Awhile back my husband and I redid our monthly budget, updating it with his salary raise, our new life insurance policy, and the money we’re putting into our various savings and retirement accounts. We discovered we were saving 26% of our take home income!
Are we saving too much?
Here’s my internal monologue.
Yes, it’s okay to spend a little more every month!
- Life’s too short to save so much! Who knows, the end of our lives may be much closer than we think.
- We should indulge in the treats we really love – like getting a massage every month, instead of two or three times a year.
- We have a strong safety net, what with our diverse investments, including stocks and real estate. It’s unlikely that a little extra spending will severely impact our long term savings.
- We can always scale back later.
- We should enjoy our lives and not just worry about the future.
- We have plenty of friends who make less money than us who go out and spend money more often than us. If they can afford it, can’t we?
No, keep saving at our current rate!
- The more we save now, the sooner we can retire!
- There are plenty of cheap and free ways to have fun. And how about date night at the gym? Without kids, that DOES sound like a date!
- We can’t depend on government social security programs to be around in 25 years when we want to retire.
- Who knows what medical costs will be by the time we retire?! I know we’ll be covered by Medicare when we hit 65, but we may need long term care or prescriptions that lie outside of Medicare. That extra medical insurance and medical expenses are likely to be extremely expensive.
- Our family may need to spend our savings on major medical illnesses, periods of unemployment, college tuition, or other unforeseen expenses.
- We have major expenses coming up in the next 1-5 years, like replacing one or both of our two relatively old cars. (2003 Mini with 117,000 and a 2006 Honda Element with 115,000 miles)
- We may buy a new home or take on renovation projects on our current home.
- We should try harder to be satisfied with our current “fun” budget, which lets us order take out 1-3 times a month, and hire a babysitter to go out about twice a month.
You can never save too much! Best example are the charts that show if you saved 2,000 a year from age 18-35 what it is worth at age 65 and the amount you’d have if you wait til your 30’s to invest……save early,invest wisely and you will be able to afford college for kids and retire earlier!
Bargain Babe says
@Janet I agree that money invested at a young age grows to be much more money than if the same amount is invested at an older age. But my point is that you CAN save too much. It’s important to enjoy life day to day, especially when you consider that your health may not allow you to travel later, or that you may have other obligations that prevent you from certain activities. It’s no fun to save every dime except true essentials and live on rice and beans. YOLO!
Each family has to figure out priorities– we had one car for 4 years so we could move to our very desirable area with amazing schools ( ranks in top 10 in the state) and I love to use coupons, find free things, get movie tickets half off, cook from scratch and do,not eat out at fast food places. We have traveled to 35 of the states and to Europe twice and NZ and Australia……I still do not have by choice a smart phone ……and saved early to put our child thru private college– he did work and contributed but he also did an abroad summer which we felt was important for his career. And this was done on a teacher’s income……..I think I bought a coffee out 3 times in the last year and do lunch out once a month and usually share it! Instead I prefer to take a walk with friends or watch a movie at our house. So I agree YOLO but just need to decide where you want to spend limited income …….
Bargain Babe says
What an inspiring story! How did you keep your focus for all those years? Did you post pictures of the vacation spots you were saving towards to remind you? Did you get rid of your credit cards? How often did you check in with your budget? Very curious about how you maintained your resolve to save?
Guess I am frugal by nature! And we always preferred to spend our $ on memories or objects that would last vs dinners out (and I happen to love cooking). Just don’t use the credit cards unless I am paying it off in full–just to get miles. We actually don’t do a formal budget….but I love to go grocery shopping and only use coupons (just apologize to those in line behind you and go when it isn’t busy). Happy to say I am retired now (at an earlier age than most) and reaping the benefits of working and saving in the early years! I did exchange child care with friends and we do a lot of dinners with friends in a home and everyone brings something but I can’t say I ever felt deprived! For a couple of years I did put $ in envelopes (food, gas, ‘outings’) which made it easier to track how much I was spending. I listen to Dave Ramsey but we are not doing his program…….do adhere to the “live today like nobody else so tomorrow you can live like nobody else”. I love shopping online at outlets and can save up to 90% sometimes at a site like Lands End or Coldwater Creek. We live in a suburb of Los Angeles so we can access lots of wonderful and free things –beach, observatory, free museum days, and more–so when our child was younger we did a lot of those things.
