Budget Busters
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Library of Congress Every day I read about 60-70 personal finance/frugal living blogs. Through the help of many of our online friends, I have been fortunate enough to put my personal finance position into its proper perspective, and begin to take ownership of my financial decisions and decision-making. However, even after completing a total overhaul of my spending and budgeting, there are some financial pitfalls I cannot avoid.
I often think about the little financial "sea of troubles" many times throughout the course of my day. I acknowledge several times a day, that despite all I learned, and all I am willing to learn, at some point the knowledge must translate into action, and through persistent action, habit. But, the process of financial planning is imperfect, that's why there are so many resources offering sometimes competing advice. This thing of ours (personal finance) is an imperfect science, one we must know inside and out, before we can hope to master it.
A famous Chinese proverb sums up the mess of our struggle with personal finance, "To learn virtue takes three years; to learn evil, one day." While I think three years might be quite optimistic, it is important to take steps toward acknowledging your faults, in order to turn vice into virtue.
With that in mind, I've listed some financial problems or areas of concern for my life. No matter how much energy I put into these areas, I generally cannot reduce the significant amount of stress they put on me and my budget:
- Automotive Expenses
Between auto loans, insurance, gas, maintenance, our automotive costs for two people sometimes consume nearly 40% of our entire monthly expenses. This is completely unreasonable. I've considered re-financing the auto loans to take advantage of lower rates, but banks do not like our high student loan balances and the fact myself and the future-wife (more on that below) are both still in school with no full-time jobs. I've also considered trading in the SUV for a compact-car to save on fuel efficiency. However, I have problems parting ways with my truck (especially with all the snow Upstate NY gets) so we are quasi-content to maintain the status quo, but try to carpool or walk whenever possible. I've promised some people a blog post on this topic and apologize for its delay, but I'm also considering how much fuel, i.e. money, I waste using my remote car starter approximately 600+ times per year. Until that post is finished, suffice it to say, the automotive expenses in our household elevate the stress/anger level a good two or three notches.
- Dining Out
Let me start by saying I love gourmet food. This flies in the face of almost everything we are trying to accomplish. To that end, we've reduced the amount of times we eat out (down to maybe once or twice per week) and become more conscious of what we buy at the grocery store. The problem is that when you weave our school/part-time work/internship/community involvement schedules together, there is little time left to cook. For some time we were both on Weight Watchers (eliminated as a frivolous expense) at the end of last year and since then we've been eating mostly healthy foods. The limited time for meal preparation + expensive healthy snacks puts a damper on the finances, but it is a welcome problem, because the causes are school (more education = more $$$) and a desire to eat healthy.
- Wedding Costs
Planning a wedding is not for the faint of pocketbook. We are both having a great time planning our wedding this June. However, we are not having a fun time dealing with the costs of our wedding. Getting married is expensive, but getting divorced is more expensive, which is why I don't mind spending gobs of money to marry the person I know I am going to be with forever (hope she's reading!) I checked out Myscha's article on going green with your wedding, and was delighted to learn that we were implementing many of her recommendations.
- Consumer Debt
This section is the bane of my existence. After implementing the debt snowflake model and porting our one credit card with a high balance over to several smaller cards with long 0% balance transfer periods, I feel this category is starting to come under control. Since we currently only pay the taxes on our house (although we plan on moving and purchasing a new house soon) and our student loans are still in deferment based on our active enrollment in Grad School, the credit cards are currently our only active debt. Admittedly, we'd be paying them down much faster if we weren't constantly setting money aside for the wedding. My goal is to be credit card debt free by the end of 2009, although I think the freedom will come much sooner then that.
- Grooming (Damn It Feels Good To Be A Gangsta)
Total vanity point. I love to buy expensive male grooming products. Fusion Power razor blades, Grooming Lounge shaving products, Molton Brown soaps and shampoos and expensive colognes are my weakness. My partner-in-crime over at The Frugal Law Student has even spun-off and started a great new website, The Art of Manliness (check out his article on shaving like your grandfather ). There is nothing that brings me more pleasure then spending the afternoon surfing the web to purchase another over-priced hair care or shaving product. That being said, I'm trying to cut down. Trying is the operative word.
Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.
Might I ask where you live?
I live in the SF Bay Area. I earn over $80k, have zero debt, a healthy 401(k), a healthy-ish Roth IRA and a healthy savings account. I cannot afford to buy a house. Not even a shitty one.
