
Ask HN: Hacker Finances? / How much do you save each month? - flacon
I have a question related to personal income and budgeting. My significant other and I have been vexed by this so I would love any input.<p>What percentage of your monthly income do you spend on: A. Mortgage/Rent, B. Credit cards / Personal Loans, C. Other expenses ?<p>What percentage of your income do you put into savings?<p>Using myself as an example, of my income over the last 6 months (also my partner does not work and we have 2 children): 32% - mortgage, 20%  - Bills and utilities, 10% - loans (school loans, Credit cards etc), 18% - food and dining, 7% - education, 4% - auto, 2% - gifts and charities and only 3-6% into savings.<p>The issue is, we feel like we are being pretty frugal etc, but can never seem to get ahead. It feels weird to be making so much money but still feel like we are living month to month. We have been prioritizing paying off loans, since it makes sense. Home improvement projects seem to get expensive too (all DIY), since we bought an older home and want to make it feel livable.<p>There's this voice in the back of my head telling me that every other person in my position (making a decent salary) has their shit figured out: 1. not overpaying for their living space, 2. socking away tons of money in savings each money, 3. living frugally, 4. plans to retire by 35 etc.<p>I can't help feel a bit crushed having bought into "the system" and perennially feel like I need to be making more money just to keep up.<p>Feel free to share any thoughts or strategies related to this.<p>What hacks do you know to either save money or that have helped you establish some financial security.<p>Addendum:<p>People are providing some really good advice on this thread. I want to outline some additional details.<p>Current Lifestyle:<p>Take lunch everyday to work, CHECK<p>Walk or bike to work, CHECK<p>Cheap Hobbies: Veggie gardening, Meditation, CHECK<p>Buy used stuff rather than new, CHECK<p>Drive older car, CHECK<p>Budget software, CHECK<p>Entertainment.all.first == Netflix.find_by_price($8.99)<p>Entertainment.find_all_by_name(cable, TV, video_games).empty? == true<p>EDIT: formatting, updated percentages, notes
======
olegious
I want to give you a different take on frugal living- my grandparents lived
frugally their whole lives so that they would have a comfortable retirement.
They didn't go on many vacations, they didn't go out, they spent their lives
working and saving and thought that everything was set. Then the Soviet Union
collapsed- within 2-3 years, everything they worked for their whole lives was
wiped away by runaway inflation. They were left with nothing. So they spent
their lives denying themselves so that they can have a comfortable old age and
came away with nothing as a result.

Am I telling you this because I think you shouldn't save for the future? No.
I'm telling you this because there should be balance in life- you only live
once and you're only young once, balance fun, travel and the more pleasurable
aspects of life with saving for the future. You never know what the future
hold for your health or for your country.

------
throwawayuhuh
32 years old, married, one child (another on the way), living in the Bay Area
renting a house.

My salary until May of this year was $120k. My wife is staying at home with
our son so we're a single income family.

Monthly expenses..

Rent: $1750, student loans: $225, credit card: ≈$2,000 (paid off in full each
month)

Savings...

We have about $50k in 401k, $50k in a brokerage account, $20k in Lending Club
and some mid term savings in the bank around $5-10k.

I was having 15% post tax taken out for ESPP and 14% pre tax for 401k.

The only loans we have are about $17k for my wife's schooling. We started
paying cash for the last 2 years of it.

We are pretty frugal in most areas which aren't important to us (don't go out
to eat much) but it enables us to be generous in areas we are passionate about
(paid $5k for a kid in Ghana to have heart surgery and gave my sister $12k as
a gift since they're moving to do medical work in Africa). Our frugality also
enabled me to quit my job and bootstrap a startup (going on 6 months at this
point).

It's interesting because it's normal (I think) to look at others and feel
poor. The truth is that no one knows what a person's finances looks like. The
guy driving a Mercedes and wearing nice clothes may or may not be doing so
well.

I wish people were more open about this stuff.

------
Mz
A major budget killer in my marriage was shopping for furniture/decor
together. "Having a nice home" was one of the few things my spouse and I could
agree on, so shopping for decor was one of the few ways I got any of his time
and attention in something vaguely resembling a positive fashion. (He could
only really give me his undivided attention if we were arguing about
something. We spent way too much time fighting and this was a major factor in
the marriage failing.) I didn't really need more furniture. I really needed
some positive attention from him and just couldn't get it. Furniture shopping
was the closest substitute I could get, so we did way too much of it, much to
the detriment of our budget.

I think any relationship based on a "dating" model is at risk of equating
relating with "having a good time" ...aka spending money. If you are doing
this, consider finding another way to relate to your S.O. Cooking together,
gardening together, just plain talking for hours, long walks and other forms
of spending time together that don't revolve around spending money per se can
do a lot for both your relationship and budget.

