Where Logic Meets Love

Budgeting for the Long Term

Tuesday, July 5, 2011

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Budgeting for the Long Term | Faith Permeating Life
In case you missed the news, Mike finally landed a job after a year of job hunting. I'm very proud of him!

I've written previously about how I don't believe your standard of living should grow with your income and that when I got a promotion this year we weren't going to make any huge changes to our budget except committing more to our retirement fund. This ended up being a good strategy when Mike quit his part-time job and we were able to maintain our same budget, just without putting much money in savings for a month or two.

Now that we're looking at having a substantial boost in income, we've been discussing how to maintain our frugal lifestyle while taking advantage of this period while he's working. When we have kids, Mike will be the stay-at-home parent, so we want to be sure we can continue to live on just my income.

Here are the changes we've made or we'll be making:
  • Doubling the amount we pay toward his student loans each month. We'll save over $3,000 in interest over the long term, and pay it off in less than half the time, than if we continued with the monthly amount we were paying, which was already above the monthly minimum payment. We also took an interest-free loan from my parents for his grad school, so we're planning how and when to start paying that back.
  • Putting aside money every month for a vacation. We want to plan a big vacation with Mike's friends next summer, so we'll start saving up some money every month to make that a reality. This is the kind of thing that's good to do now before we have kids and which can be reduced or taken out of the budget if necessary.
  • Increasing our tithing amount. I've talked before about the importance and benefits of tithing. We split our 10% between our parish, our World Vision child, and another charity of our choice each month. We ended up folding that last part into our CSA subscription because we felt strongly about supporting the CSA, but now we'll have some additional funds to go toward charity again and may increase the portion going toward church as well.
  • Making some larger purchases. Mike needs a good desk chair -- he just uses a folding chair and it's horrible on my back when I have to use his computer -- and his current "L-shaped desk" is actually his childhood desk and one he picked off the curb, pushed together. We'll save some money as our budget allows and use that to get him a nicer setup.
  • Getting a pet. I promised Mike a long time ago that when he finally got a full-time job, we could discuss getting a pet. Given that we live in a small apartment, we decided that fancy rats would be the best pet for us. The plan was to save some money from his first paycheck or two before getting the rats, but no sooner did he land the job than he found someone on Freecycle giving away two rats from their own rat's litter and pleaded with me to let us get them. The next morning we were off to PetSmart to buy the necessary supplies before picking up our two new housemates, whom we dubbed Bert and Ernie :)


That's it! The rest of his salary will go into savings to get us closer to our goals of adopting kids and owning land.

Here's what we're not doing with the extra money:
  • Increasing our personal spending budgets (we each get $10 a month to use as we please)
  • Increasing our "eating out/entertainment" budget
  • Moving to a bigger apartment (although we did discuss this briefly)
  • Getting smartphones
We are viewing this as a temporary excess of cash rather than a permanent increase to our monthly budget. We're trying to plan long-term so that we won't be forced to "cut back" on our lifestyle if one of us loses our job or when Mike stops working to stay with our kids. Of course we will have to make changes to our budget when we have kids, but by then we should have a healthy amount of savings and have Mike's loans nearly paid off, and I should have a higher salary by then as well.

I can tell that my husband has really been reformed from a spender to a saver because he has actually started brainstorming ways to save even more money so that as much of his salary can go into savings as possible!

What do you think? What are good and bad ways to deal with a temporary influx of money? Do you think we're taking a good approach?

3 comments:

  1. I think this is fantastic! I completely agree that just because you have more money, doesn't mean your standard of living should go up. I'm a big fan of living on (more-or-less) just what you need. We have a lot of luxuries we don't necessary need (smartphones, computers) but we use them a lot. But we also live in a cheap, 400-square-foot apartments and I don't see that changing until absolutely necessary.

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  2. Yes, in total agreement with you guys living on the same amount even if your income increases. Anything you can save is great! And then, if something happens where you need to pull on that extra money (expensive car repairs, medical needs, whatever) you aren't feeling a huge pinch.

    I'm curious about that $10 you each get a month. What exactly do you use it on? That doesn't seem like a lot, unless your other (personal) needs are categorized somewhere else? I remember seeing something about how Mike uses it for fast food/snacks. (I know everyone has different set ups for budgets; I like to see how other people use them!)

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  3. @Ashley
    It sounds like you've found a good balance of needs and wants that works for you! It's definitely possible to live on just "what you need" without completely depriving yourself.

    @Rabbit
    Our personal budgets are used for anything not covered by our regular budget that we don't want to have to justify purchasing to other person. For example, bringing lunch from home is part of the regular grocery budget, but if I wanted to go out to lunch with a friend, I'd use my personal money. Mike has been saving up and buying video games with his personal money--he used to buy food at work, but he gets meals for free at his new restaurant. Birthday and Christmas gift money goes into our personal budgets as well.

    If there's a one-time purchase we both agree on, though, like getting Mike a new desk, we'll take that out of our "Everything else" category or adjust our budget to save up money for it.

    The $10 has ended up working well for us, but what works is different for every budget and every couple. My best friend and her husband do $100 each a month, because that works for them, but the effect is the same: She finally got her husband to start bringing his lunch to work because he wanted to save his personal money for video games and basketball cards and not use it up on lunches out! It helps to know at the beginning of the month what the max amount is that will be spent on those kind of "extra" purchases; it's also good that Mike and I don't ever have to argue over whether it's worth spending money on video games, etc.

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