What is always shocking to me is college costs. Our eldest is a junior in college and is one of the most frugal teens you are ever likely to meet. If he had gone to college back when I did, he probably would have gotten a free ride between his grades, extra curriculars, and ethnic background. Even up to 5 years ago, our diocese provided a full ride to two students at his university (which he really would have had a good shot at because of his activities) but suddenly POOF they went away. So now he holds down 3 skilled on campus jobs (he doesn’t qualify for work study, which makes no sense to me), uses swagbucks to pay for his texts, and definitely eats on the frugal end of the scale (if a campus group is offering a free meal, chances are that he is there).
Yes, all this means that he is incredibly responsible and driven, but I do wish that he and we as his parents weren’t under as much financial strain. In the end, you can save and plan, but you really can’t count on tomorrow’s situation being anything like today’s.
Bargain Babe says
@Sarah What sobering advice. I am confident that we’ll be able to save at least 50% of the college costs for both our daughters, and that financial aid, grants, jobs, scholarships, and loans will make up the other 50%. I’m comfortable with that. My husband is not. He wants to save for our entire college bill now, but I’m not opposed to having our children pay for a significant part of their college or graduate with loans. I suppose at heart I agree with you, though, that you really can’t know what your financial situation will be by the times your kids are in college, and we can’t predict how much college will cost by that time (though there are good calculators that take into account college inflation trends). So the best way to prepare is to save save save!
Accident Management says
People always want to save their money. They usually see it as a wise choice, but sometimes it could also make them seem selfish & cheap. Like if they rarely buy presents to exchange for the merry holidays or experience electricity once in awhile or go wear the same several clothes for years. Anyways, if you’re a totally not cheap type of person, then you’re more likely to go broke. How do you manage to spend without going broke & saving without looking like a shopping antagonist for years? Does saving money require becoming selfish?
Bargain Babe says
I don’t think saving money requires selfishness – but if you have friends and family who expect something from you, then I suppose they would consider you selfish for saving your money. But good friends and family don’t expect anything. Plus, there are plenty of ways to give great gifts that don’t come with a big price tag.
Once you have your safety net and you are well on your way to saving for retirement I don’t see anything wrong with saving to do something you really want to do like travel or learn to do something you’ve always wanted to like art lessons or flying lessons or learning a new language and with it a new way of thinking. The dangerous thing is starting to spend money on things that start to seem like necessities like an expensive cup of designer coffee every morning, going to a chain restaurant every week or going to the expensive gym that calls itself a spa instead of taking zumba or yoga classes at the local elementary school. Money is not the only thing that makes you rich, and he who dies with the most does not win. Experiences and knowledge have a value that far exceeds the money spent to acquire them.
Bargain Babe says
Wise words Jennifer!
I agree it’s best to spend money on the things that stay with you, as opposed to short lived treats, like lattes!
Jen Y says
I am very grateful that we saved as much as we could in our 30’s – we actually became debt-free in our 30’s & started saving heavily for our son’s education & our retirement. We’re now just entering the empty nest. We’re very pleased with how much we were able to save for our son, who just got married. In addition to a small college fund we have a gift trust that will come do in a few more years & we’re hoping it will help his family buy their 1st home. Because we worked so hard to live on less, during his teen years we were able to do so much more with him & for him. Even though we weren’t saving as much as we are now, we chose to do things with him. The experiences through the teen years were a much better investment than spending money on experiences when he was younger & we’re glad we didn’t let peer pressures push us into doing more too early.
