Total Newbie Here - Trying To Get A Grip- Help!

[CidreCreek]

This is my first foray into the MM world so please be kind! I am trying to get a grip on our family's spending.

Husband makes about $100,00, I am a stay-at-home parent
We have one toddler and plan to have one more child
We own two cars (paid in cash)
We have investments of $700,00 in stocks and bonds
Our mortgage and property taxes total $2600/month (yes, realize that is very high but we have only owned a year so we do not plan to move).
The day-to-day expenses are where we are having all kinds of trouble. We pay off credit cards every month but are not adding to our investments at all. In fact, we pretty much live paycheck to paycheck. My husband does contribute to 401K but I believe we are left with $1000 after fixed expenses and I'm not sure where to trim the fat. I want to live a more minimal lifestyle but I feel like we have locked ourselves in here. I don't want to dig into our investments to pay for our lifestyle. Can you help by giving examples of how you budget $1000 for groceries and everything else?

[Laura33]

Hi, welcome!  So my first suggestion is to go to the “Case Studies” subtopic - there is a template there you can fill out that can help you provide a little more detail.  It sounds like even filling out that template might be really useful, because it forces you to pay attention to where your money is going.  So do the best you can now, and then flesh out with more detail as you get it.

Which brings me to:  track your spending.  Every penny!  Don’t worry, it’s not as hard as it sounds - there are several programs like Mint and You Need a Budget that make it very easy to enter things as you buy them.  This is really really critical; I know it doesn’t sound fun, but when you just don’t know why the money always seems to fly away, the first step is watching where the money flies away to!  The great news is that once you do this for a month or two, you will probably be horrified by the amount you spend on stuff that wasn’t worth it (I can tell you for a fact that this will happen, because if you don’t know where the money is going, that means that whatever you spent it on wasn’t memorable).  And that will help you decide for yourself that you can cut XYZ and not even miss it.

Finally, while you are getting your ducks in a row, read the forums.  There are a lot of people here with really awesome ideas and tons of experience, and they can be very generous with their time helping people who aren’t as far along the path.  I would particularly encourage you to read and even join one of the challenges in the “Throw Down the Gauntlet” forum.  I personally am in the grocery spend challenge, because I got very lazy and was spending way too much, and again, the people there have great ideas and are very supportive to people who don’t do as well as they do but are trying.

Good luck!  You made a very good call joining here, so welcome aboard!

[NoStacheOhio]

If you haven't read most of the blog, I would recommend starting there. It really helps to mentally reframe spending. https://www.mrmoneymustache.com/all-the-posts-since-the-beginning-of-time/

It looks like your original post might have some typos? Is your income about $100,000.00? USD? Investments of $700,000.00 would put you in a really strong position, but I'm not sure if that's what you mean?

[OurNextStop]

Hi! Welcome.

Your story sounds eerily similar. We were literally in the exact same situation 4 years ago (same income, same age kids, same financial situation). We were getting down to a zero balance in our bank account each month.

As far as budgeting for groceries (since you asked about that specifically). I think meal planning is critical. I wrote down my menu for dinner each week before going to the store. I also estimate the price of each item that I'm going to buy and write it in parentheses next to each item. If I'm buying something pricey for dinner one night (say, crab meat), then I make the other meals I'm planning on the cheaper side. I can easily buy groceries for our family of four for $150 each week now.

We also discovered a hack that was the total turning point for our spending. We called it a Purchase Pause. I'm including an excerpt to explain the basic premise but if you'd like to read more you can read a whole post about it at http://retiringtotheroad.com/saving-money-purchase-pause/

"One of the most effective ways that we changed our relationship with money was putting every single purchase we wanted to make on a “pause”. The cycle used to be the following:

Have fleeting thought about the need for something.
Immediately purchase it on Amazon.
Item arrives at house.
Item goes into the closet.
Wonder where all the money is at the end of the month.
A purchase pause is simply putting a pause between step 1 and step 2 in the cycle outlined above. When either of us had a thought that we needed something, the item got written down, along with the price, on a whiteboard in our kitchen. It sat there for two weeks. At the end of the two weeks, if we still felt that we needed it, we bought it. If not, it was erased and we moved on."

I was totally where you are and was really stressed about how we were spending our money so I sympathize with your situation.

[former player]

Your family is in a good basic position with income and investments.  The issue at the moment is that you have piled on your biggest lifetime costs - house purchase and raising children - at the same time that you have reduced your income to a single earner.  That is why you are feeling as though you are in trouble: your financial life is suddenly and for explicable reasons a lot less comfortable than it used to be.

