Balance of living and saving

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Topic Author
Cmpliance
Posts: 593
Joined: Wed Jan 08, 2014 11:41 pm

Balance of living and saving

Post by Cmpliance » Wed Dec 19, 2018 7:32 am

I've had a job change and I'm going through and planning future finances. The majority of the extra income I'm allocating to retirement since I was "behind", but I'm having trouble balancing my obsession/stress of if I'm saving enough vs enjoying/living life. In the back of my mind, I "feel" as though I'm saving enough, but I just don't know. I want to have a "set it and forget it" type mentality, but find myself obsessing going onto Mint daily to track budgets throughout the month and stressing if we go over budget by a hundred or two some months. Although it is important to stay in budget, I feel as though I'm stressing out about the smallest purchases because I know they add up and thus creating a potential over budget issue, but this isn't enjoying life. I know it can't be healthy as I grow older (early 30s) and would like to hear your opinion based upon where I'm currently projecting budgets/retirement allocation as well as how you personally handle this feeling (I'm guessing I'm not alone?)

With the rough numbers, I'm calculating discretionary income a month to around $5,000 which is the result after paying/saving the following:

- Saving $730 in pre-tax 401K contribution + $1,000 post-tax IRA contribution for significant other and I ($31K annual retirement contribution)
- Paying mortgage, HOA, Property Tax, Insurance
- "Paying" monthly allocation for car insurance & registration (I do a 1 time payment for this, but will transfer the monthly amount to savings each month and consider it a "expense" to my discretionary income)
- All living expenses (PG&E, Internet, Cable, Cell Phone, Gas, Gym & Food)
- Misc Expenses (This includes a total of $400 in "fun money", $200 per person and $600 in "shopping" which would be other miscellaneous items that weren't budgeted for such as car maintenance items, entertainment, etc.)

Only debt we have is our mortgage for our starter home and our next big purchase is saving up for a down payment on our forever home. We live in a HCOL area and can get around $700K of equity out of the current house and wanting to put another $300K down in the future. With the current discretionary income, assuming no change in job/income, it would take us around 4 years to reach that $300K

So do I take some money from my discretionary income to live a little more now (say $500?) as well as contribute more towards retirement funding at the sacrifice that now the $300K we want to save for the down payment goes from 4 years to 5-6 years?

Shallowpockets
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Joined: Fri Nov 20, 2015 10:26 am

Re: Balance of living and saving

Post by Shallowpockets » Wed Dec 19, 2018 7:50 am

I see $400 in fun money and $600 for shopping. A month! You have a big buffer there to either enjoy your life or save more. Your call. That is way more discretionary funds than most people will ever have. I think your living/saving balance needs to be resolved in your mind more so than as figures on a balance sheet.

Golf maniac
Posts: 251
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Location: Florida

Re: Balance of living and saving

Post by Golf maniac » Wed Dec 19, 2018 7:56 am

What does your spouse say? It needs to be a joint decision. In our budget we have what is called an “extra” category. We put some money in that account and distribute at the end of the month to any account we may have spent more than budgeted. If money is in the account at the end of the month after looking at the categories it goes to savings. That way you don’t freak out by going over a little bit in a category and you increase savings most months.

To directly answer I would say yes, go ahead and put off the forever home for a couple of years and enjoy life, you don’t get a second pass at life.

NextMil
Posts: 540
Joined: Wed Dec 13, 2017 12:33 pm

Re: Balance of living and saving

Post by NextMil » Wed Dec 19, 2018 8:04 am

1. Everyone thinks they are behind - from what I see I think you are doing really well given your situation.
2. If you are going over budget by $100 or $200 most months, then your budget is wrong. I do it in reverse, I overestimate expenses and then whatever is left over at the end of the month gets pushed into TAXABLE investments or in your case saving for down payment. Sure it delays your putting the money away by 30 days, but it reduces your stress of going over each month.
3. Understanding personal finance is a double edge sword. Once you understand how it works, everyone begins to obsess over it. I can tell you I have had an unhealthy obsession with it, and I am sure others will attest to doing so as well. You need to find balance. In my experience, set it and forget it doesn't exist until you are FI. You will always tinker with it until that point.
4. You are early 30s and in a HCOL area - that is an expensive time of life. It will get better and easier as you keep building.

stan1
Posts: 6962
Joined: Mon Oct 08, 2007 4:35 pm

Re: Balance of living and saving

Post by stan1 » Wed Dec 19, 2018 8:10 am

You could do a little more breakout. Dining out is often a major expense. If you are often buying breakfasts, lunches, and dinners because it is convenient there's usually going to be a lower cost option if you do some advance planning at the grocery store so that you always have easy to prepare foods handy. It's a way to save money and maybe eat less. A brewed coffee with complimentary milk or cream is usually about half the cost of an espresso based drink. We live in a HCOL area as well but there are hundreds of lower cost ethnic restaurants where we can get out for under $30 for two people. Drinking free tap water not alcohol or sodas with most meals out can save $1000 or more per year if you eat out frequently.

