Tag Archives: spending

Why every couple needs a prenuptial agreement

This morning, I read this New York Times article on the importance of financial common ground in marriage. These are basic tips that we all know, but it got me thinking about the underlying theme of basic communication.The article discusses the importance of communication during marriage, but the groundwork for good financial communication begins before the wedding.

I am often surprised at how little my friends share financial information with their significant others. I’m not suggesting that you swap credit scores on the first date, but full financial disclosure is an essential part of engagement. It was easy for Tony and me to blend our finances because we started with so little; it’s more complicated for couples who have already acquired independent assets.

Drawing up a prenuptial agreement before marriage can help facilitate these discussions. A common misconception is that prenups are only for couples with huge amounts of wealth, or that their purpose is to protect one spouse’s assets from the other in the event of a divorce. In reality, a prenup outlines what will happen to all assets if you divorce, even normal assets like the equity in a home that you bought before you met your spouse.

The prenup has gotten a really bad rap, but it shouldn’t be viewed as a way to keep your spouse from getting your money if you divorce. If you come into the marriage with individual assets, a legal document that says what belonged to whom before the marriage and how shared assets will be distributed makes things clearer.

All couples need a “prenup.” It doesn’t necessarily have to be a formal legal document that distributes wealth. For young couples who have no assets, it can simply be a verbal agreement about how you plan to manage your finances.

A prenup allows you to lay it all out there before you’re married, take stock of your individual and shared assets and debts, and have some very important discussions about money that many financially independent adults are uncomfortable having with their partners. Through these money discussions, you’ll discover common ground from which you can build your financial goals and philosophies.

Tony and I agree that money will be an open topic in our family, not just with each other but also with our children. There will be no secrecy about our budget or how we manage our money. I want them to understand that money management takes hard work, and even a grown-up salary isn’t a limitless fortune.

We also share a mutual desire for security above possessions. We don’t want to spend our income, no matter how much we have, on a lot of “stuff.” Our frugality began out of necessity, but we plan to continue living frugally even as our income increases. We will always drive inexpensive cars, cut corners where we can, and live below our means. As our income increases, the only difference in our lifestyle will be that we’ll have more money to distribute in our savings accounts for emergencies, retirement, and education for our children.

We agreed that I’ll continue to work full-time until he finishes graduate school, and then he’ll take over the responsibility of earning our income so I can stay home with our children for a few years.

Finally, we agreed that once we got married, our assets and debts became shared. This may not work for everyone; for instance, your prenup may dictate that you’re not responsible for your fiance’s credit card debt. Tony and I decided it would be easier for us to blend everything and work as a team to pay down debt and continue saving together. The important thing to is figure out what you’re comfortable with before you tie the knot.

We moved in together shortly after we got engaged, and we opened a joint bank account. The lines between his and hers were immediately blurred. Communication eased the transition tremendously, and we’ve had no problems with this system.

Drawing up a verbal “prenup” made it much easier for us to budget, manage our money, and plan our future. We frequently remind each other of our goals during moments of financial weakness (i.e. the clearance cookware that nearly blew our budget last month). These shared goals have strengthened our bond.

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Being frugal doesn’t mean giving up the hobbies you love

In general, most frugal folks don’t like to admit that the frugal lifestyle deprives them of anything. We pride ourselves in the ability to find ways to get the things we want in life without spending too much money. There are certainly sacrifices involved, but for the most part, we’re able to find creative ways to live a full life on less money.

I’m trying to find balance between frugality and deprivation. It’s tricky to know the difference when you’re just starting out. But I think it’s crucial to balance the two, or you risk resenting your frugal lifestyle and giving up.

I love to quilt. I’ve been doing it to some degree since I was a teenager. It wasn’t until after I graduated college that I got my own sewing machine and started really getting into it. About a year ago, I gave up quilting for my frugal lifestyle.

You see, quilting is an expensive hobby. Compared to the high cost of beautiful handmade quilts, it’s relatively inexpensive. But fabric and thread and other notions can run pretty steep.

Over the weekend, I dug my two unfinished projects out of storage. I’ve put hours and hours of labor into these two quilt tops (one of which was sewn completely by hand), but I stopped short of quilting them a year ago because I deemed quilting a frivolous hobby that would have to wait until we had more income.

