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How the heck does anyone afford anything?
So, I want/need a new (used) car. Considering how much DH and I make combined, it seems like we should be able to afford it. We also want to move into a rental house, which, it also seems we should be able to afford.
OK, so we don't keep track of our expenses and well as we should. That's probably the problem. I bet we COULD afford BOTH of these things and still be able to save if we payed closer attention.
I guess I'm just confused as to how families who earn a lot less money than we do afford the whole sha-bang: house, cars, kids, pets, vacations, retirement.
I just don't know how they do it! We make a decent amount of $$ and we are struggling to figure it all out.
Like I said, I guess we should pay closer attention to our finances and maybe talk to a financial planner, but sheesh.
Anyone else feel overwhelmed about $$?
Re: How the heck does anyone afford anything?
First of all, try not to assume that other people can afford what they have. SO many people/families are drowning in debt to be able to have things that they basically can't afford.
You need to sit down and figure out where your money is going. Check out the Money Matters board, those ladies are awesome with budgets, etc. There is a website called Mint.com where you can keep track of all your finances, it is awesome. Basically you link all your money sources to it (your bank accounts, mortgage, student loans, car loans, credit cards, etc -- it is very secure), and it tracks everything for you. Then you can go back and review what categories your money is going into. The only things it doesn't track are purchases that are made with cash (you can enter that manually though). It's been pretty eye-opening for DH and I to see what we're spending money on. For example, do you eat out a lot? Do you shop a lot? Most people (myself included) bleed money all over the place and don't even realize they are doing it because it's just a few dollars at a time.
To start, you can always just make a list. Write down EVERY habitual expense that you have, from rent to cars to student loans to groceries to gas, etc. Even things like gifts for other people or your morning coffee. Don't forget expenses that you incur less often like insurance, any membership dues, car maintenance etc. Then list your take-home pay, and see how the two match up.
So TRUE!!! Without giving too many details, I know of a family you lives in a "million dollar" home in Florida, but has maxed out all their credit lines in order to "afford" the house and keep two kids in college . . .all on ONE salary . . .
Like mardoll10 said, take a look at your bills and your expendable income. I created a spreadsheet for each month. Since I get paid biweekly, I take out half the money to pay bills from each paycheck so that I have a little left over for other things (e.g. - For a car payment of 214.00, I take 107.00 from the first paycheck, and then another 107.00 from the next. Since my car payment is due at the end of the month, and I use autopay, I just leave that money in my accounts and considered that money already spent). I also created a couple different savings account to save up money for things like travel, Christmas gifts, car stuff, and medical stuff. Once I got in that habit, I found that I can still have a little money to spend on things like coffee or clothes, but still have money to go towards bills.
The answer to all your problems is in one word:
CREDIT
You should definitely get a realistic budget and stick to it to help you track costs. If you go see a financial planner, the first thing that they will ask you for is your budget. If you don't have one, you will essentially be paying someone for a year to help you do something you can do on your own in an Excel spreadhseet. There are a lot of FP making tons of money off of people just by helping them do budgets.
I don't think I can add anything to Mara's response (its quite MM worthy!)
Its amazing how fast little things like lunches out or coffee/snacks can add up. And, I don't know about you, but for us gas has been a substantial chunk of our monthly budget. Mint can be a great resource for helping you understand where its all going.
Yeah, I completely agree with Mara. I think the best thing you can do for yourself is to just start tracking your purchases and to create a budget. If you can get a handle on where your money is going it makes it a lot easier to figure out where you need to tighten the budget.
Just don't worry about what other people are spending money on. Figure out what your goals are and work towards those. Some people just have different priorities.
Serendipity3, South Beach, Miami, FL 2012
Like others have said, the most important thing to do is create a budget. I guarantee you'll be shocked at how much you spend on certain categories that you never thought of. Just a few dollars here and there really add up. We sat down and made a list of all of our monthly expenses (house, cars, phones, electric, etc.) Then we took a look at what was left and decided on a budget for a few things after that, such as a "grocery/household expense budget" and an "entertainment budget." We also have a category for our charitable donations and our own personal spending money that is a percentage of our income. Obviously Savings is most likely a category in here as well.
Everytime we make a purchase I keep track of it on the Excel sheet and when we've "maxed out" a certain category (i.e. entertainment) for the month... we just stop spending in that category! If I don't have any "fun money" in my account for myself, then I don't buy the shirt I want. It's obviously a matter of being disciplined, because it's so easy to just whip out a credit card and buy what you want, but it can be done.
I wouldn't try to compare yourself to anyone. While there are obviously lots of people with beautiful homes and such that are responsible with their money, I know of people who live in expensive homes and drive pricey cars who also use a bridge card to buy groceries. It doesn't make sense, but basically you can never really know what other's financial situations are.
We are just super frugal and meticulous savers. I think I was born cheap or something. We don't have a budget since some of our income tends to fluctuate, but having things in place like automatic withdrawals for savings, not using credit cards and such helps out a lot. We honestly don't make that much money, but we also don't spend a lot. Really question everything you think you need and decide if it truly is a need. I don't feel like I'm missing out on life because I don't go to Starbucks or whatever. We'd rather spend our money on bigger quality items rather than lots of fluff.
Thanks ladies! Again, you all are so helpful! I'm going to take a deep breath, start tracking where the money is going, and go from there.