Open Thread: Let’s Talk Saving

Wow, we were not expecting that response to the “how much do you spend on clothes” thread — among a lot of our friends we’re the cheapskate.  (We run with a lot of well-dressed ladies!)  Keep in mind, however, that we haunt the sales — as we tried to make clear, there’s a difference between what you think a work-appropriate item of clothing should cost and what you’ll pay for one.  For example, yes, most of our bags cost around $600-$700 — but we figure out which brands we like, and then stalk the sample sales (both online and in NYC); we’ve also gotten some ridiculously great deals.  In general, we end up paying around $200 for a bag.  But that’s part dedication, part talent, and part ego, also — we enjoy getting a good sale on things we think are high quality.  Pictured:  Money, originally uploaded to Flickr by AMagill.

But how much you spend on clothes should, obviously, be less than what you’re saving — for retirement, for a down payment, etc.  So let’s talk about this.

(For starters, we should say that we were blessed with the gift of both college and grad school from our parents — we started with no debt.  We should also say that we don’t have a lot of expensive habits, other than clothes and taxis — we tend to bring our own lunch most days, buy drugstore beauty items (on sale, usually), and avoid expensive treatments (we pay a lot for hair cuts a few times a year, but don’t color our hair, which we understand can be expensive).  We don’t have an expensive hobby (e.g., jewelry-making or something), and we have no pets or children.   No car payments (NYC), and until recently, we rented (in what we always considered to be reasonably-priced apartments).   We pay our credit cards in full every month.

With that out of the way:  one of the most amazing gifts we ever got from our father (in addition to the above-mentioned tuition) was this piece of advice:  set a savings target every month. We’ve always done this — even when we were making a low, low amount of money as an editorial assistant for a major women’s magazine, we tried to save $X per month.  The goal started out as $100, in those days — and some months it was tight; we’d end up buying bags of potatoes and eating a baked potato with a slice of American cheese for dinner in order to meet the goal.  When we graduated law school — making more than 5X what we were making as an EA — we set our savings goal higher, adjusting it as our pay increased.  What your target is, obviously, depends on your lifestyle, your debt, et cetera.  There’s probably something to the way in which we save, also:  once a month, we physically move our “savings” from one account (our checking account at the local bank) to another (a Schwab money market fund). This is pretty easy to do — most banks can link accounts online so it’s easy enough to do with just a few clicks.  But it accomplishes a lot of things.  First, how much we save is very present in our minds — our savings target has sort of morphed into a checking account target; we don’t like to keep more than so much money in our checking account and we move everything above and beyond that into our Schwab account (our savings target is more like a minimum, in our mind).  Second, we are very aware if we’re dipping into our savings. If we can’t meet the minimum savings, we reexamine our month — what were we doing that cost so much money?  If we actually have to move money over from our savings account back into our checking account, we buckle down even more.

Another important thing (we think) is that we don’t include bonuses or other “found” money in our budget. So if we got a big bonus from the job, that went almost entirely to savings.  Tax refunds, large gifts — they all went into savings — until we figured out what to do with them.  We have never left money sitting around in our checking account to be spent.  Sure, we’ve dipped into it through the years — trips, a nice watch, et cetera — but those were very intentional, planned splurges.  (We didn’t start doing this until fairly late in the game, but we also max out our 401K every year.)

Obviously, what you do with your savings is a very different issue, and we don’t pretend to be financial advisers.  The best tip we can give you, though, is to find a savings or money market fund with a high interest rate (in your favor, we mean), and stick your money there until you have time to hire a financial advisor, or read some books or articles on investing, or until it’s time to pay for that downpayment.

What tips and tricks do you use to save money?  How do you try to save every month?  How does your spending on clothes compare to what you’re saving?

Comments

  1. Amber says:

    I wish I saved more.

    I’m wondering how others handle money when it’s shared with another person? My husband and I have different saving styles (as in, he would spend every penny if he could). I feel so busy and stressed all the time from law school, extracurriculars, and my job that I don’t want to necessarily sit down and put in the time and work it takes to create a budget and make sure we’re sticking to it. He doesn’t have the desire to do that just because it’s not something he enjoys doing.

    To answer C’s question, 10% of my income is placed in a savings account automatically through direct deposit. My husband has 10% of his put into a 401k. I wish we were able to save more than what we are doing…

    • We decided early on how to handle the shared money. We definitely have different spending and saving priorities.

      We have three general checking accounts, a his, a hers, and and ours (a joint account). We have a general idea of household expenses and each contribute half to that. Then we can each spend our “own” money on whatever we feel the priority is for us. So if I want to blow my checking account on whatever (not usually clothes for me but I do have several hobbies that I always want the latest gadget for), I do, without breaking the family budget.

      We each have seperate savings and brokerage accounts too. And then our retirement accounts. And yes, I really do need to save more than I do. I try to up it ever couple of months or so and it is definitely time to reevalute.

      It is definitely not a perfect system. A lot of times one or the other of us will pay for “joint” stuff like groceries out of our own checking account. And we still have tension about money, especially when one or the other of us is feeling particularly poor. But most of the day-to-day tension is gone.

      • Nancy P says:

        Mew, I like your system. Question: do you and your hubby have similar salaries? I wonder about whether I would want both spouses to contribute equally if one made twice as much as the other. (This of course is a hypothetical question in my single state.)

        • It varies from year to year, since he is self-employed. So yes, at times, I end up contributing the greater amount to the joint account.

      • Amber says:

        I like that idea a lot. I think that my fear with that system is that we don’t make much more than we need to pay the monthly (shared) bills, so each individual checking account would have like $60 left each month after we contributed our parts to the account for shared expenses.

        Were you and your husband ever in a similar situation, or did you start doing this after you would still have a significant amount left after the shared stuff?

        • When we started, we’d both been working for a long time. I made less than he did at the time, so sometimes there wasn’t a whole lot left in my individual checking account. (Although more than you’d have.) It did make me really disciplined about spending for awhile. I’ve gotten away from that, and I need to be better about it, since I’m not sure how secure my job is right now.

      • We also have a his, hers, and ours/joint account. But we filter money into the three in a completely different way. All of our paychecks/earnings go into the joint account (We earn within 20% of the same salary). The person who works less makes up for that by doing more household chores.

        At the beginning of each month I transfer $250 into “his” and $250 into “hers.” The $250 has to cover all of our “discretionary” expenses. Discretionary expenses would be toys for our hobbies, going out to eat, alcohol, most charitable donations, clothing (though we occasionally will give a ~$200 boost when one of use needs a lot), etc. Also, if one of us does consulting work or gets money from a different side job, that generally goes into our discretionary account.

        Since our nondiscretionary expenses are about the same every month, we have a fairly predictable amount left over in the joint account at the end of every month. Right now this money is going to home improvements. When that is done we have made loan repayment priorities, and the left over $$ will pay back loans (or go into savings) based on that priority list.

