Author Topic: Case Study: Hair on Fire Spending  (Read 5249 times)

MustachedImposter

  • 5 O'Clock Shadow
  • *
  • Posts: 15
Case Study: Hair on Fire Spending
« on: July 11, 2017, 01:42:11 PM »
Hello, first time posting, not new to MMM's philosophy, but despite that my hair is on fire.  I've tried to implement some changes, but I have a terrible time sticking to them.  It's like my spouse and I understand the philosophy but are weaklings in certain areas.

I think the goal for us is moderately early retirement.  Spouse 1 is not very interested in FIRE, and spouse 2 (me) is more interested but not sure it’s feasible.  My primary motivation in posting a case study is to get our spending under control, because I feel bad about how much we are overspending and it’s a huge lost opportunity.

Life situation: Spouse 1, 39, and Spouse 2, 37, MFJ, two children 2 and 6 months, live in a MCOL city (although plenty of people say it's HCOL)

Gross Salary/Wages: Spouse 1: $155,000 + 12% bonus (new job, so he hasn't gotten the bonus yet and it is not included below)
Spouse 2: $74,714

Net Salary per paycheck (biweekly pay):
Spouse 1:
Gross Salary - $5,961.54
Taxes - $1,515.23
401k - $834.62 (Spouse 1 was unemployed the first two months of the year, so this amount equals $18,000 split by the remaining pay periods, employer matches first 7.5%)
ESPP - $889.73
Health and Dependent Care FSAs - $95.24
Medical/Vision -  $18.03 (Covers Spouse 1 only)
Transit - $30
Net Pay - $2,578.69

Spouse 2:
Gross Salary: $2,873.60
Taxes - $359.91
403b - $689.66 (Employer matches first 3%)
Health and Dependent Care FSAs - $314.58
Medical/Dental/Vision/LTD - $187.43 (Covers Spouse 2 and the children)
Net Pay - $1,322.02

Total Monthly Income:
Wages: $8,451.54 (paychecks x 26 / 12)
ESPP sales: $2,104 (we sell immediately to bank the gains from the 15% discount, and use it as general income)
Daycare FSA reimbursement: $417
Total income: $10,972.54

Expenses:

Housing
Mortgage + HOA - $1,510 ($934 principal and interest, $576 taxes, insurance, and HOA)
Storage Unit - $70
House Cleaner - $220
House maintenance - $214

Utilities
Cell Phone - $57 (One Verizon 2 gb plan, spouse 1 has phone through work)
Internet - $50 (Lowest available non-contract price)
Natural Gas - $65
Electricity - $63

Transportation
Gas - $35
Car Insurance - $24
Bike share - $17
Auto maintenance/replacement fund - $150

Kid Expenses
Daycare - $3,033 (one infant and one toddler, this is insane, but is actually below market rates for our area)
Babysitter - $100
College savings - $200

Health/Insurance
OOP Medical - $180 (actual spending above Health FSA from last year, may be lower this year)
Umbrella Insurance - $13
Life Insurance - $163

Debt Service
Student Loan #1 - $483
Student Loan #2 - $143

Discretionary Spending (average last 6 months, unless otherwise indicated)
Groceries - $598
Restaurants and food away from home - $783 (This is about 1 sit down meal out a week, plus way too many lunches out)
Alcohol - $83
Amazon/Target - $748 (this includes some groceries and alcohol not tracked separately, household supplies, baby formula, kids clothes, and all “other”.  I know I need to break it out better)
Spending money - $600 (budgeted, covers adult clothing, hair, hobbies, anything else not in the budget, actuals are lower because I don’t spend my whole allowance)
Travel - $625 (budgeted, three trips east to visit family for holidays, one big vacation every other year, small local trips, actual was right on last year)
Vet - $83 (budgeted, actual has been lower but we have two ancient cats and expect it won’t be low forever)
Christmas - $115 (per month, based on actual spending last year, including tips/gifts to service providers)
Technology Replacement - $29
Charitable Giving - $300
Entertainment - $30

Total Expenses - $10,784

Assets:
Condo - 2 br, worth about $360k, outstanding mortgage of $185k, so about $175k in home equity
Roth IRAs - $75k
Tax advantaged retirement accounts (401k/403b) - $183k
Taxable investment account - $77k
Spouse 2's random investment account - $1,904
Cash savings - $26,851
Checking - $5,689
Car - $1000 (2003 Toyota Corolla, in fair condition)

Liabilities:
Mortgage - previously mentioned, balance of $185,080, interest rate 4.125%, 28 years left, minimum payment $934
Student Loan #1 - $29,790, interest rate 4.0%, 6 years left, minimum payment $483
Student Loan #2 - $9,050, interest rate 3.0%, 6 years left, minimum payment $143

Other relevant information:
Our income has increased dramatically over the past two years, so have only been saving at this level for about 1.5 years.  I think our spending has been this out of control for longer than that.
I have several chronic health conditions (hence the high OOP medical spending).
Two highly specialized careers keep us tied to major U.S. cities.
We previously have been maxing two backdoor Roths, but our daycare costs have increased substantially this year.  I imagine we will fund it out of the bonus this year.
My spouse is not necessarily "on board", but I control a lot of the discretionary spending, so it is primarily my problem to fix.

Questions: My primary question is how people find motivation to cut spending when it’s not an “emergency”?  I literally feel like I don’t understand where all the money is going, and this level of spending is so out of line with my values.  Just putting together this case study has been enlightening to say the least.

For a variety of reasons, I want to keep my job right now, but I realize the math doesn’t look great.  Has anyone opted for a stay at home parent for financial reasons?

How do you set financial goals?  I think not having goals might be part of why it is so hard to stick to the plan.

There’s a ton of low hanging fruit here, and plenty of room for face punches.  This might be a case where putting together the case study illuminates the path forward.  Stories from recovering spendypants appreciated.
« Last Edit: July 11, 2017, 02:27:06 PM by MustachedImposter »

Feivel2000

  • 5 O'Clock Shadow
  • *
  • Posts: 95
  • Age: 32
  • Location: Germany
Re: Case Study: Hair on Fire Spending
« Reply #1 on: July 11, 2017, 02:23:43 PM »
Is your mortgage calculation correct? Paying down $185,000 with 4.125% interest and a minimum payment around $1,300 should take around 16 years.


MustachedImposter

  • 5 O'Clock Shadow
  • *
  • Posts: 15
Re: Case Study: Hair on Fire Spending
« Reply #2 on: July 11, 2017, 02:26:13 PM »
Is your mortgage calculation correct? Paying down $185,000 with 4.125% interest and a minimum payment around $1,300 should take around 16 years.

Thanks for the catch.  Some of that is escrow.  P&I is $934/month

Feivel2000

  • 5 O'Clock Shadow
  • *
  • Posts: 95
  • Age: 32
  • Location: Germany
Re: Case Study: Hair on Fire Spending
« Reply #3 on: July 11, 2017, 02:34:46 PM »


Is your mortgage calculation correct? Paying down $185,000 with 4.125% interest and a minimum payment around $1,300 should take around 16 years.

Thanks for the catch.  Some of that is escrow.  P&I is $934/month

Ah, OK, that's more like it.
Do you know that over 28 years you will pay more than $125,000 interest? So if you are looking for a financial goal, maybe focus on your mortgage? Living in a place you truly own and not paying almost twice the price is a goal people not interested in FIRE can probably relate to.


PapaBear

  • 5 O'Clock Shadow
  • *
  • Posts: 78
Re: Case Study: Hair on Fire Spending
« Reply #4 on: July 11, 2017, 05:20:08 PM »
One remark regarding motivation: Right now it seems like you are basically spending your take-home pay. Was that always the case?
Some people here have noted that it helps them from a psychological angle if they reduce the available money as much as possible, which forces them to limit their spending automatically. This can be done by e.g. maxing out all pre-tax investment vehicles) as well as by setting up automated transfers of take-home pay to savings or investment accounts - the concept is called "pay yourself first".

What does motivate you in other areas? And what are your long-term goals? Tie your financial goals to your long-term life goals and you will see that it reduces the pain of cutting the unnecessary spending here and there.

---

But now let's have a look at your budget. I guess your biggest opportunities are quite clear:

- Daycare - 3000: Are there any options to reduce the amount of hours in daycare? E.g. by switching to a different schedule at work, working from home 1 day a week or similar? Teaming up with other moms and dads could be also an option. Every hour less in daycare counts.

