Money | Matters

Budget

I’ve been asked a few times, in real life and on the blog, about matters regarding money, budgets, investing, etc. And while money can be a touchy subject I’m happy to share what works in my household. I also think it’s so important for women, especially, to talk about money matters – it’s been a subject deemed appropriate for men and taboo for women for far too long. And guess what, it’s 2011 and we’re still not being paid equally.

On the flip side, though, I do believe in the wise words of Notorious BIG Mo Money Mo Problems. I’ve mentioned before that I’ve stopped measuring my success in terms of dollars. I’m not interested in keeping up with the Jones’ or running in some sort of rat race. Money matters but it’s not the most important thing – not by a long shot. I live comfortably and within my means – which is what allows me the freedom to not worry about making ends meet.

So, all of that said – let’s get into the nitty gritty.

Budget
How we budget our money.

We’re not super strict with our budget. In fact, I kind of hate the word budget. It makes me itchy. We don’t have designated envelopes for our expenses. There is an ebb & flow when it comes to money and what we spend it on. Some months I’ll do a little more shopping and a little less eating out at restaurants. Other months we’ll have to spend a good chunk of change on incidentals like getting new tires on our cars. It also complicates things that I’m freelance and don’t have a steady or reliable income. Anyways, this is a general overview of what works for us:

SAVINGS
A big chunk of our money goes to savings (almost half!). But we keep it all in a high-interest checking account yielding 3.5% interest. This is a great way to make your money work for you – and it affords you a nice meal each month. Once we save enough this money goes to buying investment property and/or vacation(s).

MORTGAGE
When you own a home, especially right now when interest rates are so low, it’s like putting money in the bank. We put 20% down on our home to avoid paying PMI (Private Mortgage Insurance) – that saves us about $100 a month in unnecessary fees.
* This budget does not include investment property mortgages – as that is usually covered by tenants.

GROCERIES
Americans have been bombarded with advertising that makes us expect our food to come cheap. Eating organic and local isn’t always cheap but it’s important to me. I cook at least 4-5 nights a week and we eat on leftovers for lunch. I should also note that I cook a meal for 6-8 of my closest friends every week – connecting and laughing over food is worth every penny.

RESTAURANTS
We like to eat at nice-ish places with our friends. It’s how we socialize and entertain ourselves.

ALCOHOL
I was shocked (and a little embarrassed) to see so much of our budget going towards alcohol. What can I say – we drink nice beer and wine. And we always buy enough to share with friends too.

GIFTS/DONATIONS
One of the things I love about Jeremy is that he’s frugal (not cheap, there’s a difference) but at the same time very generous.

DIVIDERDots

MONEY TIPS
Along with our budget I’ve picked up a few tips along the way that I would like to share:
• Get a high-interest checking account. And if you can, find a credit union to bank with.
• We like to put all of our expenses on a credit card that gives us reward points (for things like new kitchen appliances). We pay it off in full at the end of each month so that we don’t have to pay any interest. Meanwhile, our money is sitting in the bank gathering interest in our high-yield checking account.
• Invest in a 401k. If you work at a company that matches invest up to the maximum amount they will match.
• Invest in real estate – especially if you live in an area where real estate is dirt cheap. Like Oklahoma. Being a landlord can be challenging at times but it’s not as hard as you might think. Kelly at Tearing Up Houses is an incredible inspiration and resource when it comes to real estate matters (and she manages to be hilarious at the same time).
• Don’t buy new cars. The truth is – I really want a new car right now. But when I consider the payments, insurance and the environmental impact it takes to produce and drive a new car it’s just not worth it.

DIVIDERDots

So I’d like to hear from you all. What sorts of things do you do to leverage your dollars? Any money tips?

I’m going to continue to expand on this new “matters” series. I’m an open book, so let me know if there are any other life/beauty/money/marriage/food/etc. topics or specifics you’d like me to dive into. Help me figure out what to talk about next!

  1. Margie

    What a great read, andKathleen.