Topic Author
Cmpliance
Posts: 593
Joined: Wed Jan 08, 2014 11:41 pm

Re: Balance of living and saving

Post by Cmpliance » Wed Dec 19, 2018 8:10 am

Shallowpockets wrote:
Wed Dec 19, 2018 7:50 am
I see $400 in fun money and $600 for shopping. A month! You have a big buffer there to either enjoy your life or save more. Your call. That is way more discretionary funds than most people will ever have. I think your living/saving balance needs to be resolved in your mind more so than as figures on a balance sheet.
The fun money typically isn't an issue. We get $200/mo to spend on whatever we want and what is not spent that month rolls over into the next month. So it encourages learning how to save if you want something bigger than $200. Out of the two of us, I'm the saver where my significant other I feel like has the "use it or lose it" type mentality and therefore don't want to increase this.

The $600 "shopping" budget is again a budget that I put the non-standard monthly expenses and has consistently been over budget this year. We've incurred a lot of cost this year that typically we wouldn't, so that explains the reason (e.g. had a baby this year, so money spent for the baby room/medical payments went under this). Beginning 2019, I'll want to keep an eye on this and see if we can stay within the $600 budget we've set.

Olemiss540
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Joined: Fri Aug 18, 2017 8:46 pm

Re: Balance of living and saving

Post by Olemiss540 » Wed Dec 19, 2018 8:10 am

You are only putting 31k into retirement and stressing about trying to accumulate 60k/year for a bigger house? Your post seems to be stressing about SPENDING on a bigger house not savings for the future you whereas I am exactly the opposite.

Why do you NEED a million down on another house? What is your income and current house value versus the new house wants?

This seems like stressing because you are saving too much to buy a Bugatti in four years and dont want to put it off to year 5.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

Topic Author
Cmpliance
Posts: 593
Joined: Wed Jan 08, 2014 11:41 pm

Re: Balance of living and saving

Post by Cmpliance » Wed Dec 19, 2018 8:13 am

Golf maniac wrote:
Wed Dec 19, 2018 7:56 am
What does your spouse say? It needs to be a joint decision. In our budget we have what is called an “extra” category. We put some money in that account and distribute at the end of the month to any account we may have spent more than budgeted. If money is in the account at the end of the month after looking at the categories it goes to savings. That way you don’t freak out by going over a little bit in a category and you increase savings most months.

To directly answer I would say yes, go ahead and put off the forever home for a couple of years and enjoy life, you don’t get a second pass at life.
My spouse had a difficult time with financial management prior to meeting me, so she knows/trusts my decisions in setting budgets and such. Obviously, I run the proposed plan past her, but majority of the time, she just wants to know what she needs to track to. That is why I don't want to increase budgets because when she checks Mint and she may see some "additional budget" she again has the mentality of use it or lose it. So my concern with increasing budgets is that it will encourage spending and still may not even fix the over spending problem. I think my safer play is to keep budgets as is, knowing that I am OK with having $500 extra being a buffer for the overall monthly budget.

Topic Author
Cmpliance
Posts: 593
Joined: Wed Jan 08, 2014 11:41 pm

Re: Balance of living and saving

Post by Cmpliance » Wed Dec 19, 2018 8:19 am

NextMil wrote:
Wed Dec 19, 2018 8:04 am
1. Everyone thinks they are behind - from what I see I think you are doing really well given your situation.
2. If you are going over budget by $100 or $200 most months, then your budget is wrong. I do it in reverse, I overestimate expenses and then whatever is left over at the end of the month gets pushed into TAXABLE investments or in your case saving for down payment. Sure it delays your putting the money away by 30 days, but it reduces your stress of going over each month.
3. Understanding personal finance is a double edge sword. Once you understand how it works, everyone begins to obsess over it. I can tell you I have had an unhealthy obsession with it, and I am sure others will attest to doing so as well. You need to find balance. In my experience, set it and forget it doesn't exist until you are FI. You will always tinker with it until that point.
4. You are early 30s and in a HCOL area - that is an expensive time of life. It will get better and easier as you keep building.
To point #2, as I explained a little more above, my wife and I are opposites where I like to save and she does as well, but if you tell her a budget, she will spend to the point of that budget. (E.g. if there is $100 left in food budget for the month, she will go out and spend $100 in food even if it isn't necessary). So to protect against that, I've set the budgets to the point where they are reasonable but I think if I were to take your approach, we wouldn't be having that left over in the budget. Best bet seems to be to keep budgets as is and know that I will keep a $500 buffer for the month so I don't stress out...hopefully.