Edit: I will note I did the stay-at-home-mom thing for nearly two decades.
Perhaps that detail will help clarify why I am making this remark.

------
rwk
I feel anyone who has any sense feels worrisome no matter how much they are
socking away.

I got a lot more mileage than I thought I would out of books like I Will Teach
You To Be Rich by Ramit Sethi([http://www.amazon.com/Will-Teach-You-Be-
Rich/dp/0761147489/r...](http://www.amazon.com/Will-Teach-You-Be-
Rich/dp/0761147489/ref=sr_1_1?ie=UTF8&qid=1322026384&sr=8-1)). It rubs some
people the wrong way, but it has some really good points about automating
finances, and just handling companies via some social engineering.

Some of the things I think a bunch of people working day jobs are the insane
benefits their companies offer. Make sure both your and your significant other
are maximizing their 401k benefit(at least to kick in the employee matching
and more if you can afford it).

The savings accounts should just keep compounding on each other. Possibly toss
some other money into a Roth or into the stock market. Also have a rainy
day/emergency fund for when the roof leaks and other unforeseen circumstances.

If you have a side project, that money should be coming out of your personal
spending money. It should be thought of as your hobby and not impede on the
family as a whole(this is for day jobbers).

Obviously finances get a bit rougher if there is no day job and it is just
startups, it gets more difficult. One of the plans I had envisioned was to
have an account setup and once it reached a certain percentage of drainage(aka
burn rate for funded companies) that was agreed upon in the family, then there
would be a meeting to discuss hanging it up and looking for a new day job to
refill the fund to try again.

If you luck out and get funded and/or someone buys a project, that money
should go first to replenish the project fund and then go into emergency,
savings, and a little left over to celebrate(vacation, new back door, etc).

------
ChuckMcM
Generally I've told my kids that if they are carrying a credit card balance
across months they living beyond their means. That being said, we've talking
about finances and while my wife was much better at these things than I was in
school, if you have a couple of thousand dollars in your 'emergency cash' fund
(that is so you don't suddenly need to carry a credit card balance) and you
don't carry said balances except for long term debt (student loans, mortgages,
car loan) and you are able to add _something_ to your savings each month then
you are in ok shape.

Things that eat at your money are bills {phone, power, sewer, internet,
various subscriptions), eating out, and 'impulse' buying (clothes, toys,
books, movies, Etc.). You have to be very aware of them to keep them in check.
Eating out is particularly insidious, since spending $10/day on lunch is $200
a month. Of course bring in a sandwich and a piece of fruit can feel dorky but
don't let that discourage you, people will be more impressed than you know.

If you can't motivate yourself to do that for yourself, then do it for your
marriage/kids. Nothing sours a relationship like money trouble, and money
trouble can come from not everyone in the relationship being on the same page
with respect to what things cost or the value of frugality.

Camping is a lot of fun and a great way for your family and you to get out
without spending a lot of cash as well.

Final thoughts. I started contributing to my 401k in 1987. I always put in the
max. They told me it would be worth over $3M now. They were wrong. I'm glad I
have what I have, but sometimes you have a second great depression. Life is
uncertain, do not give up your life so that in the 'future' you can do cool
things. Find cool things you can do now and afford (there are lots) and you
will be happier.

~~~
brc
Good point about taking in lunch. When I worked in an office, I always did it,
day in, day out. I usually made a bit extra for dinner the night before and
made a lunch out of that.

Not only is it frugal, it's usually better for you. Especially if you drink
water for lunch instead of hitting up the vending machine.

The other big one is takeaway coffee ala Starbucks or similar. Yes, it's nice,
but the work-supplied coffee is a lot more economical.

Friends used to snicker at me until we had a little session on the whiteboard
and calculated how much their bought lunches and coffees cost per year. Just
$10 a day works out to about $3000 a year, and most people spend more than
that. After that I saw a lot more lunchboxes for a while.

~~~
jlyke
Replying late. This is also one of the best ways to ensure that you are eating
better food. In my experience, it is much easier to cook a dinner with good
food than to buy one. If I have leftovers of good food, I can turn one
decision to eat better into two the next day.

------
throwaway21222
I made a throwaway, because I don't want friends to know the details of my
finances.

Your categories (after tax):

A. Rent - 10% B. Debt service - No loans, no pending CC debt. C. Discretionary
- 30% D. Net (savings) - 60%

How do we do it? Well, we make a lot of money (me, $225k, she, $100k, this
before tax), so that's one thing. We have no kids. We travel a bit but not a
ton because I am something of a homebody. We don't have lavish tastes. And we
were lucky enough to have parents that paid our way through college.

What I mean by the last thing is that I feel no pressing need to own a house,
an expensive car, a boat or a plane. My hobbies are inexpensive relative to my
means (computer gaming, reading, skiing). And she and I are of one mind on
finances.

