Budgeting/spending as income increases?

[wanderingback]

Thought we could have a conversation about how you all have handled spending/budgeting as income increases.
Most of my spending up until now in regards to "big ticket" items has been on travel. Obviously that hasn't happened in awhile but I'm still saving for things like that.

But I guess my question is more in line with what you all have done in regards to more day to day spending.This month I made a lot of "extra" money from per diem work and contract work, so it's at the top of my mind. I think I made almost the same amount from this extra work than I did from my full-time job.

I'm not a big spender on "stuff"...like I would never just go to Target and mindlessly buy things and I get most of my clothes from the thrift store. But things like gym memberships, massages, activities, etc are more of the things I'm talking about. To give a concrete example, I currently spend $99/month for virtual fitness classes. I don't quite think I'm ready to go back to the gym yet, but there's a local Black owned small boutique fitness studio that offers 1:1 personal training sessions. 8 sessions are $760, so I could afford it, but the price tag is still high obviously. A couple of months ago I splurged and paid $350 to do a 8 week writing workshop, which was really great, but I waffled back and forth on if I wanted to pay for it.

Right now I do typically put about $150 in my "fun money" debit account to spend and I mostly spend it on food and occasionally books or make up. I want to continue to have a good mix of saving (emergency savings is at a good point now, paying down debt (hello student loans) and at least being able to do something for myself every once in awhile without "worry." 

So anyway, what do you all do? Increase your fun money to a higher amount so it's more budgeted and you don't spend anything above that? "Splurge" every once in awhile on bigger ticket items like the personal training? Always save up for these type of purchases? Spend away as long as the rest of your budget necessities are covered? Other ideas?

[ny96]

I think I can categorize our increase in spending as better quality of life spending. We don’t but big ticket items either, but as our incomes have increased we have started spending more on groceries, a nicer bottle of wine for a Saturday night, weekly house cleaning, an Equinox gym membership (that’s been on hold for a year), better clothing, and newer vehicles (not luxury, but more reliable). I still agonize over when to purchase home items or other items not in the need category. Our travel hasn’t changed too much because we were probably spending more there before then what we should have been.

@@@@
We don’t have a set amount of fun money. H has buys a fair amount of music equipment, and beyond reading and television I don’t have a lot of things I do in my free time (2 young kids) so my fun money wouldn’t really get used for “fun stuff” right now. For us, beyond clothing, when we want to buy something that’s more than $50 we check in with each other and unless we’ve just made a big purchase or had a large tax bill (see my past post) it’s fine.

[cosmowife]

I assume you are already maxing retirement? When my income increased, I switched to a Roth 401k and maxed it, so that is a large chunk of post-tax income that is gone. Otherwise, I like to spend money making my home more comfortable and attractive (plus I’m a homebody). I also like designer purses but haven’t really felt the urge since the pandemic started. Instead, I’ve been spending more money on tech, which is fun for me and also helps me to be more productive. I don’t even budget for food - I just buy whatever I need to try to eat healthy. I’ve been ordering Daily Harvest for a few weeks now, and while it is very expensive, I can see a real difference from eating so clean.

[goldengirlz]

Our HHI has more than doubled over the past five years. We bought our house before the increase so our mortgage is very reasonable for our income.

The first thing we did was increase savings. We automatically save 50% of my income (or roughly 25% of the total) on top of retirement.

Otherwise — while this might not be very MM — I don’t spend a lot of time stressing about our spending. I always remark to H that I think the best part of having money is never having to think about it. We joke on this board about what makes us “feel” rich, but for me, it’s that — just being able to go through life never worrying about how much something costs. For smaller ticket stuff, if I want something, I buy it.

For larger ticket stuff, we still plan and budget for it — the only thing that’s changed is where the threshold is between “large” and “small.”

[ny96]

Apr 11, 2021 11:38:54 GMT -5 spearmintleaf said:

So- it sounds like you need a goal! Knowing what I know about your life, goals could be house/apartment down payment, extra payments on your Philly place, retire earlier, plan to take a break from work if/when you have a baby, kid college fund.