    I’m frugal but not cheap. I’ll pay the money for a good meal at a good restaurant but I prefer to make all of our meals because my stuff is better. We do the 401K, the donations, the savings as well as buy used cars when the times arise. Unless it’s a big purchase, we don’t confer with eachother and it’s only after a lot of research went into it. We budget and plan and enjoy our childless lives. 🙂

    As for other topics to bring up, marriage is a good one. I’m always interested on how other couples handle their ball-n-chains.

  2. Thanks, Margie! I love talking about marriage but I feel like I need a focused topic or two to narrow it down to for the matters series. Is there anything you’re wondering about in particular when it comes to the ol’ ball and chain?

  3. So true about food! I did the math a couple weeks ago, and in the five years I’ve been a member of the Oklahoma Food Co-op, I think I have easily spent $12,000 buying food from local farmers. Groceries really add up over time, no matter where you buy them, and I love knowing I put that money into the hands of people I know, who received a fair price for their labor.

  4. I’m with Margie. I’d love to hear more about your partnership with Jeremy. Nothing specific, but it’s a nice get a glimpse of that sort of personal dynamic, you know?

    Kelly

    p.s. Thanks of the (very generous!) compliment. 🙂

  5. Margie

    How about how you make time for one another or how you handle squabbles?

    Kelly has the best name.

    MargieMargieBoBargieBananaFanaFoFargieMeMiMoMargie…Margie.

  6. Chasity

    What about other things? Clothing, makeup, home accessories, etc?

  7. Alotta

    Hooray! I love it when people tackle the last taboo: MONEY. And you’re right, it matters.

    Like you, I HATE the term budget, and I would call my husband and I’s approach more of a ‘spending plan’ than a budget in the traditional sense.

    About a year ago, we took a hard look at where our money was doing in terms of food and made some dramatic changes, which I talk about on my own blog on a regular basis. The long and short of it is that by planning our dinners in advance and shopping strictly from a list, we’ve cut our grocery bill in HALF, AND we’re eating better food as a result. We’ve also cut our restaurant bill in half, although we do still enjoy a meal out at a really excellent spot at least once or twice a month, because great restaurants are something we really enjoy and value.

    We also started carpooling to work in October, since our offices are only 2 miles apart. It required some re-working on my part because I was accustomed to going in and leaving much earlier than him, but overall, it’s worth it because we’re saving about $150 a month! Plus, it’s cut our car-related carbon footprint in half.

  8. Hey Kathleen,
    Thanks for sharing. We too have a very similar budget. We save a lot. We’re about 10 years older and I think it’s great you are so sensible in these matters. Funny our alcohol expense was high too, but we have taken a break off the beer and wine for a while, so that’s more money for other stuff. Living within your means is so important, if you have kids you’ll find it’s still doable too. Good Luck!

  9. Brooke

    I used to feel the same about buying only used cars, especially since they lose so much value once off the lot. I still feel the same unless you can find a deal for a 0%APR loan for the duration of the loan. It is a good way to pay exactly what the car is worth instead of interest and also to work on building good credit. I guess the ideal would be to buy a used car with 0%APR, I’m just not sure if I see a lot of those deals out there. To me, if you buy a used car and have to pay interest on the loan then you are basically going to be paying the ‘new car’ price.

    Clearly, this doesn’t take into account the whole environmental impact on buying a new car vs. used.

  10. Tracy

    May I ask what bank you use..we have a huge savings and don’t get near that in interest! I would LOVE to transfer that to a bank that pays that sort of interest~~

    and we are much like you and J in that we save at least half of our income as we were blessed to inherit our 4 bedroom home, thus we have no mortgage and our taxes each year are a whopping 600.00!!!

    eating out…well, we’d rather not as my husband is a trained chef and retaurants can’t even compare to his cooking!! so “ding” we save there as well!!! we live 30 mins from San Francisco..so we do splurge once in awhile though~~~great eats there for sure!

    we drink alcohol, but try to just save it for the weekends as my husband drives for UPS and works nights driving the freight trucks..again “ding” savings there :0)!!

    love your tips though And your cute self! xx

  11. Kate

    ditto chastity – where is your clothing budget? does that come out of savings? what about utilities and house-upkeep?

    do you use mint to track your money? since you don’t like the word budget, but you guys are obviously good at budgeting, i *highly* recommend it. it’s FREE, safe and has a nice layout (that they keep improving). 🙂

  12. Vanessa

    Super interesting! I guess further into the money/relationship topic: How do you & Jeremy split costs. Do you pool all your money together? Do you have separate savings accounts? If you lived with Jeremy or another S.O. prior to marriage, how were finances arranged then vs. now?