My advice around saving (from when I was making much less): as a hacker you
should be thinking about what you are spending money on. The simplest way to
increase your net is to reduce spending on non-necessities that cost a lot of
money. That is, focus on the inner loop, the big ticket items, the cars and AC
replacements, backyard pools and mortgage payments.

I have no idea the scale you are talking about when you say home improvement,
but it can easily be a non-necessity depending upon the condition of the
house. If you bought a house that requires 35% of your income in mortgage
payments AND needs expensive fixups AND you are carrying significant personal
debt, you may have overextended.

That's not the end of the world, provided that your home improvement costs are
efficiently appreciating the value of your house or you are willing to cut on
your other discretionary spending. Appreciating your existing assets is a form
of saving. But biting off more than you can chew is risky.

By living paycheck to paycheck you are running a great risk in the event that
anything happens to your income. At a savings rate of 2-5%, it takes you
anywhere from 7-17 months to build up a single month of mortgage payment
buffer, and that's not including the cost of putting food on the table.

I'm not well versed enough in real-estate to say whether selling your house
and getting something more manageable is the right choice for you. But I can
say, not knowing the composition of your discretionary spending and assuming
zero transaction costs, I would probably downsize if I were in your shoes.

Of course you could always just start making more money, and that is advice
that HN likes to throw out there, but I personally think it's easier to spend
less than to make more, especially in the short run.

~~~
gujk
Make $325k/yr, get finances by parents, and have no dependents. Yeah, that's a
good way to stay afloat. Nice work if you can get it, indeed.

~~~
throwaway21222
It's true, but we would still be saving more than OP if we made $90k, and
that's without the adjustments to our spending that we would no doubt make if
our income fell so much.

------
lotharbot
Very few people in the high salary range have their shit figured out. Your
story is all too common. Just asking for advice puts you ahead of most people.

One common hack is called the "debt snowball"; it's advocated by Dave Ramsey.
The idea is, keep making payments on all of your debts, but channel any extra
money you can into one of your smaller debts. Once it's gone, you get a
psychological boost, and you can redirect everything that was paying for that
debt into another one. So the next debt gets paid down even faster, and the
one after that, even faster.

~~~
anonimo
That is a very costly hack. You should pay off the loans with highest
effective interest rates, period.

~~~
lotharbot
There are really two hacks here.

The first is a human psychology hack -- paying off small loans so you can feel
the results and be motivated to keep at it. You're right, it is costly to
ignore a higher-interest loan while aggressively paying off a lower interest
loan... but it's _much more costly_ to lose your motivation and not pay off
any of the loans. (For someone with the discipline and motivation to pay them
off without this hack, I agree, pay off the highest interest rate first.)

The second hack is the "snowball" idea -- once loan A is paid off, use the
cash flow to pay off loan B, and then use the cash flow from A and B to pay
off loan C. This works no matter which loan you pay off first. As a followup,
once most or all of the debts are paid off, I recommend using some of the
freed-up cash flow to increase savings rate.

------
anonimo
Short answer: the "hack" is to set a monthly budget and stick to it
religiously.

In theory, if your savings account pays 2% and your loans charge 10%, you
should put all your money into paying your debt. On the other hand, unless you
have a very stable job you'd better have savings of at least 6 months worth of
expenses.

You probably don't really _need_ most of your home improvements. Unless you
have serious problems like water leaks, you can always postpone those
improvements to after you've paid your debts.

35% of your _net_ income for mortgage is on the high side (average in US is
about 33% of _gross_ income). But it's probably not too bad for a family of 4
with only 1 income.

[http://money.cnn.com/2005/08/26/pf/expert/ask_expert/index.h...](http://money.cnn.com/2005/08/26/pf/expert/ask_expert/index.htm)

Your main problem might be in those 45% worth of "other" expenses. You need to
break this down into something like:

a) essential recurrent expenses (food, commuting, school-related, etc). These
shouldn't change much from month to month. And assuming your partner can cook,
you shouldn't be spending too much on food.

b) non-essential recurrent expenses (cable, second car gas and maintenance,
gym, etc). Rank those expenses in order of importance and start cutting them
out.

c) non-essential one-off expenses (eating out, trips, buying gadgets, etc).
Only do these if they fit in your budget in that month (or trimester, etc).

------
latch
This varies on a lot of things, especially housing which varies based on
location (as does transportation).

But...

You should have a breakdown of that 45% (you might and you just don't want to
share it, that's fine)..it's the biggest piece of the pie, and it's the most
likely place to optimize.

Also, rather than think in terms of "what % should I save", you should think
of it in terms of how much money you need to retire at the age that you want
to.

You also seem to think of "savings" as putting money aside, which is wrong,
wrong wrong. Do you pay more interest on your credit card or mortgage than you
get from your savings? If so, you'll "save" more by paying those down first
(of course, you need to understand your mortgage to know what you can and
can't pay down).