I agree. Our spending is shaped by our financial goals. We are looking to remodel our house or buy another one so that is always in the back of our minds when making a larger purchase. At the same time we’re trying to stay on track with our retirement goals.

[pierogigirl]

We bought a bigger house (oddly, our mortgage only went up by about $100 and our utilities are less or the same - starter house was oil heat and this house is gas).

Right now we are saving for future expenses like retirement, college, and new (or new to us) cars. We just refinanced and our mortgage should be paid off in 8-13 years, depending if we continue to pay extra each month.

We take a better vacation every other year. Last summer, we re-did our wills and the trust for the kids.

We did not outsource any household tasks like lawn care, snow removal, or cleaners but we may in the future. We should increase our retirement since it has been a few years since we reevaluated and I would like to talk to someone so we maximize our saving and do the right thing for college financial aid. We're in a kind of sweet spot now (only one in part time after school care, kids are too young to drive so no crazy insurance fees, and sports were cancelled last year and the fees will pay for this year if sports happen) so we are trying to save as much as possible.

[fryjack2]

I know this is privileged but we are similar to goldengirlz. We are in a position that allows us to pay our bills, max retirement via traditional routes, have a healthy savings, and save a bit more for retirement in other accounts.

So, the money that is left over, we throw some into long term goals like a 2nd home, some into a house repairs account, and the rest we spend however we want. We don't have a food or fun money budget, etc.

That said, we are similar in that we don't spend money just because we can afford to do so. I don't care about very many material things like high end bags and shoes, etc. We prioritize travel and experiences over stuff. A weekend in a new city or week in a country that I've never been to means more to me than owning the latest Louis Vuitton.

[ssmjlm]

I would say as our income as gone up, we’ve made sure to max retirement and then put more in savings.

I have allotments setup for a car fund and savings.

We don’t budget and buy what we want within reason. I do have a few $$$ handbags, but that’s my main vice.

[aspentosh]

As income went up, we made sure to max out all retirement vehicles (401k for him, Roth IRA for both of us). We are single income, so having a fully funded e-fund is also super important because things can and do happen (like in December when he lost his job). So, once those are done, we have more money to play with.

I am very frugal by nature. Probably too frugal, if I'm being totally honest. I will waffle on $100 or $200 purchases that skirt the want/need category (like an air purifier for the house) when it's not necessary. Like you though I prefer my big ticket items to be travel and that just hasn't happened much recently.

For us, once we max out retirement and stuff, we still try to save 40% or more of his salary. With his new job it will likely be be a bigger number because his salary went up. We don't want to have "lifestyle creep" because he is making more money and this is the easiest way to prevent that. I budget out for what we need and then add about $400 to give us wiggle room for when something comes up that we want or need and then put the rest in savings. I guess the answer to your question is that- we will spend up to $400/mo without fretting but if it's more than that we budget for it, or I guess withdraw from savings if it's a limited time thing.

[goldengirlz]

I’ll also say that at a certain point, this is a philosophical question as much as it’s a practical one. For instance, you may have specific and concrete goals like “save for a down payment” or maybe a loftier one like “financial independence, retire early.” Or maybe you’re more like me these days, with a vague goal of simply “don’t screw things up.”

And if that’s the case there’s nothing inherently wrong with “lifestyle creep” if all your other bases are covered. My dad died in his mid-60s and was forced into retirement because he was too sick to work. So, yeah, maybe a little part of me wants to travel NOW and drive the nicer car NOW instead putting every dollar into “the future.” The future is important, of course — my grandfather is still alive in his mid-90s so I know I need to plan for that possibility too — but the line between “live for today” and “a penny saved is a penny earned” is something that comes down to your personal comfort/values more than a formula we can point you to.