Within a few years, your kids will be older giving you some time to earn money, your spouse's earnings may have gone up, and the high initial costs of home ownership should begin to settle into something that feels more manageable.   If you can avoid pulling on your investments and let them grow in the meantime, then you will be doing reasonably well: leaving investments of $700k to grown with reinvested dividends is a very good basis for your family's future. 

Definitely track all your spending, as others have said.  When budgeting, make sure that "lumpy" expenditure such as once a year payments is fully accounted for by setting aside a monthly amount out of income that adds up to the average of those annual expenses and you shouldn't have any unwelcome surprises that will leave you needing to pull from investments.

[CidreCreek]

Thank you so much for your input. Quite honestly, it is tempting to keep dipping into savings to pay for home improvements. In the past yea alone, we renovated all bathrooms, put in a new HVAC system, and roof and furnished a whole house (we moved from an apartment). We have used a huge amount of cash in a year. At least we have not taken out any loans to pay for home improvements. They are all paid off. As we are entering year two of home ownership, we are slowing down though. Still, I find it tempting not to take on more home improvement projects. With part-time preschool, we pay $6,000 a year. We have one to two more years until we lose this cost when my little one reaches public school. Of course, we will start again with another child. The problem is that we're currently technically overspending our current income in. After reviewing our spending habits, I plan to try to reduce our grocery bill and dining out. What's a reasonable way to manage upfront home costs, stage of life costs with our current income?

Could anyone recommend some blogs, etc to get started on educating myself on investing/balancing portfolio, etc? Currently, we pay a manager and we are planning to cut that cost.

[CidreCreek]

@OurNextStop Thank you! Great advice. Yes, we have a horrible Amazon habit. I will start to institute a purchase pause. I just took a look at all the crap we have purchased on Amazon in the past month. I also have a weakness for spending on my daughter. When I think she would like or could use something, I don't even think twice.

[CidreCreek]

@Laura33 Thanks so much! I am starting to track. The problem is that husband and I are paying bills from different places so I need to aggregate his purchase habits with mine. I am starting to get the hang of my weaknesses. Now, I think I can save a couple hundred a month if I am diligent.

[CidreCreek]

@NoStacheOhio Yes, it was a typo. We bring in about $100,000 with just my husband's income. I was earning about $50,000 pre-kids so we lost that income. Our investments have been doing well. I need to learn to manage this on my own without a manager. We grew investments of $600,000 to almost $900,000. Then we took out almost $200,000 for downpayment, cars, home renovations in the last two years.

[NoStacheOhio]

@NoStacheOhio Yes, it was a typo. We bring in about $100,000 with just my husband's income. I was earning about $50,000 pre-kids so we lost that income. Our investments have been doing well. I need to learn to manage this on my own without a manager. We grew investments of $600,000 to almost $900,000. Then we took out almost $200,000 for downpayment, cars, home renovations in the last two years.

Plenty of people here would retire on a $900k stash, or at least cut way back on paid work.

[CidreCreek]

@NoStacheOhio Well, we're down to $700,000 in investments now. That's encouraging but I don't think our spending habits are in line with Mustachians yet. My husband would love to be a stay-at-home dad or at least cut back. He hates his job. I'm going to start spending some time really trying to figure out our spending. Maybe we can make that happen but we have to make some changes.

[NoStacheOhio]

@NoStacheOhio Well, we're down to $700,000 in investments now. That's encouraging but I don't think our spending habits are in line with Mustachians yet. My husband would love to be a stay-at-home dad or at least cut back. He hates his job. I'm going to start spending some time really trying to figure out our spending. Maybe we can make that happen but we have to make some changes.

I said it before, but I want to emphasize: go read the main MMM blog. You're really close to unlocking a huge life change that could make both of you much happier.

Also, consider posting a case study with more detailed expenses. The posters here are pretty good at finding things you may have missed, or approaching from an angle you didn't previously see.

[Trifle]

@NoStacheOhio Well, we're down to $700,000 in investments now. That's encouraging but I don't think our spending habits are in line with Mustachians yet. My husband would love to be a stay-at-home dad or at least cut back. He hates his job. I'm going to start spending some time really trying to figure out our spending. Maybe we can make that happen but we have to make some changes.

