60016 - What do you wish you had saved for?

[Dragon Lady]

Laser Jock and I actually randomly talk about this. Mostly when I'm doing my finances and I'm annoyed at money and he's online to whine to. I'm pretty sure that's where he got his idea he mentioned to save up for a house.

Seriously, folks! Paying cash for a house would be the most awesome thing ever! I never even considered this idea until about a year ago. I mean, really. Who pays cash for a house? I had never, ever heard of anyone doing such a thing. In my house, it was known that everyone gets a mortgage. It's a law or something. Because everyone does it. About a year or so ago I was reading a frugality blog (because we were hoping to buy a house on a grad student income and needed to be super frugal) and in one post she announced that they were close to having the money saved up to buy a house. In cash. And I was like, "Whoa. That's awesome!" But then I promptly forgot about it, because certainly that was an anomaly and I couldn't do that, right?

Well, Yellow and I bought a house. (Well, a condo.) And we got a mortgage. Because that's what people do. And we got looking at how much we'd pay in interest and were sickened greatly. And we have a really low interest rate! So even though Yellow had gotten a full-time job and we were living off that instead of a grad student income like we had thought, we decided to pretend like we were still grad students. If we never got used to having the big bucks, continuing to live like a pauper wouldn't be so hard. Simply by doubling our monthly payment, we reduce our 30-year mortgage down to 7 or 8 years. All because we'll be paying less interest. Then Yellow got a raise. So we put the extra money we got straight to mortgage. That knocked off another 1.8 years. And I'm starting to realize that it might actually be possible (though probably not probable) to pay off our condo completely before we outgrow it and move. And if we moved somewhere small and cheaper than what we sell for, we could actually pay for our next place in cash. IN CASH! And then if we payed ourselves our typical mortgage payment and earned interest on it instead of paying it, it wouldn't take very long before we could sell again and pay for a much nicer, perhaps permanent house IN CASH.

Now what I wish I had done? Started saving for a house a long time ago. For example, when Yellow and I first got married, I was working full-time and he had a student income. And our rent was half of what our mortgage is now. Or, in other words, with approx. the same income we have now, we were paying 1/4 the amount on rent then than we pay on our mortgage now. (Cuz remember, we pay double our mortgage payment.) If we had figured out how much we actually had in our budget then, we could have been saving 3/4 of what we pay in mortgage now. And in that 10 months before we bought our condo, we could have saved up 30 months of our minimum mortgage payment. That's 2.5 years worth of minimum payments. Or a17% down payment. As it was, we barely scraped up 3%. Now imagine how much bigger that would have been if I had started saving when I was single? Especially when I had a full-time job? I mean, I didn't get married until I was almost 25. I started college at 17. I started working at 16.

Ok, I'm not saying I wish I had lived as a pauper for those 9 years, not enjoying my teenage and college years. Not at all. But I'm pretty dang sure I could have been a lot better about handling my money. Even if I just did what my mom had taught me to do with my money. 10% to tithing; 50% to savings; 40% to myself. And even when I stopped getting scholarships and Pell Grants and had to pay for all of that myself, even if I had only put 10% into savings I would have been SO MUCH BETTER OFF than I was.

Also, I wish I had kept my grades up and kept getting scholarships so I didn't have to take out loans to pay my tuition. Or would have better managed my money so that I wouldn't have thought I had to take out loans. Because paying off student loans sure puts a damper on saving up for a house.

Ok, it must be near bedtime. I'm hitting verbal-spewing mode. Made even worse when I'm on a soapbox.

Just… just… save money. K? Even if it's not for a house. Just make sure you make a habit of saving money.

Please?

[Laser Jock]

Laser Jock and I actually randomly talk about this. Mostly when I'm doing my finances and I'm annoyed at money and he's online to whine to. I'm pretty sure that's where he got his idea he mentioned to save up for a house.

Yep, I never would've seriously considered saving up for a house in cash were it not for Dragon Lady. Though I have another friend who's single and has a very good job, and she's also saving up for a future house. I think it's a great idea.

[Tao]

I've a friend who took a similar approach to buying a car. Upon arriving at college, he went and found a used car that fit his needs and tastes and worked out the monthly payments he'd be making. He then set up a dedicated bank account and began making payments, while biking to school. After a couple of years, he was able to buy a newer used car with the cash he'd saved and, since he had just bought a new car, started making payments on it. By paying himself he earned interest instead of paying it, and was in a better position to dicker over prices when buying cars. (Apparently paying cash is less of a big deal to car dealers now, he claimed on his first couple cars he was able to finagle deals in the range of 25-30% off of the 'final asking price' just by mentioning that he was paying in cash. Now, not so much.)