        Before we did this all of our accounts were jumbled and we spent whatever we wanted on discretionary items, though we talked to each other before spending more than ~$50 or $100 on something discretionary. We didn’t really know for sure what our monthlies were. I know we spend less with the 3 separate accounts, but I’m not sure it’s a whole lot less. The benefit is more in making us conscious about how much we’re spending on what.

        As far as the question of “should I save it” or “should I pay down debt with it,” we figure we need a certain amount of accessible cash (a couple months expenses assuming our expense level at the worst case scenario), and beyond that it just a cost-benefit analysis. If the savings/investment account will return more than we’re paying in interest on our loans, we will save it.

        • JB–the one who works less does extra chores or the one who makes less? This is a major issue in our house. Although currently our salaries are almost equal, within about two years my SO’s will be at least 50% more than mine, even if I stay working at a law firm. That said, I work substantially more than him and will be working substantially more than him as long as I stay at a law firm. Dividing household chores is a much bigger point of contention for us than money and I think it will only get worse. (Fortunately, it is not that big, so I am certain we will work it out.)

          We have three accounts (his/hers/ours) and each put an equal amount in to the joint account (which is enough to cover joint (not necessarily nondiscretionary) expenses). Once there is a noticeable difference in our incomes, the contributions will be adjusted proportionally (if he makes 50% more than me, he contributes 50% more than me to the household). This system usually works except for when I go nuts at the Container Store using our shared debit card. (Not that I’ve ever overdrawn it, but the cushion has shrunk some months.)

          As for savings, I max out my 401(k)–which works out to 15% of my salary– and currently save about $1,000 a month to pay off part of a remodel (which we were able to finance for 12 months same as cash). Once the remodel is taken care of, I will start saving for emergency or another special purchase. Or paying down my student loans which cost me about $850/month (and I’m on a very long term plan for some of them).

          Looking at my Nordstrom history (where I buy most of my clothes) I would guess that I spend about $8,000 a year on clothes, which is about half of what I save for retirement. My SO insists that this is way to much, and now that my work wardrobe is largely complete, I will try to cut back.

          I like the idea of moving everything “extra” into savings at the end of the month but every time I have tried to do that, the next month has been unusually expensive. I think that for it to work I would need to have a larger minimum amount in my checking account than I currently do.

          • Whoever works fewer hours does more household chores (which would be me). Though I also happen to be the one with the salary 10-20% lower. We figure if one person is working to contribute to the partnership, the other should be doing a proportionate amount. That said, if someone wants to be a workaholic, the other person doesn’t have to go that far. There is a degree of personal choice to the hours you work. So if he works 70 hours a week, that doesn’t mean I have to do my 40 at work and then 30 at home. But it does mean I have to spend a day or couple of evenings doing laundry and cleaning. Sometimes I get a little pissy about doing laundry, because I think, “hey, it was your choice to take on the extra commitments at work.” But really, it’s who he is. So I have to suck it up, because he’s who I want. Bottom line, we’re in this together.

    • divaliscious11 says:

      We also have a his/hers/ours. We do 10% to our individual accounts 90% to the joint account. What we do with that 10% – totally up to the individual and I find that my 10% builds because I usually bring my own lunch to work, unless I am going out with my team and other than a cup of coffee in the am, I don’t have time to actually spend.

      • divaliscious11 says:

        For most of my career , my spouse has made 2-3x what I have made and we still stick to the 10/10/90 rule. He is transitioning to a different but related position next year which means I currently make more but ultimately he will surpass me again and probably get back to the 2x. However, we have always built our spending plan on one income. Used to be his, now it will be mine, but we’ll stick with the above allocation. Each person needs to have $ they can spend without question or guilt.

  2. This has become an issue for me lately. I just finished my judicial clerkship and started a job at a public interest law firm with a good salary – much more than I made when I was clerking (where I wasn’t really able to save anything). But I live in an expensive city and pay $2k a month in student loans and it’s really hard to save money at all. I’m aiming to save $400 a month right now for long-term savings that I won’t pull out to spend on vacations or whatnot every year, but I wish I could save more.

  3. I am a pretty extreme saver, and pretty much do what C does except that my savings money is tranferred to my Zecco trading account so I can invest it. I just try to save by spending as little as possible, i.e. cutting expenses, bargain shopping, etc.

    When I was making less than I do now, I used a cash system- I withdrew $500 at the start of each month, and that had to buy everything (food, clothes, etc.) until the next month. This was kind of fun- it became a game to see how much I could have left and sometimes I would go and splurge the remainder on something I wanted, knowing I had earned it. For me, this cash system worked very well, and I keep meaning to reinstate it.

    As far as spending in general, this is my approximate monthly budget:

    7,000 net income

    -2,500 (2k loan payment and 500/month parental support – my parents are both on disability)
    -2,000 savings
    -1,500 rent
    = 1000 for utilities, food, clothing, entertainment, etc.

    Bottom line: I was a total fool to go to law school (HYS), notwithstanding the higher income it temporarily brought me. I expect to be laid off in the next year, like many of my friends. When that happens I will be lucky to find a job that lets me live and support my parents (who will need more help as time passes), never mind pay back my loans.

    I strongly suggest to ANYONE contemplating an advanced degree to NOT do it, unless you are lucky enough to have parents or a benefactor who can pay for it. Otherwise, between the years in school and years of paying back your loans, your ability to save in your younger years (and thus to take advantage of compounded interest) will essentially be torpedoed. You will be playing catch-up for the rest of your life.

    • I don’t know; statistically, that’s not at all the case with many (not all) graduate degrees, and most people with grad degrees don’t go to HYS and get big law jobs or the equivalent either. But a law degree tends to net people several times the cost of even high loans over the course of their life time. That’s not to say it’s always a good investment, and of course minimizing debt is a good idea in a lot of cases, but on average a lot of those degrees are worth it.

      • There was actually just a post on this over at TaxProf blog: http://taxprof.typepad.com/taxprof_blog/2009/11/schlunk-law-school-is-a-bad-investment.html

        It’s not uplifting news for most of us, unfortunately.

        If I could do it again, I would not toto law school. Or at the very least, I would go to a law school where they gave me some money (instead of the “best ranked” school that I got into).

        • I think it completely depends on the circumstances of the individual. I think I’m probably a rare (and lucky) bird, but I went to an in-state school with in-state tuition and a partial scholarship to boot. The school is easily a top-50 school, but was a good 15-20 slots down from the “best” law school that I got into. I decided that spending about $25K for all three years of law school tuition was better than going + $150K into debt to schools that were located in big cities with higher costs of living, though these schools probably have a glam factor that mine did not. It turned out to be a good decision, because not only do I (reasonably) like what I do, but I got a job in a good firm paying market salary in a big city. I was able to pay the costs of going to school (minus of course what I could have theoretically been saving/investing during those 3 years) in a year. This is a whole other can of worms, but it seems like lots of people go for the “name brand” law school rather than thinking about out the entire costs/benefits of the school and wind up regretting it.

