Three money questions
October 21, 2019
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I often grumble at myself that our monthly expenditures are too high – what are we spending on?? Where can we cut costs? Shouldn’t I be having so much more fun with our income level??
Oh yes, right, we made terrible choices. We live in the Bay Area with a mortgage (renting would save not much, if anything), a kid who needs childcare and therapy, and we take very good care of our dogs. Dogs and children are luxuries we chose.
I remind myself regularly that we aren’t carelessly throwing money out the window. That’s always my immediate assumption when bills are too high – we were reckless with spending somewhere. In reality, those reckless spends are always on the small scale. $5 or $10, maybe. By and large, we are making spending choices consistent with our values: taking care of each other, health, education. We are also making savings choices consistent with our values: we must have a very healthy portfolio of assets so we can retire with some level of income security, some day. Probably not early, but some day. It must be particularly robust to account for known and unpredictable health issues.
This was all by choice. I’m not failing to do money responsibly just because I feel squeezed as costs rise every month. I may always work on adding to our income and cutting our spending but all of these are part of our active choices in what we prioritize in life.
While filling out a survey, I was struck by how my answers about our finances don’t convey an accurate picture, and get to what I assume the researchers actually mean because of lack of context.
How would you answer these three questions?
1. During the last calendar year, how often did you put off buying something you needed – such as food, clothing, medical care, or housing – because you need the money? Would you say:
Never / Rarely / Occasionally / Frequently / All the Time / Don’t Know
2. During the last calendar year, how much difficulty did you have paying bills? Would you say:
No difficulty at all / A little difficulty / Some difficulty / Quite a bit of difficulty / A great deal of difficulty / Don’t know.
3. Thinking about the end of each month in the last calendar year, did you generally end up with …
More than enough money left over / Some money left over / just enough to make ends meet / not enough to make ends meet / Don’t know
Am I weird because I’m a PF blogger or am I just weird because I’m me? How do we tell?
(Answer: it’s just me)
1. All the time: I almost never buy clothing when I need it. My jeans have holes spawning baby holes but unless and until the seat splits open, we’re calling it good. Old basic clothing can get me through all seasons even if I look awkward or shabby because most of those clothes were pre-pregnancy and date back as far as 2005.
I time my healthcare to optimize for FSA coverage: I have dental work that is being delayed until 2020 or forever because I don’t have $7000 to throw at it in our current budget.
Actual medical emergencies, like my ER visit last year, are covered. Non emergencies all take a number.
I assume the question is trying to gauge whether we CAN properly tend to our essential needs but the way it’s phrased ignores that we might intentially delay most purchases to be responsible. We can’t afford everything we want and need at the exact same time. Maybe we could if we made $300,000 a year ….? Hah.
This answer is based on income constraints that I created (required savings) which is a luxury many people don’t have. 15 years ago me certainly didn’t have the choice! Take the brakes off that savings and we could buy a whole lot today (and be royally forked tomorrow!).
2. Some difficulty: I time our automated transfers and bills to be paid in two waves a month, timed to come out after each pay period. So by one way of thinking, we are paycheck to paycheck.
But the first thing that comes out is our savings transfer which goes off to be part of our savings and investments and creates more income. So making some assumptions as to the heart of the question – we cannot be said to be having true difficulty because we are able to have preset constraints to create buffers to protect our Future Selves.
3. Just enough to make ends meet: and only because I delay purchases or we’d run short some months! Again, after the savings are set aside, we have a lot of big bills. It takes some careful timing to ensure we pay everything on time without dipping into savings. But we have savings and therefore, we’re doing better than making ends meet.
I would never try to make out as if we are truly struggling.
I know what those years were like and these are not them. I used to live on a $75 a month gas and groceries budget for myself. I ate one meal a day because that’s all I could afford. I worked hundred hour weeks just to have enough left after bills to save $5. (And save it I did!)
But on the face of it, my honest checkbox answers imply that I’m in that same place and I don’t know how to correct for that in a survey.
OMG, same.
I have savings — enough for several years — but day to day I act like I do not have that buffer. I also treat my savings as non negotiable part of my spending/budget. That mindset means that I almost always have *just* enough to get by. However, I’m not poor or truly paycheck-to-paycheck, which is what I think that survey is trying to get at.
For 1), the definition of ‘need’ is very ambiguous. I need some food, yes, but i don’t need to eat out lots. I’m not eating mayo sandwiches like I did in college anymore (too poor for lunchmeat!). I need clothes to cover myself, yes, but I very rarely need a specific item for any reason. Clothes purchases get delayed for up to a year, and happen when I visit the US as NZ prices and goods are abysmal. If I had a medical emergency, by definition I couldn’t put it off, so what does that even mean? I definitely try to delay and space out my regular appointments so that I’m not outlaying a ton of cash every single year on dentist visits, e.g. I get the ‘it’s time’ appointment notice and wait a month. As for housing, how on earth do you delay paying for housing and not get evicted??
In terms of delaying a purchase because I ‘need the money,’ — need the money for what? What else would I need the money for, if not for housing, food, medical, etc? What does that part of it even mean?
For 2), a little difficulty, because I consider anytime I have to dip into savings to pay for a bill, it is difficult. It happens once a year (when I go to the US), but that is money I’ve saved up for just that purpose. Still…transferring $$ internationally is difficult in my book. During that one month, my income is much less than my spending.
3) is usually ‘just enough to make ends meet’ because some of my money goes into savings, and I adjust my spending to equal the remainder left from my mandatory savings. But in reality it is more than enough because …I am saving.
So, in conclusion, no, you are not the only one that found those questions perplexing and complicated to answer!!