Topic Author
Cmpliance
Posts: 593
Joined: Wed Jan 08, 2014 11:41 pm

Re: Balance of living and saving

Post by Cmpliance » Wed Dec 19, 2018 8:22 am

stan1 wrote:
Wed Dec 19, 2018 8:10 am
You could do a little more breakout. Dining out is often a major expense. If you are often buying breakfasts, lunches, and dinners because it is convenient there's usually going to be a lower cost option if you do some advance planning at the grocery store so that you always have easy to prepare foods handy. It's a way to save money and maybe eat less. A brewed coffee with complimentary milk or cream is usually about half the cost of an espresso based drink. We live in a HCOL area as well but there are hundreds of lower cost ethnic restaurants where we can get out for under $30 for two people. Drinking free tap water not alcohol or sodas with most meals out can save $1000 or more per year if you eat out frequently.
That's the thing, we used to go over budget with our food, which was $700/mo for two, so we decided to try out a few months where we split it ($350 for him, $350 for her). By doing that, we were able to see that the majority of my wife's food budget was getting used up from dining out with her sisters/friends and "luxuries" such as Starbucks. I would be well within budget because I'd grocery shop/cook with the occasional fast food here and there.

I know dining out can eat up your budget. Typically when we dine out it comes easily to $75-$100/bill depending on the occasion, so because of that we actually rarely eat out. Also, those types of expenses we will typically allocate under the $600/mo shopping budget since they are "special occasions" and one meal would kill our food budgets.

jharkin
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Joined: Mon Mar 28, 2016 7:14 am
Location: Boston suburbs

Re: Balance of living and saving

Post by jharkin » Wed Dec 19, 2018 8:36 am

Shallowpockets wrote:
Wed Dec 19, 2018 7:50 am
I see $400 in fun money and $600 for shopping. A month! You have a big buffer there to either enjoy your life or save more. Your call. That is way more discretionary funds than most people will ever have. I think your living/saving balance needs to be resolved in your mind more so than as figures on a balance sheet.
True, but hte OP isnt most people. They are a couple living in what looks like a near million dollar house in a VHCOL area. Based on the numbers their income is probably mid-6 figures.

The $400 a month is less than $50 per person per week. In the kind of area they live in that wont even cover one restaurant meal. Heck a single new pair of levis costs more than that now. A new pair of dress shoes (the kind they might be expected to war if they have high power jobs) might blow their entire month "fun budget". A new cell phone could blow 6 months worth.

You have to be careful that being frugal doesn't turn into an unhealthy miserly obsession, and I think that is exactly what the OP is worried about.

Shallowpockets
Posts: 1143
Joined: Fri Nov 20, 2015 10:26 am

Re: Balance of living and saving

Post by Shallowpockets » Wed Dec 19, 2018 8:59 am

jharkin wrote:
Wed Dec 19, 2018 8:36 am
Shallowpockets wrote:
Wed Dec 19, 2018 7:50 am
I see $400 in fun money and $600 for shopping. A month! You have a big buffer there to either enjoy your life or save more. Your call. That is way more discretionary funds than most people will ever have. I think your living/saving balance needs to be resolved in your mind more so than as figures on a balance sheet.
True, but hte OP isnt most people. They are a couple living in what looks like a near million dollar house in a VHCOL area. Based on the numbers their income is probably mid-6 figures.

The $400 a month is less than $50 per person per week. In the kind of area they live in that wont even cover one restaurant meal. Heck a single new pair of levis costs more than that now. A new pair of dress shoes (the kind they might be expected to war if they have high power jobs) might blow their entire month "fun budget". A new cell phone could blow 6 months worth.

You have to be careful that being frugal doesn't turn into an unhealthy miserly obsession, and I think that is exactly what the OP is worried about.

True, they lve in a HCOL area. By choice. 700K equity now and hopeful for a savings 300K down on a new house in 3 years. $50 per person might not cover one restaurant meal. New dress shoes may blow their entire fun budget. Sounds overall like a major first world problem. They have plenty to enjoy life and save more. Thye can have it both ways.