Well, now we have more income. I’ve decided that wasting my hard work and the money I already invested in the fabric is more wasteful than spending the extra money to finish them. All of that money and work, and we don’t even have the quilts to show for it?

So I headed to the fabric store and bought batting, quilting thread, and fabric for the backing. Even with a coupon for 40% off the fabric, I ended up spending $30. I’ll have to rework some of our unnecessary spending in our budget to make sure we don’t go over (with my husband’s blessing, of course). But now I have everything I need to complete two beautiful quilts that would cost hundreds in a store. Well, maybe not hundreds, but much more than I paid for supplies.

My point is this: being frugal doesn’t mean giving up the hobbies you love. Is there something that you really love to do that you’ve given up because it’s too expensive? See if there’s a creative way that you can reduce its costs or limit your spending on it without giving it up completely.

For me it was quilting. Rather than giving it up completely, I’ve decided to work it into my budget. Can I afford to spend $30 a month on quilting? Probably. But that seems a little excessive to me, so I’m compromising. I decided to attempt hand-quilting one of them. This will extend the amount of time it takes me to finish it. I’ll be able to enjoy this project longer if it takes me longer to finish.

Because I only quilt for a little while in the evenings, it will probably be another 3 months before I’m ready to invest in the materials to start a new project. Hopefully, I’ll enjoy hand-quilting more than machine quilting, and I’ll be able to extend the time it takes me to finish projects. That way I’ll always have something to work on, but I’ll spend less money.

My husband’s expensive hobby is movies. He would go to the theater once or twice a week and rent movies every day of the week in between if we could afford it. His solution is to rent old classic movies at the library for free. His university has a huge selection of quirky classics that he’s never seen before. We haven’t given up the theater completely, though. Every month or two, there’s something we really want to see, so we go to the last matinee on Sunday when tickets are cheapest. We still end up paying $10 for two tickets, but that’s a huge discount compared to the Friday night ticket price ($8.50 per ticket).

Maybe you love photography, but you don’t want to spend hundreds on equipment. Look into a used camera or get creative with the digital editing on your snapshots. Maybe your beloved hobby is scrapbooking, but you can’t afford all the materials. Limit yourself to a reasonable amount of scrapbook spending each month proportionate to your budget, and take a break when you reach your limit. It may take months to complete your projects, but that will just make them all the more satisfying when they’re done.

Above all, being frugal is about finding a way to live the lifestyle you want without living above your means. Get creative. Find a way to make it work. You might be surprised what you can work into your budget if you want it badly enough.

How do you make room in your budget for the hobby you love?

Working an unexpected raise into the budget

Last week we found out that Tony is getting a raise for his monthly teaching assistantship stipend, which works out to about a $160 increase in our monthly income after taxes. Woo hoo!

This is particularly exciting because we weren’t expecting it at all. We thought it was a mistake when the deposit was higher than normal last week. But he called and they confirmed that yep, it’s a raise, and we can expect that amount every month from now on.

Today when we sat down to rework the budget for September, we were amazing at how much money $160 is when it’s put to work in a budget. In the past we probably would have blown that extra money and still felt strapped for cash at the end of the month. Now that we’re budgeting, this extra money will make it a lot easier for us to reach our goals.

We decided to divvy up the extra money between savings and debt. We’re putting an even $300 toward savings, which is about a $75 increase. We also upped our debt payment by $75, bringing it up to $325. We still won’t make our final credit card payment until November, but our final payment will be small.

We haven’t decided what to do with the extra $10 floating around in our budget. We might tack it on to our entertainment budget just to give us a little extra mad money every month. Snowflakes and other miscellaneous income will continue to go into our savings account to save for Tony’s tuition, our future expenses, and emergencies.

Yay for raises! We weren’t expecting to see an increase in our income so soon, but I’ll take it!

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Being frugal when temptation strikes (is really hard)

Sigh. Being frugal is hard enough without the constant testing.

Today, Tony (the husband) and I were on a routine shopping trip at Target. Dish detergent (bought with a coupon), dog treats (also bought with a coupon), Raisin Bran on sale, and deodorant. We picked up our items, and because we’re masochists and we’re not doing anything else until we head out to a cookout later, we decided to browse a bit. Big mistake.