  13. Hi Kathleen! This was really interesting to read. I’m still trying to figure out all this grown-up money stuff. I’m curious why you recommend banking with a credit union though?

  14. jrose

    Great post…I’m always interested in other people’s money situations, mostly because I feel I could learn a thing or two. Glad to see your side note about investment properties too.

    On the marriage topic, there are two things I’m curious about in other couples: First, how do you split up chores? Are either of you significantly messier than the other? If so, how do you deal?
    Second, how does Jeremy handle living with a designer? For instance, my fiance and I constantly butt heads with decorating. He wants comfy carpet and big plushy couches, all of which make my designer eyes cringe!

  15. kathleen, i think we think along the same lines when it comes to $$. we invest in our savings first. always putting the max we can in hubby’s 401k. money in the bank is a security blanket to me. our savings is in high-yielding mutual funds. i like my $$ to be making $$.

    i would consider myself frugal. we spend on nice things every once in awhile, but it’s usually something for the house (renovated kitchen, new sofa, new dining room table). and we bought those things on sale. occasionally i’ll do a clothes shopping trip but always look for bargains.

    food is our greatest expense. mainly groceries. we eat out nice about twice a year (it helps that we don’t drink and avoid $14 glasses of wine!). we eat out locally more often but no meal’s over $40.

    what we can is charged to the amex card. we always, always pay it off monthly and reap the benefits of those reward points. love that!

    great post! thanks for sharing. pam

  16. Do you & Jeremy combine all your money? I’m getting married very soon and Matt and I are discussing how we are going to combine and what if we will keep some finances separate. It’ll definitely be a transition…

    We like to spend on eating at nice places and drinking good wine/beer too with good friends. Is there another way?

  17. Wow! Great questions you guys! And great comments – keep ’em coming! I love hearing how you guys are making your money work for you.

    On Credit Unions:
    1. Credit unions are member-owned. When you join a credit union you own a share of the company.
    2. Credit unions are for the people. You’ll often find them giving back to their members and communities the way banks don’t.
    3. Credit unions are not-for-profit. They’re not banks. Banks are threatened by credit unions. Credit Unions will work with you to help you get out of debt, work on payment plans, give you loans at low rates all while not trying to make money off you. When they do make money off you they have to give it back in one way or another.

    I’m happy to recommend some great credit unions in Oklahoma via email but usually branches are very small and will only be in your area. However, if you travel or move your credit union is probably networked in the Credit Union Service Centers so you can make transactions there or online.

    Clearly, I’m a HUGE advocate of credit unions.

    On Combined Finances:
    Jeremy and I do share a checking account. When we first got together he made double what I did. If we were to keep it separate we would probably split our bills based on a percentage of our income – that way I’m not broke as a joke (he makes more). It works because we’re respectful and considerate of each other when spending OUR money. I think if at any point money becomes a battle or resentments build in a relationship you should do what’s best for you as far as keeping it separate or merging funds.

    On Budgets / Mint:
    I actually gathered the data for this graph via Mint! Huge fan.

    On clothing / house / utilities / incidentals:
    So yeah. I was wondering where that stuff was too when putting together this chart – and it turns out we haven’t spent a whole lot on buying those things. It usually evens out when I buy clothes that I’ve spent less somewhere else. Like I said, we don’t have a strict budget – this is just a general overview of where our money goes. So for example, we spent a good chunk of cash on the Nepal trek which meant we couldn’t put as much into savings.

    I included utilities, cable/phone, car stuff (gas, insurance, incidentals) as well as smaller things like getting my hair done on the chart too – I just didn’t list them out.