          • This is the route I opted for as well. I was accepted to two top-tier law schools, but chose State U. (the Chevy Chevette of law schools :-)) because they gave me a lot of scholarship money, and the in-state tuition was a bargain. I graduated w/only $20K in debt and a very useful degree.
            Given that I am not ambitious – I like a challenge but don’t particularly want to be at the top of the totem pole – this was a great decision for me, and an excellent investment. No regrets here.

        • IronB says:

          Please tell this to my brother. I’m a year and a half out and keep trying to explain this to him as I struggle to pay my $1500/month student loans and $2k/month mortgage…and I’m one of the lucky ones who actually HAS a job. I’m coming up on the 1 year anniversary of becoming a lawyer, so I’m hoping for a raise, otherwise, with a roommate to help with the mortgage I’m just barely making it. Saving anything is laughable, though 1% pre-tax does go into a retirement fund with my firm.

          I don’t understand why anyone would start law school right now. I went to the cheapest school I got in to, but there are cheaper out there that I refused to consider. in 29 years when my loans are paid off, maybe I’ll think differently. :-p

          (P.S. my clothes budget is $50/month, rollover so I can save for a few months and Christmas and birthday combined means a good $200-$500 in gift cards to JC Penney’s and Macy’s which helps. I’ve only gone over twice this year.)

        • Interesting – though as a liberal arts major, I’d have been lucky to make $40k a year for the three post-college years I was in law school, and I graduated from law school as a “hot prospect” based on his chart, so I certainly can’t complain about my investment. For people with solid pre-law school careers or undergraduate majors that weren’t worthless, the picture is probably different than for me, as well as, of course, varying based on what law school you go to.

      • v-among lawyers, you are wrong. Tuition at non-top ten schools is rarely lower than that at HYS and the likelihood that you will make over $60K is very low. This is confirmed by studies and anecdotally. Going to law school is one of the worst investments that you could make. Don’t get me wrong–law can be a very interesting and rewarding field but your chances of becoming rich from your work are extremely slim.

        • Looks like that’s the case; too bad. I was just reading Young, Broke and Fabulous, which said differently, but that might have been before the last round of tuition increases and law school openings.

          • I can’t emphasize the in-state option enough. That is a huge saver. If you know you want to go to school and are qualified (GPA/experience) and have a good shot of getting in, it may be worth it to move to a state that would give you that option, work for a year, get in-state status, and then move forward with your plans. This may only be realistic for some, but those folks should take advantage! Also be aware that the reputation of schools (not necessarily the rankings) do play a role in your ability to get a job at the end of the day, though your performance/class rank is a huge indicator too. Be aware that Big Law (and the money that comes with it) recruits at a limited amount of schools. Look at the employment statistics of a school before you commit and be realistic.

            Like other posters have commented, hopefully people will learn that going to law school or graduate school is a baaaad idea if you just don’t know what you want to do and think school will buy you time or will magically create “options.” The people in school who were focused and had a pretty good idea of what they wanted are doing well for the most part (e.g., I am interested in these specific practice areas of corporate law and this makes sense due to my background in abc and I can talk about my related pre-law xyz experiences in interviews… and not simply oscillating between unrelated fields without a clear idea of what those fields entail). In contrast, those who didn’t have a clear concept are not as well off. It drove me nuts in school to hear kids talk about how they went to law school because they couldn’t get a job after graduating or because they didn’t get into med school or because they didn’t know what else to do. These kids didn’t really want to be lawyers and were more or less miserable during law school.

            It is a good idea to have a clear idea of your career path before you start off. Things might change and flexibility is a good thing, but just because you’re smart enough to get in doesn’t mean that things will automatically work out. The only thing that is certain is the cost of tuition!

    • Well, that’s good financial advice, but not necessarily good life advice. I’m broke, but I love my job, and I love being an attorney. I wouldn’t be nearly as happy if I hadn’t gone to law school, even though I’d probably make the same net pay as I do now after loan payments. I chose to work in the public sector and knew I’d be broke. So I think it’s all about having reasonable expectations and goals.

    • divaliscious11 says:

      That’s unfortunate you feel that way, and I don’t mean this in a bad way, but where you went to school might get you in doors, but what you do is totally dependent on you. I got in to several top tier schools and opted to go to my state law school (still top tier but not the big names) which is very good, and spent significantly less for my law degree, and the ROI has been significant. I subscribe to the your first salary should be more than your total school loan number. When I realized that even the biglaw job wouldn’t get me to that if I went to the big name, big name was out. As it happened, I did well at my school and ended up in biglaw anyway, where my school debt load was 60% of my post clerkship salary. Some said I was crazy for not going to the big name school, but when I worked right alongside those who had – I knew I’d made the right choice. I was doing the same work and paying 1/3 for the knowledge. I agree that going to law school with no idea of what you want to do is bad, but if you have a plan or a map, before you sign the promissory note, going to graduate school is a great idea.

      • Completely agree. I also chose a “top 25 but unglamourous” state school where I could get in-state tuition over some much flashier and higher-priced alternatives. I didn’t get a scholarship on the way in, but the school later erased my first year loans because of my performance. I’m about to graduate with roughly 80k in debt (from undergrad and law school), but my starting salary will be twice that in the major market I wanted to be in. Now, that isn’t to say that picking my state school was a sure bet for getting a Biglaw job. It was a calculated risk that I took and it paid off, but it won’t for many in my class.
        Even with my “prestigious” undergrad degree in a liberal arts major, I would have been lucky to earn 40k without some kind of graduate degree so I think that TaxProf’s analysis is seriously skewed by the inflated starting salary assumptions out of undergrad.
        Bottom line: it was a good investment for me both financially and personally. I have no regrets.

    • Would definately not do law school again. I just graduated, I’m in my early thirties and won’t be able to afford to have (biological) kids during the remainder of my reproductive years because of my loan payments. It wasn’t something I gave enough though to when I was taking the LSAT at 26 … now I’m over 100k in debt and barely making monthly expenses. That’s without cable, shopping at goodwill, and taking the bus to work.

  4. Want to save more, but saving the minimum right now. Hubby and I made mistakes in the past and abused credit cards. The goal right now is to pay off the credit cards and then all the money we put there will go into savings in addition to what we currently save.

    Fortunately, we don’t have a car payment (both vehicles paid off), and the student loans have gotten smaller (paid off almost all of the private loans), but we have a modest mortgage and currently my husband does not work (he’s a stay at home dad). So, we put as much as we can afford into savings while being on track to pay off the credit cards ASAP. Looking forward to that because after they are paid off – we’re getting rid of all of them except for my husbands business card (when we decide to put our youngest into preschool and he restarts his business).