- Target/Amazon - 748: Please specify what is in here. Here in the forum, there are people feeding a family of 4 or 5 on way less than that and you have a different pot for groceries...
- Restaurants - 783: That is extremely high. You could try to reduce your sit-down meals to every other week and pack your work lunches. Even if you do that every other day, that would be almost 400 USD saved. That is double the amount you are saving for your kid's college. Please explain that to your kid :)
- Groceries - 598: Seems also very high to me, especially since there is another xx% of groceries in the Target/Amazon bucket.
When I sum up all household and food-related expenses, I'm at 2129 USD or 70 USD/day. Slashing that in half should be possible without anyone suffering too much.

- Spending money - 600: Since that is a budgeted number - what happens if you just cut it in half? Will that change your life dramatically? What of the spending actually adds value to your life and what does not? Eliminate the stuff that does not add a lot of value to your life.
- Travel - 625: I know, domestic and international trips can be quite expensive. It might be worth it to look into travel hacking and credit cards with travel rewards. With your overall spending levels, this could substitute a substantial portion of your travel budget (and even without manufactured spending).


- House cleaning - 220: Is that really necessary or only lifestyle creep? See it as a treat that you do not deserve right now - but when you cut you other budget by xx% in the future, you might deserve it again (every other week) - if it is worth it to you.
- Storage - 70: A small amount compared to all the other expenses, but a great start for a new lifestyle. Go through the stuff in storage and get rid of everything that you have not used in the last 12-24 months. There is a good chance that you will not use it in the next 12 months. The important stuff is in your apartment already anyways.


The categories mentioned above are already ~65% of your take-home. Even if you just reduce it by 20-30%, you would have a lot of more breathing room in your budget and you could invest way more.

Lady SA

  • Stubble
  • **
  • Posts: 147
  • Age: 25
  • Location: Midwest
Re: Case Study: Hair on Fire Spending
« Reply #5 on: July 11, 2017, 05:29:36 PM »
How on earth are you possibly spending more than $1.3k on food EVERY MONTH!??!!? I can't wrap my head around it. You are spending outrageous amounts on groceries but an even more outrageous amount on restaurants. How is it possible for you to eat that much?! I mean you have kids, but they are small and don't eat enough to significantly increase this beyond what would be normal for two adults (~$400-450). Where is all this extra food going? Are you having to throw away a bunch of food every month to make room for all the new food you buy the next month!?
https://www.earnest.com/invite/lillian2 --> Use this referral to refinance your student loans with Earnest and get a $200 bonus!

MustachedImposter

  • 5 O'Clock Shadow
  • *
  • Posts: 15
Re: Case Study: Hair on Fire Spending
« Reply #6 on: July 11, 2017, 06:56:01 PM »
How on earth are you possibly spending more than $1.3k on food EVERY MONTH!??!!? I can't wrap my head around it. You are spending outrageous amounts on groceries but an even more outrageous amount on restaurants. How is it possible for you to eat that much?! I mean you have kids, but they are small and don't eat enough to significantly increase this beyond what would be normal for two adults (~$400-450). Where is all this extra food going? Are you having to throw away a bunch of food every month to make room for all the new food you buy the next month!?

I've been reading around the site about how people keep their food bills low, and basically we don't do any of it.  It is not hard to run up that grocery bill because we aren't careful about what we buy, shop at the most convenient store despite higher prices, and buy convenience foods.  And "restaurants" includes any food away from home, so coffee out (my spouse is guilty of this one a lot), lunch at work, etc.  Actual restaurants are very expensive here, with a special meals tax and of course tip.

We also are overstocked with food.  We have a full freezer and a full pantry, and I'm terrible at planning around what we already have.  We waste some food too, although not egregiously so.  I could definitely focus on eating what we already have in the house to reduce the grocery bill.

I know it's absurd, and I know I have to do something about it.  I'll also admit that my social circle is very unmustachian.  We have several friends who never cook and eat out every meal and easily spend 2x per person what we do.

Lepetitange3

  • Bristles
  • ***
  • Posts: 356
Re: Case Study: Hair on Fire Spending
« Reply #7 on: July 11, 2017, 07:06:43 PM »
Soooo does spouse 2 have any interest in staying home with the kids?  Because there's a lot of low hanging fruit here and you could definitely afford it, especially considering a huge chunk of spouse 2a salary is going to afford daycare.

MustachedImposter

  • 5 O'Clock Shadow
  • *
  • Posts: 15
Re: Case Study: Hair on Fire Spending
« Reply #8 on: July 11, 2017, 07:08:55 PM »
One remark regarding motivation: Right now it seems like you are basically spending your take-home pay. Was that always the case?
Some people here have noted that it helps them from a psychological angle if they reduce the available money as much as possible, which forces them to limit their spending automatically. This can be done by e.g. maxing out all pre-tax investment vehicles) as well as by setting up automated transfers of take-home pay to savings or investment accounts - the concept is called "pay yourself first".

This is a really good point - our spending has almost always taken up all our take home pay, minus what we stashed away ahead of time.  And in times that our income has been lower, we've lowered our spending without too much pain.  So pay yourself first is probably a good strategy.

MustachedImposter

  • 5 O'Clock Shadow
  • *
  • Posts: 15
Re: Case Study: Hair on Fire Spending
« Reply #9 on: July 11, 2017, 07:30:54 PM »
But now let's have a look at your budget. I guess your biggest opportunities are quite clear:

- Daycare - 3000: Are there any options to reduce the amount of hours in daycare? E.g. by switching to a different schedule at work, working from home 1 day a week or similar? Teaming up with other moms and dads could be also an option. Every hour less in daycare counts.

Unfortunately in most daycare scenarios here, this doesn't save any money.  Our daycare only has one price - full time 5 days a week.  When the new baby started daycare I priced out other centers in the area, and "market" is more like $4k/month.  $2300/infant and $1800/toddler.  Our center is run by the owner of the in-home we used to go to and we get a substantial discount because we stuck with her through the transition from in-home to center.

Quote
- Target/Amazon - 748: Please specify what is in here. Here in the forum, there are people feeding a family of 4 or 5 on way less than that and you have a different pot for groceries...

There is a slight anomaly here, which is that the baby needed special formula for three months that was about $400/month and ordered from Amazon.  I was unable to breastfeed for medical reasons and he had tons of GI issues.  We've been able to transition him back to regular formula, which is $150/month and in this category.  Diapers are in here too.  The rest is just...stupid stuff?  Last several Amazon orders were bottles for the baby (daycare requested more), protein powder, a birthday present for a friend's kid, and a Dustbuster.  Last trip to Target was kitty litter, cat food, some wine, baby formula, and wrapping paper and a birthday card.

Quote
- Restaurants - 783: That is extremely high. You could try to reduce your sit-down meals to every other week and pack your work lunches. Even if you do that every other day, that would be almost 400 USD saved. That is double the amount you are saving for your kid's college. Please explain that to your kid :)
- Groceries - 598: Seems also very high to me, especially since there is another xx% of groceries in the Target/Amazon bucket.
When I sum up all household and food-related expenses, I'm at 2129 USD or 70 USD/day. Slashing that in half should be possible without anyone suffering too much.

Yes, this is stupid and the most obvious place we can cut.

Quote
- Spending money - 600: Since that is a budgeted number - what happens if you just cut it in half? Will that change your life dramatically? What of the spending actually adds value to your life and what does not? Eliminate the stuff that does not add a lot of value to your life.
- Travel - 625: I know, domestic and international trips can be quite expensive. It might be worth it to look into travel hacking and credit cards with travel rewards. With your overall spending levels, this could substitute a substantial portion of your travel budget (and even without manufactured spending).

Spending money I've been saving some of mine, so it would be easy to cut.  I've started looking into travel rewards credit cards - this probably makes sense for us.

Quote
- House cleaning - 220: Is that really necessary or only lifestyle creep? See it as a treat that you do not deserve right now - but when you cut you other budget by xx% in the future, you might deserve it again (every other week) - if it is worth it to you.
- Storage - 70: A small amount compared to all the other expenses, but a great start for a new lifestyle. Go through the stuff in storage and get rid of everything that you have not used in the last 12-24 months. There is a good chance that you will not use it in the next 12 months. The important stuff is in your apartment already anyways.

The house cleaner is totally lifestyle creep, and it would be hard to go back but probably worth it.

I've always viewed the storage as something that enables us to live in our current (small) place.  But you're right that at the very least, we can downsize this, because we're just paying to store crap.

MustachedImposter

  • 5 O'Clock Shadow
  • *
  • Posts: 15
Re: Case Study: Hair on Fire Spending
« Reply #10 on: July 11, 2017, 07:40:32 PM »
Soooo does spouse 2 have any interest in staying home with the kids?  Because there's a lot of low hanging fruit here and you could definitely afford it, especially considering a huge chunk of spouse 2a salary is going to afford daycare.

