Budget Challenges

[2chatter]

For whatever reason, when I get a raise (it’s been years) it’s easy for me to just apply that amount to debt. I did get a raise this year, and plan to throw those few hundred dollars a month onto my student loan payment, which is my only debt outside our mortgage. When DH gets a raise, for some reason it’s harder for me to do this - I think because he’s opposed and would rather just add that to our monthly spend for things like eating out or going out.

Do you guys roll your raises into paying off debt?

[twinmomma]

We do not, but it's because for the past couple years our budget has been super tight and we have needed that wiggle room in our monthly budget. This year when I get a raise I wanted to start paying down student loans more aggressively. But we'll also need to re-do how our taxes are taken out, since we're not having enough taken out of our checks currently. So we'll likely not be able to put it towards debt again this year.

[erinshelley21]

While I've never had the opportunity to decide what to do with a raise, I think it would depend on a few things: how much debt there is and how close it is to being paid off completely, my satisfaction with contributions to college funds, and my satisfaction with my current standard of living.

If the debt is close to being paid off, like within 12-18 months without the added funds, I would probably just roll it into that and enjoy the extra money when it's paid off.
If you're already maxing out college accounts, then I'd find something enjoyable or something to make your life easier to do with the money.

[justcheckingin73]

That is my plan this year but I have no idea how large my raise will be or if I will get one. I haven't been able to rely on significant raises for a while so even with the best of intentions, many times, some expense will come up which I will use the extra for and then I feel like I "need" that extra in my monthly expenses and end up not using it for debt payments. It's such a bad mindset.

[xctsclrx]

We split the difference. Half to debt. then split the remaining to savings and cushion in our budget. When we pay off a debt we revamp our budget.

[2chatter]

justcheckingin73 - that’s exactly what happens here. BUT - my student loan will be paid off in July with the extra - soooo there’s some short term motivation! Then we will roll that payment plus the money I have recaptured from DC that’s on the student loans and throw a pretty crazy big number per month at DH’s student loans.

So...we aren’t saving for college at all right now, but we are paying cash for the two who are in college and once we are debt free except mortgage will throw
the debt payments into a 529 if I can ever get one opened through my financial services firm employer.

I remain tempted to sock away college money and split it evenly with My loan payments, but paying interest on the loan and paying cash for the kids already in college make me stop on that. Maybe when my loans are paid off we put half in a 529 and half on DH’s student loans - because DD goes to college in 4.5 years. And....she feels called to children’s ministry which means...expensive private school so she can double major for ministry and education or business.

Adulting is hard.

[k3am]

We are special snowflakes because the only debt we have is our house. We're already prepaying on the existing mortgage, and I don't feel like we need to increase the amounts we prepay.

Currently, when we have raises, I try to push more of that into our savings/brokerage account on a monthly basis and operate as though the raise didn't happen. When we (finally, I know I've been talking about it forever, but it's getting close!) sell this house and move into something significantly more expensive, I'd funnel that into paying down the mortgage and into savings before I started inflating other lifestyle expenses.

Bonuses are another story. Because they're bonuses. I generally don't want to be in a position of relying on them for everyday items, so we tend to save at least half and have the option of spending the other half on fun stuff (which.. usually a good chunk of it ends up in savings anyways.

[kimberlybb]

When we got significant raises two years ago we refinanced our mortgage to a 15 year loan since that is the only debt we have. DH gets a bonus every year. Half of that usually goes to savings and the other half we use to do a home improvement project or vacation. I will probably use future raises along with the money we are saving from reduced daycare expenses to increase our 529 contributions.

[traveltheworld]

We used to be really good and every time we get a raise, that whole amount would go towards increasing our mortgage payments (our only debt).  We'd use DH's raise for a vacation, and then my raise would go towards the mortgage as well.  Then about 3 years ago we stopped doing that as life just got more expensive as the kids got older - one more child, nanny, extracurricular activities, more money on vacations. And frankly, I think I just got complacent and started wanting to live like the rest of my friends/colleagues instead of living frugally like we've done. I think my problem is that since I grew up poor, I was super frugal for a long time; and then suddenly, it dawned on me that we are pretty financially secured, so I may have gone a little overboard with "loosening the reins". One of my new year's resolutions is to get back on track with savings as our spending should stay consistent now, so technically any new raises "should" go towards savings.

But, I agree, adulting is hard.

[covergirl82]

I do typically budget a healthy chunk of increases to pay off debt, but also some to go into savings and 529 plans. But I will admit that somehow we end up spending more somehow on frivolous things (which means DH aren't all that diligent about sticking to a budget, I guess).