[sadlebred]

It is a bit different I think if you are a single income like me. I've noticed that I spend more on nice haircuts--ie I go to one of the top 5 stylists at the local high end salon (multiple locations) instead of a lower priced less experienced stylist. I get a massage every 3 weeks instead of every 6-8 weeks. I do buy high priced items since I'm a competitive cyclist and buy a new bike about every other year that I save up for; sometimes stuff gets sold to help pay for it. I don't think anything of spending $10-12 for dinner/takeout 3-4 nights week; I don't feel too guilty over this since the places I like are locally owned & I feel like I'm supporting them during this time. I do put more into my emergency fund and am about to start contributing to my ROTH again. I am also trying to pay down a roof (house) loan faster than the minimum. I haven't traveled in 2 years because of health problems, but I want to start saving again for that.

What I wish I could do: Save more in my 401K. There is a point at which you can't save more b/c the bills have to be paid, and there is no one else to pay them. I also believe in a balance of living for the now (see spending on my bike hobby) and saving for the future. Put more money away in general. I think I'm around 10%. I'd love to be at 15%.

[minzy]

I don’t have much of an answer for this. Aside from owning our house and cars (@@and having the kids), we don’t live much “bigger” than we did when we met as poor students, despite ample ability to do so. We track after the fact loosely, but we don’t budget. I recognize this is big time privilege. Sometimes I wish my husband would enjoy more of what he earns, because he works his ass off for it, but he’s just not wired that way. I’m not either. Sometimes I’ll spend a little (usually on stuff for others, like tulip deliveries for ten people, or donations, or on things I actually need, like running shoes) but then I too will revert back to savings/frugality mode. It’s partly for environmental reasons, too. But, if you can afford it, spend what you want!

My husband just loves getting a deal on stuff, it’s like a hobby for him (i.e., yesterday, he was eager to get the less expensive milk at the other store). I was like, “dude, you’re being ridiculous, did you see the numbers on your W2 last year?!” Yet he’s not cheap - he reminded me this morning to pay for my two younger cousins when the three of us met for outdoor brunch (I would have done that anyway). We’re about to have another six figure job in the house, so he will just have to get over it if I buy the more expensive milk or eventually join the awesome new gym that he thinks is a “rip off.” But even still I don’t think we’ll generally live much larger than we currently do.

[formerlyak]

@@ I can tell you what I wished I’d done when I got a raise or bonus pre-kid, since I know kids are something you may be considering. I wish I would have taken half of the extra and put it in a separate savings. With both my kids, I threw money at making things easier during the first year - different gear, eating out, etc. I hadn’t budgeted for that so the extra fund would have been nice. Anything not spent could then be put into a college fund, which I also wish I’d have started sooner.

ETA: and if kids don’t end up being part of your future, you can always stick it in an IRA and save it for retirement. Most people wish they were further along with retirement savings.

[ellipses84]

Ever since my first job I said I’ll know I’ve made it when I can hire a regular house cleaner and get frequent massages. I’ve still never done either 😭 We’ve had a lot of ups and downs in our financial journey and whenever we have excess there seems to be more responsible things to do with it, like extra retirement. That being said, we don’t deprive ourselves either. We are more likely to spend it on things for the house, kids or a great travel deal, not luxury items / pampering for myself. So, that’s what we prioritize. And whatever it is, I do my research, wait for a sale, etc.

I’m working 2 jobs which was supposed to be short term and has been going on months longer than expected so this morning I decided if this continues, I’m going to hire a house cleaner. A friend told me what she pays and her cleaner is reasonably priced. First, I’d like to be fully vaccinated and organize the house more so it might be months before I actually do it. I may hire a lawn service too, which we have used in the past. I’ve found other solutions for back pain so I don’t know if I’ll ever get massages regularly, but a couple times a year would be nice. At some point the tables turned on what I have more of: time vs. money, so I’ll pay for things that save me time, like a direct flight vs. a flight with layovers. I also am willing more to prioritize my health for gym memberships and workout classes if I actually use them.

[brooke77]

My extra money is fairly predictable. I get an annual bonus and salary increase in January. My bonuses are large and traditionally split 3 ways: 30% to savings, 30% to SLs, 30% donate. My salary increases aren’t specifically budgeted. I am aggressively paying down SL debt and may be done this year! Once that happens, I will likely split all that extra money to add to a general savings for a down payment for a new house and to college savings for DS.