I'm really torn.  Obviously, daycare takes up my entire take home.  I am basically working to provide health insurance and save $18k/year in my 403b.

I've invested a lot in my career and I worry I'd be a terrible SAHM.  I don't have a lot of patience for toddler antics, I'm a terrible housekeeper, etc.  I realize this sentiment doesn't fit in well on a board where most people want to FIRE and stop working.  I also went through a bad divorce in my 20s and the idea of leaving the workforce makes me feel vulnerable.  So basically even though it probably makes sense for me to stay home with the kids, and a huge part of me would love the time with them, I feel pretty ambivalent.

Lady SA

  • Stubble
  • **
  • Posts: 147
  • Age: 25
  • Location: Midwest
Re: Case Study: Hair on Fire Spending
« Reply #11 on: July 11, 2017, 08:06:03 PM »
Soooo does spouse 2 have any interest in staying home with the kids?  Because there's a lot of low hanging fruit here and you could definitely afford it, especially considering a huge chunk of spouse 2a salary is going to afford daycare.

I'm really torn.  Obviously, daycare takes up my entire take home.  I am basically working to provide health insurance and save $18k/year in my 403b.

I've invested a lot in my career and I worry I'd be a terrible SAHM.  I don't have a lot of patience for toddler antics, I'm a terrible housekeeper, etc.  I realize this sentiment doesn't fit in well on a board where most people want to FIRE and stop working.  I also went through a bad divorce in my 20s and the idea of leaving the workforce makes me feel vulnerable.  So basically even though it probably makes sense for me to stay home with the kids, and a huge part of me would love the time with them, I feel pretty ambivalent.

Those benefits aren't nothing to sneeze at. $18k in savings plus health insurance plus sanity plus adult conversation? Sounds like a good use of time to me! You aren't losing money with this venture so I think you're fine with keeping on your current path. Plus it means when your kids are older and no longer in daycare, your savings are much accelerated because you've still been plugged into the workforce and advancing.
https://www.earnest.com/invite/lillian2 --> Use this referral to refinance your student loans with Earnest and get a $200 bonus!

theotherelise

  • Stubble
  • **
  • Posts: 202
  • Age: 28
  • Location: Missouri
    • The Other Elise - Debt Free Journey
Re: Case Study: Hair on Fire Spending
« Reply #12 on: July 12, 2017, 11:41:47 AM »
In terms of immediate action plans, here are my recommendations on your groceries/target/blow$/restaurant situation...

1 - Plan ahead more. My partner and I have a budget planning meeting at the beginning of each month to lay out the budget and discuss what variables we will need in the month ahead. That is how we stopped wasting money at Target. We said, hey we are going to need to get a new frying pan asap and we could both use some new tennis shoes, so let's budget $150 for those things. It seems like right now all your non-allocated income is treated as a slush fund. That is why we do a zero-based budget and then adjust only when we need to.

2 - Limit your blow $ or spending money to cash only and make all non-family, non-date meals or coffees a blow money expense instead of a restaurant expense. In our family, that means if I want to go get a drink with a friend, that is paid in cash out of my spending money (we do $80/month each). It means that we take leftovers or make our lunches together on sundays so that we don't have to spend our blow money on lunches during the workday. I would also definitely bring this amount down some as well. What all is included in it?

3 - Track your spending. We use everydollar and I like that it requires a manual entry instead of something like Mint which is a bit more "set it and forget it."

4 - This is probably priority #1, but whatever, I just got to it now. You need to have more conversations with your spouse about long term financial goals. At the very least, you all could determine some savings goals. Do you want to do more college funding for the kids? Do you want to pay off the student loans sooner? Do you want to save for a new vehicle or reach a net worth goal or be financially independent by 50? That will help you backwards engineer what your budget should look like and it will help you and your spouse get on the same page with small financial decisions if you have the big financial plans determined already.

Moustaches

  • Pencil Stache
  • ****
  • Posts: 645
  • Age: 38
  • Location: DC
Re: Case Study: Hair on Fire Spending
« Reply #13 on: July 12, 2017, 12:14:06 PM »
First I'd like to point out that you are maxing your retirement contributions for work, congratulations and this is a great way to cut taxes as you know.

My impressions on your expenses side:

Get a small detached home without an HOA.  HOAs are stupid and costly.  You are a family of 4 which is probably tight in a 2 bedroom.  Don't get a mcmansion, but get something with enough size to be comfortable long term.  With no HOA, at least you will be building equity with your mortgage payment.

Get rid of the storage unit.  If it can't fit in your house, you don't need it.  Go to goodwill regularly.

Get rid of the house cleaner.  You can't afford it if you take home $10,900 and spend $10,700 per month.

Why is your home maintenance $200 per month?  Seems pretty steep.

I understand the daycare costs completely.  The only thing I can say is this will be gone when they go to school so it's a temporary situation.

The life insurance seems really high.  If it's whole life insurance get rid of it and get term life insurance.

Cancel the umbrella insurance.  You don't need it at your level of assets.  You should be fine with auto and homeowners insurance.

Sounds like some of the Amazon purchases are for the baby.  Work to reduce that over time as you get settled and have the things you need. Also join mommy groups and try to get hand me downs from local families instead of buying new things.

Learn how to cook.  Drastically reduce the amount of meals eaten out.  Get a slower cooker and cook for the week and freeze to save time.  Learn to love sandwiches for work lunches.

Try not to spend $1300 on Christmas this year.  Spend $500 and see if the level of happiness decreases.

Give $500 to charity instead of $3600 this year.  You can give more once you get the kids out of daycare.

All of these changes will be easier if you set a goal.  College fund for the kids.  $1M in assets.  Pick something and strive for it, then think through all your purchases more.


Live like a badass, so that later you can live like a badass.

MustachedImposter

  • 5 O'Clock Shadow
  • *
  • Posts: 15
Re: Case Study: Hair on Fire Spending
« Reply #14 on: July 12, 2017, 01:11:03 PM »
Soooo does spouse 2 have any interest in staying home with the kids?  Because there's a lot of low hanging fruit here and you could definitely afford it, especially considering a huge chunk of spouse 2a salary is going to afford daycare.

I'm really torn.  Obviously, daycare takes up my entire take home.  I am basically working to provide health insurance and save $18k/year in my 403b.

I've invested a lot in my career and I worry I'd be a terrible SAHM.  I don't have a lot of patience for toddler antics, I'm a terrible housekeeper, etc.  I realize this sentiment doesn't fit in well on a board where most people want to FIRE and stop working.  I also went through a bad divorce in my 20s and the idea of leaving the workforce makes me feel vulnerable.  So basically even though it probably makes sense for me to stay home with the kids, and a huge part of me would love the time with them, I feel pretty ambivalent.

Those benefits aren't nothing to sneeze at. $18k in savings plus health insurance plus sanity plus adult conversation? Sounds like a good use of time to me! You aren't losing money with this venture so I think you're fine with keeping on your current path. Plus it means when your kids are older and no longer in daycare, your savings are much accelerated because you've still been plugged into the workforce and advancing.

Thank you, this is helpful to hear.

MustachedImposter

  • 5 O'Clock Shadow
  • *
  • Posts: 15
Re: Case Study: Hair on Fire Spending
« Reply #15 on: July 12, 2017, 01:13:44 PM »
4 - This is probably priority #1, but whatever, I just got to it now. You need to have more conversations with your spouse about long term financial goals. At the very least, you all could determine some savings goals. Do you want to do more college funding for the kids? Do you want to pay off the student loans sooner? Do you want to save for a new vehicle or reach a net worth goal or be financially independent by 50? That will help you backwards engineer what your budget should look like and it will help you and your spouse get on the same page with small financial decisions if you have the big financial plans determined already.

I do agree this needs to be a priority.  I feel pretty alone in the financial management and goal setting, and mostly get shrugs when I bring up either the spending issues or the lack of goals.  I honestly don't know what my goals would be, other than "stop feeling guilty about money all the time".

MustachedImposter

  • 5 O'Clock Shadow
  • *
  • Posts: 15
Re: Case Study: Hair on Fire Spending
« Reply #16 on: July 12, 2017, 01:28:06 PM »
First I'd like to point out that you are maxing your retirement contributions for work, congratulations and this is a great way to cut taxes as you know.

Thank you, I pushed for that when we got the raises because I wanted to actually have something to show for the increased income.  I feel like we still get slammed at tax time, but I try to think of it as paying our fair share.


Quote
Get a small detached home without an HOA.  HOAs are stupid and costly.  You are a family of 4 which is probably tight in a 2 bedroom.  Don't get a mcmansion, but get something with enough size to be comfortable long term.  With no HOA, at least you will be building equity with your mortgage payment.