That’s kind of a relief 😀
My initial answer to 1) was “never”, but after reading your answer, I suppose it is at least “occasionally”. I have convinced myself that I don’t really need the replacement clothing, even if I’ve actually been wearing some maternity jeans (just the side panel kind) because they are one of the only jeans without holes in the knee that I currently own…. It is probably less about money and more about not feeling like shopping for something I’m happy with. So, I’m not sure, maybe never is the right answer. 2) No difficulty at all. We don’t “pay ourselves first”, aside from the stuff that comes out of our paychecks (whcih is actually significant), and we use a slush fund to cover any months that need it, with the knowledge that we are saving what we need to on an annual basis. and 3) More than enough left over. Because, again, we are comfortable with “be generally frugal and save what is left”
Your answers surprised me a little, even though I know you save first and keep a tight budget. Is it still stressful, or is it just an effective way to save? I hope that the money stress is much less, even if some of your actions are similar!
Both.
The problem is that I already have huge health limitations and it’s restricted my day to day life significantly. It’s not at all a stretch to think that ten years from now, give or take a few years, I might not be able to work anymore. Heck, this past week I could hardly function.
And if that comes about, well, the reality is that we can’t afford this life without both paychecks. We’re not extravagant but that means that even enjoying THIS life feels extravagant when we cannot survive on a single paycheck and I know that that’s a very real possibility in our future. So that weighs heavily on me, constantly.
This is probably something you’ve already considered, but would geographic arbitrage help make up the difference in a pinch? It would mean going through the hassle of finding new care providers & re-establishing support networks, but it sounds like a big part of what would make future early retirement so squeezed for you is the insanely high COL for your location.
Possibly but it depends on a few things. It’s not an option right now because our jobs are very location dependent.
In X years, (X being the time I can’t work anymore), that possible solution will depend on whether or not we’re able to sell this home for a number that fills the gap, without having to use all the proceeds for another abode. And would it make sense to move to a place we don’t have any connections? I am super introverted and rebuilding a support network when we’re working so hard on this one sounds terrible.
There are lots of variables!
Right now we’re in a bizarre place where we’re buying All the Things because we spent so much time putting off purchases and we have all of our savings goals met and we’re nowhere near being to a point where we could afford to buy a house in a good school district where you live so why not live a little instead of saving up for something we’re not sure we want anyway (we like our current jobs and mine is location dependent).
1. During the last calendar year, how often did you put off buying something you needed – such as food, clothing, medical care, or housing – because you need the money? Would you say:
Never, but until recently we did put off buying things we wanted, not because we needed the money but because we valued savings more or even more strongly, didn’t value the cost to shop plus the money cost enough.
2. During the last calendar year, how much difficulty did you have paying bills? Would you say:
Never ever. Bills have always come first even when we didn’t have money for meat, we had money for bills.
3. Thinking about the end of each month in the last calendar year, did you generally end up with …
Over the summer we dipped into savings when we bought a car, but we had that money. Now that I’m getting paid again, our paychecks combined are more than enough.
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So this is an interesting thing! For us, bills also always get paid first but I do perceive there to be difficulty when there’s nothing left over.
Maybe your view is more straightforward.
I do sometimes put off purchases until a new week’s or month’s budget comes around, but I don’t have trouble paying bills these days and almost always have money left over. So my last two answers just prove that my first answer is due to neuroses rather than reality.
Of course I only have a few accounts where I save an automatic amount. (The car fund and vacation fund spring to mind.) Retirement and savings get what’s left over after bills have been paid. So that makes it easier for me to field larger expenses or just not have to worry about covering the bills.
All in all it sounds like your goals keep you honest but also cause you a lot of stress. I’m so sorry you have to deal with that so frequently. Especially with the stress of having two more people’s expenses than I do. I’m going to go count my blessings now and tell myself to shut up when I’m feeling stressed about money.
I think we’re in agreement we both have some neuroses going on! 🙂
To be fair, the goals will eventually result in less stress, it’s the reason for them that are causing the actual stress. I let off some steam every so often and it helps the stress from becoming panic.
Haha, holes spawning baby holes! I just fixed (patched) my pants and then yes they are spawning new holes. I have a lot of old clothes too, some circa 2005.
It’s hard to stay ahead of those holes!
I’m definitely the same for question 1. Not with food, but clothes or other things people would consider needs, I contemplate for a long time and try to make do.
I can’t say that I struggle to pay bills, but I do wince at how expensive they are. We have the money to pay them, but it still feels like we pay a lot out.
For question 3, although we have money left over (always some saved and invested), it feels like a smaller proportion than I would like and therefore not enough.
We are wealthy by most people’s standards, but I can’t shake my nervousness around not having enough
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I feel like we’re in the same mental boat!
It does make me think that maybe the issue is that we have redefined “needs” to a more stringent definition which is actually good.
I think my extreme anxiety about feeling or becoming poor has mostly gone away. The turning point for me was when we hit around 5x yearly expenses in investments that continued to rapidly accumulate. Like “oh, we’d really have to try to mess this up.” This bout of unemployment has elevated my anxiety, for sure, but it’s been nowhere near where it was when I was a kid or just entering the job market. So, uh, progress!
Nowadays, I refuse to put off spending on needs anymore, though I’ll still do so for wants. And since we generally make enough to do both pay-yourself-first (through retirement accounts) and pay-yourself-last (through brokerage), I always feel like we a have a healthy flow of money always coming in.
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That would be a great turning point!
My anxiety persists because we aren’t even at 1x yearly expenses in income from investments so I know we could deplete them very quickly should I be out of a job long term.