Personally, I'd find 80% of my money going into housing and "other expenses"
unacceptable. But, I live frugally, I no longer own a car (or the insurance,
or the gas that goes with it), I know how to cook, I don't impulse buy (my
Kindle 3 is going to last me for years), I no longer own a tv/cable.

And I hate to be one of those guys, but I can safely say that giving up a car
and tv have caused huge gains in my productivity, health and happiness.

To answer your specific questions: a - 25%: but, I live in Hong Kong, where
the rent is stupid (but everything else is awesome cheap) b - 0 (CC is
automatically 100% paid every month), moving from owning to renting and giving
up driving cleared me from any loans...happy days. c - 25% on "other
expenses"..which is more of an average due to spikes (like buying a new bed,
moving, getting a new macbook).

------
groaner
My monthly breakdown:

\- $1000 renting a room in my parents' house (utilities and wi-fi included!)

\- $50-100 my contribution to groceries and household purchases

\- $50-100 transportation

\- $10 cell phone (it's prepaid and I'm a recluse who prefers to communicate
online)

\- $100-200 miscellaneous discretionary stuff that I don't really track (e.g.
restaurant meal, a new pair of shoes, a sale on Steam, yet another USB stick,
etc.)

At this rate I socked away about $30k annually into my "I have no idea what to
do with this but maybe someday I'll figure it out" fund. Another half that
amount in pre-tax retirement savings. So far I've only watched the balance
slowly shrink in my brokerage accounts.

I assure you that I do _NOT_ have my shit together, though. You can probably
imagine the quality of life I have when discretionary spending is less than 5%
of budget.

Considering that you have kids and a house to take care of, I can't even begin
to imagine how much of a difference that 45% "other expenses" would make. But
you're really going to have to offer more details before anyone here can make
suggestions on how to possibly trim some fat there.

~~~
citricsquid
what the what, $1,000 per month for a single room? My rent and utilities
combined is only just above that, I'm in the centre of my town with 2
bedrooms... where on earth do you live?

~~~
groaner
It's not that surprising when the house is valued at roughly $1 million. This
is in southern California, where that kind of money doesn't get you a mansion
either.

~~~
theshadow
Still. $1000 to live with the parents? In the LA area you can get a place with
a roommate between $450 - $700 a month, without all the issues or social
stigma of living with the parents. It'd be one thing if you were getting a
sweet deal ($300-$400 a month, everything included) but paying 1k just to live
with the parents seems counter-intuitive.

~~~
groaner
I'm Asian. What social stigma?

