I got my bank statement last week and, as I had thought, about $11 K left the account last month with $9.5 K going in. I do not refer to it as spending $11,000, since much of it was not spending.
I realize that is not sustainable. If a Middle Class family consistently spent $1,500 more per month than it takes in, it would not take long for its funds to expire.
But let me explain.
First of all, I have wholeheartedly adopted the Pay Yourself First philosophy as I read about in numerous financial books, blogs and articles.
I paid “ourselves” first on both April paydays, on the 14th and the 28th. On the 14th, I paid both my wife’s and my own Roth IRA $250 each, and I paid myself another $250 first on the 28th.
If you are not in the habit of paying yourself first, you may consider those investments $750 that one could spend otherwise, like for a lease for a cool car, a new iPhone, perhaps a new TV or a few nights at a nice hotel.
I did not pay for a new car, phone, TV or spend any nights at a nice hotel, but I did pay my future self $500 and my wife $250. Not a different future wife, but the future self of my one wife.
I also sent an “extra” $250 to our mortgage, although I use quotes around extra. Our typical payment is around $700 per month, with only about $300 going toward principal and about $400 in interest.
Our March statement came in the mail showing a balance of $131,250, so I wanted to make it a nicer, more even number. When the balance is three hundred or less over an even thousand, I like to send a check to round it out. Some sunny day, we’ll pay off our mortgage and hopefully those extra payments here and there will help us do so sooner rather than later.
Consider that an “extra” thousand that we sent out, adding the additional mortgage principal payment to the amount that we paid ourselves.
With a son in college that costs us about $25,000 per year and our daughter well on her way to a competitive college, I do my best to save money for their education.
To do so, I have automatically contributed to their 529 accounts for many years on the first of the month. I do not even really consider this extra spending, but if you want to split hairs, we would not contribute to that account if it was between that or paying our mortgage or buying food.
I currently send $400 to our daughter’s account on the first of every month, so you could bump that number up to $1,400 in payments that those in lower income brackets than ours most likely would not have paid out.
Interestingly enough, had I not paid ourselves first, sent an extra principal payment and contributed to our daughter’s 529 account, we would have broken dead even for the second month in a row almost to the dollar. Our checking account would have had $9,513 in and $9,505 out.
I should also mention that the $9,500 in was not all from income. I transfer $2,000 per month from our son’s 529 account, in tandem with making a $2,400 monthly payment to his college.
Other “extra” expenses that we had in April included four big ones:
- I sent a check for $1,860 to the IRS due to making untaxed income on some savings bonds for our son, a profitable stock trade that I made last year, and about $2,000 in income from one of my late father’s projects from many years ago.
- $600 to Abt Appliances for a new washing machine after our old one called it quits. We had the old one since we moved in ten days before 9/11, and we really do not know how old it was then.
- $625 for my root canal, which still does not have a cap. Because I went well beyond my dental insurance limit this year, I must wait until January to complete it. But I have gone to the dentist seven times this year, and plan to return for one additional cleaning on my dime over the summer.
- $415 in repairs at Car-X. We had our clunker Chrysler Town & Country minivan repaired in order to pass Illinois emissions.
- Incidentally, we paid over $100 each for two license plate stickers for our two running cars.
I could go on and on, detailing our every purchase and expense, but my point is that I still remain surprised at all the articles about the high percentage of Americans who would not be able to come up with some amount like $500, $1,000 or $2,000.
My family’s income is just over $100K, and we had to shell out $3,500 in extra expenses, made a tuition payment and still socked away $750 for our IRAs and $400 for our daughter’s college account.
What didn’t we buy?
Truth be told, we need to start spending on much needed home-related repairs inside and out.
Life can be expensive for a middle aged Middle Class Guy living in the middle of the Midwest.
I have read dozens, perhaps hundreds, maybe even thousands of articles, blog posts and books related to budgeting, cutting back, how to become wealthier, how to live better, how to be more frugal and I could go on and on.
What every single one of them advises includes spending less than you make. That is a philosophy that I embrace, and it is actually one that helped me save quite a bit for my children’s college accounts considering our Middle Class income over the years.
I just hope to report about $1,500 less flowing out of our account than coming in during the course of a month before the year is through.