I'd not considered the same when thinking of buying a house, it feels very far away yet. Also, my job opportunities have not yet reached home-buying potential. It seems like it'd be very advantageous, and it is good to hear of your good fortune DL!

[bobtheenchantedone]

I used to be really good about saving money. I paid for my own braces, am responsible for all my school money needs, bought myself a scooter, let my parents borrow my extra hundreds, all sorts of stuff. Somewhere, though, that went down the drain. Now I'm excited to have $170 in the bank, and that's all going to be used for taxes and tithing so it's not even really mine. Though saving money would be much easier if I had a regularly-paying job...

[Craig Jessop]

I save between 10-25 percent of every paycheck. This is the plan my mom taught me, and it's also the plan taught by Dave Ramsey, financial planner. It's pretty much awesome, very conservative, and following it has made me financially secure. My parents, too. I HIGHLY recommend it.

http://www.daveramsey.com/new/baby-steps/

[C is for]

Yeah, it's time for me to start budgeting (now that I'm actually about to start getting paid!). In college I would just save everything but spend whatever I felt like on groceries, gas, and rent. (Usually I "felt like" spending exactly $255 on rent each month.) And that was good, but I need to start budgeting for actual real-life expenses. Like a house that I may someday live in.

[Darth Fedora]

Some people, who have an investment opportunity that makes more money than paying interest on their mortgage costs, deliberately delay paying off their loans so they can keep that money invested somewhere more profitable. I don't know how common that is, but I have heard of it being done.

[Craig Jessop]

(Usually I "felt like" spending exactly $255 on rent each month.)

I wonder what would have happened had you felt like paying something different?

[mic0]

Hey, since we are talking about this, I have a question for you all. My boyfriend does not think having a savings account is a good investment because the percent you get back is so small. I tried explaining to him that it is a long term, secure investment. Does anyone know what I can tell him to understand why saving is such a good idea?

Maybe it's an American/Mormon thing. My parents taught me to save, so I always put a percentage of my paycheck in a savings account. I'm glad y'all are so money smart, too.

[thebigcheese]

Hey, since we are talking about this, I have a question for you all. My boyfriend does not think having a savings account is a good investment because the percent you get back is so small. I tried explaining to him that it is a long term, secure investment. Does anyone know what I can tell him to understand why saving is such a good idea?

Oh gosh, I've heard all about this because my husband is a financial planner. A savings account is not a good investment if you're saving for like, retirement or something. Over the long term, there are better ways to invest your money that return a much higher yield. For example, the stock market can be a secure investment, if your investments are diversified in a lot of different companies across a lot of different industries. There are also other ways of investing that help you pay less taxes on your money over time, but I don't know what they're called. So...your boyfriend is kind of right about this one, at least in terms of long-term savings. Since the interest is so low, a savings account is best for your shorter-term savings.

(If you want any more details on that, I'll have to ask my husband because this isn't my area of specialty at all.)

[thebigcheese]

While I'm on the financial planning bandwagon...everyone should get life insurance when they get married, and especially when you start having kids. Convertible-term life insurance is the way to go!

Okay, I'm done.

[Dragon Lady]

mic0, agreed. Savings accounts aren't the best way to go long-term. You want one so you can have easily-accesible funds, or if you're saving up for something short term. I would even suggest having a savings account with enough money to get you by for 6 months, just in case. (Dave Ramsey will tell you that, too.) But for long term, go for something else. Yellow and I each have a mutual fund and a 401K. Stocks can also be good, if you're financially savvy like that. (I'm not. Someday I will be, but right now, I'm not.) If you want to be safe, I'd definitely recommend a mutual fund. Find a broker that is with a reputable company (we use USAA and Edward Jones) and have him explain what is what.

And yes, I agree with thebigcheese. Get life insurance!

[Marduk]

Just for the record, generally money market>savings account, since that will still allow you access a few times per month, but generally has a much higher yield.

[mic0]

You would think that since my dad is in the energy bond industry and I grew up hearing about mutual funds I would know better Oh well. Thanks all, this is good advice.

[vorpal blade]

I think we pretty much did as Dragon Lady suggested. We saved up enough for a down payment on a house. After three years of marriage we bought a house and lived cheaply like we were still in school, paying off as much of our loan as we could. In those days the interest was about 9 or 10 percent. I think it took us 11 years to pay off our loan. By then we had six children. A couple of years later, just before our last child was born, we bought a bigger house. We could have bought the bigger house with cash, but decided to keep some money for an addition to that house. A couple of years later we decided against the addition and paid off our loan. It has certainly been a blessing to owe nothing. Now we save up the money before we buy anything, including a car. In 36 years of marriage I've bought just two cars, one was previously owned when we bought it in 1986, and the other was new when we bought it in 2002, after 27 plus years of marriage. I still have both of these cars.

