a rambling post about money
Since I haven’t had time to read this week, I’m going to cheat a bit and talk about a book I read years ago, Your Money or Your Life, by Vicki Robin and Joe Dominguez, as well as to riff off Laura and Mel‘s recent posts about money.
Robin and Dominguez’s argument is that by the time you add in all the real costs of working — taxes, commuting costs, business wardrobes, the meals we buy out because we don’t have time to cook, the toys we buy ourselves as rewards for getting through frustrating times — your true wages are quite low. They advocate for cutting expenses and saving until you can live off the interest from your savings — which they call Financial Independence.
I have issues with many of their specific recommendations, but the basic point that money is a medium for exchanging "life energy" for goods and services, and that you should know where that life energy is going, has stuck with me for years. Interestingly, the first time I did their exercise of tracking every cent you spend, I decided I wasn’t spending ENOUGH money on books. (This was before the advent of the online library catalog, and the ability to put holds on books from home. I’d say that 90% of my reading is from the library these days.)
I haven’t tracked every cent in a while, but the recent exercise of tracking our groceries made me confident that there’s not a whole lot of slack in our budget. Travel is really my one expensive hobby, and we haven’t been doing much of that lately.
I make more money than I ever thought I would. But I also didn’t expect to be the sole wage earner in my family. A major factor that made it possible is that we were extremely lucky in our timing in buying a house; we couldn’t afford our house on one income if we were first-time homeowners today. If my primary goal was not to have to work, we could move somewhere outside of a major urban center and live off our equity for a while.
I’ve been job hunting, and most of the jobs that appeal to me pay significantly less than I currently make. I’ve done a rough budget and figured out how low I think I can go without having an ongoing negative cash flow, but that doesn’t help with the emotional issues. If I get a job that I love, I don’t think I’ll regret the money, but I’m afraid that if a job turns out not to be what I hoped, I’ll think "well, I could have been unhappy at work but making 30% more."
February 15th, 2005 at 10:43 pm
I’d be afraid to track every penny, but I am often surprised that even in months when we haven’t been extravagant–no books, no clothes, only one or two dinners out–we still don’t have significant amounts left over.
February 16th, 2005 at 9:17 am
If you’ve never done it, or haven’t done it a while, it’s worth doing the tracking every cent exercise for a month or two. It’s useful to see where the money goes.
I read an article a while ago that argues that the key to a balanced budget isn’t to limit the occasional extravagences, but to control the “committed spending” — mortgage, rent, student loans, car payments, groceries, utilities — because that’s where the real money is. The author suggests that if more than 60 percent of your income is committed in that way, you’re going to have trouble saving.
It’s at: http://moneycentral.msn.com/content/Savinganddebt/Learntobudget/P36153.asp
February 16th, 2005 at 9:37 am
I used to be great about budgeting, and sticking to a budget, before I got married and had kids. Now it’s more difficult.
First, I feel like a complete Nazi if I razz my husband too much about spending habits. If I were a man, and were putting my wife on an “allowance”, would that not make me a Nazi? So I’m unwilling to say anything about my husband’s ridiculous grocery shopping bills.
Second, I find it very difficult to budget properly with kids in the house. Clothes and shoes, for example. It depends on so many things: change of seasons, how fast the kids are growing, whether a birthday or holiday is in there that can rope in clothes from grandparents, and of course other intangibles, such as DD’s terrible string of potty-training disasters. Then there’s “activities”, etc. The nature of pre-school admissions was such that I didn’t have a solid number on pre-school costs until maybe three months before she started — and the pre-school insisted on full payment for at least six months before she even crossed the door. And don’t even get me started on pediatrician visits and prescription costs. Totally unpredictable.
If anyone has any tips about budgeting with kids in the house I’d love to hear it.
February 16th, 2005 at 2:50 pm
We’re longtime fans of YMOYL but we aren’t pursuing FI in anything more than a half-*ahem*, desultory fashion. We look at our spending every month and answer the three questions (did I receive value in proportion to life energy spent? is this amt. in line with my values? how would this change if FI?). I’ve liked the non-condemnatory attitude towards spending (not ‘you overspent in this category’ but ‘would you trade that dingus for a day/week/month not working?’).
Our latest budgetary revolution is to account for only the fixed household costs (mortgage, utilities, food) from the couple money (my salary) plus a minor allowance for both, and everything discretionary (dinners, movies, books, etc.) comes from our own accounts. Theoretically, if we don’t want to spend our own money on it, we don’t do it.
I’m hoping to go parttime postpartum, and I want to have a year’s worth of household money saved up each year in advance. Everything else will be bonus. Even so, I’m trading the security of my job and fabulous health insurance for time. There came a point when security just wasn’t enough to make up for the negative emotional issues, as you say. Maybe you’re not quite ready to make the transition yet.
February 16th, 2005 at 3:00 pm
Straw Horses
This all reminds me, powerfully, of a post about money management that I found via Half-Changed World.
February 16th, 2005 at 4:27 pm
There’s a big difference between putting your spouse on an “allowance” (e.g. treating them like a child) and having a discussion with them about the family’s budget, your mutual goals, and whether your spending is aligned with your priorities.
YMOYL actually suggests tracking your progress towards FI in a big wall chart. I’ve never actually done that, but if your husband needs some sort of reminder that there are opportunity costs to his spending habits, it might be worth giving it a try.
For variable costs like doctors appointments and clothing, the usual suggestion is to figure out the average monthly cost, and then put that amount in an account every month, and draw from it as needed. The goal is for you not to see that money as “available” for other purposes.
February 16th, 2005 at 4:54 pm
I’ve been getting together with some friends to discuss money. It’s been a great de-panicker. I’ve blogged about our first meeting, if anyone is interested . . . .
February 17th, 2005 at 2:56 pm
Just wanted to clarify that the allowances I was talking about were not to keep my husband’s spending in check. It was to give both of us a small sum of money for personal use that didn’t have to be negotiated in couple budget discussions (it’s useful for presents when you don’t necessarily want the other person to see the total on the bank statement).