[Covergirl82]

We've done quality of life increases (e.g., buying higher quality groceries, such as organic, spending more on travel), increasing savings (e.g. increasing 401k and 529 contributions, building an e-fund, and building up another account for future large purchases/home repairs), and increasing loan payments (e.g., paying off car loans in half the time or less, refinancing to a 15 year mortgage). We don't have a specific breakdown or formula, but DH and I will talk about what we want to do ahead of receiving a bonus or pay increase.

[bee20]

The first thing I did was ramp up savings, but now that I am doing great there, I have focused on health items because that's something I struggle with. Physical Therapy and Chiropractor to fix some joint issues, a healthy meal prep/delivery service for when things get crazy at work, and I'm now looking at a personal trainer because with my joint issues fixed I am going too quickly back to activities and keep injuring myself, so I need some professional help on scaling up.

I also have some small side income, when I earn that I note it in a spot on my phone to help me put my spending into context. Otherwise I can be too frugal for my own good. So, for the personal trainer it's similarly around $800 for 8 sessions, but I earned $2k in my side gig, so it's a reasonable splurge since that side gig took time I could have spent researching on my own. I'll subtract out $800 for a trainer and then might spend $1200 on a vacation once things open back up.

[Beeps (WOT?*)]

H is finally willing to take more vacations now that he's older and realizing that it's better to do it now. We make enough now that the kiddos will have college paid for since our other debts are paid off. (We planned that way rather than 529s due to the ages we adopted them - they weren't babies but were too young for adoption credits/scholarships.) We ramped up savings and are updating the house, inside and out.

We live in the same house we purchased sixteen years ago, rather than upgrading as our income rose. (We're more than triple the income of when we purchased the house.) It's a suitable house and with the grands approaching college we don't *need* anything "bigger and better" and we are approaching retirement as well. We have reasonable cars that are paid for and don't trade them in for fancier versions that we don't need at this time.

For the most part it's simply that we don't have to worry as we used to. We can go out to dinner when I don't want to cook, we can buy what we want (within reason) when we want. We can blow far too much money at the casino just for fun (DH likes to gamble, I stress if I lose $20 at the slots, lol) if we so desired, without feeling a pinch. (And I spend/give way too much to my kids still. lol.)

It's all in the priorities. Ours is getting the grands through college, having a decent retirement (we started our retirement savings late) and not having to worry about money now or in the future, with the ability to finally relax at times during the year.

[Cappy]

I agree with others that it helps to have some overarching goals even if they are lifestyle creep. I use sub-funds in my CapitalOne for this purpose because I can name them based on the project/goal/trip.

[melmel48]

I am single income, so right now, I am aggressively paying down my car and student loans, so any extra goes to those debts.  

Otherwise, I would increase my vacation savings and my running savings ( races, shoes, socks, fuel etc.) or treat myself to a luxury such as regular massages that I can't afford right now.

I am also trying to save for a bathroom remodel, but I am using any money I earn via cash back on my credit card, rakuten earnings etc. to fund that! 

[sandandsea]

We use it to meet other goals like:
1a. Max retirement
1b. Paid off student loans
2. Bought a better house/location
3. Fund 529s
4. Travel more to new locations and worry less about finding the best deal and having that drive the destination
5. Increase hobby spend - this is our biggest lifestyle creep
6. Pay for time/help (cleaners, gardeners, daycare/private school during Covid, door dash, grocery delivery, stitch fix, etc) - another lifestyle creep area
7. Bought nicer cars with cash
8. The general save more for “the future”/retire early/give more/etc.

