Do you live with a budget in mind or how do you budget for the area where you live?

  • Posted by a hidden member.
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    Jul 09, 2010 7:32 AM GMT
    This is a variation on the thread posted by the person who can't stop spending money.

    Two things have happened recently that have made me think about how different people have different approaches to money.

    1. I live in SF and I have been thinking about buying a place in the bay area for a little while now. I was using an online tool to calculate the kind of mortgage that I could afford using what the web site called the "front end load" and "back end load" ratios (insert the obvious jokes here icon_smile.gif ) and I was surprised at the size of the mortgage that the calculator suggested I could comfortably carry. It was a lot larger than I would have thought or picked for myself.

    I tend to think of things in terms of what they cost as % of my take home salary. For example if I want to buy a big purchase, like a plasma tv or a a new car or take a trip I think ...oh that would be equal to X% of my take home or Z months of my takehome salary. I do this just to get a sense of proportion and this usually moderates or eliminates my desire to make the purchase. I try to live well below my means and save and invest the rest, so when I saw the calcuation of what the mortgage calculator suggested was a comfortable level of mortgage payment it was a big surprise.

    I could probably afford to live someplace nicer or buy a new car, but it just does not seem to make sense to me at this point.

    There was a point in my life where I spent more freely but I realized that having savings feels better than anything I could ever buy.


    2. The other thing that has happend is at work. I have had a conversation with some people in HR about trying to hire someone and meeting salary expectations for someone who has to move to the bay area to accept a job. Although prices have come down some, I still think the bay area is an expensive place to live.... especially for newcomers. People who have been here for a while (20 years or more) may have a house already and they don't always think about what the cost of entry is for a newcomer.


    So my questions to the forum are

    Do you budget using ratios or fixed dollar amounts so that you live well within or below your means? Do you keep track of your budget and are you following a financial plan? What are some of the ratios you use for housing costs, planned savings rate etc.

    Since this recession started I have reworked my plan to now incorporate the possibility of unexpected unemployment that could last more than one year. Some people I know have been out of work for more than one year and it does not look like things will change soon so I have upped my savings rate.

    Has the Great Recession encouraged you to save more in case of unexpected unemployment?

    Where do you live and what do you think it takes to have a comfortable middle class lifestyle in that area?. I am not asking what you make just what you think it would take for where you live. This relates to part of my discusion with HR. I think if we can't offer someone a decent lifestyle comparable to what they have now, they won't relocate to this area.

    For example, I think for this candidate (a 30 something married guy with two kids) to live comfortably in the city of San Francisco and raise a family we would need to offer over $200,000. $200,000 would be a lot of money in most places but its does not go far in SF when you factor in housing (as a newcomer) and the cost of private schools (his kids are in private school where he lives now). Someone would be comfortable but far from on the path to getting rich at that rate. If we offer something lower and he has to live further out to match the lifestyle he has now, the commute will be too long and he won't accept the job.

    What are things like in your area? What do you think the income levels need to be for a family of four or a single person who is not living with roommates?

    I have researched cost of living calculators online but I think its better to hear from people who actually live in those locations.


  • Webster666

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    Jul 09, 2010 8:27 AM GMT
    I live in San Francisco.
    What's the job ?
    I'd probably do it for HALF that salary.
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    Jul 09, 2010 2:21 PM GMT
    I do accounting, and my biggest splurges are book purchases. This makes keeping track of my personal finances much easier than it might otherwise be.

    Another way to think of the cost of something is to consider how long you'd have to work in order to pay for it. This obviously works best with an hourly wage, but it could be adjusted for other methods; "How many sales commissions would I have to earn to pay for X, and how long would that take me?"

    I've not given much thought to the direct costs faced by a four-person family, but those are probably dwarfed by the indirect costs of time and effort required to keep the children from painting on the walls, putting flammable objects in the oven, crashing the car, and so on depending on age; and of course there's the maintenance cost of the laundry, dishes, wear-and-tear and other required upkeep that dramatically increases as you add more people. And after all that, such a parent must be available at unexpected dates to deal with schooling, teachers, doctor's appointments, band practice...