[thebigcheese]

One question I have for Dragon Lady...when you talk about living like a grad student, what does that mean exactly? Are you one of those crazy coupon ladies? Do you buy off-brand products? Are you one of those hardcore make-everything-from-scratch people?

I just always wonder what people mean when they say they're living more cheaply. For example, my old bishop's wife taught us how to make our own laundry soap, which I thought was kind of extreme. I also saw a video about the "cheapest family in America"--a family that buys all their clothing from thrift stores and buys almost-expired beef, which they grind at home because it's cheaper than buying ground beef. But I know that everyone has different methods and I'm curious about yours, since you mentioned it.

[Dragon Lady]

First, who taught you how to count to one?

Second, I can interpret your question two different ways, so I'm going to answer both.

1. What do I mean by living like a student? I mean, when Yellow got a full-time job, and quadrupled his student income, we continued living like we were only making something like 12K a year. (I don't actually remember what he made at BYU as an undergrad.) Sure, we paid more in a mortgage instead of rent, but in other aspects, we pretend we didn't suddenly have four times the extra money. Instead we put all the extra money towards paying off my student loans, building up a six-month savings, and then we put all the extra towards mortgage. We did allow ourselves some extra spending, however. For one, we started paying for life insurance. We also started paying ourselves a little each month so that we each have personal money to spend however we choose. I finally bought all the ridiculously expensive Harry Potter audiobooks so that my iTunes is finally 100% legal. I had to do it over the space of several months, but I was able to do it. It was really nice. Especially since I didn't have to feel guilt about ruining our frugal budget to do so.

What we didn't do was go spend all of that money on cool new toys. We didn't buy a new car. (We eventually did because we had been paying ourselves a car payment, so when our really old car's A/C broke at the beginning of summer, we took whatever money we currently had saved up and bought a new-to-us car.) We didn't go buy all the movies, books and toys we had been wanting. We didn't start eating out every night. We didn't buy season tickets to Hale Center Theater (even though we really wanted to. Still want, actually).

So, in a nutshell, get a bigger paycheck (non-student), live like you still have the smaller paycheck (student), put the extra money towards savings or debt.

2. How am I currently living cheaply? Well, I did the couponing thing for awhile, but decided, at least in that stage of my life, it wasn't for me. I've always bought off-brand products. That's nothing new to this lifestyle. I do make a lot of things from scratch, though mostly for the knowledge of how to do something. (I think part of being prepared for an emergency is not just the food in your pantry and having a 72-hour kit, but also having the skills for surviving without access to a grocery store.) So I know how to make bread, but that doesn't mean I always make bread. I think someday I'll try making my own laundry soap, actually. And not just for frugality, but also so I know what's in my laundry soap. Natural stuff, not a bunch of chemicals. (Yes, I'm also kind of a hippie. ) I don't buy clothes from thrift stores, but then again, I don't often buy clothes at all. I hate, hate, hate shopping (my body shape is a bit unusual) so I rarely buy new clothes. Instead I'm still wearing many of the same clothes I've had since beginning of college. Some from high school. So if I buy one or two new shirts every year or two, I figure it's ok. I don't buy beef at all. But that's because my parents are beef farmers. Lucky break for me.