[aspentosh]

Apr 11, 2021 16:35:24 GMT -5 goldengirlz said:

And if that’s the case there’s nothing inherently wrong with “lifestyle creep” if all your other bases are covered. My dad died in his mid-60s and was forced into retirement because he was too sick to work. So, yeah, maybe a little part of me wants to travel NOW and drive the nicer car NOW instead putting every dollar into “the future.” The future is important, of course — my grandfather is still alive in his mid-90s so I know I need to plan for that possibility too — but the line between “live for today” and “a penny saved is a penny earned” is something that comes down to your personal comfort/values more than a formula we can point you to.

This is also very very true. As much as I'm against lifestyle creep, it's not all bad. Case in point, we spent almost $10k on a vacation in 2019 and I don't regret one penny of it. And that wasn't our only vacation that year. So I am all about increasing the spending and living while you're able and we continue to do so. 

Same is true for H's car. His is a 2013 and showing its age and he really wants a hybrid truck as his next vehicle, which will likely need to be new. So yeah, we save for the nice car, too. 

I hope I didn't come off as preachy or high and mighty. 

[pinkdutchtulips]

I plan on throwing it at increased retirement contributions and my SL but also to consistent therapy and braces for dd. I'm finally at a place financially where I can commit to out of pocket expenditures for dd's much needed therapy/specialists and to braces especially since her father is 100% out of the picture and cannot help with these expenses. 

[ohgillian]

It's a great topic. I have handled this differently at various income points. When I was younger, and earning less, and single, increases just went to paying off debt (student loans and a loan on my first car purchase). I didn't allow for much change in lifestyle at that point at all, other than I bought a townhouse so the costs of homeownership.

I'm more established in my career now and no debt except mortgage, which I don't plan to pay off early.*  With each raise I usually increase retirement contributions slightly, and increase what I guess is the "save to spend" fund -- like, saving for big irregular expenses, including car replacement. I do not ever expect to have a car payment again.

I also have an annual charitable giving goal of 5% of wages, so as income goes up, that goes up.

We've also *definitely* had what I think people call "lifestyle creep" (I think I know what that means) and I'm fine with it. Eg I just splurged for two fancy sofas for the den, but they're replacing two 20 YO couches from H's first apartment, lol. I bought a nicer car than I had earlier in my life. We always tipped the basics (20%) but now we're more generous with that. We do optional house projects.

So I guess --

I paid off debt
I saved to avoid more debt
I fully funded retirement (we aren't maxing out our accounts, but I mean we are saving more than the planner thinks we need to save)
We increased giving
We spend.


* Although honestly I'm considering paying more b/c our overage tends to get spent vs invested.

[aprilsails]

I always pay myself first, so as my income increases I increase my savings as a percentage. I am slightly behind on retirement saving, as I aggressively paid off my student loans in my 20s, so I have a bit of catching up to do.

Next we did upgrade our house. We will also be upgrading our furniture in the next two years, which will be a project as DH hates spending money on furniture, but I am over having either 30yo hand me downs from our parents or IKEA furniture in my house and I want to buy something with quality that will last.

We still have a lot of work to do on the new house. Any minute now we also need to get a house cleaner in, as it is becoming a major point of contention in our marriage and we are struggling with a lack of time.

[Roc A Bee]

I have a savings account labeled with different activities- for example “vacation.” Mentally it is difficult for me to spend money from my savings account. I’d rather just cash flow or charge it and pay it off (it makes no sense). But if I label it with a certain intention, then it is easier for me to spend.

For your bigger expenses, I’d throw it in a hobbies account- maybe that means a writing workshop or a workout class. Once you have enough saved in there, I’d spend it.

As for increases, I up my 403b savings to be 20% then I start funding my savings accounts for future spending.

[janegold]

We've more than quadrupled our salaries in the 11.5 years we've been married. The main spending increases during that time have been housing, kids, paying off student loans, and savings.

If anything, I think we have probably decreased spending on material goods because we just have different priorities now. We have always been travel snobs, even when we didn't have money, and that hasn't changed either (other than COVID, of course).

Housing - we bought, renovated and sold a condo, and recently bought and are planning to renovate what may be our forever house. Plus all the other expenses that go along with having a house, including some things that are luxuries rather than necessities (housekeeper, landscaper, snow removal, handyman, etc.).