    We’re house hunting, so if I don’t get a credit card eliminating bonus, if we sell our house we’ll use remaining proceeds (fortunately we already have most of our down payment) to eliminate CC debt for good. That was a mistake we’ll never repeat.

    • Anon, you would be better off putting all of your money into paying off your credit card debt rather than putting anything into “savings.” Unless you’re earning more on your savings than you’re paying in credit card interest – and I can’t imagine that you are, what with the exorbitant rates that are being charged for credit cards these days – it’s better to get rid of the debt. As Suze Orman once said (and I paraphrase), paying off your credit card debt is like earning an 18% return on your savings.

      • I agree, but want to have some cash just in case. I’d rather take longer to pay of the CC debt and have money to live off of (including paying the CC bill) if I were to loose my job.

        Man, this has been a REALLY interesting thread.

      • divaliscious11 says:

        Also, in the current credit environment, you can’t depend on your cc for emergencies anymore as they are closing accounts with zero balances (They did this to us – we had several cards to maintain our credit ratios when we need to make large expenses etc… and they closed them for non-use). You need some cash. That said, when you pay your cards off, don’t close them, it will crush your credit score, and unless you are planning to buy your next house with cash, you will need a strong score to get the best rates. Use them to buy gas etc.. and pay off monthly.

      • Suze Orman has changed her advice lately to match the current economic situation – she now recommends paying ONLY the minimum credit card payment until you’ve reached a goal of an 8-month emergency fund in your savings account.

  5. Sharon says:

    H and I were also blessed with the gift of education from our parents (him: undergrad and grad, me: undergrad and my work paid for grad). So that’s really huge.

    But bottom line: We live on my salary (the smaller of the two) and bank his. It’s all technically shared, but administratively, I handle the day-to-day and he handles the long-term. So on a day-to-day basis, everyday expenses (food, utilities, clothing, etc.) come out of “my” salary, and the only things that come out of “his” are our mortgage payment, any medical bills, vacations / travel, and any large / unexpected bills (like needing a new roof or buying a new car).

    This enables us to pass on the gift of fully-paid education to our children.

    • This is a really good call. I think my dad regrets not paying for all or part of my law school. He wanted to retire early and did so when I graduated from college, for which I’d taken out only about $30K in loans, all federal. He figured he had paid his way through college and grad school and I could do the same. But now he says that he realized that when he was a student, the total cost of attendance, including cost of living, for a year was about the cost of a new car and could easily be paid with a 20-hr/wk job. Instead of working for three more years and helping me pay for law school, he now has to send me money whenever I have an unanticipated urgent expense (like medical co-pays) because I have zero savings even with my loans on an income-contingent 25-year plan. It’s a situation he really does not like seeing his only daughter in. And the worst part is that unless I marry well, if I have kids, I won’t be able to set aside to help them pay for their educations and the cycle will repeat itself.

  6. I’m so glad Corporette is tackling this subject … it’s easier to talk about some of this stuff with an anonymous audience than with close friends, who you may not want to share the intimate details of your finances with. My biggest savings tip is to count it as a monthly bill just like everything else. Each month I pay my phone bill, student loans, and my savings account. Right now I’m saving a big chunk of my paycheck until I save up a year’s worth of living expenses. Once that’s done, I’ll shift some of what I would have put into savings into loan repayment. Right now it’s $1000 a month to savings and $500 a month to loans (that’s on top of minimum payments of around $700). Once I have my 1 year of living expenses saved, it shifts to $500 a month in savings and $1000 towards loans. I put awy 7% to retirement. Also, I give myself $160 a month in cash for ‘spending’ money. All non-essetials (clothes, make-up and haircuts, happy hours with friends, etc.) come out of that cash. When I’m out of cash, I stop buying things.

  7. Kalorama says:

    We have money automatically transferred from our checking acct into savings about 3x a month (we each get paid biweekly). We figured out the amount by taking reviewing our budget and subtracting the total budget from our income–”leftover money.” Interestingly, it was right on target to the percentage we wanted to save.

    Budgeting/tracking of expenses is really key to saving, especially, if like me you share your finances with your husband/partner. Amber, I’d recommend checking one of those online sites like http://www.mint.com. You can research this online at financial site like cnn money.

    I should add that I carry law school debt and live in a really nice part of town of an expensive city, live well but still very frugally (am a sale maven, bring my own coffee and lunch etc to work, cook a lot instead of eating out). So, yeah, budgeting and saving is a hard, but like anything else, you feel much more in control if you know where your money is going.

    Love this post, btw. Can we have more financial type posts?

    • Kalorama says:

      Oh I should add that all of this savings happens after my automatic retirement savings (10%) into my retirement account.

  8. This is a great topic. My most pressing question, to those contributing to a 401(k), does your employer match? From anecdotal evidence, I think most law firms don’t match. So does it really make sense to max out your 401(k) when you could be putting it towards a roth or do some kind of other post-tax savings? Also, it is clear I need a financial advisor but I hate the pushy ones and they all seem pushy to me.

    My husband and I are trying to save up 8 months of living expenses in our savings account in the case that (heaven forbid) one of us gets laid off. That’s a lot of money for us since we have a mortgage, student loans, etc. So we’re putting about $2500 a month in savings. I put about $900 into student loans a month.

    Our one “trick”? We have cut waaaay down on eating out. I’m by no means a chef so I try to make one big meal on the weekends and then we eat the leftovers twice during the week. We usually work late at least one night a week and then get the firm dinner. Not very cool but it’s saving us a lot of money.

    • Nancy P says:

      W, those of us at law firms make too much for the Roths I think. That’s why I max out my 401K pre-tax (and kick in an extra 10% post-tax too) even though my firm doesn’t match. It’s still pre-tax, so it’s all good.

      I only have $50K in law school debt (thank you scholarship), and it’s locked in to a ridiculously low rate. No credit card debt. I put the above in my 401K, and was putting away an extra $1200 a month in savings through an automatic deduction every time I got paid. I just bought a new apartment, however, and my debate is whether I can keep putting that much (or anything) in savings and make my new (much) higher mortgage payment without cutting back on my lifestyle. Until now I haven’t watched what I spent, because I just spent whatever was left after the 401K and savings withdrawals. I probably spend $200-400 a month on clothes, plus at least another $200-400 on eating and going out. I consider it to be a great luxury to not have to buy things on sale (I was a wicked sale maven until I got the firm job), but I know I can go back to that if I need be. And I’m pretty sure I can survive on free firm coffee and don’t need the $3 D&D cup in the morning.

      • You’re totally right, Nancy P about the Roths. I should have said some other kind of investment vehicle aside from the 401(k).