    Being very close to my absurdly large extended family growing up, it was fairly easy to observe these demands in action regularly. On a wage or salary basis, all that time and effort would add up to be a substantial sum... well before actual cash changes hands.

    But back to budgeting... If you can't save 10-20% of your earnings, you're spending too much. Saving here includes paying off debt(the principal, not the interest alone!), reducing the stream of expenses required in the future, and your existing liabilities.

    It's also quite surprising when you break down the numbers how much little purchases matter. A couple that spends $2.50 every workday for coffee is shelling out $1,250 a year; that number is even smaller than the "real" cost though, because some or all of the sum could have been spent on debt payments, accruing interest, or acquiring a useful asset instead.

    Listing out what one's expenses actually were over the course of a week or so is very enlightening, especially given that one might not be inclined to think about all the little buys without being prodded. That's one reason using cash in a household system is so helpful... You can start a week with a set pile of cash for your irregular expenses, and physically see it change; especially every time you open your wallet.

    This went on longer than it should have. Ah well. Pay yourself first with a rate of saving, and adjust expenses to mach it, and you can't go far wrong.

    Webster666 saidI live in San Francisco.
    What's the job ?
    I'd probably do it for HALF that salary.


    We all need to do our part to reduce nominal wage-price stickiness. icon_biggrin.gif

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    Jul 09, 2010 2:37 PM GMT
    The online calculators and what you can get pre-approved for are usually much greater that what you can actually afford if you want to have a life outside of making mortgage payments. My last home purchase was for less than half of what my pre-approval was for.

    I don't devote percentages to spending, but definitely to saving. I try to bank 15-18% for retirement each year and blow the rest on fun stuff.

    Quality of life past 60 is always a question, enjoy it now.
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    Jul 09, 2010 2:53 PM GMT
    "Budget" is alien to my vocabulary. I just live as cheap as possible, eat only what my body needs, buy only what I need, and save the rest.

    I also live alone in a 2br duplex in South Florida on a $40K/yr salary...not much left to save once the basic bills are paid. But I have accumulated a well equipped workout room.

    As for buying property, this is definitely the time to buy. If I knew my job were stable, I'd buy...but my job right now is dependent on the stupid oil spill in the gulf. If that oil hits our beaches, I'm out of a job for a while because my job relies on tourism, and the rest of the aviation industry is still in a slump.
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    Jul 09, 2010 2:54 PM GMT
    I do a bi-weekly budget based on when I get paid.

    However, I'm now going to overhaul the budget items after two years of unemployment/underemployment. I just started back to full time on July 1. The first thing I'm doing is paying off debt I accumulated when I was unemployment or working part time. After that, my partner and I are going to create a savings plan so we can budget for any more unexpected unemployment or medical expenses, household repairs/improvements, and travel. My partner's an independent contractor and does not have insurance (but I'll be able to add him to mine soon).

    I'm not good at saving and I make impulse decisions when I buy things, but he's very good at keeping me in line.

    I give myself a weekly allowance that I can spend however I want, which actually helps me stick to a budget (since I don't feel like I have to watch every single penny).

    It's amazing how many free things there are to do in NYC and I try to take advantage of that as much as possible. I'm going to be much more frugal now having learned my lesson from sudden unemployment 2 years ago. NYC doesn't have to be as expensive as some people think.

    I've never thought of calculating the % of my take home salary; it's an interesting way of looking at it and I might start doing that. I definitely want to start living below my means. We are very fortunate to live in a rent stabilized apartment.
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    Jul 09, 2010 2:58 PM GMT
    We've always calculated using our net take-home pay. Calculating using gross pay before taxes is foolhardy and what financial institutions love to do.

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    Jul 09, 2010 3:08 PM GMT
    I've just started my first real job and my "salary" is 40,000. I'll need to double that within 5 years. I'm a big saver, so i try to put at least 1000 a month into my savings. I feel like that more than anything makes it seem like my income is a lot less than what it actually is. I feel i'll appreciate it in the long run. PLUS i use my savings for expensive trips and stuff so it works out. I still live at home with my parents so it's not that bad. The joy of being 23
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    Jul 09, 2010 3:09 PM GMT
    My partner and I are frugal. We have no outstanding debt, except for our mortgage, which will be paid off in 12 years. Our mortgage payment is about 1/4 of our take home (combined). We don't eat out all that much (about once every two weeks). As for purchases, if we don't have the money for it, we don't put it on credit. We just don't buy it. And it's the money in Checking, not savings. And when we get over a certain amount in checking, the amount above the threshold gets transferred to savings. The money in savings is sacrosanct.

