Income Size / Budget

[2disneyboys]

I have a question - Sorry if I give too many details or ramble, just trying to get my thoughts across!

Last week, my cousin asked me if I could help her set up a budget and I agreed. She's doing a good job already, but is frustrated as she feels she should have more money in her savings account then she does (in her words) because of how much money she makes. Because her primary goal was to increase her savings, we do that category first.. savings, then mortgage, then utilities, etc. No credit card debt or other loans, just a mortgage. Like I said, she's already doing great on her own. So we get to the last couple of categories on her budget -- Gas, Entertainment, Groceries, etc. She wasn't happy that in order to keep the # she liked in her savings category, she would have to reduce these categories.. I explained that it was her money & she could put it where she wanted, but since she was not happy with with she had been saving, the only alternative was to either 1. increase her income so she had more to save or 2. decrease spending in some categories so she had more money to save or 3. don't worry about not saving as much (not what I recommend, but that's just me!) her response? Well, it's easy to budget to save money when you have a lot of money to start with! I told her that I agree more $ means more discretionary uses of the $, but she still had the OPTION to put more into savings by cutting out elsewhere, but if she preferred not to, that was fine, just don't be upset your not contributing to your savings as much.. ultimately its your choice what you put/spend where.

I guess where I'm confused is that using my mom as an example. She had a very small income level to take care of our family of 6. I love my dad, but he's a drunk and was never a great provider for our family. Mom was limited on what she could do to supplement the income, but she did everything that she could. As a result, she always had "something" to put into her savings each month. Sometimes it might be as little as $5.00 but she was proud of the fact that she was able to save that! Now, as a family, we went without some things our friends took for granted. We didn't go to the movies a lot, or eat out very much at all. We had a comfortable house, plenty of food at home, we were by no means deprived, but mom did make it a priority to set aside what she could rather then be frivolous with it.

my cousin just keeps insisting that unless you make alot of $ you'll never have savings.. I will admit to being frustrated. She came up to me & asked me to help her. She then reminded me a few days later & was very proative about getting a time where we could work on it. But in the end, she wanted me to increase her savings amount without her having to give up anything to do it and when I said that's not possible, in order to save, you have to be willing to give up something, she gets mad..

I don't feel that your "savings' amount has as much to do with your income level as it does with your choices. If you choose to eat out nearly every meal, and always buy the newest hottest thing , then yea, your prob not going to be able to save as much as you woud like. If you are willing to give up some of these things, either permenantly or temporarly, then you have a better chance of saving more. Either way it's personal to each family. Am I wrong in this? is there some magic calculator somewhere that allows you to continue to make the same choices you've been making - no changes to expenses, or income, and yet, increase your savings??? If so, I wanna use that calculator!!!! Maybe I don't really have a question, just wanted to vent a little.. either way Thanks.

 

[FlyingBelle]

We just went through this exercise at home.

Split our expenses into 2 categories - fixed (i.e., mortgage, car payment, student loan payment, utility bills, etc), and variable (groceries, gas, eating out, lunch, gifts, donations, and misc)

I'm not focusing on the fixed costs now, because we've determined we're doing the best we can there. Could we cancel satellite and internet? Sure, but then we'd probably end up spending more in going out

For the first 3 months of this year, we're tracking every penny we spend, by category. I set up a google doc so DH and I can both enter expenses each day. This way we can see how much we're able to save, and where we are spending too much money.

It's only been 10 days, but so far I've definitely stopped from making impulse purchases, because I know I have to account for them!

 

[2disneyboys]

DH & I used to be very "relaxed" with our $ and could never figure out @ tax time when our tax returns say we make $xyz...where is it!?!?! Someone recommend the FPU class that Dave Ramsey created and we took it.. one of our first exerciese was to make a copy of our bank statement and categorize each item.. utitlies, grocery, gas, fun, etc. I was shocked, I mean SHOCKED at how much $$ we were "eating" each month just by eating out etc.... it certianly opened our eyes and we are not nearly as wasteful as we once were... it's amazing how looking at it right in your face can make an impact to help you resist temptation down the road... lol

Good Luck to you & your husband! Sounds like you have the right mindset from the start so I'm sure you'll do great!

 

[Julia M]

I would agree that savings (at some level) can occur at any income level. However, I think the most successful savers (at any income level) have a concept of puttitng money aside first and what's left can be spent, rather than "giving uP' whats already in the budget. A fine line, I realize, but it does make a difference.

My first "real" job (mid 80's), I took home $800 a month. I had a rent of $250, a car payment of $150 and student loan payment of $100. I saved $50 a month. I did have a safety net, because if I really had an issue, I'm sure my parents would have helped out. I was thrilled when I got a much better job (jumping from 12K a year to 22K-it was like I hit the lottery!!)