        • I’m perplexed by this. I’m at biglaw and we can contribute to either a traditional 401(k) (pre-tax) OR a Roth (after-tax) 401(k). That’s an inclusive “or” — I contribute to both. All the money goes to the same investment account, it’s just the pre- or after- tax distinction that matters.

          Did you perhaps mean that we make too much for a Roth IRA? That’s not the same as a Roth 401(k) option.

          • I meant a Roth IRA but my original comment was confusing. If you wouldn’t mind sharing, I am interested in why you decided to contribute to both the traditional and Roth 401(k). As I understand it –and this obviously may be wrong–it makes sense to contribute to a Roth 401(k) if you think you’ll be in a higher tax bracket when you are ready to retire and thus you pay taxes now and not later. If you think you’ll be in a lower tax bracket then you should contribute to a traditional. Is that right? If so, why contribute to both? Hedge your bets?

            Of course, this puts aside the whole debate about whether or not the government will ever go back and re-tax the Roth 401(k).

          • W, you are essentially correct. A Roth is most appropriate if you think you’ll be in a higher tax bracket at retirement (or you think that taxes overall will continue to rise). A traditional 401(k) is more appropriate if you anticipate staying the the same or lower tax bracket.

            I have a financial advisor, and he recommended starting with the 25-Roth, 75-Traditional contribution. I agreed with his reasoning, so I adopted the system. Essentially, as a young associate making too much money to deduct my student loans, with no dependants, and no mortgage interest deduction, I got NO tax breaks whatsoever. That’s a little bit hard to deal with (espeically when you’re starting out with a lot of debt). Therefore, my FA suggested contributing to both initially. I get a good tax benefit from the traditional 401(k), but I’m also already in the “habit” of contributing to the Roth. Over time, and especially now that I have some other tax benefits (I bought a house this year), he recommends slowing changing the contribution percentages in favor of the Roth. So, for example, next year, I may move closer to 50-50, and eventually 25-50, and ultimately to Roth contributions alone.

            Obviously, your personal situation makes a big difference here (which is why I’m telling you mine). If you already have some tax breaks in your favor, it might make sense to move directly to a higher Roth contribution.

          • I think that’s what she meant – although those of us who make too much money for a Roth IRA should take note of the upcoming changes to the income limits. My understanding is that they will be gone as of 2010.

    • Karen says:

      W, I know what you mean about pushy financial advisors. They’re constantly calling me at work – drives me crazy.

      If you really want to find someone, one of my close childhood friends grew up to be a financial advisor and he is one of the sweetest, least pushy people I’ve ever known (and also much smarter, I think, than the typical financial advisor). I haven’t used him personally but if I wanted a financial advisor he’s the person I’d go to. He lives in the middle of nowhere so you’d probably interact with him by phone /email / mail. If you’d like his contact info, please feel free to email me at kemnyc at gmail (trying to thwart the spammers by spelling it out).

      Karen

    • divaliscious11 says:

      Essentially, you need both tax advantaged and non-tax advantaged retirement savings. I forgot to mention my after tax IRA below (usually paid with bonus money), but each of types of accounts have different rules around when you must make withdrawals etc… so for maximum flexibility, its best to have both.

      There are some great books out there, but try to read more than one and then you can put together the plan that works for you. The library is free and you know your circumstances better than others. Plus financial planners try to sell you stuff that lines their pockets (whole or universal life insurance – racket unless you make major $$$$, but the first 5 years of premiums go to the fin adviser, for example). And remember that spending plans get adjusted for life all the time…

    • W, if you are in the San Francisco Bay Area, I can highly recommend Cam Neri of Retirement Capital Strategies as a financial planner. She’s lovely, smart, not pushy, and very stylish to boot!

  9. Maggie says:

    In terms of student loans, does everyone send a big check to the student loan people every month? I had gotten some advice that if you have a low enough interest rate, it makes more sense to save the money up and put it in an account that will beat the interest rate.

    So, say I have $70,000 in Sallie Mae loans from undergrad that I consolidated during my grace period to lock in 1.8% interest. Shouldn’t I make the minimum payment for the next 30 years and put that $70k in a CD or something that earns 3%? I realize I’ll pay taxes on the interest I earn, so maybe it’s a wash. I realize it would feel good to have it paid off, but as long as you kept it fairly accessible, you could always just cash out and send Sallie a check if you wanted to be done with it and join the Peace Corps or something. But if you didn’t foresee something like that happening, you could even buy some stocks and if you left it alone for 10 years, you’d get at least an 8% return, conservatively speaking. I have some higher interest loans that this plan wouldn’t work for, but for this particular low-interest tranche, I can’t imagine why I’d rush to pay it off.

    Also I’m not dying or anything, but say I was to be in a plane crash. Any federal loans I was still carrying would be canceled on my death. Then the family would have the extra cash. But maybe I’m missing something? Has anyone else thought about this?

    • I feel the same way about my federal loans — I’m in NO hurry to pay them off. (Even the interest rate on my “historically low rate” mortgage is higher!) My private loans are another story, entirely.

      • I think it has to do with your level of comfort with your amount of debt. Some people want to get them paid off right away, some are comfortable making the minimum payments. I used to be on the standard 10 year plan, but when I wanted to take a public sector job for awhile I got comfortable with the extended plan. It only really matters if you actually are putting that amount into savings, I guess.

    • No one else is going to give you money at 1.8%–I wouldn’t pay that off any faster than you have to. People get very strange about debt–they tend to either ignore it and spend, spend, spend, or they don’t want to have any of it and pay off debts that shouldn’t be paid off quickly. But, there can be good debt, and a 1.8% loan qualifies. A general rule of thumb is that if you could make more interest by putting your money in a different vehicle (a cd or stocks) then you could by paying of your low interest loan, then put the money in the other vehicle. On the flip side, pay down higher interest debt as quickly as you can–think of it as investing your money at that interest rate.

    • I can barely make the minimum payment. But if your interest rate on the loans is lower than the interest rate on your savings account (or the rate of inflation) then definitely save the money instead of paying down your loans.

    • divaliscious11 says:

      I am in a similar position. I didn’t have private loans, or six figure debt and I am locked in at super low rates like you described. I pay the minimum on the loan and invest the difference. If something happens to me – those loans go away and my kids get what I’ve invested. For me its a no brainer.

  10. I’ve said it before and I’ll say it again: I am not a natural saver. I’m not proud of this fact, but I recognize it and have found some pretty effective work arounds to “trick” myself into saving.

    First, I max out my 401(k). In fact, I set my percentage of income such that I max out in about 9 months. I do this primarily because if there is ever a time of year that I need a little extra cash, it’s the October-December holiday stretch. That also happens to correspond with when I stop paying into social security, so my last three months of the year I end up taking home a lot extra in each paycheck. My 401(k) contribution is divided 75% traditional and 25% roth, and I take 15% of my income out per paycheck until I hit the $15,500 limit.