I said it before, but I want to emphasize: go read the main MMM blog. You're really close to unlocking a huge life change that could make both of you much happier.

x2.  My God @CidreCreek, with just a few changes you are there.  You are in a fantastic position to dramatically increase happiness.  Read the blog and let it soak in, swim around in the forums for a while.  It doesn't all 'click' immediately -- it will take a while.  And track spending -- that is key.  I would say good luck, but you don't need it.  :)

[jeroly]

First of all, in the big picture you're in great shape.  If your money doubles every 10 years you'd have nearly $3 million in 20 years without adding a cent, which would generate more income than you're living on now.  If you continue to max out your 401k contributions and/or fund 529 plans for your kid and future kid, you should be able to retire even sooner even without changes to your spending patterns.

That having been said, let's consider what you might be able to do to reduce your expenses now - after all, if you were able to pare them all the way down to $28k/year your husband could retire today! ($700k x 4% safe withdrawal rate)

-------------------

In order to figure out where you can economize you first need to understand what you're spending money on.
Use a tool like Mint or YNAB to track your every expenditure and to categorize them. 

While it's hard to assess your situation without knowing the more precise breakdown, the two biggest things that get people stuck in the lifestyle inflation loop are housing and transport. 

Do you really need two cars and/or are one or both of your cars fancy-schmancy or new-ish?  Perhaps selling the newer one (or both if they're fancy) and also cutting back on insurance coverages would help both your asset level and expenses. 

Do you need to continue doing all the home improvements you've been doing?  Maybe taking a break from that would be good both financially and psychologically - sometime focusing on home improvements can be a distraction from other areas of one's life that could be improved upon.

You say that you have only $1K left after fixed expenses, yet you only list your preschool and housing expenses which add to $3150/mo and should have around $6250/mo after taxes and 401K withholding.  Where are the other $2k going?

[CidreCreek]

Let's see...this may not be everything but recurring expenses---
Mortgage and property taxes: $2458
Gym ($100/month for family of 3). We may look at cutting this after this summer. I have to look at when we renew.
Big one - my husband's student loans: $525/month
HOA Fees: $80/mo
Once monthly House cleaning: $120 (I would really rather not give this up!)
Gas: about $50/mo
Therapy (not covered by insurance): About $150/mo -- Can reduce by going once a month instead of every 3 weeks
Car Insurance: $172/mo
Tv/internet (we are cord cutters so no cable includes Netflix): $89
Quarterly Pest control: $26
Gas: $50
Cell: $88
Security system: $25/mo
Preschool: $6/k a year (does not include summer)
Two rather new cars: One 2015 Mazda CX-5 purchased for around $20K and one 2016 Honda Civic. Neither are particularly fancy but they were bought new. We plan to basically run them into the ground. No problems so far. We used to take public transit for about 10 years before that. It's not really feasible in our current city.

[NoStacheOhio]

Start tracking spending with Mint or something similar. You may also be able to import older credit/debit transactions, it's been a while since I've done the initial setup.

[Mrs. D.]

Welcome and congrats on making the big life changes!

I have two young children and I get the impulse to buy things for them (so cute! so fun! so educational!). Over and over, my son proves that 1) the absolute best toy in the world is a stick he found in the yard and, 2) it's a good thing we get his clothes at Goodwill because usually his clothes are covered in dirt since he's digging with his stick in the yard. Very few things that we have bought him or that have been given to him give him that much joy. (My sister is a spendypants kinda gal and she was appalled when she learned I put Goodwill clothes on my son. She even swore she could tell them apart from the "nice" clothes that had been given to us from Gap or Carter's. So I put her to the test and she got 0 out of 10 correct. Facepunch!)

My husband and I also like to analyze our purchases for their "cost-to-fun" ratio (this is for all spending categories, not just our kids). When you get creative you can have an amazing amount of fun for next to no money. And watching your net worth increase becomes its own kind of fun.

One more thing to keep in mind - I often describe my fiscal discipline as flexing my mustachian muscles. It didn't come naturally for me at first and I had to (and still have to) work those muscles at times. Fortunately it can be learned and practiced and with each success it becomes a little easier. Keep at it!

Oh, I think we spend around $200/week on consumables, which includes food, drinks, diapers, wipes toiletries, household cleaning supplies, etc.  I used to track it religiously but having a newborn has taken up my time recently. We meal plan, shop at Aldi, buy generic for everything we can. And I canceled my gym membership when I discovered FitnessBlender and started working out at home for free.

[CidreCreek]

@MrsD Thank you! I'm so bad at meal planning - do you use an app for that? Right now, we're using Blue Apron for a few meals a week, but obviously it would be cheaper if I could meal plan myself.

So true about the stick...and rocks...haha