 

[Gr8t Fan]

I'd love to use that "magic calculator" too. It is definitely about choices, and unless she has a dramatic rise in income, she's going to have to cut something if she wants to increase her monthly contribution to savings. If nothing else, at least you've spelled it out for her.

 

[hsmamato2]

excuses excuses.....maybe that's why she feels her savings are not enough? kind of like going in a circle when you look at it that way...no matter your budget,there is always a set amount of income,which has to equal a set amount of 'outgo'

 

[DisneyCowgirl]

But in the end, she wanted me to increase her savings amount without her having to give up anything to do it and when I said that's not possible, in order to save, you have to be willing to give up something, she gets mad.

I don't think she's mad at you; she's frustrated by the situation.

For the first 3 months of this year, we're tracking every penny we spend, by category. I set up a google doc so DH and I can both enter expenses each day. This way we can see how much we're able to save, and where we are spending too much money.

It's only been 10 days, but so far I've definitely stopped from making impulse purchases, because I know I have to account for them!

This is a great idea and worked for us. Several years ago we did this--for several months we tracked everything and came up with a plan for paying all bills, saving, and allowing each of us enough spending money to be reasonably happy each month. I can honestly say it changed our lives--we really don't worry or argue about money at all any more. We know what we can and cannot afford, and we don't feel deprived about it.

 

[briarrose]

Is she trying to save for something? Then she might want to have to savings accounts one for a short goal (say less than 1 year) and then long term savings for retirement. Does she have 401k, she could increase her savings there especially if her company matchs and she is not contributing enough for the full match. But the only other way is to do want you have suggested to her.

 

[purpledisneyprncess]

Well your cousin sounds like MANY people that I know... I have this "sister in law" who can't keep her debt/spending under control and always cries that she has no money- yet she will finance a $500 KIA (you can get a BMW for that price!) b/c of her poor credit, the payment is so high. Rather than having to have a brand new vehicle, she should have sucked it up and kept her older car and tried to save her money. My husband and I are very money conscious (I don't like to use the term frugal or cheap). We take our vacations each year, and give the kids a good Christmas. Do we go overboard, no? Deprived? No.

Sorry to vent as well- it's just frustrating to see people complaining they want to save more, but won't compromise their spending in order to do so.

Like someone else mentioned, there are fixed & there are variable expenses. Focus on the variables- decrease eating out, movies, take out, clothing purchases, etc. Don't completely eliminate, but decrease.

 

[brymolmom]

I feel your pain OP and from my experience - you will NOT win this 'argument'.

My sister, who is my best friend, is NOT GOOD with money. She isn't too terribly in debt but just spends a lot without thinking about it and without necessarily needing it - which is FINE...as long as you don't turn around and complain about not having savings or being able to pay down this or that debt.

She has said to me probably 200 times in our lives 'Of course YOU can pay off credit cards - it's easy when you have so much' - This statement annoys me to no end.

So I sat down one day and put down some number estimates....Put her in one column and me in the other. Between the difference in our mortgage/taxes (we pay a LOT more each month), the difference in childcare costs (she doesn't have kids), the difference in 529 savings, the difference in retirement savings (We save around 30%) - when it comes down to 'spending cash' - our two families have ABOUT the same amount from month to month. This finally shut her up on this point.

She and her dh make decent money....We make more...but we have higher costs and choose to tuck more money away each month. So in reality we are in similar situations when it comes to bill paying, how much to save and how many times to go out to lunch....And she did NOT like seeing this - because now she knows that if she would truly choose to make some changes, she COULD be paying down more debt/saving more.

One of the favorite things for she and her husband to say is 'You took HOW many vacations this year?' - UGH - well YOU COULD TOO if you make different choices.

Ultimately, I'm pretty sure we will have this same discussion until the day one of us dies.

 

[Marionnette]

I feel your pain OP and from my experience - you will NOT win this 'argument'.

My sister, who is my best friend, is NOT GOOD with money. She isn't too terribly in debt but just spends a lot without thinking about it and without necessarily needing it - which is FINE...as long as you don't turn around and complain about not having savings or being able to pay down this or that debt.

She has said to me probably 200 times in our lives 'Of course YOU can pay off credit cards - it's easy when you have so much' - This statement annoys me to no end.

So I sat down one day and put down some number estimates....Put her in one column and me in the other. Between the difference in our mortgage/taxes (we pay a LOT more each month), the difference in childcare costs (she doesn't have kids), the difference in 529 savings, the difference in retirement savings (We save around 30%) - when it comes down to 'spending cash' - our two families have ABOUT the same amount from month to month. This finally shut her up on this point.