Granted, "cannot" is relative. I could raid my retirement savings and come up with $100k for a down payment, but even so, the mortgage calculators I've played with still say that if I want to put 20% down, the most I could afford would be a $350k property. That might buy me a studio condo or tenancy in common in a less than desirable neighborhood with a $2,500 mortgage payment, but in the process I'd be giving up the security I currently have. If I lost my job tomorrow I'd be able to go a year at my current burn rate before I had to start worrying. If I wiped out my savings and took on $2,500 mortgage payments I could kiss that security goodbye.
Some might say I should give up on the idea of a 20% down payment, but the idea of that much debt just seems ludicrous to me. The amount of stress that would put me under on a day to day basis would not be worth it. As much as I want a piece of dirt to call my own, to do with what I will, I'd rather sleep well at night.
I realize not every area has this expensive of a housing market; I am often blown away by the low prices in other areas. But are they really so low that a newly married couple, both still in grad school with student, auto AND consumer debt can really afford to take on a mortgage too? Perhaps the rent-vs-buy debate plays out so differently in cheaper areas that that actually makes sense.
We live in Upstate New York; the housing market in this area is a far cry from that in the SF bay area. My law school buddy from SF marvels when I tell him you can buy a really nice 2,500 sq. ft. house for under $150,000 easily in some of the best neighborhoods.
That being said, prices in my area are on the rise, assuring that this buyer's market will not last forever. While we aren't thinking of buying until after school is over, we do want to take advantage of the market before it starts to readjust to national averages.
Eating out and grooming are my 2 financial leeches.
When I read your bit on food, I felt like they were my words - I am self employed, have a 9 year old son who lives with me half the week and am juggling a busy schedule with home life, trying to get some balance.
I have had even more reason to cut back recently, I just split with my girlfriend, so my house has gone from 2 incomes to one.
You got any tips for single life living?
Thanks, and love your blog.
Eating out and grooming are my 2 financial leeches.
When I read your bit on food, I felt like they were my words - I am self employed, have a 9 year old son who lives with me half the week and am juggling a busy schedule with home life, trying to get some balance.
I have had even more reason to cut back recently, I just split with my girlfriend, so my house has gone from 2 incomes to one.
You got any tips for single life living?
Thanks, and love your blog.
I'll try to keep this short:
(1) two FT students and a mortgage and 2 car loans--are you nuts?
(2) the average divorce is actually cheaper than the average wedding, and the amount you spend on the nuptials has no bearing on that likelihood. The necessary ingredients for a memorable wedding are all about the people--right people, right place, right time. If you're going to splurge on anything, splurge on the setting. Everyone will remember where you got married, but no one will remember which cocktail napkins you picked.
Your personal grooming stuff is small potatoes. The problem is you're trying to live a lifestyle that's ahead of your life progress. Adjust that "vision thing" of what you need/deserve to be happy right now.
And...more time cooking quality food, less time reading finance blogs :-)
We haven't done car payments as a couple. Ever. That being said, I can certainly see where life circumstances might force us into that if everything came crashing down at once.
Even without the car loans though, I hear you on the additional costs. We do the remote car starter thing too, when the temperature dips below a certain number at night. Because we are now writing and studying at home, our monthly gas budget has decreased some, as has our insurance since our mileage on both vehicles is now minimal.
Again though, it's still freaking expensive. Partly because we live so far from things. Part of the tradeoff we made for affordable lakefront property, but some days it's hard to remember that when the gas costs here are so far above what everyone else in the country is paying. Ditto with groceries and such.
Since I haven't had my coffee yet, I realize I've likely reached the point of rambling. I'd be interested in anyone else's take on vehicle expenses.
My worst habit is that I fly out of the house in the morning without getting breakfast- and end up buying a bagel and coffee more frequently than I'd care to admit.
I can get my act together to pack lunches- somehow I think each morning will magically allow time for me to eat at home before my bus to work each day.
ALso- to ANthony Marrone- I live in Syracuse. The market for housing is way inexpensive- but the issue is- where are the jobs? If you work at all, you can afford a great house here. However, sometimes when people come from out of state, they end up having to buy McMansions to avoid too much tax burden from the sale of the prior home. Then the taxes and upkeep of the huge house become killer--- I have seen this happen way too many times.