    I hope that helps clear some things up! Again, I can’t stress enough that this is only what works for us. We’re actually pretty casual about our money and how we spend it – but with a few FIRM goals in mind (like buying real estate and retiring when we’re 50.)

  18. I need to save more. noted.

  19. Jeremy

    I think it makes sense to group things like clothes and vacations into “savings”, since… What’s savings for if not the things you want save up FOR? And retirement, of course.

  20. Raechel

    Love your post on the money matters. It seems our financials are pretty much along the same lines. We don’t have a “budget” but cut back when need to and save as much as possible.

    The only thing I do different is use a high interest savings account through Sallie Mae. It is a couple of days to get the money transferred to my checking that it really makes me think about it before I remove it. I also forget about it frequently which is helpful for saving lots of money!

    It’s refreshing to see other people my age have a healthy financial outlook. So many of my friends are still in the broke college mentality and don’t budget (which I’m pretty sure would help resolve the broke part).

    Great post as usual!

  21. Thanks, Kathleen, because of your post I finally started using a “money managing” program and realized: CRAP, I NEED TO MAKE MORE MONEY. It works out as about 40%food 30% rent/utilities and 30% for everything else. I’m screwed…

  22. Jessica

    I’d be interested in hearing more about your investment properties. I had no idea this was part of your life, and it seems like it would be an interesting part to hear more about.

    Our finances look somewhat similar. We don’t save quite as much, more like 35-40%, but we try to keep things well balanced. The only debt we have is our mortgage, we pay cash for our cars, and we pay our credit cards in full each month. We spent more on eating out than I was happy with last year, at least on junk food. Trying to control that while I’m a full time student and working 30+ hours a week is proving to be a challenge, but I’m trying!

  23. Jessica – WOW! I can’t even imagine working and schooling full time AND saving that much money. Good for you! I will definitely get into investment properties. We only have 1 right now so it’s no big deal but we do planning on getting more and using it as a way to invest/retire at an early age.

  24. I probably shouldn’t be speaking too much about money matters right now, being a poor grad student, but I know one thing: living on a limited budget really forces you to learn what “necessities” are. My biggest rule is don’t charge something to a credit card if you don’t have cash in the bank to pay for it immediately. That usually curbs my spending.

    I really appreciate you talking about this, Kathleen. It’s extremely important that women have this discussion with each other. It’s empowering.

  25. Elisa

    Hello Kathleen,
    thank you for sharing this!
    Maybe that’s a little off-topic, but it makes me curious: I’m wondering about your entertainment-category. I mean, the concept of entertainment seems to apply to a vast variety of activities. What do you guys spend most on to entertain yourselves, apart from the activities already covered by the other categories?
    DVD-rentals, cinema, theater, opera, expositions, iceskating, rollerblading, baseball games, clubbing? None of the above? All of the above?
    Anyways, best wishes from Germany!
    Elisa

  26. Elisa,
    Not off topic at all! We do spend $10/month on Netflix (instant movies that streams to our TV). We also go out to the movies from time-to-time. Another thing we like to do is to go rock climbing – which is $10 each per visit. Hrm. I think we mostly entertain ourselves though by going out to restaurants or hole-in-the-wall bars with our friends – so that goes in the restaurant and alcohol category.

    We also enjoy lots of free entertainment. Like going for hikes or making out with each other. Ha!

  27. Jeremy

    “Entertainment” also includes mp3 albums purchased from Amazon and apps purchased from the iTunes store.

  28. I need to discuss investment property with you sometime. When I bought my house I knew it would be perfect for a rental once I got married, I just didn’t expect it to happen so fast. Sheldon moved in 7 months after I closed. Now that we’re ready to start looking for “our” house, I’m getting worried about the possibility of being a landlord.

  29. Craftyminx / Dana – I’d love to talk to you about it sometime! Maybe some Saturday we can grab a cuppie & joe.

  30. Great stuff Kathleen. I’d be interested in how money matters changed once you went full-time freelance. I just left my corporate job to focus on my freelance work and my wife and I are learning how to budget with the new income situation. Suggestions?

  31. Your money philosophy sounds quite like ours. Ebb and flow.

    And we definitely spend too much money on alcohol.

