I’ve had a lot of questions about how we manage our money and how I can shop so much and not be in major debt or in the poor house (is there such a thing?) We are by no means rich, but we are really careful with how we spend and save our money. We have been living on one income for the past five years. Before that I taught elementary school (and barely made minimum wage, but that is a post for another day…)
We have made every income since we moved in together 11 years ago and have lived comfortably on all of them. Looking back on the beginning of our life together I don’t know how we lived on so little, but it didn’t seem bad. I guess we just get used to what we have at any given time. Below are some ways that we live (practically) debt free!
1) We don’t have any credit cards. This is not all on purpose! We keep meaning to get one in the past to use for household management and get rewards or money back, but never have. There just really hasn’t been a need for it. Everything we buy is with a debit card and if we don’t have it in the account we don’t buy it.
The only thing we have done in the past is to get a store credit card for a certain big ticket item and then pay it off with tax money and cut the card up. Last year we purchased wood floors for the house and got a project loan. The floors were installed in December and the loan was paid off in full by March.
2) Tax money. This is big for us. Every year we earmark what the tax money will pay off. We get an obscene amount back (this ramped up after having two kids) and we use this for debt pay off, college accounts for the kids and trips. We don’t adjust the money taken out each month because it is easier/less tempting to have this large tax return than to have more in a paycheck each month.
Our first 7 years or so of returns went primarily to school loan payoff and car loans. That is the debt we had and we wanted to get rid of it. In that time we paid of $35,000 in school loans and two cars. Since then we have traded in a car and paid off my new car, so we currently have no car payments. Most of my grad school was paid for in cash and I only took out one loan for that (and paid it off.) It would have been more fun to take that money and play, but I will say it feels really good to have no school loan debt or car loans.
3) Saving and retirement. Every month we have a large amount taken out of our checking account that goes into our savings and a separate retirement account. It is important for us to have a secure retirement (both government and personal) as well as a savings buffer. We have a set amount that is in our savings account that is not touched and is used for emergencies. It makes me feel safer knowing we have that and I think that is why I am happy not having a credit card as we always have that cash liquid if we need it.
4) Shopping and budgets. I don’t have a shopping budget, but I always have an idea of what I can spend depending on bills being paid, events coming up, etc. Some months I have more to spend and some I have very little. We have a set amount of bills that get paid (utilities, mortgage, savings, retirement, preschool, gymnastics, food, gas, etc..) and I know when these are paid out. Once these are taken care of I have a better idea on what I can spend on my personal/blog needs and for the children. I don’t spend frivolously or all the time. I browse more than I buy and I rarely spend more than $20-$30 on clothing items. I love buying cheap and finding the best bargains out there.
On months I can spend less or feel like I have shopped more than I need to I go on self imposed shopping breaks and this gives me a moment to breathe and enjoy more of what I have. I am a shopper! I truly enjoy it, but would never spend more than I have or put my family’s finances in jeopardy.
5) Forward thinking. I am always thinking ahead of what we need to save for, what events are coming up that require money or what items are needed at any given time. It is a constant check and balance system on my part. My husband and I both plan ahead for what we want for the future and how we can achieve this. We work as a team and come up with ways to get what we each need. I tend to buy a lot of little things on a frequent basis and he buys bigger ticket items less frequently. One thing that we save and work for are college funds for Molly and Brady (they have no choice but to go!) Education is very important to the both of us and we have plans to help them through most of their education. Not all, though! I think it is important for kids to be responsible for some of what they are getting.
Lastly, we are not perfect! I go overboard with shopping some weeks, we spend more than we should sometimes and have to scrimp another or we go longer periods of time being really careful because we try to live fully on one paycheck and no debt. We get paid once every two weeks and that money is what we have to live on. Once it is gone we are done spending. Sometimes I have to say no to dinners out or activities because money is just not there all the time, but I try not to be embarrassed by this. I don’t want to pretend that I am richer than I am or that I always have money to spend, because I don’t.
Tell me, how do you manage your money? Do you have a strict budget or have any tips for living on a limited income?