We’ve done well saving for retirement as well but medical costs are the biggest thing we’re working hard to prepare for. My husband(who is 51)is an insulin dependant diabetic & I(am 47) lost my thyroid a few years ago to a cancer scare so we both have medications we need to live each day – some of them very expensive even with our insurance. So, we’re working hard to save & we work hard to be as healthy as we can be as we age to keep medical costs down. My husband plans to work into retirement, partly to save more, partly because his employer insurance is so good (so far) & partly because the employee family gym membership is great! Plus, we can keep the gym membership through life after being members for 20 yrs now if he retires there.
For us, we tweak our budget every year. Some years were hard & we needed a little fudging money to motivate us to press on so we’d up our fun money just a few $$$ – other years when our health was good we’d really tighten it more. I think it’s fine to do that as long as you are not behind on your goals.
One last thought about your cars – my husband has driven a 1990 Geo Prism to work (with over 200,000 miles) since 1991 & I drive a 2000 Honda Civic (with over 200,000 miles) since 2004 – neither of us are thinking about replacing our cars any time soon. With an empty nest we don’t travel as much & are happy with our little civic with the travelling we do. We maintain our cars well, don’t mind putting some money in them to keep them safe & running well – it’s been much cheaper than buying a newer car with higher insurance.
Just a brief comment about the cars, Jen Y. I, too, keep my cars for many years (over 10) and agree with you about car maintenance. However, one thing to be said for newer cars is they are safer. I’m thinking in particular of your husband’s 1990 Geo Prism. We are very safety-conscious when purchasing cars. My husband checks the crash tests; I get to pick the color. 🙂 I wonder how the Geo Prism rated in 1990 and your Civic in 2000. I think Mini Coopers are so cute and I ogle them whenever I see them on the streets or in parking lots. But I wouldn’t buy one after checking their safety grades and crash test results. There is no contest between keeping an older car running and being protected while driving. (Yes, BB, I was thinking of you when I mentioned the Minis. And do you buy cars now with safety a top priority?)
Bargain Babe says
I’m amazed Jen Y! You and your husband are top notch savers and have managed to stay on the same page with your finances and saving goals. Incredible! You two must be great at talking about money and compromising when you have different opinions. I suppose we should really focus on our saving and retirement goals now when our expenses are relatively low. Our mortgage is less than $2,000 per month because we refinanced several years ago and both our cars are paid off and require little maintenance. I hardly know anyone who has a car with as many miles as you too. I guess I just assumed most cars die after about 100,000 miles. I need to know more about how cars last so long!
I’ve never heard of a gym giving lifetime membership (I’m assuming that’s free) once you’ve belonged for 20 years. So awesome. And happy that you’re both keeping active with so many chronic health issues. I love staying fit – as much for the shape of my body as the emotional stability and happiness I get from it. Plus, with two little ones, I need to stay light on my toes to keep up with them! The feeling of having a “heavy” body that I have to lug around is the worst. When I run, swim, practice yoga, and stretch even just once a week, I feel so much better.
One question I have for you is why you decided to leave a small trust for your son. Don’t you think he will be able to buy his own home? Wouldn’t you rather retire a little earlier? Why did you feel the need to provide him with that extra financial boost?
Jen Y says
Diane – I guess I do somewhat think about the safety issue of my husband’s Geo. But, he was in an accident in it a few years ago. Coming home from work on a 2 lane highway, an SUV turned in front of him. My husband ran into the passenger side ‘totalling’ (according to the insurance) his car & almost no damage to the SUV. My husband wasn’t hurt at all. The insurance totalled our car – because of it’s age- & gave us a check for the blue book price – obviously not very much. Because the frame was not damaged, we were able to get it repaired for less than the amount of the check & he still drives it to work. We decided we could not find another used car where our insurance would be so low & at the time we would have had to have made car payments. We want to pay cash for our next car. Doesn’t really answer your question but it shows just how strongly my husband is attached to his little Geo.
Bargain Babe – We decided to leave a small trust for our son just because we wanted to. We are hoping it will help him have a smaller mortgage payment & make life a little easier for him. I don’t think parents should sacrifice funding their retirement to their children & in our case the trust is small & we think we should be comfortable through retirement if we can control medical costs.