I don’t even bother looking at high ticket items anymore, so Tony saw it first. The Calphalon cookware we’ve been eyeing for over a year. On clearance. 50% off. Gulp.

As you know, we cook a lot. Aside from two Calphalon skillets we bought at Bed, Bath and Beyond with a gift card we got at the wedding, we’ve been using the same cheap cookware for two years. It’s still functional, but we’ve been dreaming of a new, high-quality set of cookware since before we moved.

So there it was. The exact set we’d been dreaming about for two years marked down from $200 to $100. It’s like the fates were trying to tempt us.

We stood in the aisle for about 20 minutes just looking at it and drooling. Tony, who I know wanted it more that I did because he does most of the cooking, tried to make it easy on me. “Let’s just go,” he said, gently pulling me away. “We don’t need it.” I knew he didn’t mean it, though. And I knew, despite his heroic attempt to save me from myself, that he was hoping I’d override his veto.

Mostly because it was something that I knew he wanted, I started making the standard excuses. “We’ve been so good this month. We deserve it.” Then the little frugal voice in my head that’s been getting louder and louder lately said, You want to celebrate the fact that you’ve saved money this month by spending money? How does that make sense?

“But because we’ve done so well, we should end up having about $300 left over at the end of the month from cutting corners in our budget. We could afford this without even breaking our budget!” To that, the little voice said, Um, up until two minutes ago, you couldn’t wait to put that toward your last little bit of credit card debt or your savings.

And of course, the excuse that used to trump them all: “We need it.”

But this time, that excuse wasn’t going to work. I reminded myself of the $100 Target gift card we received at the wedding. We discussed putting it toward new cookware, but ultimately talked ourselves into using it for an ice cream maker attachment for our stand mixer. Yeah, dumb.

To be fair, the cookware cost $200 at the time, and we didn’t want to spend money in order to use our gift cards. We did receive cash from relatives at the wedding, but we decided to use it as the first deposit into our savings account.

The fact remains, if we really needed that cookware, we wouldn’t have bought the ice cream maker first. You didn’t need that cookware so badly when there was something frivolous and fun you wanted two months ago, the frugal voice said. After all, gift cards never expire. Nothing was stopping us from saving up money to pay for the rest of it or saving the gift card until we saw a great deal like this one.

After I had talked myself out of it, it was Tony who started having second thoughts. “I guess when you think about it, we would easily spend $100 by going out to eat only four times. For that price, we can get brand new cookware that will help us cook hundreds of cheaper meals at home.”

As much as I hated to admit it, though, that’s not the point. We can easily make hundreds of meals at home with our old cookware without spending another $100.

Besides, do we really want to undo all of our hard work and restraint this month by spending money now when we’re so close to our first month of budget success? Celebrating your financial successes by spending money is a good way to keep yourself from ever really getting anywhere.

It was the hardest decision we’ve made since we decided to get serious about living frugally, but we walked away from the clearance cookware. Even though we had the money for it, and even though it was an amazing deal. Sigh.

I’m still questioning our decision. Eventually, we’ll need to buy new cookware. Will we end up paying twice as much for it and regret our decision to wait? That thought has definitely crossed my mind. But I just can’t risk getting off track now that we’re so close to our first successful month. We need to know we can do this, and we need to walk away from some good deals for a while if we’ve ever going to get ahead.

I’m sure someday, after many months of budgeting success, we’ll be able to make exceptions for things like that when the deal really is great and it’s something that we really could use. But right now it’s just too early to start making those exceptions. If we give in to every temptation from the very beginning, how will we ever get anywhere?

What do you think? Did we make the right choice? What would you have done?

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Saturday Grocery Round up

We had quite a day. It started with our research at the farmers market and the co-op. We didn’t make any purchases at either, because we were waiting to see what our best best would be. Ultimately, we decided to stick with trips to multiple stores to get the best deals.

Today was particularly intense, because we were out of a number of staples that we buy in bulk (coffee, mozzarella cheese for homemade pizza, and black peppercorns). Those are all pretty pricey because we buy enough to last us a little over a month. We also bought a whole chicken that we’ll roast for dinner tomorrow night, then use the leftovers for chicken Alfredo later in the week. We use the carcass to make a gallon of chicken stock.