    Second, I purchased a substantial whole life insurance policy. Whole life insurance is more of a savings vechicle than I realized before speaking to a financial advisor. It’s relatively inexpensive if you purchase at a young age, and has much of the compounding interest benefits that you expect from a more traditional savings account. Plus, obviously, it offers additional safety to my family if something tragic were to occur.

    Third, I have “short-term, goal-specific” savings in mutual funds. This comes straight out of my checking on payday via auto-deduction. In truth I only put a few hundred dollars into this account per month, but by putting it in the mutual fund it is “out of sight, out of mind”. I don’t think of that as money that I could spend. I never see it, and I never think about it until I get my quarterly statements.

    Fourth, my fiance and I maintain a money market emergency fund account. I don’t contribute to this account on a monthly basis. It just sits there unless and until it is needed.

    I still struggle with setting my savings goals appropriately, especially given my student loan debt situation (abismal). The interest rates available right now in money market accounts (in my favor) are seriously laughable compared to my student loan debt interest rates (in the bank’s favor). I figure that the most important thing is to start saving early. I use my bonus, tax return, etc. every year to make a big lump sum payment toward my student loan balance (which is still abismal, despite my efforts).

    • divaliscious11 says:

      Whole life insurance are rackets. You get significantly less insurance coverage than you likely need, plus you are paying most of the money to the seller of the policy for the first 5 years. Then on top of it, if the returns on the investment portion are the average of 8%, (because the fine print says those great numbers are just estimates, not guaranteed – you will only get what the market returns minus their fees) you actually only get 5.5%-6% after the fees are taken out. And the kicker, if you die, you beneficiary only gets the life insurance piece, not the investment piece…
      Run the numbers, ask whomever sold you the policy how they get paid, it will always be cheaper and a better deal for you (not necessarily the seller) to set up a vanguard or fidelity type investment account with auto deduction and purchase term life insurance, if you actually have people who depend on your income.

      Don’t feel bad, my husband had the same thing before we got married – real life example
      He was paying in excess of $5000 a year for one policy for roughly $400K of life insurance + the investment piece. After 4 years, the cash value of the policy was about $4K – (before the market crashed) because most of the initial premiums go to the insurance broker and that was inadequate insurance. We now have $2.5mil in term insurance (we now have kids) for which we pay $2K a year, and the difference (plus more) goes to a very low fee investment account, both of which will be all ours should something happen to him.

      Like I said…run the numbers…you’ll be surprised….and then probably mad…

      • Thanks for the advice. I will run the numbers. I also should have mentioned that my parents co-signed my private loans (but could not afford to pay them off in the event of my untimely demise). At the very least, I need to maintain life and disability insurance sufficient to pay off these debts until I pay them off myself (which is likely to be another 20+ years for the private loans).

  11. So anyone have any recommendations for what savings account or money market fund has the highest rate of return?

    • I have my “emergency fund” online savings account (usually the best rates are online – not regular) with HSBC direct. An online savings account seemed the easiest path for an account where I don’t keep the bulk of my savings. The emergency fund for me is an account that gives me a certain amount of relief to have, but I am not looking to use as a vehicle for savings/investing now that I have it. That said, I still wanted an above-average interest rate and a bank with a great reputation. While there were a few banks that (at the time I opened an account) had higher interest rates, I also liked the fact that HSBC sends you an ATM card and you can withdraw money wherever/whenever. I travel internationally a fair amount, and access to HSBC ATM’s seemed like a big a plus. HSBC also got great reviews, and I haven’t had a problem with them in my few years of having the account. FYI — if by some strange circumstances I am nowhere near an HSBC ATM, it takes about 3 days to transfer money out of the account to my usual checkings account. I think this is fairly average.
      When looking for a good place, I just did a Google search for “best online savings accounts.” I’d recommend you do the same thing and obviously look at the source of the information. From what I recall, ING Direct also was rated pretty highly, as well as FNBO Direct. Good luck!

      • Emilie says:

        We use ING Direct and have been totally satisfied with it. I think we’ve had an account with them for about 5 years.

    • Anonymous says:

      The magazine Kiplingers, which is really fantastic for helping you learn about money, posts that information every single month. It is most likely on their website as well. It sort of varies from month to month. They also post which credit cards have the lowest interest, most cash back, etc. They find some really obscure stuff that you would not find on your own.

    • Karen says:

      Check out bankrate.com. But whatever bank you choose, I recommend thinking about how you will get $ in and out of it, and check the fees. When internet banks first opened, years ago, you could do unlimited ACH transfers from your local bank account that were free, so it was all very easy. Lately many banks have added fees and dollar limitations that make it harder. So you need to think about that as well as interest rate and monthly fees / minimums.

      Karen

  12. I’m curious – how people manage to max out their 401k. As much as I’d like to, I just can’t afford to do it (and somehow, in 30 years, I’m going to be saying how could I have afforded not to). I mean, between student loans and health insurance (hello $1200/month), in our household, I just can’t imagine being able to afford it, especially with my husband not working currently. Kudo’s to y’all and I’ll continue to dream and gradually increase my contributions so that someday we’ll be able to do it.

    • They don’t have debt. Maxing out my 401K would mean contributing 6% of gross income – my loan payments are a quarter of my gross income. Without loan payments, it’d be easy to stick away 6% in the 401K and still put another 5% or so in savings.

      • I assumed that by “max out” you meant contribute the maximum amount that your employer will match – reading the comments above, maybe that’s not what it means.

      • I assumed you meant contribute the maximum amount that your employer will match – reading the comments above, maybe that’s not what max out means.

      • That’s not true — I have boatloads of debt. I’m the only breadwinner in the household (so I pay for my fiance’s health insurance — although nowhere near $1200), and I have $150,000 of student debt. I pay a minimum payment of $1,500 per month on student debt. I also have a $1,500/month mortgage.

        That doesn’t mean that everyone with debt can do it, but it’s not impossible. Maxing out my 401(k) is 12% of my gross income, and I’m still doing it. It’s not easy, and some months there are weeks where I literally cannot afford to buy a cup of coffee, but I make it happen. I hope, hope, hope that someday I’ll be glad that I went through some rough weeks early on.

        • Your mortgage plus your monthly loan payment equals my take-home pay. Don’t assume everyone is as well off as you.

          • Believe me, I don’t. If it came off that way, I apologize. I was just countering the proposition that they way to max out your 401(k) is to not have debt.

            (Also, I did not mention that I have an unemployed fiance with $150,000 in law school student debt as well. His monthly payment is also $1500. I recognize that I do very well compaired to many people, but when you look at my montly expenses — the ones I’ve mentioned so far: my loans, fiance’s loans, and mortgage equal 3/4 of my take-home pay — I’m hardly rolling in it.)