She and her dh make decent money....We make more...but we have higher costs and choose to tuck more money away each month. So in reality we are in similar situations when it comes to bill paying, how much to save and how many times to go out to lunch....And she did NOT like seeing this - because now she knows that if she would truly choose to make some changes, she COULD be paying down more debt/saving more.

One of the favorite things for she and her husband to say is 'You took HOW many vacations this year?' - UGH - well YOU COULD TOO if you make different choices.

Ultimately, I'm pretty sure we will have this same discussion until the day one of us dies.

I don't think that I would have used that much of my time to prove a point to someone who really doesn't want to face facts. It's like trying to argue a POV regarding politics. There are just some people who close their minds to what others have to say, even if it makes more sense.

OP, don't let this cousin's outlook take up any more space in your head. She doesn't want your help in developing a savings plan. She wants someone to tell her what she believes to be true...that she cannot save because the Fates are against her.

 

[Squidgyness]

After another loooong talk with my family whom I still live with till I can earn enough to move out, I gave up trying on anything to do with money, but in exchange made them promise not to complain so much to me about not having it.

I offered to help them make a budget for expenses and income etc, they didn't want to.

I offered to help cut all our spending down (I've already cut my own since I felt like a sponge at the minute, soaking up my families income in utilities etc.) they said it was fine at the minute...

I offered to help sort some stuff we don't use to sell, they didn't want to.

I offered to help set up a savings plan in an unofficial manner, nope.

I'm really looking hard for a job at the minute, really bad economy where I am though, and I just get the feeling they unconsciously wish I was earning though they are consciously nice to me, I sure do wish I had a job... At the end of that conversation I got tired and just said if you don't want my help trying to save money don't complain to me about it. I offered to pay rent out of what I have left saved from my loans, they said no. I offered to help them save and cut spending, they turned me down. I dont know what else to do that i am not already doing, and I honestly think they just want to use me as someone to talk to about it, but it gets annoying when they wont try anything i suggest. Money is a touchy subject.

I'm still concerned that my parents aren't entirely honest with each other on their spending. Not big stuff, just the little things, but it all adds up. I guess with me not earning and consuming in the household I don't really have any right to complain, but they're still my parents and I worry sometimes. I feel guilty about using and not giving much back. Not a good situation for anyone.

We may inherit some money soon from my grandmother. I'm going to squirrel anything I get away and give some to my parents, so that's something.

Oh and sorry for the vent and long post... OP I have to agree I don't think you'll change her. I've given up. People are who they are and sometimes they don't change their ways.

(OT, this reminds me I need to remove my planned trip... )

 

[gillenkl]

For the first 3 months of this year, we're tracking every penny we spend, by category. I set up a google doc so DH and I can both enter expenses each day. This way we can see how much we're able to save, and where we are spending too much money.

It's only been 10 days, but so far I've definitely stopped from making impulse purchases, because I know I have to account for them!

We are doing this exact same thing and it's really eye-opening!

 

[brymolmom]

I don't think that I would have used that much of my time to prove a point to someone who really doesn't want to face facts. It's like trying to argue a POV regarding politics. There are just some people who close their minds to what others have to say, even if it makes more sense.

OP, don't let this cousin's outlook take up any more space in your head. She doesn't want your help in developing a savings plan. She wants someone to tell her what she believes to be true...that she cannot save because the Fates are against her.

LOL - in this relationship I've got nothing BUT time! She's my sister - And not going anywhere. So inevitably these conversations come up time to time.

 

[2disneyboys]

I agree w/ the ideal that in order to be an effective saver, you have to put that first so you don't feel like you are "losing something". That's what DH & I did wrong for so many years... We always paid all of our bills on time, and we (thankfully) never bought a huge house or got into a lot of credit card's.. our problem was savings was LAST on our list.. after all the bills paid, and some fun was "had" then whatever was left went to savings... so while thankfully, we never were in a huge financial hole to begin with, we were just hemorrhaging money without even realizing it. Once we recognize that (I really wish we had caught that alot earlier!!!) we changed & put savings first and while we still go out a lot, we know our limit and our savings are growing. We make the conscious choice to not go out as much so we can save more. It just annoys me that my cousin & others act like you can only save when you are "well off" or get a windfall... umm... no, you can save whenever you CHOOSE to. Thanks for letting me vent guys!

 

[DisneyATlast]

I didn't read all the replies, but here are some thoughts/experiences...

I've pretty much always worked low income jobs. I went to school to become a teacher and then very shortly after went back to school to become a nurse.