We went to two grocery stores and Costco for the coffee and cheese.

Our grand total? Still a depressing $91. Sigh. I feel like I’m failing miserably at bringing our grocery bill down to $60 a week.

I know it’s time to make some drastic changes, but I’m just unsure of what my next step should be. Unfortunately, grocery store coupons don’t help us much because the only processed foods we buy are cereals (I do use coupons for that when I have them) and pasta. The rest is produce and fresh meat.

I know that cooking without meat is a big money saver, but we don’t have many vegetarian meals in our repertoire, and the ones we do have require expensive produce like grape tomatoes. Next week we’ll try to come up with some menus that don’t require us to purchase additional meat. We have some chicken breasts on hand in the freezer, but we usually buy some kind of meat each week. I think cutting out the extra meat will help, but I’m just afraid that our meal plans will begin to lack variety.

Anybody have any delicious vegetarian meal ideas to share?!

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Sometimes free money = unnecessary spending

I have a Victoria’s Secret Angels card that I opened in college. I’m proud to say I’ve never carried a balance on it. The truth is, I like their stuff, even if it is overpriced, and by maintaining an open account I can often score some great deals.

They periodically send out coupons. I put them aside until I honestly need something, then I bring my coupon in during the semi-annual sales. The result can be $10 off the clearance price on an item that was marked down from $40 to $19.99. The catch is you often have to use your card to get the deal, but that’s no big deal to me if I’m only spending $9.99 for a nice bra. I’m happy to charge it and pay it off immediately before the interest kicks in. It’s very rare that I use the card, I never use it to pay full price or for anything that I don’t need, and I always pay the balance right away.

However, my relationship with my Angels card and the coupons associated with it is love/hate. This month, they sent me a “birthday reward” for $10 off anything in the store. Sort of weird because my birthday isn’t until October, but whatever.

I read the coupon. The only limitation was that I couldn’t use it with another discount. From what I could tell, it was $10 off anything with no provision that the item had to cost more than $10. I didn’t need anything, but I figured if it was free, I might as well pick up some scented lotion.

I went there tonight, picked out a bottle of lotion for $9, and brought it to the cash register. “I’m sorry,” the nice cashier told me, “but in order to use this coupon, you have to charge the remaining total on your Angels card. If you’re not charging anything, you can’t use the coupon.”

If you’ve read my About Me page, then you know that I worked in retail as recently as 2 months ago. I wasn’t about to make this woman’s life more difficult tonight by arguing with her about a coupon that I was using to buy something frivolous. She was just doing her job, and there was probably nothing she could do about it anyway. I thanked her and went to look around the store to see if I could find something I needed for $10.

I settled on a tube of mascara (an item that I’ll probably need in the next couple weeks to be fair). I normally pay $4.50 for mascara every 4-6 months. The tube I bought tonight was marked $12, but with the coupon I paid $2. It’s important to remember, though, I didn’t really save $10. I really only saved $2.50 because there’s no way I’d ever pay $12 for a tube of mascara. But $2.50 is $2.50, I guess.

When I left the store, I felt resentful and a little mad at myself for giving in. When I was in college, that $10 coupon would have led me to spend $30. Even then I paid it off by the end of the month, but still … it’s not really a coupon if you’re spending more than you’re saving.

I went into a store tonight planning to spend $0 and walked out with a $2 charge on a credit card I never use.

I still have a lot to learn, but I learned a valuable lesson tonight. From now on I’ll skip the coupons if there’s nothing I need. Free money is rarely ever really free money.

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Spending money can save you money

When it’s time to tighten your budget, the first rule is “cut all unnecessary spending.” Since we started cutting expenses, there have been many “extras” that we’ve cut out. Restaurants, movies, and shopping trips for unnecessary items, to name a few.

Budgeting has changed the way that I look at my money. I’ve begun to dread extra expenses outside of our normal monthly living costs, because it forces me to renegotiate the budget to avoid overspending.

This can be a good thing. It forces me to really examine unnecessary spending and put it through a basic litmus test: “Do we really need this?”

It can also be dangerous. It makes me hesitate spending money on some things that may not be required, but could ultimately save us hundreds of dollars in the long run.

When considering whether to cut “unnecessary” expenses, it’s important to consider the future, too. Maybe you won’t see a return on your investment immediately, but shelling out the money for certain expenses can end up saving you money later on.