So now that I've covered everything you specifically mentioned, I'll tell you some of the main things I do to save money.
- I cloth diaper. I bought the higher-end diapers (bumGenius) which means I had a much higher up-front cost, but by the time Dragon Baby was about 9 months old, I was diapering for the cost of laundry. Which, even if it cost me $10/month, I'd still be saving $30-40 every month off disposables. And whenever Baby #2 is born, I'll already have diapers I can use, making it even cheaper. (Though, I'll probably buy a handful more, just so I don't have to do laundry daily.) Yes, I do still buy disposables. In bulk at CostCo. She's a heavy wetter, so we put her in a 'sposie at night. And when we go on trips we use 'sposies. And if someone is babysitting her who is less than comfortable with cloth, we'll take 'sposies. So I don't save as much as I could, but I figure sometimes convenience is worth it.
- I grew a garden this summer. We ate for dirt cheap all summer (though I'm sure Yellow was sick of squash. ) and I was able to can a lot of food for the winter. I've done pickles, spaghetti sauce and beets from my garden. I did beans, spaghetti sauce, and… I'm sure there was more… from my mom's garden. I bought peaches and pears and apples from Allred's orchards and canned all that. (The apples were for apple pie filling. Maybe next time I'll do applesauce?)
- I plan my meals in advance and try to incorporate all the produce I buy. If I buy a head of lettuce for salad one day, I try to plan other salads or sandwiches so that I use the whole head. I don't always succeed… but I try. I also plan my meals around what's on sale at the various stores. Yes, I actually look at the ads they send out. And if they have a great deal (1 lb. of strawberries for $1 or less, for example), it's quite possible I'll buy a bunch and freeze it.
- I take advantage of case lot sales. I know I use a lot of cream of mushroom and cream of chicken. So when I'm running low and a case lot sale comes around, I'll buy a case of both.
- When we do splurge and go out to eat, we use coupons. We eat at Arby's a lot (well, a lot of our eating out is at Arby's). But we can easily feed both of us for $4 (plus tax) using coupons.
- We rarely go out to movies.
- We have free babysitters (love family. Love them!)
- Our dates are often cheap or free. (This month, Orchestra on Temple Square!)
- Yellow works a second job (programming for the iPhone) and all the money we get from that (post tithing and taxes) goes towards everything outside the budget. Sometimes fun, but mostly practical things that our budget doesn't allow. Like a new washer and dryer. Getting our piano tuned.
- Back to food. When I'm really feeling domestic, I'll buy a whole chicken, boil it, shred the meat and and freeze it (I love having chicken already shredded when I go to cook!) then save the broth and freeze it, too. For about $2-5, I can have tons and tons of broth and chicken in my freezer. Much cheaper than buying the equivalent from the store. Healthier, too. (Have you ever looked to see how much salt is in chicken broth?) Also, you develop skills to live without a grocery store. (Well, if you have access to chickens when the stores are gone, that is. )
- And this may sound funny, but we try to give to charities as often as we can. I love Kiva because the money I give is returned and I can use the same money again to help someone else. My money is recycled. We also give to the various funds on our tithing slip. We just treat it as a bill in our budget. I firmly believe that if you are charitable, especially when money is tight, it's ten times easier to live within a strict budget and to manage money. There's a scripture in the BoM that basically says that if you desire money with the intent to do good with it, God will bless you with it. That doesn't mean you'll get rich. But that does mean that if you desire to give charitably, you will always have money to do that. Always. Even when you're a super poor college student.

Ok, so that was another novel. And I'm sure there is more I can add. But does that answer your question?

[thebigcheese]

That was fantastic. Thanks.

Since I just got married a couple months ago, I've been learning about all the different ways to save money and trying to figure out which ones would work well for us. I'm not particularly domestic right now, but I could be if I sat down and learned a few things, like how to make bread. So far, we've saved money by buying all of our furniture used on KSL (except the bed). We also started doing this co-op every other week for cheap produce. I've started reading the grocery ads and keeping my eyes peeled for other coupons. And we're always trying to find ways to make money on the side (like selling stuff for his brother's business).

So, for being two months into it, I think we're doing pretty good. We're not grad students, but we're both sort of thinking about it. We're also thinking about all of the massive expenses looming on the horizon. We need a second car. Someday we'll want a house. Someday we'll have kids. Someday we'll want to go on fun vacations and not put ourselves in debt for it.

Also, one other thing I was just thinking about...along the lines of going on free dates. I think it's important to invest in your hobbies. There are a lot of things that require an initial investment, either big or small, but they're mostly free after that. Since we have bikes, fishing stuff, camping stuff, tons of sports equipment, books, and board games...we don't really need to spend a lot of money on dates because we're sufficiently entertained by the things we already own. I consider that a smart investment, as long as you don't go overboard with it.

[Dragon Lady]

Yeah. Hobbies. Yellow programs, so he needs (or strongly wants) the newest toys to program for. Like an iPad. Or we're looking at upgrading our iPod touches so they'll have a camera to make testing a billion times easier. Huge expenses. (Though, we're working on doing the iPods for free or dirt cheap.) (Also, he does a pretty dang good job of making up for it monetarily by writing said programs and getting paid for them.) We both like to read, so we frequent the library. A lot. And we do invest in the books we know we're gonna wanna keep. Even better when we get coupons for 40% off Borders. (Meaning Yellow just got the newest Wheel of Never Ending Time book (the one that came out last year, not the one about to come out) in paperback for about $5.50. Woo! I like to crochet, so I've been learning new things on all my old, cheap yarn, then buying new stuff when I have a 40% off coupon to Roberts or Michaels. And often I use my personal money for that.

Oh! I should have mentioned Freecycle. We clothed Dragon Baby for her first year for free with that. And let me tell you, that's a lot of clothes. Babies grow so fast! We also got matching nightstands and a hide-a-bed couch for free on there.

If you ever want to learn things like making bread or whatnot, let me know and I'd be happy to teach you. I'm no expert, but I can do it.

[Craig Jessop]

I think this a topic DL is passionate about...