I am not sure if this will work in my city, but it is interesting advice.  SFHs go for a HUGE premium in our city because land is worth a lot.  Our HOA is $168 a month and includes water, garbage, and snow removal.

Quote
Get rid of the storage unit.  If it can't fit in your house, you don't need it.  Go to goodwill regularly.

I am 100% on board with this, but my spouse is not, because most of the things stored are his.  I'll see if I can make any headway.

Quote
Why is your home maintenance $200 per month?  Seems pretty steep.

We've had bad luck with mechanicals and appliances, and had to replace both our hot water heater and our dishwasher within a few months of each other.

Quote
The life insurance seems really high.  If it's whole life insurance get rid of it and get term life insurance.

Cancel the umbrella insurance.  You don't need it at your level of assets.  You should be fine with auto and homeowners insurance.

Life insurance includes a 30 year policy on me, purchased in a panic as some of my health issues were developing.  It probably was not a great choice, but I also suspect I can't find a better price even for lower coverage and a shorter term because of my health issues.

Quote
All of these changes will be easier if you set a goal.  College fund for the kids.  $1M in assets.  Pick something and strive for it, then think through all your purchases more.

Yes, thank you.

Moustaches

  • Pencil Stache
  • ****
  • Posts: 645
  • Age: 38
  • Location: DC
Re: Case Study: Hair on Fire Spending
« Reply #17 on: July 12, 2017, 01:54:34 PM »
First I'd like to point out that you are maxing your retirement contributions for work, congratulations and this is a great way to cut taxes as you know.

Thank you, I pushed for that when we got the raises because I wanted to actually have something to show for the increased income.  I feel like we still get slammed at tax time, but I try to think of it as paying our fair share.


Quote
Get a small detached home without an HOA.  HOAs are stupid and costly.  You are a family of 4 which is probably tight in a 2 bedroom.  Don't get a mcmansion, but get something with enough size to be comfortable long term.  With no HOA, at least you will be building equity with your mortgage payment.

I am not sure if this will work in my city, but it is interesting advice.  SFHs go for a HUGE premium in our city because land is worth a lot.  Our HOA is $168 a month and includes water, garbage, and snow removal.

Quote
Get rid of the storage unit.  If it can't fit in your house, you don't need it.  Go to goodwill regularly.

I am 100% on board with this, but my spouse is not, because most of the things stored are his.  I'll see if I can make any headway.

Quote
Why is your home maintenance $200 per month?  Seems pretty steep.

We've had bad luck with mechanicals and appliances, and had to replace both our hot water heater and our dishwasher within a few months of each other.

Quote
The life insurance seems really high.  If it's whole life insurance get rid of it and get term life insurance.

Cancel the umbrella insurance.  You don't need it at your level of assets.  You should be fine with auto and homeowners insurance.

Life insurance includes a 30 year policy on me, purchased in a panic as some of my health issues were developing.  It probably was not a great choice, but I also suspect I can't find a better price even for lower coverage and a shorter term because of my health issues.

Quote
All of these changes will be easier if you set a goal.  College fund for the kids.  $1M in assets.  Pick something and strive for it, then think through all your purchases more.

Yes, thank you.

I've never understood the logic of storage units.  You are spending $70 per month indefinitely.  That is $840 per year.  Are you telling me you are keeping more than $840 worth of stuff in a place outside your home?  If you are, I think that's stupid.  If not, you could replace everything in there in 1 year with the savings you get.
Live like a badass, so that later you can live like a badass.

czr

  • 5 O'Clock Shadow
  • *
  • Posts: 31
Re: Case Study: Hair on Fire Spending
« Reply #18 on: July 12, 2017, 02:30:42 PM »
I applaud your savings and maxing out your annual pre-tax contributions. You are not doing too bad considering your incomes jumped up the last year and a half and you know your Discretionary Spending is your biggest issue.

Besides the spending changes, I would stop saving for kids college savings and pay off your student loans with that. Think about that for second. You are funding your kids college when you are still funding your own. Also, same think and stop contributing to your ESPP and pay down the 4% student loan first.

MustachedImposter

  • 5 O'Clock Shadow
  • *
  • Posts: 15
Re: Case Study: Hair on Fire Spending
« Reply #19 on: July 12, 2017, 03:34:40 PM »
I applaud your savings and maxing out your annual pre-tax contributions. You are not doing too bad considering your incomes jumped up the last year and a half and you know your Discretionary Spending is your biggest issue.

Besides the spending changes, I would stop saving for kids college savings and pay off your student loans with that. Think about that for second. You are funding your kids college when you are still funding your own. Also, same think and stop contributing to your ESPP and pay down the 4% student loan first.

You know, I'd never given any thought to paying off the mortgage or student loans until now.  It actually could work really well as a "savings" strategy and a goal, because it is tangible and sort of permanent - once you've made the payment you don't get it back.  Generally we've done well with not touching investments once they're invested, but this is probably even better.

Laura33

  • Pencil Stache
  • ****
  • Posts: 807
  • Location: Mid-Atlantic
Re: Case Study: Hair on Fire Spending
« Reply #20 on: July 12, 2017, 07:28:34 PM »
Soooo does spouse 2 have any interest in staying home with the kids?  Because there's a lot of low hanging fruit here and you could definitely afford it, especially considering a huge chunk of spouse 2a salary is going to afford daycare.

I'm really torn.  Obviously, daycare takes up my entire take home.  I am basically working to provide health insurance and save $18k/year in my 403b.

I've invested a lot in my career and I worry I'd be a terrible SAHM.  I don't have a lot of patience for toddler antics, I'm a terrible housekeeper, etc.  I realize this sentiment doesn't fit in well on a board where most people want to FIRE and stop working.  I also went through a bad divorce in my 20s and the idea of leaving the workforce makes me feel vulnerable.  So basically even though it probably makes sense for me to stay home with the kids, and a huge part of me would love the time with them, I feel pretty ambivalent.

Those benefits aren't nothing to sneeze at. $18k in savings plus health insurance plus sanity plus adult conversation? Sounds like a good use of time to me! You aren't losing money with this venture so I think you're fine with keeping on your current path. Plus it means when your kids are older and no longer in daycare, your savings are much accelerated because you've still been plugged into the workforce and advancing.

ITA with Lady Smartass.  Your salary is significant, and it is providing real, tangible benefits to your family (and your own sanity).

My advice:  First, breathe.  You are in the middle of the suck right now -- two little kids, recovering from unemployment, significant job demands with infants, etc. etc. etc.  It feels like it will never end and you can never get ahead.  But:  daycare is temporary!  It will be $500 cheaper in another six months to a year, right?  And then it keeps going down from there.  The way I see it, that $3K you are spending on daycare now is $3K available to save as the kids get older, right?  And, hey, money you are spending on daycare isn't going toward lifestyle creep -- you could be blowing it on something much stupider.  :-)  So just make a point that, the minute either kid moves to a cheaper level, increase the automatic withdrawal from savings to investments by the difference (do this with raises, too).  Immediate future savings! 

I am also going to go counter to the standard advice here and advise you NOT to try to take on everything at once.  Again: you are in the middle of the suck now, the hardest, most exhausting, most expensive time of your life.  Yes, you have gotten into some bad habits as a result, and that is completely understandable.  And yes, now that you are starting to come up for air from the early infancy days, you are seeing that and recognizing you need to change that, and that is both true and awesome.  But don't put so much more pressure on yourself to fix everything at once.  The last thing you want is to throw yourself at it so hard and fast that you feel like you can't sustain it and toss the whole thing.  It's a long life, and you are young; you can afford some baby steps, especially at this particular point in time.

So in terms of prioritizing, I would distinguish between the things that provide real value for the money and those that are just bad habits.  E.g.:  cleaners.  If someone had told me to ditch the house cleaners when I had two young kids and was working full-time, all to save $200/mo, I'd have told them to bite my shiny metal ass (and probably not that nicely).  OTOH:  without looking or researching, name four things that you bought from Target in May.  What did you order at those expensive May restaurant meals?  When you can't even remember where the money went, when the thing or the food or whatever was so forgettable that it didn't even make its way into your long-term memory, that's just throwing money away. 

Make your own list:  what are conveniences that are worth it given the current demands on your time from being both worker-bees and parents and, oh yeah, lovers -- call them "investments" in your careers and/or sanity and/or relationship, as it were -- and what are not?  Then start with the latter.  Read some of the "throw down the gauntlet" threads for ideas of how to tackle those things (for ex., I too have gotten too dependent on takeout, so I needed to set aside time Sunday to menu plan/shop/cook, and to have easy fallbacks on-hand for when the best-laid plans fail).  Start with one big thing, and take a month to really challenge yourself, distinguish between needs and wants, lower your standards, find free/cheaper alternatives, etc. etc. etc.  When that starts getting comfortable, move on to the next thing on the list. 