As a nurse, for the first time in my life, I'm making a living wage! I've waited/planned for years for this so that I could do things (like go to Disney World)!

But...it has been hard to adjust going from having hardly any money and getting disconnect notices in the mail to having paychecks larger than what an entire 2 months of earnings were! I thought it would be a piece of cake and I'd have tons of money left, but I found (like they say) "When you have more, you spend more!"

The first thing I did was sign up to have money taken directly from my check to go into a retirement account. You can sign up for as little as 1% on up to however much you'd like. I started with just 1% just to have an open account. I plan to increase that once I get this newfound freedom figured out. Not that I'm buying a new car or anything, but I am going to enroll my daughter in gymnastics and do some other things we've been deprived of for years. Once I factor in all of my new expenses, I'll figure out how much I can realistically save.

Next, I'm going to add some other accounts to have my money directly deposited into. Our checks are direct deposit and we can have several different accounts (I think 5). So, I'm going to opt to have a certain percent (maybe 5%) sent to a separate checking account for savings.

I don't know if your relative has a direct deposit option (probably so) but I think this is the very best way to save money. You don't ever actually get the money so you don't "get used" to having it. If I had to take my check and set aside an amount to save then I probably wouldn't be successful. When I don't ever see the money however it's a different story. Say I really made $1500 but $200 of that was put into savings accounts then I look at it as my paycheck is $1300.

I'm not a budgeting type person. I just pay my bills as they come in and buy things as I go along...so not having access to that money is the absolute best way to ensure it's being put away. When I go to work tonight, I am going to go online and set up an account to have a certain percentage sent to that is going to be reserved for our Disney vacation. Instead of percentages, you can also opt to have dollar amounts sent to certain accounts.

This might be a good option for your relative as well!

 

[Irin997]

The first thing I did was sign up to have money taken directly from my check to go into a retirement account. You can sign up for as little as 1% on up to however much you'd like. I started with just 1% just to have an open account. I plan to increase that once I get this newfound freedom figured out. Not that I'm buying a new car or anything, but I am going to enroll my daughter in gymnastics and do some other things we've been deprived of for years. Once I factor in all of my new expenses, I'll figure out how much I can realistically save.

I highly suggest at the bare minimum you contribute the maximum percent you can in order to receive your company's match, if they do that. If they don't match, you should seriously reconsider saving more like at least 6-8% of your salary into your 401k. You can't finance your retirement and you should make that your priority before a vacation savings.

 

[disykat]

Hmm. She wanted you involved in helping her save more money without spending less. It sounds like what she really wanted was for you to GIVE her money each month for spending.


Depending on how close I was to her and if I had the kind of relationship where I could either tease or be really honest with her, I'd be tempted to ask her if that was her intention.

Scary as it is, it could have actually BEEN her intention. Somehow in her mind it's not fair that some people have more and some people have less. She considers herself in the have less category so somehow she deserves to have money fall from the sky into her lap to make it more "even." She might think she should be able to get what she wants, but doesn't connect that it's her responsibility to make that happen. Sad, but it really seems like some people think that way.

 

[DisneyATlast]

I highly suggest at the bare minimum you contribute the maximum percent you can in order to receive your company's match, if they do that. If they don't match, you should seriously reconsider saving more like at least 6-8% of your salary into your 401k. You can't finance your retirement and you should make that your priority before a vacation savings.

Thanks for the advice, but I already mentioned that I started it at 1% just to have an account so that I can increase it later.

You don't know enough about my life or anyone else's to be telling people what their priorities should be.

My kids have gotten up at 5am for several years, spent years in daycare, and sacrificed sports among other things while I got an education. It is MY priority to take them on a vacation now that we're at the end of the road.

I'm obviously not flippant about savings or I wouldn't have opened an account, but I have my finances under control. Thanks!

 

[ilovemk76]

I like Gail Vax-Oxlade's way of budgeting.

10% Savings

15% Transportation - Car payment, gas, car repairs, car insurance, AAA membership and the like.

15% Debt repayment - CC, personal and other loans except for car an home. It there is no debt, then you can increase your savings and other categories.

25% Life - Food, health insurance, life insurance, vacations, movies, medicines, Dr. visits and the like.

35% Housing - Mortgage, home insurance, property taxes, electric bill, heating bill, water bill and the like.



If you are too high in one category then you need to reduce another category, except savings or debt repayment, or reduce your spending in your category. The reduction could be selling your car and taking the bus, cutting out cable or whatever it takes to get within your category.

As you can see, your income does not pay into the percentages. You pick where you live based on your income and not on what you feel you deserve.