overpaying in rent is OK if it can relieve pressures in other parts. Ie, living inner city and not having a car, or saving on long public transport commutes. But make sure you can justify the big expenses like rent or mortgage and be realistic.<p>You've got to pay yourself first. This means taking money out of your income and automatically place it into some type of savings vehicle which you cannot access easily. An online savings account with no attached card is a good start.<p>You've got to budget. Yes, everyone pays lip service to a budget but hardly anyone does it. You should be tracking your expenses in something like quicken or similar, and know where your money goes. Pay a bookkeeper if you must, they aren't that expensive. Make a budget and stick to it.<p>Dump the consumer debt. If you can control your credit card urges and pay it off each month, have one. But if you ever carry a balance for more than 60 days, immediately cut up your card and get a debit visa instead. If you have purchased new or near-new cars, sell them and buy a good used vehicle, or better still, don't replace it if you can get away with it (see point 1). Don't sign up for store cards or any other types of credit.<p>Be prepared to sell stuff. This is two-pronged - first you can sell stuff while it still has some value (ie, 1 year old electronics, kid stuff) which keeps a little income trickling in. The second part is that it stops you accumulating junk which occupies both mind and property. If you look at the average overstuffed garage or junk room and calculate the per-sq foot value of the stored junk you can realise you're paying thousands per year for floor space to hang onto a bunch of stuff you probably will never use again. Get rid of stuff you're not using. You can always buy it back if you need it in the future.<p>Tempted by new consumer stuff? If you want to purchase something, announce to your significant other you'll purchase it in 30 days. If you can still justify it in 30 days time, by all means purchase - if you can't get the same item pre-loved on ebay or craiglist.<p>Don't buy new cars, boats, RVs or anything else big and shiny. Just don't. If you're rich, buy as many as you want. This is even worse if you use finance to buy a fast-depreciating asset. Don't buy, and if you must, pay cash.<p>Getting rich is usually a payoff from some big event like an IPO, an ineritance, a successful project or a windfall. However, getting comfortably well off is a gradual process of spending less than you earn, and investing the surplus in worthwhile investments. You should take care of the comfort part before attempting to get rich, so failure in the latter doesn't affect the former.<p>While you have kids I think the most realistic amount you can expect to save/invest is about 10%. If anyone reading this is younger and doesn't have kids, you should be in the 20-30% range. As the kids get older you should creep back up into the 20% range - separate from college funds. If this means kids are stacked two-to-a-room and don't have the latest widgets, well, they can learn to live with it.<p>This stuff is very basic and has been known since the dawn of commerce in ancient Mesopotamia. There is no tricks - just simple discipline and wanting the end result more than the immediate gratification. It's the same for any valuable human endeavour, really. People convince themselves that somehow their ship will come in, so they don't have to worry about living within their means. Self delusion in this respect is the most dangerous of all attitudes. Time is the most important commodity in accumulating wealth, and it's the thing people seem to place the least value in.
mapsterover 13 years ago
You can only hack the budget so far. then you have to hack your income. have you explored the millions of possibilities?
redact207over 13 years ago
I'm working abroad in Asia, no wife or kids, but hold an investment property back home.<p>Rent - 14%<p>Mortgage - 12%<p>Expenses - 11%<p>Tax - 6%<p>Entertainment - 10-25% (staying in drinking vs going out travelling)<p>Savings - 32-47%
superthrowawayover 13 years ago
Income is ~50k a year running my own business.<p>28% Rent / Utilities<p>7% Groceries<p>5% coffeeshops and restaurants<p>2% random socializing(theaters etc..)<p>10% misc.<p>Save the rest of it.
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