November 2009

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?