          • Sorry J – I didn’t mean to be rude. And I completely know about not being able to buy a cup of coffee.

    • I certainly can’t speak for everyone, but I can max out my 401k because I make 6 figures, was lucky enough to have my education paid for by my parents, and have no spouse or kids to support, which also means my health insurance is about $75/month. I also don’t own a car or a house. I’m sure I couldn’t max it out either if I were in your shoes!

      • I max out my 401(k) now. If your employer matches (mine doesn’t), you should contribute at least the matching amount, or you’re just throwing away free money.

        • dcm58 says:

          I think I was able to max out because I started doing it right when I got a firm job . . . So, I never got used to living with more money.

          That would be my biggest advice to any law student. the SECOND you get your law job, max out the 401k (or if you aren’t eligible for the first year, put that much into some sort of savings). That way you never get used to having that extra money. It is MUCH easier if you do it that way.

          • a great tip to anyone with a 5-figure bonus coming up — switch you 401K contribution to the highest amount the company will allow. bonuses are taxed at a ridiculously high level, but it can be funneled to your 401K pre-tax. It can go a long way, and you end up “getting” more of your bonus (because it’ll be taxed at a much lower rate once you take it out).

          • Bonuses are a good way to up your retirement savings, but they are taxed the same as other income. However, the withholdings on bonuses are higher. If a significant portion of your income is paid as bonus then you probably get a large tax refund in April when you file your return.

          • Regarding bonuses, this is not exactly true. They are WITHHELD at 40% (or whatever it is exactly) when you receive them in your paycheck. But they are TAXED just the same as any normal income when you file your taxes. It all goes in the same box on your tax forum.

          • If you have a match on your 401(k) you do not want to increase your contribution just before your bonus if it will cause you to hit the maximum you can contribute (16,500) before year end or you will loose out on match. If you are not contributing to your 401(k) for a pay period, there is no match that pay period.

          • I agree with dcm58. If you start right away, it’s not so hard, but if you wait, it will fill like you are taking a paycut. I am fortunate enough to make six figures (just barely) but I have massive student loans. So I extended the repayment period to free up some money. I also moved in with my boyfriend which I do not think anyone should do for financial reasons but the fact is only paying half of the mortgage (versus the full rent, which was equal to the full mortgage) makes a big difference.

          • When I started my firm job, I put away 8-10% in the 401 K. Every year, when we got a cost of living adjustment or raise, I increased the percentatge a point or two. Hardly noticed it, and after five years was maxing out my 401 k. Thank goodness, cause that is about all I have in savings now.
            This year, with husband not working we are hurting. Now trying to find $$ anywhere I can, I have cut back to 2% to the 401K, and deferred my school loan payments for a year. Between the mortgage and daycare, the coffee I get once or twice a week is nothing. If only we could sell our house and downsize…

  13. I spend 1/3 of my take-home salary on paying down my student loans. If I saved more than I spend on clothes, I’d go naked. And paying off my credit cards monthly is a pipe dream.

    I do put my student loan payment money in a separate account where it sits with a higher interest rate, and I usually have about $1000 more in there than is actually due on my loans, in case I have an emergency and can’t set aside money for my loans in a given month.

    • I should also add that I contribute 1.5% of my salary to my 401K, which is matched by my employer, who also contributes an extra 5% annually.

  14. We currently don’t save a heck of a lot in cash terms, but we are putting $$ into renovating our house that we expect to get back (the prices in our area didn’t fall, and our house was in really bad shape when we bought it). We do budget everything via excel. We have checking, an ING account, then taxable savings accounts and IRAs all at schwab, but we are above the income limits for deductibility of IRAs so we have mostly stopped contributing to those. My husband’s bonuses all go into savings/renovations. I contribute 7% to my 401k – my firm matches up to 4% (small firm). I used to max it out but we have one kid, one on the way, and a nanny to pay for now, so we have increased expenses for the next few years until the kids are in school.

    Luckily, we have no student loans – but our mortgage is really big (almost 700K), so we pay a lot into that every month.

    • Also forgot, we have no debt other than our mortgage – no car loans etc etc., and we don’t carry balances on our credit cards.

  15. Claire says:

    I keep a monthly budget and detail my spending. I set goals and mostly stick to them. As a student, I deal with exceptionally small amounts of money, so it’s easier for me than it might be for some others, but I am assiduous. First of all, open a high yield savings account () I have automatic transfers every week on payday to this account. This can either function as your emergency fund if you don’t have one yet, or your general vacation/big splurge fund. I put in ten percent of my income per week. Your emergency fund is the fund for if you get laid off or come down with mono or your mother dies. It’s like long-term care insurance for the working set. It should hold enough money so that you could not work for 3-6 months relatively comfortably.

    Second, you need to be paying off every credit card every month. If you’re not doing this, get the lowest APR card you can find and transfer your balances from your higher APR cards (balance transfers usually go in at 0%.)

    If you don’t know how much the basics cost for your lifestyle, right now, then you need to keep track of your expenses for three months or so. You absolutely must know where your money is going. How would you know if you were being defrauded? You may also be shocked at how much you spend on expendables (say, on Starbucks lattes, or lunch out).

    For the marrieds or joint-account holders, you need to figure out your financial goals together. Buy a house? Go on a two week vacation? Put your kids through private school? Pay for your parents to go into nursing homes? BIG EXPENSES require LOTS OF PLANNING, and most divorces are related to financial strain. Go to a financial planner, together, and work out 5, 10, 20 year plans. What do you want and how are you going to get it?

    Phew. I didn’t know I had so much to say about this. Thanks for this post :)

  16. Does anyone have tips on 1) whether a financial advisor is necessary (in the situation that one has no debt, already has an emergency savings fund, maxes out the 401k, has some in relatively safe mutual funds, but is terrified/clueless of taking that next step in investing and doesn’t want to spend weeks/months doing the research!)? and 2) how to go about the process of finding a qualified financial advisor? I’ve read plenty of articles on fee arrangements, questions to ask, etc., but I guess I’m looking for some practical advice from women who have been there/done that. Thanks!

    • You don’t need to hire your own financial adviser. Just set up an account at schwab or fidelity and make an appt. w/ them. What will likely happen is that they’ll suggest a number of index funds, and given the economy–you’ll be happy to have these in 5+ years. You really don’t need to get any fancier than this, but they can certainly suggest other funds/stock and you may find that it interests you and look into it yourself. I too suggest Kiplinger’s as a great magazine to get your feet wet.
      Take heart in that you’re obviously making a lot of right decisions.

