House poor!

[KTP]

I am guessing the OP is living a bit of a rich lifestyle aside from the house and such. I bet they spend $2000 a month or more dining out (we used to) and buy the latest gadgets (did that too).

We were grossing 200K and spending all of it, now saving 75K/year in addition to maxing out the 401K and two IRAs, so I know you can do it on 450K. I still see some fat we can trim from our own budget, but your budget must be like foie gras in comparison. You just have to want to do it.

[disneysteve]

We were grossing 200K and spending all of it, now saving 75K/year in addition to maxing out the 401K and two IRAs, so I know you can do it on 450K.

Exactly. We earn 1/4 of what the OP earns and yet we are able to save 25% of our gross income each year.

Ultimately, it doesn't matter how much you earn. It matters how much you keep. Earning 500K is phenomenal, but not if you routinely spend all or most of it. You could end up no better off than someone earning a fraction of that.

[wincrasher]

When you make alot of money it takes even more discipline to stick to a budget.

Quite often I save up big gobs of money in my savings account, then go out and buy things like cars, fancy trips, furniture, electronics, new suits, etc and then pat myself on the back for not buying on credit. It's much better to incrementally save in various accounts for various purposes so you don't end up short.

I'd set up separate accounts for your tax savings, college expenses, cars, vacations, household expenses, etc and try to manage your money that way. You may find it easier to keep it sorted.

I used to not be much of a fan of budgeting, but those were the days when there wasn't much to spend. Now that I've got real money coming in, it's harder to keep a handle on it - it always seems to find a place to go!

[disneysteve]

When you make alot of money it takes even more discipline to stick to a budget.

It is interesting that you say that as it is very true but something we don't hear about much. Most budgeting conversations revolve around people who are having trouble making ends meet on smaller incomes. Folks just assume that their financial difficulties would resolve themselves if they just earned more money. In reality, earning more often magnifies the financial problems. There is a lot more money to manage and it takes extra attention to manage it well.

We are doing fine but I often think that we could be doing a lot better. I know that we aren't nearly as careful with our money as we were when we earned less. So even though we are saving more than ever, we are also spending more than ever and that bothers me sometimes. We've done a good job of not allowing our spending and lifestyle to constantly grow to match our income but still there is room for improvement.

[KTP]

It is interesting that you say that as it is very true but something we don't hear about much. Most budgeting conversations revolve around people who are having trouble making ends meet on smaller incomes. Folks just assume that their financial difficulties would resolve themselves if they just earned more money. In reality, earning more often magnifies the financial problems. There is a lot more money to manage and it takes extra attention to manage it well.

We are doing fine but I often think that we could be doing a lot better. I know that we aren't nearly as careful with our money as we were when we earned less. So even though we are saving more than ever, we are also spending more than ever and that bothers me sometimes. We've done a good job of not allowing our spending and lifestyle to constantly grow to match our income but still there is room for improvement.

Once you do get a handle on things though and start seeing the money pile up it can get addicting to save. Also, at least for me, the need to keep up with my friends in "stuff" went away as the accounts increased, because I knew I could always go out and buy whatever they had if I so chose. A very specific case of this is my nephew, who was showing me his new Rolex the other day and making fun of my Casio. I pulled out an ATM receipt from our bank account and let him see the balance ($217,432.65). It shut him up. (In reality I am not so crazy to normally keep that much in there, but was in the process of moving money from wells trade account to Vanguard lol).

[NorthernCalGal]

I appreciate everyone's feedback. Even though we supposedly budget, I still couldn't believe we went through all that money. So I went through all the categories (thanks to Mvelopes - it is all right there) and printed a Spending by Month report and was shocked as to how much we spent on Vacation, Entertainment, and Christmas. There was a family wedding back East (and we added a trip to DC onto it), several concerts with expensive tickets and movies, and $3,000 on Christmas (not just my family but extended family gifts as well). Home maintenance - $7,000 - includes a computer and new mattresses for kids. And yes, food + dining out averaged $1900/month. Some medical bills (out of network), a dog surgery, it all adds up to big bucks.