I could probably pay less by living elsewhere, but $1000 that stays within the
family > $500 to some landlord with whom I have no connection. Also, I'd miss
out on Mom & Dad's awesome cooking.

~~~
mapster
True. And why not help your parents out with rent payment, while feeling
independent at the same time. kudos (I hate that word, but didn't know what
else to say)

------
caw
0\. Retirement savings - 20% in Roth 401k

A. Mortgage/Rent ~1/3 of residual income + electric + internet. It's more
expensive per foot than what I could get, but I live within walking distance
of work, so no fuel or commuting for work. I can literally leave work and get
home in 5 minutes. I put value on that and the free time it allows me.

B. Credit cards / Personal Loans - $250/mo car loan, pay off CC each month. No
student loans because I worked all throughout college and managed to find a
scholarship or two. I put everything on my credit card and pay it off at the
end of the month. 2% back AMEX FIA retirement card, so I get a 2% discount on
everything I would be buying anyway, and I don't have to figure out point
multipliers and how stores are categorized.

Contrary to most advice here, I have a brand new car. Why is that? I moved
1000 miles away from my friends and family, so in the mean time I have no
support network should I get I have problems. Thus the warranty and free
roadside assistance has value to me. My reliability requirements on the car
were fairly high, so I was looking at 2007+. Once you add in the car loan, I
was easily within reach of the new car. I got 0% financing on the new car, vs
~3% on a used model, and I get really good gas mileage. Now I can keep
meticulous care of my new car and keep all the service records and know
exactly how it's maintained. New cars aren't necessarily a bad purchase, you
just have to keep them longer to amortize the value. My insurance is about
$600 more per year on a 2011 vs the 2001 I had prior, but I'm still under the
magic age of 25 or 26. I keep good coverage though, higher than the state
required limits.

In summary: in a given month, I don't see 20% of my pay, as that's contributed
to a 401k. I pay ~50% of the remainder, split between rent/utils and other
expenses, leaving me with the rest for non-retirement savings.

------
latch
If I could come up with 1 question to ask people in order to find out whether
they save enough or not, it would be:

    
    
       What type of product are you using to save your money?
    

People who answer "a savings account" or "I invest with some guy" probably
aren't saving enough, because they don't understand the fundamentals of
personal finance.

------
sardonicbryan
I save 30-40% of every paycheck (not including 401K), but I live at home and
don't pay any rent (also no loans), have no wife/kids, no mortgage and my work
offers free lunch and dinner.

One thing that helped me save more though, was creating a spreadsheet that I
update every weekday with all of my account balances (through Mint). I have
some formulas built in that basically then calculate when I will be able to
afford a down payment on a home. <http://twitpic.com/7i78rb>

I put both Mint and this spreadsheet on the list of default tabs that get
opened when I open Chrome, and the minute every morning I spend updating it
and seeing the date it spits out really keeps me on top of my spending and
finances.

Translating my current financial picture into a concrete date for a goal also
helps make things more real, and motivates me a lot to save more.

------
josscrowcroft
Oh my god, read "The Millionaire Next Door"

I used to be on the same treadmill - making more money than I could spend but
somehow spending it all - now I make less (since stopping freelancing, oddly
enough), and yet save more.

I put between 10% and 30% of my income into savings - never less than 10% and
sometimes more than 30% (as far as I'm concerned, that 10% doesn't exist
except to be taxed upon - I can't spend it).

Bear in mind I'm in the enviable position of not having a mortgage - but I do
have debts to pay and so it's a constant weigh-up asking myself "is this money
going to make me more by being saved vs. going to debts?"

It sounds like you're covering everything else FIRST, then putting what's left
into savings. How about putting 10% into savings first, then allowing the rest
to be spent on everything else?

This only makes sense if you have plans to invest it wisely.

Read that book!

------
gujk
Why the heck are you saving any cash when you have credit card debt, and how
the heck did you get a mortgage with 50% back-load debt ratio?

You need to cut back on your spending, and with rent our your too-expensive
house or walk away from your mortgage.

------
wickedchicken
"Without a jot of ambition left

I let my nature flow where it will.

 _There are ten days of rice in my bag

And, by the hearth, a bundle of firewood.

Who prattles of illusion or nirvana?_

Forgetting the equal dusts of name and fortune,

Listening to the night rain on the roof of my hut,

I sit at ease, both legs stretched out."

    
    
        Ryokan (1757-1831)

~~~
throwaway21222
On the eleventh day he was probably wishing he had thought about getting some
more rice or conserving what he had. Maybe I am missing the point of this
poem.

------
kamaal
Ok, this is going to be a little big. Firstly before giving you out details on
how I manage my money. Let me first let me tell you I'm an Indian, currently
staying in Bangalore. This is important to understand the economic background
from where I come.

To give you a brief background, I come from a relatively poor backgrounds. And
trust me poor in India translates to very poor in USA. My dad was a cab driver
and mom a teacher at a school. Me and my sister are the only kids parents
have. They slogged their whole life to get us decent education. Throughout my
teenage and childhood, I witnessed first hand how difficult life gets without
money. Many a times we didn't have money even to pay for my school fees. We
used to stay at relatives place in a small room. The whole family in a hall.
We used to get clothes probably once or twice a year. I still remember I
didn't wear shoes until I got my first pay. The first month I had borrowed my
Uncle's shoes. Until even 22, The only clothes I wore were either borrowed or
donated. During my pre university college and engineering, I've survived on
scholarships. I used to get around 2 rupees a day to live on. Given that, I
used to be able to eat my lunch only once a week. That is all could afford. If
there is anybody who knows what hunger is, its me. I've seen first hand, how
it feels to see some one eat stomach full in front of you, while you just look
at them and hope you had gotten that opportunity to eat that meal.

Coming to how I managed my finances and came out of all this.

a. Firstly my dad, got himself a cab of his own. This was a risk we took. He
used to drive nearly 24x7, he got rentals more frequently. More importantly he
was able to get a lot of personal clients who were ready to pay a little more
for the excellent services he offered. One great thing about my parents is
although we live in near hand to mouth conditions. We saved money and invested
like no one. And we used to do that very frequently.

b. Gold savings, Making a routine habit of buying a little gold helped our
family a lot. Over years, Gold prices have gone up real high in India. I
helped us sell of a lot of ornaments we purchased to buy real estate later.
Incremental investments are crucial.

c. Disposing Gold at the right time, to buy real estate not in the city. But
closer to the city. Keep an eye on the real estate market. There are always
opportunities to buy cheap properties, which are not good now but will be good
in the future. In fact the whole concept of an investment is to work towards a
future prospect, not current.

d. Get yourself a good savings plan. A penny saved is a penny gained. Know how
much is sufficient for you X years from now and plan accordingly.

e. Learn to live content and frugal. Differentiate between needs and wants.
You don't need to keep changing the iPhone model every year. That's waste of
money. Don't fall into mindless consumerism. Especially buy a get 2a free
stuff kind of things. Learn how you can cook at home, avoid hotel meals. They
are neither healthy nor economical. Occasional family outing is Ok, but
frequent ones spoil you. Don't fall for show off, know what you need and stick
to it. People's perception don't matter.

f. I don't have/take any loans, credit cards, dues as a life principle.
Interests are the most dangerous thing. They make your life miserable. Get out
of the debt as soon as you can and don't go into it ever again.

g. Don't buy stuff you can't afford.

h. Get your self endowment insurance policy. The things that allows you small
investment over years. Covers you for life, but yet gives you a huge sum of
amount at some period. This also takes care of your retirement planning.