    • A financial advisor is really not necessary in the circumstances you describe. Or, in my opinion, in most circumstances. You can pretty easily teach yourself the basics. If you already have no debt, have an emergency fund, and max out your 401(k), there are three other areas I’d think about:

      1) Insurance. If you have stuff–money, health, life, mental or physical ability–you can lose it. If you’re already saving some for retirement and saving for a rainy day, this is IMO more important than making additional investments in mutual funds. Assuming you have health insurance through work, I’d prioritize a good disability policy at the very least. It’s not the cheapest insurance out there but it’s so important. Otherwise, what happens to you when you get hit by a train or develop a medical condition that keeps you from being able to work a paying job?

      2) Additional investments. Find a low-fee company (I use Vanguard, they are awesome, I’m sure there are other good companies out there) and put some money into one or more of their index funds. You don’t have to think about this very hard so long as you stick with index funds that don’t try to do anything fancy. Maybe start with a total stock fund and gradually diversify from there. It’s easy to compare fund options on Vanguard’s site and to set up an account online pretty much anywhere. So long as you stick with low fes, broad indexes, and stay away from fancy volatile party trick funds like precious metals, you’ll do fine on your own.

      3) Big Dreams. Think about your goals–own a home? Travel to India? Get married in a big fancy wedding? To get your pilot’s license? To run a marathon in Hawaii? Whatever, your should be putting money (a little or a lot, depending on your means and your goals) aside for it somewhere you can keep it separate from your disaster money.

      • Karen says:

        Right on. Studies show that trying to pick individual stocks and managed mutual funds does not lead you to outperform the market. A low-cost index fund like the Vanguard ones seems to be about as well as you can do in the market, and should be fine until you get older (when you might want to start buying bonds). If you can budget on your own and figure out your own life insurance needs, you don’t need a financial advisor. That said, if you want one to help get you started, I’d recommend my friend – see my post above to W.

        Karen

    • If investing confuses you, I think it’s worth consulting with a professional investment advisor or with a friend or family member whom you trust and is an experienced investor. I don’t think you need a financial planner unless you’re planning major changes soon (i.e. marriage, kids, going back to school, job change).

      I rely on a family member who is basically a professional investor for advice, so I can’ t recommend a particular company.

    • Many advisors will offer to review your situation and make recommendations as a one-time appointment for a reasonable fee. This can be the push you need to get past the terrified/clueless stage. They use their expertise so you don’t have to do all the research.

      It sounds like all you need is a bit of advice, but not someone to continually manage your money.

  17. After my student loans came due, I read the book “Smart Women Finish Rich” by David Bach. Incredibly cheesy title, but a really great book. The author is very positive and practical.

    I agree that this is a great post topic and I’d love to see more like it!

  18. dcm58 says:

    I love hearing how other people are (or are not) saving. My husband and I are each from low income families and feel we are playing catch up with all of our friends sometimes . . . so, here’s our way of doing it – and I guess it isn’t really enough – deep sigh.
    We both max out our 401ks. I have a firm job and my husband has a medical teaching job (essentially, he gave up the big bucks to head up a residency, but he loves it). my firm doesn’t match, but his hospital does and it is at an awesome high rate!
    we both have a crazy high loan amount from med school and law school (along with LLM year – dumb) with fairly low interest rates. We pay about 2500 a month on loans – mostly because we want to pay off the two of the ones that he has at 6% interest. the rest are all consolidated (separately) at 2% interest, so I figure I can pay on those until we die! ;)
    the big thing we did to “save” was get a 15 year mortgage. I clerked for a few years while he worked at a non-profit clinic, so when I got a firm job we felt very “rich.” We wanted to force ourselves to save more as a necessity, so we bought our house on a 15 year 100% loan, thinking we would build equity fast and then sell it after 5 years and have a crazy good amount to use on the next down payment or something. I don’t really know whether that was a good idea or not, but we will make at least 100k on the house when we sell it.
    aside from that, we save about 1500 a month. other than that we have no budget, we just spend it. We do kick about 1500 a month to support our respective parents, but we think that is worth it. We have everything joint, so I just made the rule that neither of us can spend more than 100 dollars without talking to the other one. that may sound like a low amount to some, but it is just right for us. it is high enough to not feel too restrictive, but low enough to encourage thought before spending. it ensures that neither of us just “splurge” on something without taking time to talk out why we want to do it.

    • dcm58 says:

      oh yeah. we pay off credit cards monthly and no car payments. that’s the only debt other than the parental debt I referred to (1500 a month).

  19. Erica says:

    I love this topic! A few years ago I purchased Suze Orman’s “Young, Fabulous, and Broke” when I was, well, broke. This book was my financial lifesaver for years. About a year and a half ago a friend was over at my house and saw it on my bookshelf and told me that I made way too much to still have that book around and told me that I need to upgrade to Suze Orman’s book “Women and Money”. This book has been another lifesaver, and me and my husband use it all the time now. We set all of our insurance levels based on her recommendations, bought a condo (in an expensive city), and helped us to figure out how to run our household finances (stress free) when we make significantly different amounts of $.
    For our finances each of us have our own checking, savings, and retirement. Jointly we also have a checking and savings account. To keep it all sane we do all of our banking at Charles Schwab, and do not have any other outside accounts. Each month we put into the joint checking account the percentage that our incomes equal to our monthly budget, i.e., our household budget is something like $5,400, he contributes 64% of this and I contribute 46%). At the end of each month we take whatever there is left over in the joint checking and move it to the joint savings.
    Our personal accounts are just that. We are each responsible for our own retirement savings and for our own personal savings for big ticket items (like if he wants to take a big trip with his friends). Big ticket items that we would share would come out of our joint savings account (right now we are saving for a new car and increasing our savings to have 8 months of living expenses for the two of us saved). Additionally we don’t have the debt that some of you do (Thanks Mom and Dad) which I know helps us out, and I know that Suze Orman addresses very well in her books.

  20. The best class I ever attended in undergrad was a one day budgeting seminar. The woman running it had a lot of the same tips as C, especially about the bonuses and refunds going directly to savings. She had us make a budget spreadsheet in Excel that I still use today. Here is the general idea:

    1) You take your income for every month and divide it up into different categories. For me, rent is 30%, utilities and apartment expenses 8%, Food 14%, etc. Other categories include Family, Health, Transportation, Debt, Clothes, Entertainment, Savings and Misc. You can adjust each category to your own preferences (sadly at this point clothing is only 3% every month….but so be it.)

    2) For the spreadsheet savvy, you can make a column for each category which will apply these percentages to your income and tell you how much you can spend each month. Each row is a different month. The last column should add up to 100% of your income.

    3) In a column next to each category is one where you can put how much you’ve spent in each category. You can tell the spreadsheet to subtract these amounts spent from your 100% column at the end of each row. That way, at the end of each month, you will know if you are in the red or the black. If you are super disciplined, you can put your left over into savings. If you aren’t, you can add it to the clothing fund for next month :)

    Hope this is helpful! I basically agree with everything C has said and also emphasize the importance of a financial planner. As a lawyer, numbers often evade me, so my financial planner Matt is a lifesaver.

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