Overall, I would say we've done pretty well in our first three years with joint finances. We had some credit cards when we first started out (pretty much out of necessity) but I'm happy to say that for quite a while now, we haven't had any debt, besides the usual suspects - home and cars. We have a credit card we used to use and pay off to keep it active, but don't carry a balance.
I realize we are lucky in many, many respects. We have great families who helped us through college, including allowing us to be student loan free, and helped in various ways as we were starting out.
We haven't been forced to rack up debt because of unfortunate life situations. I realize there are many people forced into that situation, and it's an inevitable part of staying afloat. But given that that was NOT our situation, I would like to toot our own horn here for a sec.
Sometimes, it's HARD. Hard to not just buy stuff because we want it - and instead wait until we can pay for it free and clear. But the point here is, we were doing pretty well for ourselves. Saving a little each month and not having debt.
But it just wasn't enough. We didn't feel confident that the tiny nest egg we had built would last us through any significant crisis or life change - lose a job, have a child, etc.
So we cranked out some Excel spreadsheets to calculate what we could be saving each month if we tried really (really!) hard.
There were 4 main parts on our budget sheet:
- Income (our checks)
- Savings ($x per month automatically being taken out and put in a separate savings account)
- Absolute bills (unavoidables)
Through some number crunching, we were able to figure out exactly how much we HAD to spend each month (46% of our income), and based on an end $$ savings result we were looking for, how much we would need to save each month. It came out to 32% of our income. Woah nelly.
The rest (20% of our income) we would break out for our daily expenses. If we ran out before the end of the month, we ran out. No tapping into savings, and no excuses.
To make things manageable and keep everything in order, we are using the cash system. The money leftover after bills and savings is broken into these categories:
- Entertainment (going out to eat, movies, etc)
- Incidentals (copays, haircuts, oil changes)
- Fun Fund (to save for vacation)
- Personal Money (a little each month to call our own and spend on whatever)
What was leftover to go into these above categories was not much - at least not compared to what we were spending previously - on stuff like clothes, going out to eat (this was a big one!), and just buying spur of the moment stuff we didn't really need. It was clear we would need to do some adjusting to make this work.
I'll be honest - I was so apprehensive the month before we started this process.
The what if's began.
But to make it work, we made some lifestyle adjustments. We were never really living outside our means, and I like a bargain, so it wasn't so much our spending we needed to curb - just be a little more aware.
More so, we took a step back and said - what do we think we "must" have that's really just a want? We cut our cable waaay back - like, from HD digital cable and DVR to basic, basic cable. We no longer record shows. We only have 60 channels (the horror!), and our picture is not cinema-quality. We canceled our gym membership. We got slightly cheaper and slower internet. We started shopping for groceries at Walmart (yes, it's a contentious place - but it's totally cheaper).
It helps a ton too that Tony got a new job within his company - and he now has a company car and phone - slicing our auto payment, gas, insurance, and cell bills down significantly.
[side note: Tony and I never fail to notice times in our life when there's something stronger than good timing and coincidence going on - we really are blessed and everything seems to turn out ok when we need it to...]
My worries surfaced: What if we weren't home to watch our shows during their regularly scheduled times? What if I needed to upload 1,000 pictures in ten minutes? What if I totally needed to buy something that was $300 and we were out of cash? What if....
Through this process, I've learned two big things:
1. Small sacrifices can make a huge difference long term.
Example: Cutting out our DVR, etc lead to a cable bill that was $80 cheaper
By tweaking our lifestyle just a little, and making each purchase a conscious decision, we are going to save a huge amount of money in a year. Huge!
We both have good jobs, but it's not like we are rolling in dough. It's no simple feat to save the amount we are saving. But when you crunch the numbers and reevaluate priorities, it's amazing to realize what you can do! Anyone who can go to Target and spend $25 without worrying too much can do this plan (in other words, I realize there are people living check to check and could not do this).
2. Life is simpler. And I'm happier
I was never a big TV watcher anyways... but guess what - we don't feel chained to the TV anymore. If there's a show on and we miss it, no big deal, that's what Hulu is for. We don't feel the need to always be doing some sort of project or buying this or that. Instead, we tackle one thing at a time, and only move forward when the money is there to do so.
There's something VERY gratifying about cutting coupons and making a must-stick-to-it grocery list - and counting up the savings afterwards.
The $1.99 new-with-tags Target shirt I got at Goodwill makes me waaay happier than a brand new $20 one would.
And that $40 we have to spend in personal money each month - a lot of care goes into the decision on what to spend that on!
Basically, something i looked at in a negative way from the beginning has really turned into a chance for reflection and simplification.
After all, saving is the new spending. Tony and I are recessionistas on the way to a large chunk of change in our savings account - and lots of peace of mind! Simple is better, and life is good.