Eating out is a biggie for me. I've cut it down to once or twice a week, but I'm tempted sometimes to just order a pizza after a hectic day, an evening that doesn't go well, trying to get my kid through his homework . . .sometimes I just don't have the energy for cooking.
Groceries are another drain. Even though I don't always have time for it, I love to cook, so when I go to the grocery, I end up buying more expensive items. I've recently stopped buying foods imported from China, and I'm buying more organic/locally grown foods. That puts a real drain on the budget. Eating healthy is expensive.
We didn't live this high on the hog when we were both full time working professionals. I agree with the other post that your both trying to live far ahead of your stage in life. That level of spending when you don't have money coming in is just scary. Unless you have some huge trust fund hiding in the wings your one bad circumstance away from disaster. What if one of you got in a bad car accident tomorrow, couldn't finish school and couldn't work any longer? Even if you have something like long term disability insurance those plans have a pesky way of not panning out when the company wants to retain profitability by refusing to pay them out or dragging you through court in order to settle for a portion of the value. Even safety nets are not givens. I wouldn't be able to sleep at night carrying that much debt and spending without a really good cash flow.
Automotive
Sounds like you both realized this is eating at your budget. But why do students have car loans? From the sound of it they are fairly big loans. Have you looked into selling the cars, paying off the balance of the loan and buying something cheaper yet still reliable?
Dining Out
We save dining out for about every few months and treat it as an entertainment expense. But we try to make cooking on weekends entertaining and something interesting.
Wedding
Do you really NEED a big wedding? So much of the expense in a big wedding is people doing what others tell them they "must do". Of course those must do's are intended to send as much business as possible to the wedding industry. Would a really nice well done reception be an option? We opted for a more casual social event since we were both adults who had their own lives when we got married.
Consumer Debt
Beyond using as an emergency fund why would anyone be racking up credit card debt as a student. That has to get paid off some time . Hedging your bets based on possible future income is pretty risky.
Grooming
Find one set of things or products you really like and stick with them. Trying new things all the time ends up wasting money. Just remember that sometimes your paying for the "luxury" (packaging and where you bought it) rather than the product itself. Target has some pretty decent performing product lines that don't break the bank.
Holy Cow! Two students, and not just car loans, but large car loans. I'm thinking it's either your education or your car loans - you choose.
But congrats on trying to sort out your budget. And you're right, it takes years to change your relationship with money. Even harder when you're married or in a relationship where you share costs and income. I'm assuming you're still in your 20s. Thanks for a courageous article.
Ditch the car payments, and if you HAVE to dine out, Wendy's has a great dollar menu (stack attack, anyone?!).
I think what a lot of the comments are missing is that, the hardest part of personal finance is dealing with these harsh realities of your financial existence.
I wrote this post to make myself accountable for these areas I often think about and struggle with in our budget. Although we still spend less than we make (despite being a student, I still make far more than the mean/median household income).
What should not be missed here, is that we all have areas of our lives that create constant stress and struggles. The reality is we are not going to sell both cars and rely on questionable used automobiles and sparse public transportation. The reality is that we have cut back on eating out and spending greatly, but it is an ongoing struggle.
Thank you for all the great comments, and although some of the critique bordered on being what I call "tough love" I am very appreciative of all the insight provided.
...even old (but cheap) cars that aren't 100% reliable. You learn some car maintenance. It's that old comfort-zone issue. I started cutting down on expenses 2 years ago, and other than buying even LESS groceries, I think the roof over my head is the only thing I have left to give up. Good luck on your money journey!
Someone explained this to me long ago. You have money, labor and materials in any project. This applies to your budgeting too. If you have the disposable money you could use that to solve a problem or need. If not your going to need to rely on labor and existing materials to make up for it. You always have a certain finite number of each at any given time.
One repair on a newer expensive to repair car can be a whole years worth of repairs on a slightly older or cheaper to repair car. Since our local VW & Audi Dealer pretends they cater to an affluent select group of people their prices for repairs are outragous. They are about 4x the cost of the same repair on our slightly older dodge truck. So we learned to do some of the basic work ourselves by researching online and connecting with groups that work on their VW's for a hobby. If it is beyond our skill and time availability we have a couple of standard repair shops that will work on imports. We use the dealer as the last resort. But parts and general repairs for that car are still fairly expensive.
I still get jealous at people that own old Hondas or Toyotas with over 200,000 an no major repairs.