  32. Hey Tanner! Congrats!

    So, the graph I presented represents a modest and reliable average income a month for me. Sometimes I bring in a whole lot more and sometimes I bring in a little bit less. Which is why there is a little bit of ebb & flow – but if I happen to make more that savings chunk would take up a bigger piece of the pie.

    Prior to quitting my real job we were just able to save more faster (and ultimately, our goal is to save enough money to put 20% down on an investment property every year or two).

    An idea for you and Anne might be to try and live only on her income, if possible. And then use your freelancing income as savings. Once you have a healthy chunk in savings I would start paying yourself a conservative paycheck.

    Congrats again!

  33. ooh yes! A Saturday cuppie date sounds fantastic. I’ll e-mail you sometime soon 🙂

  34. Loving this series, Kathleen! Some “…matters” posts I might like to see are: fitness, marketing yourself/your business, organization (home, business) and planning (how do you spend your day and use your time efficiently).

  35. Ninniemuggins – Love your name! I would love to do an Organization | Matters but it would literally be “Jeremy does it for me.” Maybe I’ll have him guest post. 😉

  36. Meg

    Girlfriend!
    In a word – mutual funds. You should be earning waaaayyyyyy more than 3.5% on your savings. And that rate you’re just keeping up with inflation.

    Anyway, this is what we do – we have six months plus of expenses in a 3.5% savings account. Then the rest of our non-retirement savings is split between two relatively conservative mutual funds (bond/stock mix). That’s money we don’t need right this second… because the market does dip short term, but over time, you’ll make money.

    Example of this: my husband’s grandparents put $8K into a mutual fund when he was born, and he paid for much of law school with it. Bam! Interest.

    And then we have most of our retirement in target date funds right now. They are a little high-risk, but we’re far out, so ehhh…

    Anyway, that’s my two cents. I like SAFETY, so David had to pry money out of my super safe savings account. But, we gotta do this as women, it’s part of investing in ourselves.

    I have SO MUCH TO SAY about money. Of course.

    xo
    Meg

  37. Meg

    Oh! Though, looking at your comments, when you’re saving for a down payment, you might want to keep that safer.

    But, I’m a big fan of diversifying, so keeping some money in the market while some is in real estate might be smart.

    Oh real estate. One day.

  38. Pixie

    I’ve been putting money away for the past 2 years to try and save enough for a downpayment to purchase my own condo. my friends can’t believe how much I was able to sock away in such a short period of time but it was easy once I got used to not going out with the girls 3-4 times a week after work or hanging out for dinnner and then drinks at the ritzy bars every weekend.

    I still go out but I enjoy it more now that it’s not constant. Funny how that is.

  39. I recently lost my job, so I have to admit that with a few exceptions (I need Vermont cheddar, screw New York cheddar), my food purchases are nearly all based on sales and price per lb. Therefore, I’m buying the 1.99/lb ground beef for my lasagna, not the local stuff from the butcher. It hurts my heart a bit, but frankly, I have to be concerned about me right now.

    I still leave money for skiing though :-).

    As for credit cards, heck yeah to rewards! My jetBlue card got me a trip to Southern California for $5 last May (that’s from the EC), and my United card will hopefully be flying my whole family to CO for skiing later this winter! And finally, the first CC I got when I could hardly qualify for anything was a rewards card and I’ve made a few $$ off that too. There’s no other way to do it!

  40. kathleen, did you find that high interest checking account through your credit union? (i’m guessing the answer is a big YES! lol)

    i’ve been saving a percentage of our money for the last year and a half and am about ready to take a portion of it and put it somewhere it can grow itself a little. i’m appalled at the current rates on CDs, so a high interest checking account might be more appealing for how much i’m ready to invest.

    thanks! :]

  41. Meg – Exactly – A mutual fund would be great but we’re always saving for a 20% down payment on a property. So, we have to have the cash at hand. I’m definitely going to think about what your comment though and ways to diversify and what would be good for us.

    Mrs. Chinncredible – YES! Talk to your credit union about other ways to invest as well if CDs rates suck right now.