Here’s a list of the “unnecessary expenses” that we’ve added to our budget because of their long-term saving potential:

1. AAA membership

We signed up for AAA right before we drove back to Indiana for our wedding. It’s a long trip, and we didn’t want to get stranded in the middle of nowhere by a flat tire, car problem, or stupid mistake like locking our keys in the car. Membership normally costs $42 per person for a year, but we received a direct mail piece offering membership for a discounted rate of $20 per person for a year.

In my opinion, it’s worth it even at $42 per person. AAA Members receive roadside assistance that includes towing, jumping, fuel delivery, tire changing, and lockout services. If you use just one of those services even once in a year, it pays for itself. We haven’t had to use it yet, but even if we don’t, I think it pays for itself in peace of mind, especially when you’re traveling far from home.

Members also receive a huge array of discounts on car rental, hotels, and other travel and driving related expenses. This perk is secondary to me because all of the discounts are for things that we shouldn’t be spending money on anyway.

Next time we need an oil change, we’ll check the rates at the AAA Auto Care station near us, but we’ll only go there if it really is a deal. And of course, if we do need to get a hotel room or rent a car, we’ll take advantage of our AAA discount.

2. Car maintenance

I’ve recently started putting money into a savings account each month to pay for routine car maintenance like oil changes, but in the past these things have come out of our regular budget. It can cost anywhere from $18-$30 for a basic oil change service, but for some reason I hate having it done.

It’s really a no-brainer, though. Cars that are serviced every 3,000 miles last longer. Since we have a new car that was purchased in 2006 (a very generous graduation gift for us from my in-laws), we plan to drive it for at least a decade. That makes regular servicing even more important.

3. Veterinary Services and Medications

When you adopt a pet, it’s important to remember that you’re committing to a lot more financially than just the adoption fees and dog food. Every month our dog, Howie, requires heartworm prevention medicine as well as flea and tick prevention. He also gets a heartworm test, physical exam and several shots every year, including immunizations for rabies, kennel cough, and parvovirus. I think there might be other immunizations included in his yearly boosters, but I’m not sure what they are at the moment.

We get his monthly medication every 6 months through 1-800-PetMeds, which is a lot cheaper than what we’d pay at the vet. It still costs about about $16 a month for the medications alone.

Vaccinations are about $10-$15 each, so they end up costing roughly $40 a year. Our vet offers a 20% immunization discount on Thursdays, so we always schedule his appointments then. Heartworm testing is required to renew his heartworm prevention medicine each year, and that runs about $30.

His yearly preventative exams cost $50. We also spend $18 every three weeks for his dog food. We choose to feed him high quality dog food because it keeps him healthier. (If you’ve ever had to clean up after a dog that eats cheap dog food, you understand.)

As you can see, being a responsible pet owner isn’t cheap. Not including dog food, we spend over $300 a year to keep Howie healthy. But we committed to taking care of him when we adopted him, and in the long-run proper medical care could prevent major illnesses that cost thousands to treat. Putting money aside for these yearly expenses makes it a lot easier when it’s time to order another six-month supply of medicine or take him to the vet for his check-up.

On a personal note, you could argue that the best way to avoid these extra expenses is to not have a pet. That’s true. However, for us, the fulfillment and joy that we get from being pet owners is worth the cost of taking care of him. Studies have shown that owning a pet can increase your overall health and well being, so I would definitely say pet expenses have long-term benefits. Dogs really can be a wonderful addition to your family and well worth the money if you can work them into your schedule and budget.

4. Renters Insurance

We’ll probably be renting for a while, so we invest in a renters insurance policy. It covers our personal belongings in and outside of our apartment for just $18 a month 9 months out of the year. Our policy does cover us for the other 3 months of the year, we just pay the premium over 9 months for some reason. We’re covered up to $20,000, which is probably more than the total value of our stuff because most of what we own we bought second-hand.

I’ve always thought the term renters insurance was inaccurate, because it’s really personal property insurance. The most valuable things we own are our laptops and my engagement ring. Both are covered by our renters insurance, no matter where we are when the damage or theft occurs. For instance, if one of our laptops was stolen from our car while we were traveling, our renters insurance would cover it.