Where we've done a lot better job of paying off debt is with DH's bonuses. (I am eligible for a tiny bonus, that after taxes and 403b contribution is maybe $150-$300. So really it doesn't do much for our budget.)

[2chatter]

traveltheworld - exactly me on the complacency. I think Amazon convenience kills me - I ordered a $5 pack of valentines construction paper and a $13 valentines tablecloth when I could get similar items at the store for $3 and $6. I need to give myself a number per week to spend and stick to it I think then it will be easier to just roll things into savings.

Oh, if our house will stop breaking. Allll of the above is irrelevant when the house breaks.

[sdlaura]

I think it depends on what kind of debt. Our only debt is really low interest rate (our house and a small car loan), so it makes more sense to put raises into savings and investments. If we had credit card debt or anything with over a 5% interest rate, though, raises would go there.

I would only add raises to spending if my retirement and 529 plans were funded at the level I want them to be, too.

[xctsclrx]

k3am, I want to be a special snowflake. We are so close. If two cars that will be paid off in 3 years is close.

[covergirl82]

xctsclrx , count me in too then! We should have everything except our mortgage and DH's student loan paid off in 2 years (so the big ones are 2 car loans and our travel trailer loan). I'd like to have DH's student loan paid off within 4 years from now (although it could be paid off if he gets a big enough bonus in 2020).

[traveltheworld]

Jan 11, 2018 12:15:45 GMT -5 2chatter said:

traveltheworld - exactly me on the complacency. I think Amazon convenience kills me - I ordered a $5 pack of valentines construction paper and a $13 valentines tablecloth when I could get similar items at the store for $3 and $6. I need to give myself a number per week to spend and stick to it I think then it will be easier to just roll things into savings.

Oh, if our house will stop breaking. Allll of the above is irrelevant when the house breaks.

LOL - totally with you on the Amazon thing.  I resisted becoming an Amazon Prime member for years because I thought it'd just be an easy way for me to make purchases without thinking ahead.  Then after DD was born, I signed up for Amazon Prime for the convenience and noticed that my spending went up accordingly.  I just cancelled my membership as a way to force myself to plan better.

My other vice is buying a ridiculous amount of clothing for DD.  Little girl outfits are just so cute.  She has 6 winter coats. I need to stop.  

[k3am]

Jan 11, 2018 12:19:52 GMT -5 xctsclrx said:

k3am , I want to be a special snowflake. We are so close. If two cars that will be paid off in 3 years is close.

It's temporary. Also, if I told you the number we're looking at increasing our mortgage to, you'd probably vomit in your mouth. I know I do. Also, DH is likely to be up for a new car before too long, since his current one is 9 years old. I have my fingers crossed we get another few years at least out of it, but it's one of the first rounds of hybrids that Nissan made, and when we bought it, they told us to expect 10 years out of it. 

[k3am]

2chatter, I find that paying a bit more for convenience in buying one-off items on Amazon saves me in the long run. For example.. buying a tablecloth on Amazon for $12 vs. going to target and buying the same tablecloth for $6, two pairs of leggings for DD at $7/each, some candy, something I really "need" for the house, etc, etc, adds up.

[2chatter]

k3am - that is so my thinking! I constantly buy DD random food items - things like $5 chocolate bars - because they don’t contain starch and her diet is so limited. So the less I am in a store and reading labels the better...

[erinshelley21]

My vote would be get the loans paid off then after that start a "shit keeps breaking" fund.

[mae0111]

When DH and I met, we both had a TON of debt. We each had a mortgage, then he bought another property. He was coming off of a divorce that made a mess of his finances, and then he did a lot of buying to deal with his emotions. I was coming off of a broken engagement that made a mess of my finances. So we both had tons of credit card debt. We both had student loans totaling in the mid 5 figures, and he had a car loan.

Every raise and bonus went to debt - first credit cards, then student loans (one of DH's student loans was at almost 10%!). Right around the time that we paid everything off, I stopped getting raises. Once we made sure to max out our 401K contributions, bonuses were split between vacations, savings, and any home improvements. After a while, the majority of my bonuses came in deferred stock, so we'd use the cash for vacations and we really haven't touched the deferred stock. That's allocated toward college savings. DH's bonuses were split between cash and deferred compensation, so we used his cash for home improvements and saved the deferred stock.

Now we're in a different situation. DH's new truck is considered a company vehicle, and any raises or bonuses will really depend on how his business is doing. I'm not working right now. So the goal is a little bit into savings (after retirement - that comes right out of his paycheck), and limit the consumer debt. Credit cards are paid off at the end of each cycle, but I'm going to need a new car within the next year, and we can't quite pay for it in cash.