By Gods grace,I am in good conditions now. By merely learning how to manage my
monthly salary well. Thanks to my dad for teaching me this. Small expenses,
savings matter a lot. Over time they get multiplied. Its in your hand to
manage your money.

If you earn 100 rupees, sure enjoy 40 rupees. Save 30 rupees and invest 30
rupees. Incremental savings and investments matter a lot. This is the most
important thing you must remember. Don't bother about what others are thinking
or doing. You plan for your future. No one is going to help you when you are
in trouble. So save and invest whatever you have.

Above all work hard, work your life off. Going far requires making sacrifices
and undergoing pain. Show up on time, do the right thing and a little extra
than others. Take the occasional risk and make right decisions.

If you can do all this 12-16 hours a day. Success is inevitable. Its karma.
You will be ahead of at least 95% of the crowd.

~~~
flacon
Thanks for sharing this inspiring story. Having been to India previously, I
can imagine somewhat what you and your parents have struggled to
overcome/achieve.

"They slogged their whole life to get us decent education"

I bet that is probably an understatement from what I know of hard-working
Indian people.

------
trustfundbaby
Savings are huge and I think you should be putting more away each month.
Liquidity is underrated.

Do this, stash 5% more of your money in your savings every month and try to
live off the rest, keep doing that till you repeatedly have to go into your
savings to finish out the month and you'll know how much you can absolutely
not do without.

Also try not to use Credit cards. I haven't had one for years and I only spent
what I had, now that I have one and pay the balance off each month (trying to
rebuild my credit) I find that I spend about 20% more each month than I have
to simply because I know I can cover it.

Hope it this helps.

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kbob
Retiring at 35 is an unrealistic goal unless you either inherited a bank or
want to live under a bridge. Since you have one income and two kids, saving
3-5% is pretty good.

The easiest way to save money is to have it deducted from your paycheck and
routed into a tax-advantaged account (e.g., 401(k)). There's no temptation to
spend the money since you never see it. Your savings grow faster since the
interest is not taxed. And your employer may match your contributions, which
is free money.

If you're in an early-stage startup, that doesn't apply, of course.

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ww520
Housing cost is one of the most expensive expenses. Living several rungs down
in housing than you can afford generates lots of saving. In your case,
mortgage is already at 35%; tax, insurance, and maintenance are probably
another 10% to 15%. That's a big chunk of your expenses.

45% on others look a lot. Can you break it up? Hope you don't have expensive
cellphone plans or cable or etc.

Also supporting 3 other people with one income can be tight. Children are
expensive to raise. See if your SO can work, even parttime. That would help
out a lot.

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chubs
My 'hack', as you put it, is to work on iphone apps on my laptop whilst on the
train (2hrs/day). Makes the trip go faster, and supplements my monthly income
by 50% at this stage.

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jfruh
One hack that I definitely find useful for saving money is to create different
savings accounts for different purposes and putting a set amount in each on
each month. For instance, I have a vacation savings account that I put $300
into every month; it becomes a repository of of cash I can use when I travel,
and I can spend it in big bursts when I do. If that $300 month just sat there
in my ordinary savings account, I'd probably find something else to spend it
on.

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corny
Here's my system:

As a background, I have no debt right now but I did also use this system when
I did. I use my credit card for everything I can (to earn points) and pay it
off every month. I have several savings accounts with ING Direct that I use
for various large regular or upcoming expenses, plus an emergency account.

I have a hard time budgeting so rather than keep track of all my purchases, I
just keep track of my accounts. I built a simple app (but you could probably
use Mint.com or a spreadsheet) that displays the balance of each account.
Accounts include: savings accounts, credit card, and retirement account. When
I had a student loan that was listed here too. I rent but if I had a mortgage
I would include the amount owing as a loan account and the estimated equity in
the home as a "capital" account. All of these balances are totalled up and I
can see my overall net worth (it's rough). When looking at this view, my goal
is ultimately to raise the overall interest earned across all accounts.

I also have a spreadsheet which acts as a checklist for my savings goals. A
prioritized list of goals runs down the side and each column is a month. Every
month I try to check off each goal. They are prioritized like so: * Credit
Card (balance = zero at least once) * Chequing Acct. (Min. balance = $x) *
Taxes (x% of revenue set aside) * Retirement ($x set aside) * Vacation ($x set
aside) * Downpayment ($x set aside until I reach $x) * New Car ($x set aside
until I reach $x)

I have an emergency account, but if I didn't it would be near the top of this
list, probably just before retirement.

Any large, non-necessary, one-time purchase is considered months in advance
and added to the bottom of this checklist. Only when I've enough money saved
will I purchase it. Them's the breaks.

This checklist is easier than a regular budget. As long as my goals are
realistic and I'm completing them, I have nothing else to worry about. If I
regularly have trouble completing goals I can adjust the goals and/or my
spending. I check in with these two documents about once a week.

In terms of specific advice for your situation I would say... focus on
eliminating your credit card debt before all other savings or debts. When
that's done, make minimum payments on your student loan and build up a decent
emergency fund. And only when that's done, split your payments between student
loan, retirement savings, and other savings.

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Locke1689
Any money put into savings beyond petty cash for emergency situations is money
lost if you have debts. The interest on your credit card debt is going to be
at least an order of magnitude greater than any interest you're going to get
on savings or investments. Pay off your debt first, save later.

The real answer is that you need to break down what is in that 45% because
that's where "non-essentials" are going to be.