Damage to the property inside our apartment is protected by our renters insurance in the event of a break-in, flood, or other natural disaster (particularly important since we live in hurricane country). Most policies also cover personal injury to protect you from liability in case someone is hurt inside your apartment.

This is another expense that pays for itself in peace of mind. Landlords rarely cover any damage to your personal property, and usually have a provision written into the lease that says they’re not responsible for damage even if it’s their fault. Renters insurance is basically homeowners insurance for renters, so if your pipes burst or a hurricane destroys your apartment complex, you can replace your personal property. I say, better safe than sorry.

What extra expenses do you add to your budget to save money in the long-run?

Wedding planning: Looking at the big picture and getting started on the right track

This week I’m covering basic initial planning and getting yourself started on the right track. You’ll find that I come back to these basic principles throughout the series because they truly were the basis of my wedding planning strategy. They affected each and every detail of my wedding, and ultimately determined our bottom line.

Prioritize and cut corners on the things that matter less to you.

When you first start planning, it can be overwhelming. There is so much to do. One of the most helpful tips I read in the beginning was, “Sit down and think about exactly what you want. Look at the big picture before you start planning.”

Many wedding planning magazines and websites urge you to think about everything you want so you won’t leave out any of the over-the-top fantasies you’ve always had about your wedding day. When I sat down to think about the big picture, I considered what was most important to me instead.

I considered doing a small affair with just immediate family in a casual setting, but I ultimately decided that I didn’t want to miss out on the basic traditions: the white dress, the floral bouquet, my best friend as my maid of honor, or having the people close to me beyond my immediate family present.

Once we had a list of what was absolutely most important to us, we started cutting out the things that didn’t matter so much. I didn’t need a huge, extravagant party with a DJ and dancing. I didn’t really want a sit-down dinner or a huge guest list. All of those things cost a lot of money, and many people think you have to have them just because most people do. But if it isn’t important to you, then it’s not worth spending all that money. If you figure out what matters most to you, you can spend more of your money on that stuff.

Keep your guest list short

This isn’t an option for everybody because it’s a tough thing to do. Ultimately, I felt that my wedding was a very personal thing, so I only wanted my closest friends and family to be there. Our guest list ended up being about 50 people.

Our small guest list saved us money in a lot of ways. We had a beautiful reception venue at an absurdly affordable price, but the catch was that the place only held 50 people with no room for dancing.

This worked for us because we didn’t want a lot of people there. If inviting your entire extended family is one of your priorities, you’ll have to cut corners elsewhere to make it work.

Keep your attendant list short

Both my husband and I have known our best friends for many years. They were our college roommates, and we’ve known them since childhood. So it was very important to us to include them in our wedding. However, even though I have three sisters and a sister-in-law who I love very much, I just couldn’t do 5 attendants for each of us. It would have complicated the process of choosing their attire and inflated our flower costs.

We loved having two attendants. It made our best friends feel extra special, and it also made it a lot easier to plan for attire and buy flowers.

Do it yourself if you can.

This is the most obvious tip for planning a wedding on a small budget, but it bears repeating. If you can do it yourself, then it’ll probably cost you a lot less. We made our own invitations and favors, provided the music for our reception by creating a huge iPod playlist of our favorite songs, and made our own centerpieces for the tables.

Open a separate checking account for wedding funds and ONLY use that debit card when paying for wedding related things.

This final tip is about money management. Even when planning a frugal wedding, it’s easy to be swept away in the planning and spend more than you want. That’s why it’s important to keep the money that you’ve saved specifically for the wedding separate from your day-to-day living money and your regular savings.

We had a lot of money coming in from several different sources, including our own savings and contributions from our parents. To simplify things, I kept all of the wedding money in a separate wedding account with a debit card.

You could easily open an ING checking account for this purpose and earn a little interest in the months leading up to your wedding. Whatever works for you. I just know it would have been a lot more confusing to keep track of our budget and stay on track if our wedding funds were combined with our regular money.

Having a separate account also made it a lot less painful to make those big purchases. The money was there and it was set aside specifically for our wedding, so I didn’t even flinch when I had to spend large amounts of money for the big-ticket purchases like the reception food.

Come back next Wednesday for the second installment: cutting costs for the ceremony and reception!