[2chatter]

erinshelley21 - we keep 15k cash on top of 6 months living expenses for broken house stuff. It sucks to rebuild after big expenses but it for sure keeps me sane. I still don’t have a plumbing invoice...and our current house slush fund is low so it’s stressing me out for sure. Ugh.

[twinmomma]

Jan 11, 2018 13:36:53 GMT -5 2chatter said:

erinshelley21 - we keep 15k cash on top of 6 months living expenses for broken house stuff. It sucks to rebuild after big expenses but it for sure keeps me sane. I still don’t have a plumbing invoice...and our current house slush fund is low so it’s stressing me out for sure. Ugh.

Holy shit. 

I cannot even fathom having that much money just sitting in the bank. Student loans + childcare expenses decimate our monthly income. I bow down to your money management skills. 

[2chatter]

twinmomma - It is kind of unhealthy probably TBH - I pretty much obsess about cash reserves. My exh literally spent every penny I earned and refused to work and it made for a couple of pretty awful years between living with him, ending things with him and then rebuilding. Occasionally DH will say something like “let’s fly to Whistler after Christmas” and be dead serious - if I would let savings take the hit he would be all over it. But I seriously can’t.

[sandandsea]

We put our raises into savings by increasing our auto save amounts. However, this year we increased our charitable giving and I’m very happy with that.

Before we paid off our student loans and maxes retirement we threw all raises at those.

[waverly]

My raise went to increasing my retirement contribution.

DH's raise and bonus went to paying off debt. We are also building up our emergency fund.

[sunbutter]

We both increase spend (like vacation budget goes up, I consider fancier camps, etc.) and some gets rolled into savings. Our debt is mortgage and car payment.

Editing to address college savings. We currently don’t save for college. We are aggressive about retirement and personal debt because that will be so much more important for my kids. For me never to have to rely on them. Saying this as someone currently financially supporting her parents.

We will likely start college savings when the kids enter public school. Three years for DS and seven for DD.

[k3am]

Jan 11, 2018 13:52:02 GMT -5 2chatter said:

twinmomma - It is kind of unhealthy probably TBH - I pretty much obsess about cash reserves. My exh literally spent every penny I earned and refused to work and it made for a couple of pretty awful years between living with him, ending things with him and then rebuilding. Occasionally DH will say something like “let’s fly to Whistler after Christmas” and be dead serious - if I would let savings take the hit he would be all over it. But I seriously can’t.

It honestly took us sitting down with a financial advisor... twice.. and having him tell us (twice) we NEEDED to take a vacation and that our cash savings were more than enough for our age/circumstances, etc. for us to actually start using our money. We took our most expensive vacation ever this summer (less than $3k all in). I didn't shop for deals or time the trip for lowest prices. I have no regrets. I loved everything about that trip. 

I'm trying to remind myself that you can't take it with you, and you don't get a prize at the end for being frugal today. Obviously, an emergency fund and not being excessively frivolous with money is important, but enjoying today is important too. 

[shakinros]

We always try to do this but it doesn’t seem to happen. DH’s employment is pretty insecure these days (screw you, gig economy) so if we end up with extra money, it goes in our emergency fund. We have about 6 weeks of living expenses after a couple years of having to break into it during periods of unemployment and then trying to rebuild. Making progress again now that DD is in K. I’m transferring the same amount to savings that we used to stash for preschool each month and then just leaving it there.

We also use our dependent care account as enforced debt savings. As in, I turn in receipts for after care (and will for summer camp), then turn those reimbursements into extra student loan payments rather than putting it back in cash flow.

[2chatter]

shakinros - dependent care FSA is a big part of how we keep the slush fund for the house. Speaking of, DS’ school closed right after we pulled him last summer so I need to figure out the form....

[phdmomma]

We did the budget last night for the year, and it is not looking great. Working as faculty at a university I get paid by the state on a 9 month contract. I can pay myself in the summer for those additional 3 months from money I have from competitive grants. But at my university on each 3 year cycle you are allowed to pay yourself for 8 summer months in total. So this is the year that I can only pay myself for 2, which in short means that I am not getting paid for a month this summer. Which understandably throws a wrench in our budget. The theory behind this is that because we don't get vacation days, they assume that in the last 3 years that we have used 1 month of vacation. It's a super weird system. And I've been warning DH about this for months now, while he has been contemplating house projects, and I have been saying that we need to look at the budget, because this is bad. Finally did the budget last night, no new house projects summer, and its going to be a much more frugal year.