  42. chacha

    Where did you find a savings that yields 3.5%?! Spill the beans, sister. Do you need like 100K minimum or something?

    Most money market savings are around 1% or less…

  43. Chacha – There are at least 2 credit unions in OKC offering 3.5% interest! Both of them do have a few stipulations like you have to have online checking (paperless statements), direct deposit from your employer, 10 debit card transactions a month (I use my debit card for small purchases like coffee), and one bill pay (I do my water bill). Oh and no minimum! But they only pay that interest on up to a certain amount ($30k, I think).

    P.S. For security reasons I’m not being incredibly specific about the credit unions I’m using, specifically.

  44. chacha

    Interesting. So, there are lots of requirements and there is no way I would remember to do 10 debits as I always use my credit cards (cashback is 5% for certain categories, so I am always charging).

    And I don’t keep that much in checking – any sizable amount is in savings and not very easy to get to (so it doesn’t get intermingled with money specifically for bills). So the 3.5% interest would be on a relatively small amount of money, thus, not worth it.

    I think I should probably just pay off debt which would be better than 3.5% yield anyway. I just have to release the OCD grip on my emergency fund.

  45. Chacha – Yes, there are definitely pros and cons to the high-interest accounts. We keep all of our money (including ‘savings’) in our checking to gain interest on it. The requirements aren’t really a big deal to us and fortunately, Jeremy makes a point to handle all of those details each month.

    We’ve had our fair share of debt including remodel expenses thrown on credit cards, scooter loans, car loans, etc. What we did was pay off the one with the highest interest first and worked our way down.

    Emergency funds are important too! I think it’s just sitting down and doing the math – and weighing what will work best for you. If you’ve got great job security maybe paying down on debt from your emergency fund will be a good solution for you…

  46. Really impressive. Saving nearly half is a real achievement.

    Where do you bank that nets you a 3.5% return? (Im sorry if you mention this somewhere but i read the comments and don’t see it)

    Just out of curiousity how are you saving for your retirement?

  47. Mrs. L / Stefanie – It’s a local credit union here in OKC! I’m not mentioning the specific name for security reasons.

    For retirement Jeremy and I both have employee-matching 401ks. Now that I’m freelance I am no longer contributing to my 401k nor do I have an employer to match contributions. So I’m kind of banking on real estate investment properties for my retirement income.

    I should probably look into a separate IRA for myself once my income becomes a little more steady, though.

  48. Man alive…I’m 20 and while this is such a helpful post, thinking about having this much money at once—and saving half of it every month—makes me want to faint. I am so poor. And unorganized. And unknowledgeable about how to bank/do anything related to money. Is that normal? hahah. Definitely bookmarking this for future reference.

    As for other posts, I’d love to see a post on how you gained such a steady batch of clientele in such a short time…this goes with branding/promoting yourself, I suppose. I am in art school right now with one year to go and am rather nervous about freelancing once I graduate. They don’t teach you how to find clients in school. Eep.

  49. Kirsten – When I was 20 I was really super excited to have a $58 balance in my checking account. I know how it goes and am super fortunate to be in a dual-income household and not be living paycheck-to-paycheck.

    It’s normal to be broke when you’re young. BUT definitely educate yourself on money matters. Again, I use credit unions as an invaluable resource – check out this site: http://www.buckthenorm.com/

    Disclaimer: I used to work at the advertising company that designed this campaign but I do believe in their cause! Even more so after having worked with them on financial literacy projects.

    As for landing clients out of school – I actually wouldn’t recommend going freelance right out of school. I worked at an agency for 5 years and learned A LOT about the business. I would advise you go out and get some experience – then in a few years reassess if freelancing is right for you. Also check out this article by Jessica Hische: http://jessicahische.com/spendstoomuchtimeinternetting/?p=791

  50. Kathleen, thanks so much! very helpful links and I definitely don’t want to freelance right out of school. scaaaa-ry. anyway, i love your blog (and your work!) and i look forward to seeing upcoming matters posts (i too am rooting for some marriage posts..squabbles, chores etc…) thanks again!

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