    The cost of living here is extremely low. Upper middle class is mid-40k. We don't use ratios, we just base purchases on what we can afford. And need. We don't make hardly any impulse buys (well, okay, the Costco samples sometimes!)
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    Jul 09, 2010 3:23 PM GMT
    zarin saidMy partner and I are frugal. We have no outstanding debt, except for our mortgage, which will be paid off in 12 years. Our mortgage payment is about 1/4 of our take home (combined). We don't eat out all that much (about once every two weeks). As for purchases, if we don't have the money for it, we don't put it on credit. We just don't buy it. And it's the money in Checking, not savings. And when we get over a certain amount in checking, the amount above the threshold gets transferred to savings. The money in savings is sacrosanct.


    Lol, you described how we live.
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    Jul 09, 2010 3:35 PM GMT
    Do you budget using ratios or fixed dollar amounts so that you live well within or below your means? Do you keep track of your budget and are you following a financial plan? What are some of the ratios you use for housing costs, planned savings rate etc.

    - I use FIXED DOLLAR AMOUNTS as opposed to using ratios (housing, savings, expenses. This way, I know exactly how much it is
    - I use an online tool to monitor my budget and expenses
    - I NEVER CARRY CASH, which my boyfriend hates about me since EVERYTHING I buy is through my debit card so I can track it
    - I STRICLTY follow a monthly financial plan, call me anal, I made a spreadsheet of all of my expenses LOL



    Has the Great Recession encouraged you to save more in case of unexpected unemployment?

    - DEFINITELY, in these uncertain times you have to have an emergency fund that is separate from your savings. Normally, emergency funds should be at least 6 months worth of your monthly expenses (Food, Housing, Expenses, Utilities, et. al)


    Where do you live and what do you think it takes to have a comfortable middle class lifestyle in that area?.

    - I live in New York (Long Island, bout 40 minutes away), which actually is more expensive to live in than Manhattan. In the city, most people do not own cars. Therefore, people don't pay car loans, gas, car insurance, maintenance, et. al, which could be in the range of $500 - $1000, depending on what car you have and how far you drive. People in Manhattan just buy MetroCard, which if I'm not mistaken is about $80 something dollars a month, which surely beats owning a car.
    - Another thing about the NYC Borough is that their electricity is cheaper. I remember when I lived there, I used to pay $40-$60 a month. Long Island you can go as much as $200/month.
    - NYC is the 29th most expensive city (If I remember correctly), to live a comfortable life (being able to save, go out with friends, and just simply go around), if someone wants to live in Manhattan (where rent can range from $1,500, which is literally a shoe box up to well, sky is the limit), between $60K - $80K range is minimally ideal. $60K in NYC is equivalent to someone making $26,092 living in Atlanta.
    - But of course, if you are well verse with your finances, and live in the right neighborhood, you'll survive with $60K. And this is for a single person and no kids. If you're married, well, it's gonna be like your SF 30 yo something scenario.



    What are things like in your area? What do you think the income levels need to be for a family of four or a single person who is not living with roommates?

    - Utilities run about $300-$700 or more a moth (Cellphone, Electric, Cable/Internet, Gas)
    - Groceries can be as much as $200-$250/week
    - Rent for a family of four in a decent neighborhood ($3,000 - $6,000)
    - Day Care Per Child can run from $1000 - $2000 (so that's about $100,000 already for four kids a year!!)
    - Private School - $18,000 - $33,000 per kid per year
    - There are many things to consider but these things above are the things I can think of right off the bat.
    - I would say for a family of four, it has to be over $250,000. But there are some good public school districts in Manhattan that could be very helpful in saving money.
    - Or, they could live in Long Island where few of the best public schools in the country are located (but then again, those neighborhood tend to be very pricey, for example Cold Spring Harbor, NY, which has the best public school and is about half an hour away by train to NYC... houses cost around over $1,000,000. So do the math on the mortgage.