How can we know what our children will do as adults when they’re born? When he was one year old we started it & have added to it faithfully for a 20 yrs. We decided on a gift trust because it could be spent any way he wants, not just education, & there were no penalties if we decided to pull out early. Which we just did recently. It was to come due in 2016 but it has done fairly well in the last few years & had regained much of what was lost with the recession. My husband is a little apprehensive about the stock market dropping & it not having time to regain again by 2016 – so we cashed it in & have decided to just keep adding to it on our own until then – hoping to round it up to an even figure. We’ll give it to him on his 23rd birthday. We chose that age when we set it up thinking he would just be finishing college & it would be a good chunk to help him get started. Thankfully he has gone beyond our expectations & would be fine without us giving him cash. It’s just something we want to do for him.
As far as keeping cars so long – do regular oil changes, pay attention to belts, fluids, ect, take care of & buy good tires, -keep them well balanced & rotate them regularly, don’t mind spending some money on big things when it’s needed like brakes & the hardest part for me, be content with what you have. My husband checked with consumer reports before we bought – looking for the cars with the best repair ratings & durability. Honda & Toyota were at the top (Geo is made by Toyota). By the way, the Geo has 250,000 & my Honda has 220,000. I couldn’t remember exactly when I posted before.
You should do a search on cars lasting over 100,000 miles. I’ve read some really fun stories about it.
Bargain Babe says
@Jen Y You have made peace with your financial decisions and that is great. I admire you for being savvy enough to save for your retirement and give your son a gift trust. The thought never crossed my mind, though we do have 529s for both our children. I’m curious about the age at which you decided to give the gift trust to your son – 23. That seems very young! What if he goes out and buys a fancy new car? Not exactly the downpayment you imagined! I hope your son is as money savvy as you!
I got married recently.I need some advice from you.
Take it month by month, day by day. You are heading for fiancial freedom. Buy yourselves each something special this Valentines Day!
Bargain Babe says
@Paul Oh, my husband HATES valentine’s day. We don’t usually exchange gifts, aside from chocolate and a card. I’m fine with that as we have fun everyday together as it is. He has a great sense of humor and is always trying to make me laugh. Great quality in a partner!
Daddy S says
Paying through nose now for a top flight college education. Top school in country. Daughter’s first choice, and a bit of an academic stretch for her to get into. Able to write the $60k check each year, because we started saving for this before she was born. Then once she came along, started shoveling it into UTMAs, then later state 529. End result: big nest egg for her education, growing tax-free, and now with market going up fast, she is effectively getting a freebie on this semester! We’re earning as fast as we’re writing tuition checks! And our kids will graduate and start their lives debt-free. Same for son, who starts college next year. So, start early!
Yes, driving 10 year old Volvos. Small home. No smartphones, or high priced cable. But a great amount of family travel and fun over last two decades. Don’t waste money at the mall, on landscapers, on new cars. Use the public library, the tennis ourts at the school, and cut your own grass. Save, save, save. Spend on education, and family time together. Read “The Millionaire Next Door”.
Bargain Babe says
@Daddy S Thanks for the insight into your financial life. Very interesting! I can’t imagine writing $60 checks every year, but that’s what my parents did. I think my yearly college bill was $30-$40k each year, but I graduated in 2000. (I paid for part of my college education with student loans, grants, scholarships, and jobs. Still paying off a very low interest loan. )
I’ll check if Millionaire Next Door is at the library! You remind me of my grandmother – she always said “Education is the most important thing.”
Agree that education is top priority if a child has the potential for college…otherwise, excellent vocational programs that also cost $ might be appropriate. And for us having our child spend 4 years in dorms and on campus apartments was also a priority but that might not be the case for another child. I think people are influenced by their own experiences– we both had amazing college away experiences so we always talked about college and then grad school in our family– we come from a family with many advanced degrees so that is the norm for us. Happy to say our child was a great student and is now in a fully funded PhD science field at one of the top 5 programs in the US. But had he been interested in becoming an electrician, physical trainer or other career that does not require college, that would have also been encouraged by us. This is where parenting is important and seeking advice from school counselors.
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