~~~
jfruh
Well, there's debt and there's debt. Right now my wife and I have three major
debts: mortgage (4%), student loans (4.5%), HELOC (1.75%) -- and those rates
are all effectively lower because the interest is tax deductable. When you're
talking those kinds of interest rates, I don't think it's unreasonable at all
to put money into retirement accounts (especially if those too are tax
advantaged and/or if your employer matches).

But yes, if you have any kind of credit card debt, you're probably paying 10%
or more on that, and you should be paying that down (and not adding anything
new!) with money you'd otherwise earmark for savings.

~~~
ww520
Actually paying down the mortgage would be sensible. It is a guaranteed return
risk-free investment. Mortgage rates are expensive when compared to
comparative near risk-free investment; Treasure notes, CD, money market are in
sub-1% range. Comparing mortgage paydown (risk-free) to stock (higher risk)
are not a fair comparison.

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Fliko
I haven't had to budget anything hardcore yet just food, tuition, toiletries,
and entertainment but it might be better if you find out what you can be
frugal about.

An example would be that I pretty much live off a diet of beans, rice,
vegetables with the occasional pizza thrown in and it helps me save a lot of
money in a given week. This isn't really hard for me though because I love
beans, rice, and vegetables.

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nicholasreed
I am notoriously bad about saving money. I spend about 15% on rent, 15% on
food (mostly eat out), 10% on entertainment (netflix, xbox, etc.) , 20% on
friends/family, and then "invest" the rest in different projects (outsourcing,
marketing, books, etc.). In any given month I maybe manage carry across
200-300 dollars.

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ww520
Here's a long thread on household spending habits. The guy makes 250K but has
no saving. Interesting to see both sides. See if you can identify some of the
problems. <http://www.fatwallet.com/forums/finance/1133777/>

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phamilton
My wife and I are in school still, have a newborn, and only I work part time.

Rent is 20%, utilities/cell phone 5%, food is 10%, entertainment is 5%,
charitable donations 10%, clothes/shopping is < 5%, tuition and health
insurance average to 15%, and we save the last 25% each month.

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darkxanthos
I save about 20% per paycheck and next year I plan to up it to 30%.

I rent, my girlfriend pays 1/3 of that I pay 2/3. 1.5% to student loan (my
only debt). I spend a lot eating out and I like my electronics but my savings
is pretty good so I shrug. :)

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pathik
I spend around 10% on rent, 10% on food, 5% on booze, 10% on gadgets, 5% on
other expenses and another 10% on very high risk investments. I have no debt
and I'm single, so I save almost 50% each month. PS: I live in India.

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xarien
The spouse and I are both a tad into 6 figures

20% housing (includes mortgage, insurance etc)

2% Vehicles (both paid for, this is for gas and insurance)

5% student loans

10% Child Care

5% medical

5% gifts to parents

25% living expenses

6% 401k

~22% into non-retirement investments

Will be cutting back on quite a few of these categories come 2012 as we fall
back to 1 salary.

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loeg
Uh, I spend about 5% on rent, another 5-6% on drugs, and go out for food
occasionally. No other expenses. I don't, um, save, though, so you might want
to listen to someone else.

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analyst74
I don't get this thing called early retirement. You only have one life, stop
worrying and start living!

Let me ask you this, if you do save enough and can retire at 35, what would
you do then?

~~~
latch
I quit my job ~4 months ago (because I hated it, stupid big bank)...trust me,
it's freaking awesome. I'll go back to work soonish, but not for lack of
things to do.