And, yeah, while you are doing this, trade some of those restaurant meals for evenings on the deck with your SO and a bottle of wine, talking about dreams and plans and priorities and all of that stuff.
Laugh while you can, monkey-boy

AccidentialMustache

  • 5 O'Clock Shadow
  • *
  • Posts: 16
Re: Case Study: Hair on Fire Spending
« Reply #21 on: July 12, 2017, 09:44:50 PM »
I have little in specific recommendations but I'm happy to provide face punches if it helps provide motivation? Edit: no wait I do. You don't know where the money is going. Start a spreadsheet (google docs, so you can both add entries via a form -- easy to do from a smartphone) to track your expenses. Yes, you could use mint/similar to do it, but if you have to type it in manually, maybe that's the motivation you need to not spend the money in the first place? Also you can record more data about the purchase and do better analysis later.

You are at a place not dissimilar from my wife and I, except we only have one kid (but he's going to a private school/montessori so the cost didn't drop this year with kindergarten) and likely live in a less expensive location than you do although countering that we do get paid a bit less too. That said, in addition to maxing out our pre-tax savings, we're saving a good chunk post-tax -- in the range of 30-50% (30% when paid poorly working for the state, trending to 50% last 3 years after I went to private industry and my salary caught up to where it should be).

Specifics:

For the cell, ditch verizon and go Google Fi, especially when you need a new phone. $40/mo unlimited text/talk, 2gb data plus a refund if you don't actually use the full 2gb ($0.01 = 1mb data).

Bike share of $17/mo is $200/year. Um, buy a bike? I've never seen carbon fiber bike share bikes, so go get a garage sale/church rummage sale special, get it fixed up and you'll be netting some cash there.

Your life insurance seems high. My wife and I both have term to reasonably large sums and it is costing us well under yours.

dess1313

  • Bristles
  • ***
  • Posts: 441
  • Location: Manitoba Canada
Re: Case Study: Hair on Fire Spending
« Reply #22 on: July 12, 2017, 11:38:40 PM »
I had tried posting earlier but my browser failed and lost my message.

First off, retirement income, and health benefits are a good reason to work, as well as adult conversation.

For babysitting, have any couples near you ever done exchanges?  1 or 2 evenings a month you give each other breaks,  this week you babysit both broods, and they get a evening out.  2 weeks later its your turn to enjoy an evening out

Part of your problem is likely you both feel rushed, hectic, hard to keep up, and tend to make up for it in eating out, fast food, house cleaning services etc.  look up slow cooker recipes, batch cooking, and meal prep ideas.  if you're cooking items, double up your quantities, and freeze the extra, or have meals for the week, so you don't have to buy lunches.
Quote
Questions: My primary question is how people find motivation to cut spending when it’s not an “emergency”?  I literally feel like I don’t understand where all the money is going, and this level of spending is so out of line with my values.  Just putting together this case study has been enlightening to say the least.
I would really recommend something like YNAB.  You Need A Budget.  Its an awesome program for breaking down where your money goes.  like realizing your estimated costs on dining out is actually a lot higher than you thought, and makes you think and prioritize your finances.  I think you're stuck in reaction mode, instead of planning mode.  YNAB makes you go through your finances as transactions happen, and plan on what to do with your dollars, putting them to work and planing how to use them more effectively.  they have a free 34 day trial, and if you have questions feel free to pm me about it


I also second stopping the savings plans for the children's education, unless you're getting a significant match.  some programs will give a 50% or 25% match, so if that is the case do the bare minimum to get the match only.  you still haven't paid off your own education at this point.

Quote
Travel - $625 (budgeted, three trips east to visit family for holidays, one big vacation every other year, small local trips, actual was right on last year)

You need to look into the http://www.travelmiles101.com/ course and see if any flight or hotel cards can help you out.  this only works if you pay the card in full EVERY month and don't incur interest charges.  i just recently did a road trip and stayed 8 nights free at various hotels from collecting points.

Quote
How do you set financial goals?  I think not having goals might be part of why it is so hard to stick to the plan.

As for goals, sit down with your significant other and plan out some things that you want.  travel.  part time work.  a new thingymabob.  then discuss how you go about it.  first easy goal would be knocking the student loans out of the park.  that would free up some cash flow(over $600 a month!!!) and give you some good successes to continue on saving for more important things in life.  sometimes making a chart to monitor your progress helps.  you see little successes adding up.  pick a big picture to color in sections on.  each successful $100 paid off allows one bubble or square to be colored in.  as you get going, you'll see more and more progress and often feel excited to keep at it.  I also price out how much fees, or interest charges are costing me, motivating me to find better solutions.  some have paper daisy chains, some pop balloons.  put it in a nice prominent area like your kitchen fridge

On your big SL#1, over the 6 years you will have paid out approximately $3700 in INTEREST alone?
On your smaller SL#2 its $850 in interest over the 6 year loan.

If you were to quickly snowball the smaller student loan with savings from suggestions here, and roll that payment into your bigger student loan, you would pay it off 18 months sooner, and save yourself over $1000 in interest charges
YNAB Free month promo
https://ynab.com/referral/?ref=eQ5g_yJi5NxO5hoo&utm_source=customer_referral

https://www.tangerine.ca referral code get $50 for signing up!!!  34500900S1

mrspendy

  • 5 O'Clock Shadow
  • *
  • Posts: 45
Re: Case Study: Hair on Fire Spending
« Reply #23 on: July 13, 2017, 07:31:44 AM »
what is your asset allocation in your investments?

You are paying 3-4% interest on a (somewhat) short term loan.

If you own any bonds (particularly in your taxable account), it's time to sell those and pay off the student loans, making sure that the entire payment goes to principal reduction and not "paying ahead of time". <--to be clear I absolutely don't mean withdrawing from retirement to pay them off.

If you are 100% equities, I think that it could still be an okay move. Long term equity returns will outperform the rate on your loans (in 95% of cases*), but probably more of a toss-up on a 3 year basis (your 6 year loans have  weighted average principal payment of ~3 years).

I wouldn't pay off your mortgage, much different question / math considering no income limit to tax deductibility and much longer in duration.

One thing to consider is to use your home equity to get a HELOC (assuming no fees, perhaps w/ existing banking / credit union relationships). If SHTF you can borrow from your 403b / 401k as emergency and then if SHTF again and you lose your job and the 403b loan is due, you can borrow on the HELOC, if SHTF a third time you can sell taxable investments and further batten down the hatches.

That's not an endorsement of either of those types of borrowing, but my point is you have enough assets that you can have multi-pronged contingency plans that don't involve carrying $38K of student loan debt when you have $31K in cash. Another option to consider is moving your cash into I-bonds which will make inflation and be liquid after 1 year, to reduce the negative carry from earning 0 on your cash and paying 3-4% on your loans.

Paying off the loans frees up $7,500 a year in cash flow, and then once day care ends that's $18-36K/year (not sure if other expenses will replace) to add to your savings, assuming no other cuts to expenses.




*2/3 of statistics are made up on the spot
« Last Edit: July 13, 2017, 07:38:00 AM by mrspendy »

DarkandStormy

  • Stubble
  • **
  • Posts: 139
  • Age: 28
  • Location: Columbus
Re: Case Study: Hair on Fire Spending
« Reply #24 on: July 13, 2017, 10:12:12 AM »
You have $32,500+ sitting in a cash & checking account, earning you basically nothing (I'm assuming).  It's actually de-valuing due to inflation.  I'd consider moving a majority of that to investments, even conservatives ones, unless you have a huge purchase coming up.

$7,500 on travel per year?? Definitely travel hack some of that, or cut out a trip or two.  Don't the young kids sit on laps on the plane anyway?

Quote
Groceries - $598
Restaurants and food away from home - $783 (This is about 1 sit down meal out a week, plus way too many lunches out)
Alcohol - $83
Amazon/Target - $748 (this includes some groceries and alcohol not tracked separately, household supplies, baby formula, kids clothes, and all “other”.  I know I need to break it out better)
Spending money - $600 (budgeted, covers adult clothing, hair, hobbies, anything else not in the budget, actuals are lower because I don’t spend my whole allowance)

You need a Costco or Sam's Club membership asap.  That's a lot that is going to "crap."  Way, way, way too much on food.  "Spending money" isn't really part of the budget if you're not hitting it, but your spouse is.  This is extra money that could be going towards investments.  $9K PER YEAR on Amazon/Target is insane.

