Author Topic: Am I saving too much or not enough?  (Read 4704 times)


  • Pencil Stache
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Am I saving too much or not enough?
« on: December 26, 2012, 10:45:50 PM »
My wife and I have been reading the blog for some time now, and we believe we are on our way to FI. We saved about 50% of our take-home last year. While we would like to increase that figure to >70% for this year, we don't want to be saving too much and not enjoying some luxury consumptions. We are in our early 30s and have 1 kid. Where can we splurge or cut back?

INCOME (est. 2013)
Monthly (take-home, excluding year-end bonus): 14,000
Rental income (net of expenses): 450

   RENT: 2580
   CABLE: 0 (included in rent)
   PHONES: 0 (no land line)
   CELL: 20 (wife on pre-paid and I am on company phone)

   529 Plan: 600
   PRESCHOOL: 0 (company is paying w/ grossed-up tax)

   ROTH 401K: 1550
   ROTH IRA: 850

   Taxi/Public Transportation: 350
   We live in a city so no car is required.

   BOOZE: 100

   We live overseas, so we do once a year trip back home to buy cloths/daily items/OTC drugs, etc.


   RETIREMENT ACCOUNT (100% Roth): 100K
   SAVINGS (regular investment): 345k
   529 Plan (not sure if this counts as our assets): 20k

   STUDENT LOAN: 20K @ 6%
   LOC: 39k @2.9%
« Last Edit: December 26, 2012, 11:42:01 PM by chesebert »


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Re: Am I saving too much or not enough?
« Reply #1 on: December 27, 2012, 12:06:36 AM »
You are living in a foreign country, so costs of living may not be comparable - given that caveat this is what I see:

On your excellent income of 14450/month, 50% savings should be 'easy'... and higher percentages should  certainly be achievable.

Your taxi /transport cost is quite high given you don't have a car.  Is there some way of reducing this?
Restaurants and booze are substantial and optional spends
Do you really need domestic helper @$500/month? This seems a really obvious overspend.
$7200 - $8400 seems a huge amount for an annual shopping spree for "clothes" etc. How do you get $8000 worth of stuff back overseas? (Unless you are buying designer gear so theres not very much of it) I understand you night want to go home once a year to see family and friends and don't see this as a luxury.

Whats saving too much? That's an individual decision about what you feel comfortable with.

Honest Abe

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Re: Am I saving too much or not enough?
« Reply #2 on: December 27, 2012, 02:46:56 AM »
Kill that student loan @ 6%... That's an instant $1200/yr based on your current balance


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Re: Am I saving too much or not enough?
« Reply #3 on: December 27, 2012, 11:16:40 AM »
While we would like to increase that figure to >70% for this year, we don't want to be saving too much and not enjoying some luxury consumptions.

I think you might need a bit of an attitude adjustment.  Maybe it's just unfortunate phrasing, but it seems as though you're edging towards the "got all this money, we should spend it" attitude that drives consumerism.  Instead, you should be asking yourselves two questions.  First, what do you really enjoy?  Second, out of the things you really enjoy, how do you optimize use of time* & money to get the most enjoyment?

Are you really going to enjoy those "luxury consumptions", or are you just hearing the seductive voice of consumerism whispering that you ought to enjoy them? 

*Here I'd disagree with some other posts.  In your situation, that $500/month domestic helper seems a reasonable luxury.


  • Pencil Stache
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Re: Am I saving too much or not enough?
« Reply #4 on: December 27, 2012, 08:56:05 PM »
Very helpful! We just moved to Shanghai, and will use your numbers as reference going forward.

1. Only I am working at the moment, so we can contribute 17k to Roth401K. I just choose to front-load the contribution and will max out before the year end. We can each contribute 5k to Roth IRA (backdoor).

2. The restaurant budget is hypothetical. We currently eat out 2-3 times a week (mostly 2), and the average check size is <$25. We expect the number will go down once we get the helper (we are helperless right now - not quite helpless).

The booze budget needs to stay - wines in Shanghai are 3X as expensive as back home. I am really drinking like $10 wines, but they cost $30 here. I can't drink <$10 wines, they just taste awful. I limit my drinking to one bottle a week.

3. Most of the transportation cost is taxi to send my kid to school (public transportation takes about an hour each way). School bus costs 25% more, so we opted that one out. I spend about $4/day on transportation.

4. This is hypothetical at the moment. Since we had already spent $4.5k on furniture/household items this year to fill our aprt, I figure $3k is not unreasonable for a year worth of clothing, toys, cheese, meds, toothpaste, etc.

5. We don't have a domestic helper yet, but a full time helper can make breakfast, take the kid to school, clean and cook dinner/next-day lunch.

6. School loan will be gone in 2 months' time. Rental loan needs to stay as it redueces my rental income and AGI.

Hopefully life will get easier and spending can go down once we get familiar with the place.