Even though I love to code/work, your idea to "stop worrying and start living"
and "why retire at 35" are a juxtaposition born of naivety (no offense)

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brc
I'm not going to be able to calculate the figures easily for myself, but they
are out of whack at the moment for a variety of reasons. In the past I have
managed to have periods where I saved 40% of my income, and currently I'm
probably going backwards by about 10% per year due to an expense/income
disparity. Principally for me this is mortgage related but not yet enough of a
problem to go nuclear and dump the house.

First thing to thank yourself for is for even recognising that you have an
issue. Most people live in denial right up until they are on welfare of some
sort at an old age.

Second thing to realise is that expenditure always rises to meet income. There
would have been a time in your (maybe recent) past when you lived on less
income, and were probably happy enough. So the solution is rarely to try and
increase your income. It's to get control of your spending.

So here's my tips, although at the moment it's a case of do as I say, not as I
do.

You've got to prioritise your spending. I've always said overpaying in rent is
OK if it can relieve pressures in other parts. Ie, living inner city and not
having a car, or saving on long public transport commutes. But make sure you
can justify the big expenses like rent or mortgage and be realistic.

You've got to pay yourself first. This means taking money out of your income
and automatically place it into some type of savings vehicle which you cannot
access easily. An online savings account with no attached card is a good
start.

You've got to budget. Yes, everyone pays lip service to a budget but hardly
anyone does it. You should be tracking your expenses in something like quicken
or similar, and know where your money goes. Pay a bookkeeper if you must, they
aren't that expensive. Make a budget and stick to it.

Dump the consumer debt. If you can control your credit card urges and pay it
off each month, have one. But if you ever carry a balance for more than 60
days, immediately cut up your card and get a debit visa instead. If you have
purchased new or near-new cars, sell them and buy a good used vehicle, or
better still, don't replace it if you can get away with it (see point 1).
Don't sign up for store cards or any other types of credit.

Be prepared to sell stuff. This is two-pronged - first you can sell stuff
while it still has some value (ie, 1 year old electronics, kid stuff) which
keeps a little income trickling in. The second part is that it stops you
accumulating junk which occupies both mind and property. If you look at the
average overstuffed garage or junk room and calculate the per-sq foot value of
the stored junk you can realise you're paying thousands per year for floor
space to hang onto a bunch of stuff you probably will never use again. Get rid
of stuff you're not using. You can always buy it back if you need it in the
future.

Tempted by new consumer stuff? If you want to purchase something, announce to
your significant other you'll purchase it in 30 days. If you can still justify
it in 30 days time, by all means purchase - if you can't get the same item
pre-loved on ebay or craiglist.

Don't buy new cars, boats, RVs or anything else big and shiny. Just don't. If
you're rich, buy as many as you want. This is even worse if you use finance to
buy a fast-depreciating asset. Don't buy, and if you must, pay cash.

Getting rich is usually a payoff from some big event like an IPO, an
ineritance, a successful project or a windfall. However, getting comfortably
well off is a gradual process of spending less than you earn, and investing
the surplus in worthwhile investments. You should take care of the comfort
part before attempting to get rich, so failure in the latter doesn't affect
the former.

While you have kids I think the most realistic amount you can expect to
save/invest is about 10%. If anyone reading this is younger and doesn't have
kids, you should be in the 20-30% range. As the kids get older you should
creep back up into the 20% range - separate from college funds. If this means
kids are stacked two-to-a-room and don't have the latest widgets, well, they
can learn to live with it.

This stuff is very basic and has been known since the dawn of commerce in
ancient Mesopotamia. There is no tricks - just simple discipline and wanting
the end result more than the immediate gratification. It's the same for any
valuable human endeavour, really. People convince themselves that somehow
their ship will come in, so they don't have to worry about living within their
means. Self delusion in this respect is the most dangerous of all attitudes.
Time is the most important commodity in accumulating wealth, and it's the
thing people seem to place the least value in.

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mapster
You can only hack the budget so far. then you have to hack your income. have
you explored the millions of possibilities?

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cperciva
I put into savings whatever I have left at the end of the month. I don't worry
about it too much.

Tarsnap is my retirement savings plan.

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redact207
I'm working abroad in Asia, no wife or kids, but hold an investment property
back home.

Rent - 14%

Mortgage - 12%

Expenses - 11%

Tax - 6%

Entertainment - 10-25% (staying in drinking vs going out travelling)

Savings - 32-47%

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superthrowaway
Income is ~50k a year running my own business.

28% Rent / Utilities

7% Groceries

5% coffeeshops and restaurants

2% random socializing(theaters etc..)

10% misc.

Save the rest of it.

~~~
latch
Assuming you live in a high-tax country, you get some pretty nice tax
deductions as a business owner though, right?