With This Herring

  • Pencil Stache
  • ****
  • Posts: 954
  • Location: New York STATE, not city
  • TANSTAAFL!
Re: Case Study: Hair on Fire Spending
« Reply #25 on: July 13, 2017, 11:10:52 AM »
I agree with many of the other suggestions.  You spend more on Groceries + Restaurants per month than I spend for all of my non-tax living expenses.  :)

For categorizing your expenses, Amazon/Target is not a good category.  Going forward (and maybe back with Amazon's order records) you should break this into actual expenses.  I use GnuCash to track and do definitely break down an Amazon or Target order into multiple expenses if needed.  It doesn't make sense to group cosmetics, food, baby formula, clothes, and entertainment together just because they were purchased in the same order.  You just mentioned that, on a previous Target trip, wine was one of the purchases.  This means that your alcohol spending is probably even higher than you think.  When you group purchases by store like that, it throws off your other expense categories.  (I would bet that you have alcohol with some of your frequent restaurant meals as well.  How are you two drinking that much?)
Because your toaster got hacked because you tried to watch porn on your blender.

6-year CPA currently on hiatus.  Botched this.  Working again. 
Go soak your beans.  You know you keep forgetting.

MustachedImposter

  • 5 O'Clock Shadow
  • *
  • Posts: 15
Re: Case Study: Hair on Fire Spending
« Reply #26 on: July 13, 2017, 08:08:29 PM »
Thank you everyone for the thoughtful replies.  I really appreciate it.

Laura33, I think you're right that some of this is being in the thick of things as working parents of two small children.  And thank you for your perspective on baby steps, it is a good perspective to consider.  I tend to be like "OMG I HAVE TO CHANGE EVERYTHING", then get overwhelmed by everything.

With This Herring - you are totally right about the categories not being useful.  I am going to try out tracking my spending manually with Google Forms so I can get more detail and better break outs.  I actually think our alcohol budget is the least insane part of all this - we buy a six pack or two a week, occasional wine, and occasional drinks out.  I am sure the drinks out, while not frequent, make up a large portion of the spending, because our alcohol habits are pretty moderate.

dess1313 - I love the idea of a partnership with other parents for babysitting.  I looked into a babysitting co-op a while ago but didn't follow through.

MustachedImposter

  • 5 O'Clock Shadow
  • *
  • Posts: 15
Re: Case Study: Hair on Fire Spending
« Reply #27 on: July 13, 2017, 08:15:01 PM »
I think for now I'm going to focus on food spending, because I think that's where I can have a big impact pretty quickly.  Today I ate only things we already had - ate breakfast at home, packed lunch, and cooked dinner from our meal plan.

In very unexpected news, my spouse got promoted today, with a raise.  We discussed putting the raise straight into investments and he agreed.  Yay!

Edited to add: I am definitely thinking about the student loan payoff suggestions presented here, but I figured while we make a decision on that, we need to make sure the raise doesn't get spent.
« Last Edit: July 13, 2017, 08:17:59 PM by MustachedImposter »

Stashing Swiss-style

  • Bristles
  • ***
  • Posts: 310
Re: Case Study: Hair on Fire Spending
« Reply #28 on: July 14, 2017, 06:03:55 AM »
I 100% agree with Laura33.  Re-read her post and pay attention :-)  This period is tough on both parents. 

One thing I have to face punch you for is this comment you made: "I'm really torn.  Obviously, daycare takes up my entire take home.  I am basically working to provide health insurance and save $18k/year in my 403b."    The kids belong to both parents - both parents work to provide for them!! Where is your inner feminist!! Day care is the responsibility of both parents!    Don't say things like "daycare takes up my entire take home"!!  Daycare takes up part of the take home of both parents.

"I've invested a lot in my career" - yes you have and don't forget it !

Becoming more frugal / more aware and therefore wiser about spending will not happen overnight.  It takes time to build those frugality muscles, but you can do it.  Good luck.

DarkandStormy

  • Stubble
  • **
  • Posts: 139
  • Age: 28
  • Location: Columbus
Re: Case Study: Hair on Fire Spending
« Reply #29 on: July 14, 2017, 07:06:41 AM »
I think for now I'm going to focus on food spending, because I think that's where I can have a big impact pretty quickly.  Today I ate only things we already had - ate breakfast at home, packed lunch, and cooked dinner from our meal plan.

In very unexpected news, my spouse got promoted today, with a raise.  We discussed putting the raise straight into investments and he agreed.  Yay!

Edited to add: I am definitely thinking about the student loan payoff suggestions presented here, but I figured while we make a decision on that, we need to make sure the raise doesn't get spent.

Great news!  If you can reign in some of the "excess" spending, that's even more money you can put to work in investments.  Imagine your spouse's raise + ~$5K/year (could you get it to $10K/year?) going towards investing and "working" for you forever!!

Overflow

  • Stubble
  • **
  • Posts: 138
  • Age: 27
  • Location: Mitten
Re: Case Study: Hair on Fire Spending
« Reply #30 on: July 14, 2017, 07:07:15 AM »
I think for now I'm going to focus on food spending, because I think that's where I can have a big impact pretty quickly.  Today I ate only things we already had - ate breakfast at home, packed lunch, and cooked dinner from our meal plan.

In very unexpected news, my spouse got promoted today, with a raise.  We discussed putting the raise straight into investments and he agreed.  Yay!

Edited to add: I am definitely thinking about the student loan payoff suggestions presented here, but I figured while we make a decision on that, we need to make sure the raise doesn't get spent.

Big Kudos to both of these things!
Congrats to your spouse, and bigger congrats on putting that money towards savings/investments. Since you are maxing tax advantaged accounts, what are you putting it towards (mortgage? Student loans? etc)

Also, great job eating food you already bought vs. buying new food :-). It will take some effort, but I think you will notice a big difference by focusing on food spending.

Great baby steps!

Tuskalusa

  • 5 O'Clock Shadow
  • *
  • Posts: 76
Re: Case Study: Hair on Fire Spending
« Reply #31 on: July 14, 2017, 06:57:44 PM »
Sounds like you have great plans here. Good work!

I'd like to second the comments that it gets easier as they get to school age, especially with daycare. When you kids go to school, your after school care options will be significantly cheaper, and you'll rest easier.

Focusing on food and the storage unit us a great start. We started with simple things like brewing coffee and taking it to work, along with a bag lunch. We cut out like $200 a month without much effort.

But really, it will get easier over time. Good luck!

galliver

  • Handlebar Stache
  • *****
  • Posts: 1496
Re: Case Study: Hair on Fire Spending
« Reply #32 on: July 15, 2017, 12:55:28 PM »
I agree that you sound exhausted, and that exhaustion might be driving a lot of your spending. I don't have kids, but I'm in the tail end of my PhD right now and spending many hours in lab, analyzing data, and writing...I find that sometimes I don't have the mental bandwidth left to do the meal planning I was doing in more "normal" seasons of life. BF is wonderful, and supportive, and generally quite sensible financially, but he's just not as motivated or perhaps attentive in the household department and it's unreasonable to expect that to change overnight. He's also been having his own busy weeks lately. There's a couple concepts I fall back on that I thought I would share.