I live overseas (in Beijing) with two school-aged kids.  We are a two income family with a much lower income that you have, but we also save roughly 50%/year.  A few thoughts:

1)  Are you both working?  If so, then I would bump up retirement savings to the annual max.  If not, then I don't understand how you are saving as much as you are (amounts listed exceed the maximum annual contribution for one worker

2)  Restaurant meals seem a bit high.  We spend an average of around $200/month on eating out for a family of four, which typically includes about one meal out a week.  If you like to cook, living overseas can be a great opportunity to learn to cook a new cuisine/use new ingredients.  I'd think about cutting back here.  Going more local can also help bring food costs down -- imported stuff is expensive wherever you are.

3)  Transportation seems high, but this depends on what it includes and what taxis/public transit cost where you are.  I have a horrible cross-town commute in Beijing.  A taxi costs roughly $6-7/trip if you don't get bogged down in rush hour traffic.  I work a strange schedule so that I can take public transit in the morning (get the second or third bus of the day at roughly 5:45 to start work at 7 am, costs roughly $.15) and then splurge on a taxi in the afternoon (takes roughly 35-40 minutes at that time of day, as opposed to the 2+ hours the bus/subway would take).  I also take taxis in the morning roughly one week a month when my husband is travelling on business (have to wait for our helper to arrive so can't leave at my normal early time).  With all this commuting plus a few trips out and about every month with the family, we spend about $150/month on transportation. We like our apartment so tend to stay home a lot on the weekends, though -- going out a lot could easily make that more expensive. YMMV

3)  Monthly shopping total -- what does this include?  Seems like it might be a bit high.  Breaking it down may help you find more places where you are spending mindlessly.  Do understand the US stock up issue -- Costco is our friend, too!  We typically come back twice a year and often sink $400-500 at Costco per trip stocking up on things that are expensive overseas (vitamins and OTC meds, dried fruit, etc) but it saves us a lot in the long run.  I'm contemplating filling most of a suitcase with cheese at the moment because we can get 2lbs at Costco for what we pay 8 ounces for in Beijing...

4)  Domestic help.  We pay roughly $250/month for a part time helper who comes in and cleans/does laundry/cooks dinner daily M-F and helps watch the kids (less of a responsibility as ours are 11 and almost 8).  She'd also do the shopping if I was willing to delegate that, but I like to do it myself.  If you are paying for someone full-time, consider whether you really need it, especially given that your child is in school part of the day.  It does make life more convenient and it can be hard to find someone who will stick with you for a part-time schedule, though -- we have made efforts to find our helper other jobs that work for our schedule, so she is happy to continue part-time for us.   

5)  Travel actually seems somewhat low to me, though we didn't travel much (except for visits to family) when the kids were small, either.  That is one enormous area of our annual budget, and one where if anything we are actually contemplating spending more now that the kids can appreciate different places/cultures more. 

6)  Savings vs. money owed.  Not sure why you have 345k in non-retirement savings and are still carrying student loans and loans on your rental. Maybe there are tax implications I don't get, but I would pay off those loans immediately.   

Overall I'd say look closely at your lifestyle and see if there are ways you are 1) spending where it doesn't really align with your values (Your MOney or Your Life has great approach for understanding/modifying your behavior along these lines) and/or 2)  needlessly trying to replicate a foreign lifestyle when "going local" might be more satisfying/interesting and also allow you to save a lot more money.  I work a lot with State Department employees and am always STUNNED when I find out how much money they waste while living in Beijing.  A lot of it is "keeping up with the expat Joneses" kind of stuff.  Granted, we live in a ridiculously expensive apartment (which thankfully is owned, so we are gaining tons of equity), and I still buy a lot of imported food, etc., so we aren't exactly going 100% local, but we have made the choice not to get a car and to limit our spending in a lot of areas compared to the typical expat, and have the savings to prove it.

Good luck and let us know what kind of adjustments you make and what the result is on the bottom line. 

You are in a great position and
« Last Edit: December 28, 2012, 04:11:04 AM by chesebert »


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Re: Am I saving too much or not enough?
« Reply #5 on: December 28, 2012, 07:01:28 AM »
Sounds like you actually overstated most of the larger expenses.  Was going to say you should consider finding a cheaper place to live, but then you mentioned that you live in Shanghai (which has some of the highest real estate prices in the world).


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Re: Am I saving too much or not enough?
« Reply #6 on: December 28, 2012, 12:15:09 PM »
Looks like you'll be fine no matter what.  I agree with some others and say kill your student loans, at least the ones with % rates above 2 or 3.  Other than that, my personal preference would be to reduce the shopping budget, whether to increase overall savings or travel more.  Admittedly, I'd always rather spend a dollar for travel purposes rather than shopping so YMMV.