    I have researched cost of living calculators online but I think its better to hear from people who actually live in those locations.
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    Jul 09, 2010 3:41 PM GMT
    southbeach1500 saidOne very important thing you (and anyone contemplating purchasing a home) must be aware of is that President Obama is pushing for elimination of the mortgage interest tax deduction.

    Of course, if the Democrats lose control of either the House or Senate come November, we can rest easy as the mortgage deduction will not be eliminated.


    Up here we have no such interest tax deduction. And, when you sell your home 100% of any profit is yours, no tax.
  • Posted by a hidden member.
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    Jul 09, 2010 3:46 PM GMT
    Now now, curb your bitch.

    Here, go read something: http://taxprof.typepad.com/taxprof_blog/2010/06/ax-may-fall-.html


    ...and start a topic about it.
  • jmanorlando

    Posts: 205

    Jul 09, 2010 3:47 PM GMT
    Yes I live within a budget - My basic rule is always spend less than I earn.

    When buying large items - tv's, furniture, large appliances for home, etc... I make sure I have all the money today to pay for it now and then look for a deal where I can buy it now and pay it interest free for 12 months. (Since I have the money set aside - I know I can afford it.)

    Also I have done odd thing like borrow from myself to pay for something, like a new ac system for my townhouse. Basically, I took a loan from my savings and then pay myself back will interest in order to re-stock my savings. It is odd but my new ac saved me $800 a year and I paid myself a 5% interest rate.

    This may sound odd but it keeps me focused on maintaining and growing savings for the long term and budgeting wisely.

    As for living expenses: (rough estimates)
    For Orlando a good wage to live and enjoy life as a single person is $35-$45K. You may not live like a rock star buy that is:
    $1,000 for rent $450 car and $600-800 in govt. taxes a month which leaves $1,000 for everything else.

    For a family of 4 the household income should be $60 - $80K
    Note: that would include both parents working.

    FYI - You can live happily on less and on more, but the fact a person will except a job knowing what the salary is and it is up to them to determine whether they can except the offer or not.

    I recently looked at what the minimum is that I need to make a year to survive and it was just over $25K to keep my home, car, basic food and pay all taxes, I am thankful that I earn more than that and continue to save and invest.


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    Jul 09, 2010 3:48 PM GMT
    meninlove said Now now, curb your bitch.




    icon_lol.gificon_lol.gificon_lol.gificon_lol.gif
  • Posted by a hidden member.
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    Jul 09, 2010 3:55 PM GMT
    southbeach1500 saidOne very important thing you (and anyone contemplating purchasing a home) must be aware of is that President Obama is pushing for elimination of the mortgage interest tax deduction.

    Of course, if the Democrats lose control of either the House or Senate come November, we can rest easy as the mortgage deduction will not be eliminated.


    Alarmist!

    1) Most benefits of the interest deduction go to high-income households that would probably buy a house with or without it. Since lower-income people generally do not itemize deductions, they get no benefit from the tax code. So most of the subsidy goes to upper-bracket taxpayers, and politicians don't want to piss those people off. So the deduction will likely stay exactly as it is.

    2) The lender is already paying taxes on the interest, because it is revenue, so not allowing the deduction is kind of like the government double-dipping. That won't go over well unless there is some kind of credit that helps lower-income people achieve the American dream.

    3) There's nothing wrong with — and in fact it's the responsibility of — the government to review the tax code regularly, weigh pros and cons, look for alternatives, and be willing to change as much as leave status quo.

    Bottom line... the deduction isn't going anywhere.

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    Jul 09, 2010 4:18 PM GMT
    southbeach1500 said
    DjDorchester said


    Why don't you let the OP make up his own mind? I simply presented information for him to consider. You are trying to turn this into the usual RJ cat fight over taxes and politics.



    You mean you presented him misinformation to consider. I simply disputed it, you blockhead!