1) Don't let perfect be the enemy of good (props to Gretchen Rubin's "The Happiness Project" for introducing me to that phrasing). A frozen dinner or a bagged salad is cheaper than a lunch out, and perfectly edible. Sure, leftovers from a cooked-from-scratch meal or assembling your own salad is *better* and I'm sure some will argue "it's not that hard" but I know when I'm running on fumes, I find that it is. If you cut $10-12/person/meal for a cheap lunch or dinner out to $5 or $3, that's a good 50-75% savings!
2) Have contingency plans. At this point I basically have a mental list: simple pasta+sauce, frozen dumplings (potstickers, ravioli, etc), sushi rice bowls*, pick up frozen pizza+salad. Yours might be different; bf will wrap anything in a tortilla but that usually doesn't appeal to me as a meal. (*I make sushi rice and while it's cooking I'll cut up some veggies and thaw some crabsticks; favorite veg are cucumber and avocado but last week it was pickled radish and avocado b/c my last cuke went bad :'(. It's a bit more effort than the others but I'm a sushi fiend so the reward is worth the additional effort!)
3) Procrastinate. I read this somewhere (possibly: http://www.frugalfringe.com/intro-to-frugal/run-like-a-rabbit-spend-like-a-turtle-profitable-procrastination/ ? or someone mentioned it in a forum post). For large purchases it means you replace less often (a new cell phone every 3 years vs 2 is 4 phones in 12 years vs 6; tangible difference in consumption). For small purchases it's mostly to keep yourself out of the store, and incentivize using up what you already have. Put off the grocery trip one day and see what you can eat from your pantry. This is particularly important if you're thinking of stopping by the store late and hungry...use that energy and time to cook instead! Obviously, this shouldn't be applied to absolute, irreplaceable necessities, esp for kids! Don't delay on diapers, formula, TP, toothpaste, etc!
4) Batch cook OR batch prep. I don't do batch cooking or crockpots or freezing. I just can't do the mushy vegetables, they make me gag. It would be a waste of food (food that you have to choke down is wasted food, too, IMO). I do freeze components, like broth. But mostly our freezer has: frozen meats from sales, frozen vegetables, ice cream, lots of overripe bananas, a few bags of dumplings, extra butter, ice. What I do instead, when I have the presence of mind and time, is batch prep. I'll chop all the vegetables for salad, stir fry, etc later in the week. I'll cook a whole value pack of chicken, or roast something. I'll make a salad that improves with time (like broccoli salad or bean salad). Now I have endlessly configurable ingredients. A cooked piece of chicken can be eaten as is with sides, added to a salad or a stir fry or pasta, used to top a rice bowl, become a quesadilla or a sandwich. Chopped veggies can become a salad or be steamed or stir fried in a handful of minutes (and minimal cleanup-just the pan and any emptied tupperware).
5) Lower expectations. A professional woman is supposed to be on top of everything...but we all know that's not humanly possible. Maybe it's ok if the closets are cluttered if the floor is clean for the baby. Maybe you're ok with a 28-day rotating schedule of dinners (and leftovers) so you don't have to waste bandwidth on much planning. Maybe you only make one trip home per year, and if the relatives want to see the kids more, they can come visit. Maybe you spend more time at home for a couple years while outings with kids are difficult; I'm sure they'll get just as much or more out of building block towers with you or growing tomatoes on the balcony or baking cookies (or better: muffins for the next couple days' breakfasts!). Basically: if the frugality and savings are important to you, and you don't currently have the energy or mental bandwidth for it, is there something you can take off your plate that might be expected but on further analysis isn't that important?

Best of luck in everything!!!

PS I do think there is validity in looking at what one partner in a couple (usually the lower earning one, which isn't always the woman!) makes after childcare, convenience, and work-related expenses (commute, clothes) are factored in...IF this partner would be interested in staying home. If they don't (or don't particularly), you also have to look at long-term prospects, and usually staying in the workforce especially in more specialized fields is either required to maintain employability (you lose skills if you take a few years "off" from that particular job/field) or yields to promotions and raises later on. I once heard a VP at a major engineering firm talk about her life journey, and she admitted that for several years early in her career, she had worked for a net of $0 after paying for the nanny for their 3 kids (which was actually more cost-efficient) and busyness related expenses. But obviously, it paid off later on! And I suspect if you look at it this way, there's very few cases where it doesn't make sense at all for one partner to work. And it especially doesn't apply to your case, since if you stayed home you'd lose the hefty retirement contributions you're making! And since you aren't enthusiastic about it, how good it would be for the kids is questionable. So don't beat yourself up!!

Tuskalusa

  • 5 O'Clock Shadow
  • *
  • Posts: 76
Re: Case Study: Hair on Fire Spending
« Reply #33 on: July 15, 2017, 06:31:31 PM »
I think galliver makes some great suggestions here.

I agree that it's hard to take huge actions when you're running on fumes. Because of that, I'd love me to make the case to keep the house cleaner for now. Sounds like you have enough on your plate without taking that on now. 

CrashnBurn

  • 5 O'Clock Shadow
  • *
  • Posts: 16
  • Location: Washington, D.C.
Re: Case Study: Hair on Fire Spending
« Reply #34 on: July 15, 2017, 07:38:30 PM »
+1 for YNAB. I love the fact you can link most any account up to it for auto-importing. Even if it doesn't auto import, like my investments, it's easy to manually add transactions.Also, you must "Approve" (click on) every transaction. NOTHING slips by you.

My SO starting doing it, and I was very much resistant (I really hear echoes of myself in your husband). After the learning curve YNAB has, because it completely changes how you look at money, the first month or two is hell. You feel like a failure with money. Stick with it, it gets much, much better. Before you know it, you're budgeting months ahead.

As most here have said, Baby Steps.

YNAB, DO IT!

https://www.youneedabudget.com/

I had tried posting earlier but my browser failed and lost my message.

First off, retirement income, and health benefits are a good reason to work, as well as adult conversation.

For babysitting, have any couples near you ever done exchanges?  1 or 2 evenings a month you give each other breaks,  this week you babysit both broods, and they get a evening out.  2 weeks later its your turn to enjoy an evening out

Part of your problem is likely you both feel rushed, hectic, hard to keep up, and tend to make up for it in eating out, fast food, house cleaning services etc.  look up slow cooker recipes, batch cooking, and meal prep ideas.  if you're cooking items, double up your quantities, and freeze the extra, or have meals for the week, so you don't have to buy lunches.
Quote
Questions: My primary question is how people find motivation to cut spending when it’s not an “emergency”?  I literally feel like I don’t understand where all the money is going, and this level of spending is so out of line with my values.  Just putting together this case study has been enlightening to say the least.
I would really recommend something like YNAB.  You Need A Budget.  Its an awesome program for breaking down where your money goes.  like realizing your estimated costs on dining out is actually a lot higher than you thought, and makes you think and prioritize your finances.  I think you're stuck in reaction mode, instead of planning mode.  YNAB makes you go through your finances as transactions happen, and plan on what to do with your dollars, putting them to work and planing how to use them more effectively.  they have a free 34 day trial, and if you have questions feel free to pm me about it


I also second stopping the savings plans for the children's education, unless you're getting a significant match.  some programs will give a 50% or 25% match, so if that is the case do the bare minimum to get the match only.  you still haven't paid off your own education at this point.

Quote
Travel - $625 (budgeted, three trips east to visit family for holidays, one big vacation every other year, small local trips, actual was right on last year)

You need to look into the http://www.travelmiles101.com/ course and see if any flight or hotel cards can help you out.  this only works if you pay the card in full EVERY month and don't incur interest charges.  i just recently did a road trip and stayed 8 nights free at various hotels from collecting points.

Quote
How do you set financial goals?  I think not having goals might be part of why it is so hard to stick to the plan.

As for goals, sit down with your significant other and plan out some things that you want.  travel.  part time work.  a new thingymabob.  then discuss how you go about it.  first easy goal would be knocking the student loans out of the park.  that would free up some cash flow(over $600 a month!!!) and give you some good successes to continue on saving for more important things in life.  sometimes making a chart to monitor your progress helps.  you see little successes adding up.  pick a big picture to color in sections on.  each successful $100 paid off allows one bubble or square to be colored in.  as you get going, you'll see more and more progress and often feel excited to keep at it.  I also price out how much fees, or interest charges are costing me, motivating me to find better solutions.  some have paper daisy chains, some pop balloons.  put it in a nice prominent area like your kitchen fridge

On your big SL#1, over the 6 years you will have paid out approximately $3700 in INTEREST alone?
On your smaller SL#2 its $850 in interest over the 6 year loan.

If you were to quickly snowball the smaller student loan with savings from suggestions here, and roll that payment into your bigger student loan, you would pay it off 18 months sooner, and save yourself over $1000 in interest charges
Change is inevitable, except from a vending machine.

MustachedImposter

  • 5 O'Clock Shadow
  • *
  • Posts: 15
Re: Case Study: Hair on Fire Spending
« Reply #35 on: July 15, 2017, 10:25:03 PM »
Wow, guys, just wow.  I appreciate the support and ideas so much.

I've been using Quicken, but I'll consider YNAB.  It didn't "click" with me when I trialed it, but I expect that's because I didn't want to rethink our approach.  I did at least break out this weekend's transactions into categories.