Kids - soooo much money on childcare. So much. Earlier in our marriage, we struggled to figure out how we would afford full-time childcare for even a single kid in our area, so to now be able to afford FT childcare for two seems like a huge accomplishment.

Student Loans - I finished paying off about $225k in loans last year. Took 10 years to do it, so that was a big priority until recently.

Savings - We max out our retirements, try to save/invest a little beyond that, and will prioritize additional investing once our kids are in school and our budget is more freed up from childcare expenses.

[wildrice]

We've had a big bump in HHI in the last couple of years (about 50% I think). The biggest thing we've tried to do is keep our fixed expenses from going up. Eventually we're probably going to end up with a car payment, but other than that I don't really foresee us increasing our monthly responsibility for anything anytime soon. That gives us a lot of flexibility on what we do with the rest of the money.

Generally, we try to save 1 of my paychecks each month and use the rest as reasonably as we need to. So we don't go out and shop and buy fancy meals all month until we hit our max, but if that's how it works out some months, that's fine. Months where we spend less, we just throw the rest in savings. I would probably think twice about something like paying for personal training in a lump sum like that, but ultimately if it was something I wanted to do, I'd do it. In fact, I'd be more likely to pay $800 in a lump sum than to commit to paying $60 a month for 2 years, even if the end result was probably similar. I just don't like to commit to a payment!

I've thought about this some too. We are at a point where I could probably get monthly massages, a housecleaner, horseback riding lessons, or some other things that are expensive but that I would enjoy or make my life better. But I haven't moved on any of them. The pandemic has been a good incentive not to, but I also find the idea of spending money regularly like that daunting. Though, we just spent $100 on lunch the other day so sometimes I wonder why I'm ok with that but not with spending $80 a month on a massage. Both I probably equally enjoy so it makes little sense!

[CloudBee]

We also aren't big spenders on stuff. Travel is usually our big ticket item, so we are in a similar boat. The thought of going to the mall just to shop makes me cringe. It's fun to wander, but I prefer to shop when I have a specific need.

We allowed ourselves to buy a fancy car last year (old car died), and walked away with a 2013 used Honda Pilot... We just couldn't brings ourselves to splurge on the Mercedes SUV we had our eyes on. Are you content with your spending? It can be hard to adjust if you really are happy with what you spend. We also shop at thrift stores quite a bit and that will never stop.

There's no takeout budget in our household, but what we DO spend on takeout has significantly increased since Covid hit. We probably spend $300-400 / month on takeout meals, which is much more than ever before. That's been freeing.

Some of our money right now is going into renovating a house we plan to move into this summer. But even on that front, we've opted not to put a 2nd floor on and just keep it a single story. So... we had earmarked a lot of money for a 2nd story that we're no longer spending. We are GE people, not Viking kitchen appliance people, so we aren't throwing excessive money into the 1st floor reno. It's pretty basic.

It's a bit of a strange place to be. Earning money, saving money, and not being big spenders. I figure once the world opens back up we'll just throw a TON of money at travel? When I started working I trained myself not to increase my standard of living with every raise. DH has had a similar approach, and that has really set us up to be able to handle just about and financial hardship that might come our way.

I would juts give yourself permission to spend $ on wants more often, but don't go out of your way to increase your fun budget. Not unless you're already feeling tight in that department. We are saying "yes" to bigger ticket items... like a $350 grain mill when we decided we wanted it, vs. waiting until a gift giving occasion which is what we historically have done. But then we find ourselves without any wants when Christmas rolls around... So I'm not sure that's the way to go, either. Ha!

[wizardressofoz]

When I get an increase, I take the difference in take home and apply it to a mix of goals and wants. Example, my pay increased about $200 a month. I added $100/mo in savings across our Roth accounts, and then added $100 to savings accounts for efund ($50) and vacations ($50). I just try to not leave it in the monthly cash mix. I got a decent sized bonus this year, and put 75% to debt, 20% of it to savings, and 5% to vacation fund.