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    Jul 09, 2010 4:23 PM GMT
    southbeach1500 said
    DjDorchester said
    southbeach1500 said
    DjDorchester said


    Why don't you let the OP make up his own mind? I simply presented information for him to consider. You are trying to turn this into the usual RJ cat fight over taxes and politics.



    You mean you presented him misinformation to consider. I simply disputed it, you blockhead!


    OK, I'm gonna take the high road here and let you have the last word on this as this has nothing whatsoever to do with the OP but you keep wanting to turn this into Real Jock World War 783.

    So we'll let him make up his own mind.


    Of course, your tiny mind fails to realize that by typing your message you were NOT letting me have the last word on it. Not much of a high road! So here's another opportunity to let you take it. Go on now... get on the high road...

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    Jul 09, 2010 7:29 PM GMT
    1. Fixed dollar amounts. My rent and phone bills are always the same, and my electric is usually the same, give or take $15 depending on the AC. Groceries and such are pretty set as well... any food I buy for parties and such comes out of my 'fun' money stash.

    2. No. I've been paying back medical bills for over 2 years now, so I haven't had funds to save. Those are nearly finished, and when they are I'm going to be putting away what I was paying on those into savings until I have at least six months of living expenses built up.

    3. I live in Lincoln, Ne. I pay $300/mo for an all electric one bedroom apartment near downtown and shopping. This city is amazingly inexpensive to live in. I'm technically below our states poverty level, but I wouldn't know based on how easy it is for me to get by.

    4. As far as a family of four, I'd imagine they'd need around double my income. If I pulled in another 3K a year I'd be well off for a single person here.
  • Posted by a hidden member.
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    Jul 09, 2010 7:49 PM GMT
    Wow - this got off topic very quickly.
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    Jul 09, 2010 8:24 PM GMT
    When I was younger, I was dreadful with money. I always wanted more than I could afford and I was always overdrawn at the bank. One sensible thing I did do (at 26) was buy a property. I struggled financially and spent 4 years renovating it, but it has set me up for life.

    Fast forward to now. I save about 65% of my monthly salary. I will be leaving the armed forces in a couple of years time, debt-free, with a home, savings and a pension.

    It can be done.
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    Jul 10, 2010 12:59 AM GMT
    I think I save more than most people. Approximately 14% of my income goes to 401k and IRA and I TRY to put 10% in an emergency savings fund. But a lot of you guys seem way more disciplined than me when it comes to saving.

    I used to think that having 6 months worth of emergency living expenses put away was plenty but with the way the economy is right now and some folks being out of work for well over a year, I'm really rethinking that. I currently have just under 12 months worth put away and think maybe I should aim for 18 months but maybe that is overkill. After all, we still have to enjoy today.

    One of the best things I think I did was to switch from a 30 year mortgage to a 15 year mortgage. It hurt a bit at first getting used to not having as much discretionary income around but I sure am looking forward to, hopefully, having the house paid off by the time I'm 50.
  • jrs1

    Posts: 4388

    Jul 10, 2010 1:12 AM GMT
    Rodmramer said
    meninlove said Now now, curb your bitch.
    " haha. "

    ... too funny.
  • Webster666

    Posts: 9217

    Jul 10, 2010 1:23 AM GMT
    southbeach1500 saidOne very important thing you (and anyone contemplating purchasing a home) must be aware of is that President Obama is pushing for elimination of the mortgage interest tax deduction.

    Of course, if the Democrats lose control of either the House or Senate come November, we can rest easy as the mortgage deduction will not be eliminated.


    PROVE IT.
    OTHERWISE, YOU'RE A LIAR.
    BESIDES, THE PRESIDENT HAS NO POWER TO ELIMINATE THE MORTGAGE INTEREST RATE.
    SO, YOU ARE A LIAR.
  • Webster666

    Posts: 9217

    Jul 10, 2010 1:25 AM GMT
    southbeach1500 saidOne very important thing you (and anyone contemplating purchasing a home) must be aware of is that President Obama is pushing for elimination of the mortgage interest tax deduction.

    Of course, if the Democrats lose control of either the House or Senate come November, we can rest easy as the mortgage deduction will not be eliminated.


    The President has no power to eliminate the mortgage interest tax deduction.
    That makes you a LIAR.