Entries Tagged 'Saving' ↓

My husband loves kids. Recently his best man at our wedding had a baby girl and my husband loves to hold her and look at her adoringly. (I’m jealous!) He did this at church and a woman came up to me and said, “your husband is so cute! He is just fascinated by the baby! When are you having one?”

Obviously, the cheapest thing to do is to have no kids at all, but we both agreed that we would like to have at least one kid. Personally, I believe that having kids earlier in life saves money even though I have read advice that said people should wait to have kids. Here are my reasons as to why I think having kids sooner is financially beneficial to a couple.

1. Your income is lower when you’re young – When you are young or just starting out in your career your income is probably not at the peak. So when you have less money to spend, you will probably not spoil the kid as much as parents who have a lot of money. Additionally, if you have to give up some working days to take care of the kid, the amount you lose is small if you don’t earn all that much to begin with.

2. Inflation – Expenses for food and education are increasing at a much higher rate than the base inflation and wage increases. For example, my college tuition doubled in the 4 years I attended, and food prices are rising at a very high clip lately. If we have a kid earlier, we would probably have to spend less on these things.

3. Physical health and limitations – I have read a lot of stories about women who waited to have kids only to find that it is much harder to get pregnant. This results in fertility treatments that produce unwanted multiple births and other complications. It is also a lot easier for younger women to recover from pregnancy and child bearing so I rather get it over with while I am young. Fertility treatments are expensive, and so are unexpected multiple births.

4. Energy – This is related to physical health. While I am still pretty young I have the energy to take care of the kid and handle a job. From what I have seen, young parents seem to handle the sleepless nights a lot better. I think this abundance of energy we have when we are young is helpful in balancing a career and children. I think if you are less phased at work by your kids, then your potential for career advancement is better.

5. Empty nest would come at a younger age – My mother in law pretty much retired early when she was a little bit over 45 and both of her children were done with college. She had them fairly early on and now she travels all over the world with her husband. Knowing that your children are already adults at a young age really brings peace of mind during retirement. Additionally, you no longer have to financially support them so your retirement expenses are lowered.

Anyway, most people decide to have kids later in life to save more money and advance their careers, but I think if you really want kids and you can safely afford having a kid then earlier is better. My husband doesn’t think I am ready to be a mom mentally, but one of my coworkers said to me, “No one is ever ready to be a parent!” I think that is really true, and I think we will be just fine if we have a kid within the next couple years.

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Every time I go visit my parents, my mom finds about twenty ways to call me fat and tell me to stop eating. Of course, she also did the same to my aunt during a dinner party so I don’t really feel singled out. Well, I guess in the past three years I did gain a few (25) pounds so now I am slightly overweight for my height. I am still a size 2, but a lot of the dresses I wore during college and high school do not fit anymore. The problem with the fat is that it all settled on my tummy and thighs and not on my boobs and butt. Anyway, the hubby recently gave me an incentive to lose some weight. Basically he said if I lose about 15 pounds, he will cut his entertainment budget to 1% of our income. Currently it is at 2% so a 1% cut is quite huge and could build up to thousands of dollars over the years.

On one hand I know that losing some weight would be great for my health and my family really cares about me, but on the other hand I really love to eat. In the long run being fit will probably save me money on health care but my lifestyle is so sedentary that I find no motivation or desire to exercise. Anyway, I am making an effort now to exercise more so I can still eat what I like to eat. I purchased the WiiFit on Friday and today I went to hike Mt. Tamalpais with the hubby and the parents. I only got to the West Point Inn before my left leg was filled with pain. Along the entire trail my parents made fun of me being the last one in the line as I plodded up the hills while huffing and puffing. My dad laughed at my slow march and then showed off his muscles to me and my hubby. He said, “you’re less than half my age and you can’t climb this? COME ON!” Then he loudly sang some Chinese song horribly out of tune and went about a mile ahead of me. On the way back I fell on my butt two times because the trail was steep and slippery. The hubby and I clung on each other for support and made it back to the car. As a reward, we had lunch at a restaurant in Sausalito called Spinnaker which had a wonderful view of the bay. That lunch probably undid all the calories I lost from the hike. Finally, when I got home I found a blister on my big toe that was as big as my little toe. Today’s harrowing experience showed me that I am definitely a lot less fit than my college years since in 2005 I hiked a much longer trail without that many problems.

