Monday, February 18, 2013

Budget Update

Image courtesy of Wexman Trading on Etsy

As I've discussed before, we've been living on a very tight budget since the middle of August. We try to live within Matt's salary, so we can save my entire part-time salary every month. Right now, our savings are going toward 1) the downpayment + closing costs on our permanent loan on the house we're building 2) midwife expenses 3) appliances/fence/furniture for our new home 4) Henry's tuition for one more year of private Montessori school before Austin's first public Montessori school opens (fingers crossed!) and 5) my three months of unpaid maternity leave before I hopefully start working part-time again (for three more months) and then full-time. 

Once October comes (if everything goes well with the charter school and I'm able to create a job for myself), our budget should get a lot less tight. The monthly mortgage payment on our new house (principle + interest) will be about $125 less than our current rent in one of the least expensive parts of Austin. We'll be able to start adding to our retirement accounts again, saving for our boys' college funds, adding things to our house, and going on vacation. 

The way we have been saving money is really pretty simple. Here are some of our strategies:
  • We keep our monthly bills to a minimum. We shopped around for the lowest car insurance possible, we shopped around for the cheapest internet plan, and we don't have cable (just Netflix for about $8 a month).
  • We limit the number of times we eat out each week. We officially decreased our eating out frequency from three times to two times per week, but we've also been really strict with ourselves about not eating out for breakfast or lunch. If we don't have leftovers for lunch, we have to forage in the pantry or spend our personal allowances to eat out. If we want to get breakfast tacos instead of eating food we have at home or go get dessert, we again use our personal allowances. Being forced to spend our personal allowances in this way makes us much more conscious about what we're spending and why.
  • We spend virtually nothing on extraneous things. We aren't buying new clothes right now (although I did have to buy two pairs of maternity pants), we never swing by places like Starbucks (if Matt does, he uses his personal allowance), we avoid places like coffee shops where we feel obligated to spend money, we only get books from the library, and we don't go to Target because we know it will tempt us into buying more and more things that we feel like we can't live without.
  • We only buy food we're actually going to eat. We still spend a lot of money buying organic groceries every week, but we plan out all of our meals, so we only buy things that we're actually going to use. Since we only eat out on Friday and Saturday night, all of our food gets used every week and we rarely ever have to compost or throw away something. We also try to avoid buying the nice-to-have items that aren't really necessary (like $5 goat cheese for our salads). 
At first, our restrictive budget caused a lot of fights, but now we're really used to it. In fact, I hope we keep up many aspects of it, even when our income stream strengthens. For example, I'd like to keep our eating out to a minimum. We'll definitely set up automatic transfers into various savings accounts (i.e., retirement, college savings, vacation, etc.) so we don't just see a lot of extra money sitting around in our bank account and get tempted to spend it. 

The other benefit of setting up automatic transfers is that we can save up for things before spending money on them. With vacations, for example, we might decide to set aside $200 a month. We can let that amount build over time and then splurge on a big trip, or we can use it for smaller trips. Either way, saving it and then spending it once we have it will allow us to be really conscious about how much we spend on vacations. If we're tempted to spend money that's not already in the account, we'll have to ask ourselves, "We're already spending $200/month on vacations. Do we really want to spend more than that?" 

The same goes for home beautification. There's a lot of stuff we want to add to our house (a pool, a hobby room in the backyard, landscaping, furniture for the deck, etc.). If we set aside a certain amount every month that can go toward those kinds of things, it will help us rein in our spending and force us to prioritize and save up before spending.

I love thinking about this stuff. I find that it's so easy to spend mindlessly if I'm not conscious about it, and spending frivolously makes me feel like we have a lot less money that we actually do. I like being able to buy things; I just want to do it consciously. I'm excited to design every inch of our house with purpose and aesthetic intention. And I'm also excited to start going on vacation again!

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Yael said...

I may have missed a previous post on the topic, but are you only taking a three month leave with the new baby? I am in no way judging, I am just truly interested. As a mom of two (2.5 yrs and 10 mo), I find myself thinking a lot about giving equal opportunities to both children, without at the same time renouncing to my and my husband's plans and dreams.

Sara E. Cotner said...

Hi, Yael!

I started to type out a response, but I realized it should be a whole post! I promise a lengthy explanation will come in the next couple weeks.

Thanks in advance for your patience! Have a great Monday...


Annalisa said...

My husband and I have adopted a new philosophy on budgeting - rather than cut out or say no, we create income. We have our money always working for us through investments (long and short term, stocks and options, taking out a 2% car loan vs. paying cash that can yield 8-20%). We also flip stuff online or craigslist (all that baby gear you'll never re-use -- sell it to create income). Those are small, easy ways. To me it seems crazy to fight over the $20 difference between cable and netflix. I do agree people should live consciously and budget but cutting out little stuff always seems insignificant if you are all ready aware of your purchases. I think making lifestyle choices is really part of living within a budget but telling people to check out books from the library to save money seems so useless. For me, I pay $1 to reserve a library book, drive 10 mi. round trip to pick it up ($2 in gas) and then 10 mi. round trip to return it (another $2). $5 later, I could've bought the $12 book from amazon and had it delivered 2 days later (thanks amazon prime). When I am done reading it, I sell it back to the amazon marketplace (20% commission) resulting in about $9 in my pocket. I actually saved money buying a new book. I think its operating smarter, not harder. There's a ton of great books that I've read that really inspired our lifestyle -- dave ramsey was great for eliminating $110K in student loans in 3 yrs on a $60K income a few years ago, Suze Orman can be helpful for some, the 4 hour work week, $100 start up, etc.

Nora said...
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