Tuesday, April 9, 2013

Yet Another Budget Update

Image courtesy Emily Henderson's blog

The financial discussions (and--let's be honest--occasional shouting matches) continue around these parts. To catch up those of you who have joined us recently, Matt and I have a lot going on right now that impacts our finances (fortunately, it's all by choice):
  • I took a year off to stay home with Henry after his birth from 2011-12. I continued with side projects that brought in additional income (I published a book, did a couple consulting jobs for schools, sold our house for a profit without using a realtor, and ran several Purposeful Conception courses), but I still brought in considerably less than when I was working full-time.
  • For the past year, I've only been working part-time, so that I can volunteer the rest of my time to pursue my passion of starting Austin's first public Montessori school (and support our family by picking up Henry every day from school at 2:45pm).
  • We choose to send Henry to an expensive Montessori daycare because the philosophy resonates with Matt and me, and we both believe that the early years are critical for laying the foundation of Henry's brain development and future personality.
  • We're preparing to have another baby at the end of June.
  • On top of all this, we are building a house. Although our monthly mortgage payments will be less than what we currently pay for rent, we've had to save up a significant amount in order to buy the land, close on the construction loan, and gear up to close on the permanent loan. 
I know; it's crazy. 

But, honestly, for the most part, it feels really, really good to be putting all of this in place right now. 

The times when it feels the worst are when we have to sacrifice things that we want right now for all the things that we want in the future. We have seriously cut back our spending (for the past seven months--it feels like so much longer!) to live within Matt's income in order to bank my entire part-time income. We've cut way back on eating out, going on vacation, spending money on hobbies, going on date nights, purchasing clothes, etc. 

(As a side note, I know our story doesn't sound like much of a sacrifice for anyone who has been laid off or is searching for a job or can't work due to health concerns, etc. It's just felt like a sacrifice to us compared to how much financial freedom we had when we were both working full-time without paying for daycare and without saving for a house.)

The shouting matches usually come when Matt wants to spend money on something, and I remind him that x, y, or z is not in our current budget. He gets mad and then I get mad because it makes me feel like I'm the bad guy, even though I'm just reminding him of the budget we worked to set for ourselves. I get mad that I have to be the enforcer all the time, and I say things like, "We can't spend money on x, y, and z and build a house, so if you really wanted x, y, and z, then you never should have agreed to building the house." 

Really, he's mad at the fact that we can't have x, y, and z in the immediate and the house in the future.

Anyway, it's definitely been a hard process for our family. I try to stay focused on the end result. Even though it's a bad time for our family to be moving forward with this kind of financial investment, it makes a ton of sense from the perspective of what's going on in the U.S. economy, especially in Austin. We bought our land right before the market really took off again (we bought it for more than $30,000 less than the current market value). Construction prices have started to steeply increase, and they're definitely only going to get worse from here. The housing market in Austin is booming; and supply is scarce. Meanwhile, interest rates are amazingly low, which will allow us to lock in a surprisingly low monthly payment for the next 30 years.

We managed to clear the major hurdle of saving up for the downpayment and closing costs on our permanent loan. We had also started building up other savings accounts, such as the one set aside for appliances and furniture. Unfortunately, our tax bill just wiped out about half of that particular savings account. I'm trying to stay focused on the fact that half of it is still there...

Now is the time to whip out the detailed Excel sheets. I started one to predict our expenses for my 3-month maternity leave (particularly Henry's daycare for the summer, any gear we might need for the new baby, Henry's tuition payments once school starts in August, and any babysitting we'll need to cover professional obligations that pop up). 

I started another tab to predict our expenditures for the things we need/want to get right away: refrigerator, washer/dryer, stove, dishwasher, bed, couch, living room rug, bar stools, and dining room table. The total costs gets summed at the bottom, and then I subtract the amount of predicted revenue we'll be able to generate between now and then. 

As we buy things on the list, I change the predicted price to the actual price and watch the difference between our expenditures and revenues change. For example, I had budgeted $500 for dining room chairs but ended up spending $400 for eight of these. When I changed the amount from $500 to $400, I watched the difference between predicted revenues and expenditures change for the better. I look forward to waiting for appliance sales and reading about how to save even more money on big purchases. This kind of system makes the relationship between splurging and saving very clear. For example, if we save money by going with mid-range kitchen appliances, then we will be more able to splurge on a larger washing machine (which will increase our quality of life by reducing the amount of time we spend doing laundry). If we save money on inexpensive furniture (e.g., a couch, bed, and mattress from IKEA), then we might be able to splurge on a hand-crafted dining room table from a local artisan (maybe?). 

If we're going to pull off our crazy financial goals, we're going to have to stick to the rigidity of the Excel sheets until the end of October (when I--fingers crossed--start part-time work again, hopefully at a higher rate than I earn now).

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rebecca leigh said...

I don't usually comment, but I had a couple suggestions...

--It seems like you like a modern look, so it might be fairly easy for you to build some of your furniture items on your own (think basic rectangles). You could build a platform bed with a circular saw, drill, and a Kreg Jig (if you haven't heard of it, go to ana-white.com to see how she uses it and look at some of her plans while you're at it). Things might end up being comparable in price to Ikea, but I bet they'll last a lot longer. I built some bookshelves recently that are stained, but painted white on the ends, and they're simple, but modern. Also, these DIY stools may not work for bar-height, but they're pretty awesome and cost $5 to make: http://homemade-modern.com/ep8-2-revisit-bucket-stool/

--You may have already thought of this, but what about buying appliances in order of need? You could pretty easily wait on purchasing a dishwasher (I've lived without one for 3 years, and yes, it sucks sometimes, but it's doable). Or you could get a washer and then hang a clothesline for the summer--better for the earth anyway ;) I know folks in the Northwest who line dry clothes most of the year.

Nora said...

what does Matt want that he can't have? is it possible that it's not just a want, but a need, in some way?

Sara said...

I am in LOVE with those chairs! I know that you can do the hard things to make good things happen - you've inspired my husband and I to squirrel away our savings for upcoming life events, such as a wedding, a tuition bill, purchasing a car, gifts for family, etc., each in a separate savings account. Keep it up!

CB said...

Hey Sarah,

Good for you! Girl, you sure know how to set a goal and GO FOR IT!

Have you ever read Mr Money Mustache? He's a financial blogger who's actually got a fresh take and deals in pretty extreme frugality - might be up your alley.

I'm not sure if his style would resonate with you completely as he's got a pretty salty style (beware the F-bomb), but he's really focused on sustainability, living the goodlife without spending lots of money, and getting out of the rat race. All things that I think you'd appreciate.

Anyway, congrats on all the progress you've made!

CB said...

Argh...misspelled your name...sorry Sara!

Anonymous said...

As a bookkeeper with my baby turning 1 year on April 16th ( my water broke after I turned in my work last year), I totally appreciate this post. My husband and I are still trying to negotiate everything from free time to how we spend/save our money. It's not easy and definitely when one person has to be THE ENFORCER. Thank you for your honesty and for your hardwork.

Sara E. Cotner said...

Hi, rebecca leigh! Thanks for your suggestions! I really want to get into workworking and think that it will be my next hobby, but, for now, Matt and I don't have the tools or time to make it happen.

Hi, Nora! It's mainly related to things like going on vacation, which is a need for both of us. He also wants to run in races around the country, which is cost-prohibitive for us right now, given our current choices.

Hi, CB! Yes, a kindred spirit from this blog introduced me to MMM. Although I don't want to retire early (in fact, I'd like to keep working until I'm 80 or so!), I do appreciate his advice about cutting back spending and being really conscious about purchases. I find his blog to be really helpful.

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