Hopefully getting the WiiFit will help me organize my exercise routine. The hubby said he will do it with me and maybe that will motivate me a bit more. Though at work my coworker laughed at the idea of the WiiFit. He said, “you know you could just go outside and run instead of holding a little white remote and run in place!” I guess that is true, but I really wouldn’t jog outside when it’s completely dark. I am pretty inspired by this guy’s accomplishment in losing about 10 lbs in 7 weeks with the WiiFit, but I don’t know how I would do and how long I keep up with the routine. However, the hubby’s incentive of cutting down his entertainment budget aligns the goal of losing weight with saving money, and perhaps that’s enough motivation for me to keep at it. We will see how this goes and I will report on whether or not this works.

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I don’t write very detailed numbers concerning my personal finances on this blog even though it is a personal finance blog. I always write some estimates and approximations and also things that have happened in the past. That seems a bit weird since I sort of advocated revealing salary information and being transparent about personal finance. I am actually really open with my close friends about my personal finances, but I do feel weird about revealing exact numerical details to the world. I also don’t keep a networth graph here like many other PF bloggers because I feel that is akin to keeping score with money. The hubby also doesn’t like to give out too much information. Anyway, today I decided to satisfy some personal finance voyeurs by posting our savings and expenses in terms of their percentages of our gross income. I took most of the numbers from our current paychecks, and some numbers are averages of bigger expenses.

Taxes

Payroll taxes: 20.16% - This includes Federal and California State Income taxes, Social Security and Medicare Taxes, and the CA SDI Tax. The total may seem a bit low because the income taxes are only taxed off our income after our fairly significant 401k deduction. The income taxes are also tiered, so only a portion of our money is taxed at the highest brackets. Though I am pretty sure we may owe some more taxes this year because I exercised some incentive stock options at the beginning of the year and we may trigger the AMT.

Living Expenses:

Rent: 12.26% – We have been living here for less than a year, and when our lease is up in July the rent might go up, but we don’t think it would be too egregious because our landlord is not some huge corporation and we’re taking care of his apartment. We really do enjoy living here.

Car Insurance :1.71% – The hubby just recently got a rate reduction for being a good driver. It took about three phone calls to the insurance company but those phone calls saved us $400 per 6 months term so I am pretty happy about that.

Car maintenance : 1.08% – This is an monthly average of the amount of money we spent on maintaining our cars in the past 9 months or so. We actually spend big chunks of money at once. For example, my last car maintenance was a bit over $1000, but this happens rarely so I averaged it out.

Utilities: 1.1% – The main utilities we pay include cable internet, the hubby’s cellphone, and electricity.

Food: 4.69% – I feel that we spend quite a bit on food every month, but actually sometimes eating out is cheaper than cooking. For example, making a couple sandwiches at home actually costs a lot because deli meats and bread are getting expensive. A lot of the times the hubby and I just buy one dish and split it because restaurants give too much food anyway. There is a really good Thai place nearby so one time we just bought one curry dish for $10 and then cooked rice at home and stuffed ourselves.

Gas: 2.52% – We have been doing good at saving gas lately by driving slower.

Entertainment: 1.1% – As it was laid out in The Baglady Budget, we have a 2% ceiling on entertainment, but actually we never spend that much. On average we have spent about 1.1% per month, and that’s why the hubby is running a surplus that he wants to use on a computer in a few months.

Donations: around 6.5 to 8% – We upped our donations a bit this year and we’re donating more than before. The percentage seems a bit small when it is based off our gross income. In light of the recent disasters in Burma and China we also added a few special donations this and last month.

Other: 0.7% – This category includes things like gifts. It seems that there is always a birthday or wedding around the corner. The hubby has a gift account for such expenses.

Total expenses inventory: ~31.61% of gross income

Savings:

401k: 17% – We both contribute 17% of our paychecks into our company 401k plans. The hubby was pleasantly surprised when he bumped his contributions this year from 10% and 17% and barely noticed a dip in his take home pay. The reason is that his taxes were reduced accordingly.

529 plan: 0.72% – I have a 529 plan open with Fidelity for our future child(ren). Right now we are putting very little into it every month.

The rest: 31.21% – The rest of the savings currently is going into money market funds in our Vanguard joint account. I also funded our Roth IRAs for last year with our savings. I’m not sure if we’ll qualify for Roth IRA again this year since the hubby may be getting a raise soon, but we’ll see. This money is also our emergency fund and house down payment savings. It is growing quite a bit and I may buy some more mutual funds with it once it gets past 25% of our entire portfolio.

