- getting myself out of debt,
- then getting out of debt again…,
- selling and buying houses…
My life hasn’t been simple (and to be fair, the average life isn’t!), but yet again I find myself in a new life stage – now it’s the one where I think about funding private school, college, my retirement accounts, and health savings accounts… Since you might be making this transition as well, I thought it might be helpful to open our kimono a bit and share with you how we spend our money…and perhaps how you should too!
How We Spend Our Money…And Why
I wrote an article a few years back now. It was titled, “How Much Should You Spend on That?” It was all about how you should spend your money if you want to become (and stay) wealthy. AND, it came with an awesome spreadsheet that thousands of people have now utilized to right-size their spending and better align with the rich budget instead of the broke budget (that would keep them down financially for the rest of their lives).
Back then (pre-kids), my wife and I were doing an awesome job with our money. Our house was fully paid for, we had just bought a rental house with cash, and we were saving rapidly for the next rental. Life was good and our future was looking bright.
…Since then though, I feel like we’ve stalled a bit.
- Our 2nd rental house turned into a flip house (long story)
- We sold our primary house (instead of turning it into a rental property like I had always envisioned)
- And, we bought a bigger house on more acreage (ie. a much pricier property…)
So, instead of having three rentals and a paid-for house in the country a few years down the road. We have now found ourselves with just one rental and a paid-for house. Still good, but is it good enough? Are we still budgeting like the rich or have we found ourselves spending more like the broke budget?
I wasn’t so sure…
We really needed to get real with how we spend our money…
Re-Checking Our Spending
So, it was time to check myself!
- I re-downloaded the spend comparison spreadsheet tool (download it with me, it’s kind of fun!)
- I reviewed our spend over the last year and put it into Excel to figure out our spending by month
- Then, I plugged those numbers into the spend comparison report!
After taxes are deducted from our income, Liz and I earn approximately $7,500 a month (this number is way bigger than I expected to see – mostly because of the rental and blogging income). The above image is exactly how we spend our money.
- We save pretty heavily for:
- Retirement (10%)
- Health Savings (6%)
- And, private schooling for our two kids (42%!!) – we’re trying to save up for the cumulative $200k bill that’s coming our way over the next 17 years.
We have no mortgage (the dollars in the sheet are for insurance and property tax), no car payments, and have pretty frugal habits besides. While it sometimes feels like we’re living paycheck to paycheck these days, it’s simply because we’re saving/investing 58% of our income, which is in fact, a much larger amount than the rich budget!
How The Heck We Save 58% of Our Take-Home Pay
At this point, I realize some of you may be asking,
“What???! 58%? You can put more than half your income toward savings?? How in the world do you do that?”
Well…it didn’t happen overnight.
About 11 years ago, I stared at my then-wife like a deer in the headlights… We got yet another bill that we couldn’t afford – our student loan bill. We were going backwards financially and I was sick to my stomach…
Long story short, I did everything in my power to get out of debt and stay out of debt forever. Never again was my life going to be dictated by someone else – the banks, the credit card companies, the car dealerships…NOBODY!
- I took on extra jobs
- I started a blog
- And, I worked my butt off in corporate to work my way up the ladder (and receive substantial pay increases)
- started driving crappier cars that I could actually afford
- I bought a house that I could pay off in just a few years
- And, I continued to live frugally even long after getting out of debt
Now today, we still live very frugally. We rarely buy new clothes, we take only one vacation a year, and we do a bunch of free stuff for entertainment (because it’s still fun!). And, because we choose to live this way, we CAN save up for retirement. We CAN put money into our HSA account, and we CAN put our kids in private school.
The Future For Us
The next question we’re asking ourselves is, “What’s next?” What happens after we’ve saved up for the private school education? Then what?
We haven’t discussed this at length yet, but I imagine we’ll…
- Max out the 401k each year
- Start saving up for another rental house
- Put money into a non-retirement investment account (in case I decide to retire early)
- And then give away a lot more of our time and money!
We have worked our butts off to get to where we are today, but we’re also very blessed. Some people work extremely hard every single day, but because of their past, their color, their location, their disabilities, or whatever the case may be, they just can’t get ahead. It’s unfortunate, but it’s a fact.
We were fortunate enough not to have any of these uphill battles. And you know what, we’re capitalizing on it! Let the savings continue!
What is Your Current (And What is Your Future??)?
Alright. We opened up our financial kimono and showed you how we spend our money. Now it’s your turn to check out where you’re at.
- Do you have a broke budget?
- Or do you have a rich budget?
Check out the original post here and download the Spending Comparison Spreadsheet. Enter your budget items by line to see how you compare!
…seriously, go do it, then come back here after seeing your results.
Now that you know how you measure up today, what are you going to do to make sure you have a brighter future tomorrow?
- Sell your new car and buy a used one?
- Sell your house and get one that actually fits in your budget?
- Cut down on your restaurant spend and bring your food bill back in line?
- Start paying down your credit card debt by using the debt snowball?
Or…will you do nothing and live the same old paycheck-to-paycheck lifestyle year in and year out…for the rest of your life…??
It’s your choice.
For me and my family, we choose to save and invest for our future. And you know what? I don’t think we’ll regret it!! 🙂
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.