DH went to the grocery store and spent too much despite having a list (grrr), Target and forgot to use our Target card (5% off!), and didn't bring home any receipts.  But I did my best to reconstruct the categories and entered it.  But all that said, I am going to make some food tomorrow for lunches this week, and have a meal plan that uses up some food from in the house.

meandmyfamily

  • Stubble
  • **
  • Posts: 184
Re: Case Study: Hair on Fire Spending
« Reply #36 on: July 16, 2017, 09:32:30 AM »
You have got great advice here!  We also love YNAB.  This blog has really helped me in so many ways and this is a great post on how to curb eating out:  http://www.frugalwoods.com/2015/07/06/how-we-broke-our-eating-out-habit-in-9-steps/


Unique User

  • Bristles
  • ***
  • Posts: 355
Re: Case Study: Hair on Fire Spending
« Reply #37 on: July 17, 2017, 06:09:50 AM »
I'm also in the camp of baby steps.  I'd focus on the food, restaurant and Target/Amazon to start, those are the easy items.  Have you thought about doing a modified spending fast?  You mention you have tons of food in your house, spend a day and write everything down along with meals you could make.  Cook a bunch of things on the weekends to get ready for the week instead of going to restaurants or shopping.  There is a thread in throw down the gauntlet about using up everything in your pantry.  I think you'd be surprised how much food you actually have.  If you are not sure whether your husband would be on board, estimate his lunches and add in a couple hundred for produce/dairy for the month.  Pull out the cash and only use that.  Even easier with Target/Amazon, just don't do it.  Don't go and don't log on.  Tell yourself you'll pick up that item next month if you still need it.  The reset from spending might be good and cause you to keep going or at least change your outlook.  I also agree with keeping the house cleaner.  I hate cleaning and would much rather pay a cleaner than go to restaurants.  You can do it, if you weren't always spendy it will be easy!

MustachedImposter

  • 5 O'Clock Shadow
  • *
  • Posts: 15
Re: Case Study: Hair on Fire Spending
« Reply #38 on: July 17, 2017, 09:07:31 AM »
I'm also in the camp of baby steps.  I'd focus on the food, restaurant and Target/Amazon to start, those are the easy items.  Have you thought about doing a modified spending fast?  You mention you have tons of food in your house, spend a day and write everything down along with meals you could make.  Cook a bunch of things on the weekends to get ready for the week instead of going to restaurants or shopping.  There is a thread in throw down the gauntlet about using up everything in your pantry.  I think you'd be surprised how much food you actually have.  If you are not sure whether your husband would be on board, estimate his lunches and add in a couple hundred for produce/dairy for the month.  Pull out the cash and only use that.  Even easier with Target/Amazon, just don't do it.  Don't go and don't log on.  Tell yourself you'll pick up that item next month if you still need it.  The reset from spending might be good and cause you to keep going or at least change your outlook.  I also agree with keeping the house cleaner.  I hate cleaning and would much rather pay a cleaner than go to restaurants.  You can do it, if you weren't always spendy it will be easy!

I did write down all the meals I could make from stuff in the house, and have been meal planning from that.  This week's grocery run was supposed to just be produce and milk, but that didn't work out.  I'm going to do the shopping next week because I figure I'm the one motivated to change things right now.

I'd happily stay out of Target forever, but we do need formula and cat litter and cat food.  DH did Target this weekend and did stick to the list, and we got a lot of formula so we don't need to go back until next month.

MustachedImposter

  • 5 O'Clock Shadow
  • *
  • Posts: 15
Re: Case Study: Hair on Fire Spending
« Reply #39 on: July 17, 2017, 09:08:06 PM »
I set up YNAB tonight.  I'm excited to get it up and running, and actually start using it.

I also had another talk with my spouse.  He agreed to move individual meals out to our personal spending money, and to work on reducing all meals out.  I think that will make a huge difference in the bottom line.

Stashing Swiss-style

  • Bristles
  • ***
  • Posts: 310
Re: Case Study: Hair on Fire Spending
« Reply #40 on: July 18, 2017, 03:00:00 AM »
That's a great idea!  Once spending on non-essential stuff has to come from "personal spending", then you start to think twice about it.  This was a game-changer for me and my husband.  We both work and we put the majority of our earnings into the joint account, but allocate an amount per person (same amount) which goes into our personal accounts.  This is our free money and neither one of us has the right to complain/comment on what the other spends it on.  I noticed that I am much more careful about all discretionary spending now.  Of course!

Malum Prohibitum

  • Pencil Stache
  • ****
  • Posts: 660
Re: Case Study: Hair on Fire Spending
« Reply #41 on: July 18, 2017, 06:38:41 AM »
Groceries - $598
  Reduce by $100.  We feed a family of 6 on this much money or less each month (and eat very well, high protein, meat, eggs, not just rice and beans).
Quote
Restaurants and food away from home - $783 (This is about 1 sit down meal out a week, plus way too many lunches out)
  Take one month off from eating out.  See how it goes.  Just make a decision and do it.  One month of no eating out, no exceptions for any reason.
Quote
Alcohol - $83
  Easy one month, no alcohol.  Just try it.

Quote
Amazon/Target - $748 (this includes some groceries and alcohol not tracked separately, household supplies, baby formula, kids clothes, and all “other”.  I know I need to break it out better)
  Well . . . $500 of groceries has to include even groceries from Target.  No alcohol.  Do they have an Aldi near you?  No clothes for a month.  Your kids won't be naked if you put off clothing purchases for 30 days. 
Quote
Spending money - $600 (budgeted, covers adult clothing, hair, hobbies, anything else not in the budget, actuals are lower because I don’t spend my whole allowance)
  No clothes for a month.  Seriously.  Are you really going to be naked if you do not buy clothes for 30 days?  I sincerely doubt it.  Hair, hobbies, come on, this should be more like $30, not $600.

Leaving aside Target, because you have not broken it down into useful categories, there is $1536 for you to save in the next 30 days just by taking a break from your crazy spending. Including "Target," you will probably find at least a couple few hundred dollars more.
  That's more than your monthly mortgage in free money just by taking a break and reducing your own stress level.

Just try it out.  One month.

Pigeon

  • Pencil Stache
  • ****
  • Posts: 923
Re: Case Study: Hair on Fire Spending
« Reply #42 on: July 18, 2017, 07:07:39 AM »
I 100% agree with Laura33.  Re-read her post and pay attention :-)  This period is tough on both parents. 

One thing I have to face punch you for is this comment you made: "I'm really torn.  Obviously, daycare takes up my entire take home.  I am basically working to provide health insurance and save $18k/year in my 403b."    The kids belong to both parents - both parents work to provide for them!! Where is your inner feminist!! Day care is the responsibility of both parents!    Don't say things like "daycare takes up my entire take home"!!  Daycare takes up part of the take home of both parents.

"I've invested a lot in my career" - yes you have and don't forget it !

Becoming more frugal / more aware and therefore wiser about spending will not happen overnight.  It takes time to build those frugality muscles, but you can do it.  Good luck.

So much this.  Unless you really want to be a SAHP, I don't think it's a good decision for many people.  I know far too many women who have taken a major career hit and lost ground they will never make up, not to mention things like retirement, pension, SS, etc.

You've gotten lots of good advice here.  If you can stop squandering so much money on eating out, miscellaneous Target spending, ridiculously large monthly personal spends and silly things like storage units, you will totally have the opportunity to sock away a lot more.

We raised two kids with both of us working FT.  The key to keeping down the food/restaurant spending is planning.  Cook stuff on the weekends and when you do make an entree, make enough to freeze another dinner's worth.  If you have a stash of frozen, homemade food in the freezer, it's much easier to say no to restaurant/fast food meals.  Spend half an hour looking at grocery store fliers to see what's on sale.  I only shop once a week, but I will pick my store based on the loss leaders.  Also, if you have an Aldi near you, it might be useful to go there once in a while to stock up on certain staples as they are much cheaper.  We don't have Costco, but some people swear by them.  But first focus on using up some of what you have on hand.

We didn't have one specific goal we focused on.  We saved for retirement, paid off the house and saved enough to put the kids through public universities.  The key for us was having the savings automated.  If I don't get the money in my hands, I can't spend it.

dess1313

  • Bristles
  • ***
  • Posts: 441
  • Location: Manitoba Canada
Re: Case Study: Hair on Fire Spending
« Reply #43 on: July 18, 2017, 09:07:37 AM »

I'd happily stay out of Target forever, but we do need formula and cat litter and cat food.  DH did Target this weekend and did stick to the list, and we got a lot of formula so we don't need to go back until next month.

Shopping with a list is KEY to some of this.  You've already shopped your cupboards at home, and know what you have/what you need and then you don't get distracted as easily by the flashy sale signs.  they make you walk distracted though the whole store for a reason. 

http://business.time.com/2011/01/27/watch-and-learn-how-supermarkets-play-shoppers-for-suckers/

I set up YNAB tonight.  I'm excited to get it up and running, and actually start using it.

I also had another talk with my spouse.  He agreed to move individual meals out to our personal spending money, and to work on reducing all meals out.  I think that will make a huge difference in the bottom line.

FANTASTIC!  there are some facebook groups for ynab users as well.  one popular one for me is "YNAB (You Need a Budget) Fans!"
YNAB Free month promo
https://ynab.com/referral/?ref=eQ5g_yJi5NxO5hoo&utm_source=customer_referral

https://www.tangerine.ca referral code get $50 for signing up!!!  34500900S1