Total savings: ~48.2% of gross income

I hope we can still save this much when we have kids, but I think we can afford to spend 15% of our income on a kid and still manage to save a good amount for the future. It is also good that we are able to essentially live on one income because this means we don’t have to worry if one of us loses employment. Anyway, it was fun to lay this out so I could see the flow of my money clearly, and I hope someone’s curiosity has been satisfied.

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Since the hubby and I do not have any debt, we do not know the stress of debt, but there is definitely stress in saving money. First, you have to be vigilant about deals and sales when you want something.  Then you make sure you use your coupons. You also do things like budgeting to make sure that you have money to save.  Then after you save your money you have to figure out how to allocate it and manage it so you don’t lose what you worked for to inflation and other larger forces. Sometimes I do find managing our growing portfolio to be a pain in the butt.  One time my hubby laughed at me when I groaned at the dropping interest rate on our accounts and he jokingly said that he used to manage his money by spending it and I should do the same and cut out all this stress.  I glared at him a bit and told him that the interest rate on his entertainment fund as prescribed by The Baglady Budget also dropped.  At that moment he screamed in a dramatic fashion, “Nooooooooooooooooo! SCREW YOU FEDERAL RESERVE! YOU STOLE my game money!”

Surprisingly after eight months of marriage, the hubby and I almost never fought about money issues even though he is more of a spender.  I think one reason that we do not fight about money is that we have no debt.  From what I have read in the news and heard from friends, the stress of debt is very draining and even debilitating. One woman wrote me saying that she feels like she is always behind on the bills and she hates that feeling because it is like she doesn’t have control over her own life.  Unfortunately sometimes it creates a vicious cycle because research showed that when we are sad we tend to spend more money than usual. When I watched the movie Maxed Out, I was shocked that people actually killed themselves over credit card debt. I can’t say I know how that feels,but I imagine it is extreme psychological torture for people to take such extreme measures.

I think will take the stress of saving money over the stress of debt any time of the day. I don’t mind that the hubby and others laugh at my Ferengi ways because I find it funny, too. I have also learned a lot about the world and the economy through my research into how to manage my money.  In the end, the work I put into saving money gives me a sense of security and well being. Every month I pay our bills and then add up the amounts in our various portfolios and give the hubby a short net worth report. It’s always good to know that we have a financial cushion to fall back on and we are  ahead of the bills, and I truly believe that it is good for our marriage.

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A while ago I wrote an article on Wise Bread titled Five Ways to Squeeze Savings from Your Workplace. One of the commenters wrote that she actually collects cans and bottles at work and then turn them in at the recycling center for a little bit of money. I thought that was pretty funny, but I do drink quite a few bottled waters and soft drinks at work. I also bring home a few drinks that the hubby likes so we discard quite a few bottles and cans each week. Lately I have been feeling guilty about throwing those bottles and cans away. Finally, last week I sort of broke down and brought a plastic bag to work and collected the bottles and cans I used. On Friday I took the dozen or so cans and bottle I collected at work and today I sold them all at the recycling center along with a pile of other bottles and cans I collected outside on the patio. I got enough money to buy a rotisserie chicken, and I was pretty happy about it.

My hubby mocked me a bit and said, “Wow! Months of saving and all you got was a chicken!” I was still pretty proud of it because I got the chicken by recycling! If I were a bit more systematic about my recycling I could earn a few bucks a week and that could cover quite a few expenses. Here’s what I could possibly gain by turning in those bottles and cans.

Rotisserie chicken or burrito – $5 to $7 – Required recycling: 3 to 6 cans a day for a month (This is pretty easy to do between the two of us).

Laundry money - $10 to $15 a month – Required recycling: 6 to 10 cans a day (Sometimes I do drink 2 to 3 of the small bottled orange juices at work so this amount of recycling is definitely reachable).

Internet bill - $36 a month – Required recycling: 20 to 25 cans/bottles a day (This would require collecting other people’s bottles and cans but it is feasible.)

Gas money for my car – $100 a month – Required recycling: 60 to 100 cans a day (Okay this one probably requires me to be a full time dumpster diver so I probably won’t do it).

Now I have to admit that my mom is probably going to read this article and call me and say, “don’t be so damn cheap! You don’t need to be a real bag lady!” However, I think I will stick to turning in at least the bottles and cans my hubby and I produce everyday. A chicken or burrito every month for recycling waste is still a pretty good incentive to me!

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