NextMil
Posts: 540
Joined: Wed Dec 13, 2017 12:33 pm

Re: Balance of living and saving

Post by NextMil » Wed Dec 19, 2018 1:44 pm

HardHitter wrote:
Wed Dec 19, 2018 8:19 am
NextMil wrote:
Wed Dec 19, 2018 8:04 am
1. Everyone thinks they are behind - from what I see I think you are doing really well given your situation.
2. If you are going over budget by $100 or $200 most months, then your budget is wrong. I do it in reverse, I overestimate expenses and then whatever is left over at the end of the month gets pushed into TAXABLE investments or in your case saving for down payment. Sure it delays your putting the money away by 30 days, but it reduces your stress of going over each month.
3. Understanding personal finance is a double edge sword. Once you understand how it works, everyone begins to obsess over it. I can tell you I have had an unhealthy obsession with it, and I am sure others will attest to doing so as well. You need to find balance. In my experience, set it and forget it doesn't exist until you are FI. You will always tinker with it until that point.
4. You are early 30s and in a HCOL area - that is an expensive time of life. It will get better and easier as you keep building.
To point #2, as I explained a little more above, my wife and I are opposites where I like to save and she does as well, but if you tell her a budget, she will spend to the point of that budget. (E.g. if there is $100 left in food budget for the month, she will go out and spend $100 in food even if it isn't necessary). So to protect against that, I've set the budgets to the point where they are reasonable but I think if I were to take your approach, we wouldn't be having that left over in the budget. Best bet seems to be to keep budgets as is and know that I will keep a $500 buffer for the month so I don't stress out...hopefully.
I would work on that with her. I would maybe show her that if she does not spend everything she has then that money can go to the down payment and you can get into the newer house quicker, or start with something smaller that she really wants. You don't want to be pulling in one direction financially, and she is in the other, that will not only make things harder, you will undoubtedly become very frustrated with her.

Topic Author
Cmpliance
Posts: 593
Joined: Wed Jan 08, 2014 11:41 pm

Re: Balance of living and saving

Post by Cmpliance » Wed Dec 19, 2018 8:14 pm

NextMil wrote:
Wed Dec 19, 2018 1:44 pm
HardHitter wrote:
Wed Dec 19, 2018 8:19 am
NextMil wrote:
Wed Dec 19, 2018 8:04 am
1. Everyone thinks they are behind - from what I see I think you are doing really well given your situation.
2. If you are going over budget by $100 or $200 most months, then your budget is wrong. I do it in reverse, I overestimate expenses and then whatever is left over at the end of the month gets pushed into TAXABLE investments or in your case saving for down payment. Sure it delays your putting the money away by 30 days, but it reduces your stress of going over each month.
3. Understanding personal finance is a double edge sword. Once you understand how it works, everyone begins to obsess over it. I can tell you I have had an unhealthy obsession with it, and I am sure others will attest to doing so as well. You need to find balance. In my experience, set it and forget it doesn't exist until you are FI. You will always tinker with it until that point.
4. You are early 30s and in a HCOL area - that is an expensive time of life. It will get better and easier as you keep building.
To point #2, as I explained a little more above, my wife and I are opposites where I like to save and she does as well, but if you tell her a budget, she will spend to the point of that budget. (E.g. if there is $100 left in food budget for the month, she will go out and spend $100 in food even if it isn't necessary). So to protect against that, I've set the budgets to the point where they are reasonable but I think if I were to take your approach, we wouldn't be having that left over in the budget. Best bet seems to be to keep budgets as is and know that I will keep a $500 buffer for the month so I don't stress out...hopefully.
I would work on that with her. I would maybe show her that if she does not spend everything she has then that money can go to the down payment and you can get into the newer house quicker, or start with something smaller that she really wants. You don't want to be pulling in one direction financially, and she is in the other, that will not only make things harder, you will undoubtedly become very frustrated with her.
Definitely is a work in progress. She's come a long way since we first met and she's doing great on the progress she's made thus far.

NextMil
Posts: 540
Joined: Wed Dec 13, 2017 12:33 pm

Re: Balance of living and saving

Post by NextMil » Wed Dec 19, 2018 9:40 pm

HardHitter wrote:
Wed Dec 19, 2018 8:14 pm

Definitely is a work in progress. She's come a long way since we first met and she's doing great on the progress she's made thus far.
Glad to hear. Been there myself before.

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