This year we will be more frugal and knock out the credit cards - and see how things look at the end of next year

[KTP]

This year we will be more frugal and knock out the credit cards - and see how things look at the end of next year

Sorry but just saying you will be more frugal from now on is probably not going to work. You really have to take some big steps. One idea that would work very well is to take the monthly money and pay the recurring bills and a decent CC payment, then pay a saving account $4000 or so (your budget can afford it) then spend everything that is left. Spend it all if you want, but consider the $4000 as untouchable. A few months of doing this and you will figure out if you really want to eat out at that steakhouse for $300 or if you would like to have more than ham sandwiches for the last week of the month.

[jpg7n16]

Even though we supposedly budget, I still couldn't believe we went through all that money.

... was shocked as to how much we spent on Vacation, Entertainment, and Christmas.

... food + dining out averaged $1900/month.

I actually think these are good signs that something will change. The mindset is much different than the 1st post - and you're headed in the right direction.

Just think - cutting the food budget in half (you can do more than that, but just think) - that's an extra $12k/year. That's almost your 401k contribution (almost)

Some medical bills (out of network), a dog surgery, it all adds up to big bucks.

This year we will be more frugal and knock out the credit cards - and see how things look at the end of next year

Next year you also won't have the same college tuition (maybe). And medical bills don't happen every year. Dogs don't always need surgery.

Things can get much better very quickly if you critically think about your budget.

[NorthernCalGal]

I agree with you -- however there were very few steakhouse dinners in there (except if we went on vacation) -- mostly pizza, Baja Fresh, that kind of thing -- a few month's on Jenny Craig -- too much at the grocery store w/prepared foods, etc. Still, overspending is overspending.

I am going to move to the physical envelope method -- put in a weekly amount for the areas we overspend in and when the money is gone we look into the cupboards or freezer for food, movies at home, etc.

[KTP]

I agree with you -- however there were very few steakhouse dinners in there (except if we went on vacation) -- mostly pizza, Baja Fresh, that kind of thing -- a few month's on Jenny Craig -- too much at the grocery store w/prepared foods, etc. Still, overspending is overspending.

I am going to move to the physical envelope method -- put in a weekly amount for the areas we overspend in and when the money is gone we look into the cupboards or freezer for food, movies at home, etc.

A very good plan. We started out with the envelope method but eventually saving became a habit and we dropped it. I do find small things creeping in that we didn't purchase when we had to physically take money from an envelope, but it isn't bad enough yet to make us start back.

I still am a big fan of the pay yourself first or whatever they call it.

[cschin4]

I don't know why on your income you would have $60K in cc debt and only $10K in savings. Seems a bit off. I think you should pay that off and if you live within your means, i think you will be OK on the house.

[snafu]

If retaining the house is truly your over riding priority, would you consider reigning in all discretionary spending in the short term and being as frugal as possible for non discretionary expenses. Are you willing to create and follow a restrictive budget based on net income. It's important to first clear the $60,000. CC debt as interest is substantial. Next concentrate on 'balloon' payments' so that the house is no longer 'under water.' You will need the co operation of all family members who are likely unaware of your specific, short term problem.

[cschin4]

This thread just kind of proves my point of 'upspending', that no matter how much money you make and that making a more money doesn't necessarily make a difference because instead of buying $100K house you buy a $200k house and on and on. Instead of buying a used Chevy, you buy a new one, then you move up to a "better" brand like Mercedes and so it goes. There really is no end to it until you determine that at some point, good enough is just good enough and the idea of needing "the best" is just an acronym to get you to part with your money.

[LivingAlmostLarge]

NorthernGal, here's an interesting question. Can you live on $5k/month? According to your listed expenses it's running $13.3k/month. You say you make usually $18k/month. Can you live on that $5k and the extra checks go to debt?

If so then it's not a problem paying off the debt, etc. That is another thought? The house with that income is definitely keepable.

[zetta]

it's a great house in a good location and we have a 14 year-old special needs (moderate learning disability) child and envision someday having a live-in caregiver/housekeeper and maybe renting a room to another special needs young adult

Perhaps you could rent this room to generate some income? There are studious graduate and medical students, or folks who work in the bay area during the week and commute home on weekends that might need a place and wouldn't be a burden to live with.