Hi Zannie,
You sound exactly like me! I don't want to afford a sh**TY house here in the Bay Area either. Anyway, Anthony's post doesn't seem to include housing but I know a lot of people who are way over their heads in renting or buying places that eat up pretty much all of their money. I am kind of intrigued by Anthony's grooming obsession. How many soaps and colognes do you need? A bar of soap or bottle of shampoo lasts a pretty darn long time for me. I used to really love L'Occitane products and their shampoos were pretty expensive, but I would buy them on sale and they lasted a pretty long time.
Hi Xin,
He does mention housing; it's a parenthetical remark, though, not a bullet point. I see now that I misread it though. He says they are planning to sell their house and buy a new one; I thought he meant they were going to buy their first house.
The more I think about it though, selling a house they own free and clear--if I'm interpreting the statement that they pay only taxes on it correctly to mean that they do own it free and clear--to buy a new house when they have all that debt seems even crazier to me than buying a first house when they have all that debt. (At least in the latter case I can understand an emotional attachment to the idea of owning rather than renting.) Me, I'd be working on getting rid of the other debt first before taking on any new debt, and not needing to pay a mortgage OR rent would make that so much easier. That's a good thing I'd be sticking with. I might consider selling to buy a cheaper house so I could use the proceeds to pay off debt, but I don't get the impression that's what they intend.
But then to me, debt is slavery. I'll volunteer for it for a few reasons, like I did to go to school, but generally speaking I'd rather be free. Then again, that's an attitude I have found has only strengthened the longer I go without debt. When I still had student loans and a car loan (at which time I'd had thousands of dollars in debts for my entire adult life) I didn't realize what a burden debt was. The longer I go without it the more insane it seems to me that people voluntarily take it on right and left.
Well except for the automotive and man grooming expenses lol! My car payment is $180 per month and the insurance is $58/month. GOTTA LOVE Geico!
We've cut back on going out as much as we used to... one thing about a new budget ..it takes time to get adjusted.
If you need help or tips with your wedding let me know. I know how stressful that was when we got married in 2006. I definately saved by being frugal in certain aspects.
The average American is almost expected to have at least one car payment these days so if you are married you should have two... oh bullcrap!
My wife and I make over 100k a year and live in a cheap area with a nice house and I still drive my paid for 1994 Tracer. She recently upgraded to a 2003 Durango - we financed about 6000 and paid the rest in cash. Not having a car payment for the past 7 years has been really nice. I don't even do preventive maintenance on my cars so I end up spending $1500 every year or two to get some major problem fixed - this is WAY WAY cheaper than any car payment.
Drive around any trailer park and look at all of the new vehicles in the driveways.
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Katy
I can sorta - on a lower scale - relate on the grooming issue. In fact, I recently wondered - what with all of the primping & preening even us average guys do these days - if all men are turning metrosexual...
Seriously tho, the car issue is a toughie, but our solution to this has been simple. My wife & I have never purchased a car that we couldn't simply buy outright. No payments, no loans, no exceptions - and we've never bought (as a couple) a used car. However, we're very practical people, choosing cars that're often much smaller and lower-priced than any of our friends would consider. (Don't even get me started on those absurd & overblown SUVs that everyone thinks are a 'must have' for their family.) Also we're pretty meticulous about our car upkeep so they'll retain as much of their trade-in value as possible. And lastly, we resist the urge to trade up frequently - in over 11 years, we've purchased only 3 cars - both of our current vehicles are over 4 years old.
Anthony, I think the trick to enjoying eating at home and eating some of the gourmet things you like is using simple recipes that are quick and tasty. I stick with a few basic recipes when I want a quick, yet quality meal at home.
Homemade Pesto, which takes about two minutes in the blender over some cooked pasta. This only requires a bunch of fresh basil, a handful of shaved parmesan cheese, a few pine nuts, a garlic clove, olive oil, seasonings and a blender to blend it in. It doesn't even get heated, the cooked pasta makes it warm when served.
Vodka sauce, which Myscha highlighted on wisebread previously. That one is over the top awesome! Another is stir fry with shrimp and some nicer veggies. This one takes nearly no time and is awesome with frozen shrimp purhased on sale. Add in some fresh ginger, lemon zest (rind that is shredded), a little water, pepper and veggies of choice. These are three simple meals that leave me feeling like I had a nice quality dinner that I didnt have to spend hours on minus the high price tag of a restaurant.
I forgot to mention that we got married at City Hall! And it was a wonderful day.