Finance

Q&A: Saving, Budgeting, and Finances

You had so many great questions about managing finances, saving, and budgeting! I am obviously not an expert on the subject but I went from having about a few thousand dollars in savings to having enough for a down payment on a house in 2 years, so I’m doing something right. Yes, we have 2 incomes, but we split everything 50/50 and I’m still putting money away even though my half of the mortgage is more than I’ve ever spent on rent. The biggest game-changer has been having a second income. I’m talking about my blog and not my husband’s income. Today, I’m going to talk about what we do now, what I did in my 20s, and what I wish I did when I was in my 20s when I was just making enough to get by.

How did you budget and save when you were starting The Everygirl?

I hate to say this, but I really didn’t save anything during that time and some months, dipped into what I had in savings. I was just making enough to get by designing about 8-10 blogs a week. It was such a scary time because everyone was moving from Blogger to WordPress and I didn’t know how to design for WP, so something had to change. We launched The Everygirl, and it took about 2-3 years before we were salaried. My rent was just about 50% of my monthly take-home, so I had to keep designing blogs to make it work. I didn’t have a car the first 4 years I lived in Chicago, which saved me money on a lease/car payment, insurance, gas, and inevitable parking tickets. When I got my first car, I looked at my budget and knew I had to spend less than $300 a month, so I found a lease I could afford, and an apartment with easy and free street parking.

I wish I had been more careful and budgeted more. I’ve learned to think the smaller purchases through because every dollar counts. I was never an impulse buyer when it came to big stuff and will really pine over big purchases. But when there’s a J. Crew top 40% off or something for $10 at Target, it’s so easy to just buy it. We don’t always stop to think about how much we love/want/need something and those little purchases really add up.

Do you stick to a monthly budget?

Sort of. When Margot was born, we added up all our fixed monthly expenses after adding a nanny into the mix. Mortgage, utilities, cars, nanny, food, etc. We looked at what we were spending each month and look at what’s coming in. I always put something away in savings and know what we owe on our credit card. I look through our statements and see how/where/why we’re spending. I also pay our card off in full every month. So there isn’t a strict, set budget, but we plan for bigger purchases, and dial it back on the things we don’t have to spend money on.

What should a typical budget breakdown look like?
I’m a recent grad and am struggling to stick to this.

I try to follow these guidelines for the money I take home after taxes. Spend 50% or less on needs (rent/mortgage, food, medical), spend 30% or less on wants (going out, manicures, new sandals), and save at least 20% of your income. I wasn’t able to put 20% aside and understand that’s not usually possible when you’re starting out, especially in a major city.

Use Mint.com to see where/how you’re spending. Walk instead of drive or take public transit when you can. Get a roommate to cut down on rent and setting some ground rules for spending. Invest in a few key pieces (basically a capsule wardrobe) and stick to what’s timeless vs. what’s trendy. Find free workouts. Make coffee at home. Look at neighborhoods that are safe but up and coming. I moved from Lincoln Park to West Town and saved a couple hundred dollars on rent. I tried not to eat out too often, would look at how much I spent before going out, and often just get 1-2 drinks to save. Pick up a cheap bottle of wine and have friends over. You’ll save on cabs and drinks!

You can always cut back on something and need to get into the habit of putting money aside, even if it’s $5 a week to start.

How many streams of income should I have?

Having more than one stream of income is definitely helpful. Conor and I have real estate (his job), The Everygirl, and my blog. He is working on a new project that will hopefully serve as one more stream of income. I am technically a partner (it’s us, his mom, and friends of ours) but haven’t been very involved given the fact that I have two jobs and a baby. We’ve talked about buying an investment property at some point, so we’ve been saving for that.

Both of our investment accounts (IRAs) are long-term focused vs playing the stock market for short-term gains. Since we’re self-employed, we want to make sure we have cash on-hand to cover living expenses should something happen. You can then put money aside for a home purchase, investing etc.

How did you save to buy a home?

The biggest change and very honest answer is that I started making more money. I worked really, really hard and put away everything I made on my blog was a game-changer for me, and I was able to save much faster than I would have with just one salary.

When I met Conor, I had about $13,000 in savings. I remember this number because I set a goal to put a certain number aside and that’s where I started. We moved in together which saved me about $400/month in rent – a good savings but not enough to save for a down payment on a house over the course of a year. That year, we finally gave ourselves raises (for The Everygirl), and I started taking on more partnerships personally. All the money I made on my blog was put away each month, and by the time we bought our house, I had enough to cover the down payment. We split it, but the fact that I could have managed it on my own felt pretty amazing. That’s not to say you can’t save for a home without a second income. I do make enough that I can save and would have eventually saved for a home, but it would have taken longer without my blog.

Did you sign a prenup?

We didn’t so I can’t offer any help with this one.

How do you and Conor handle finances? Did you combine everything? Is it 50/50?

Our finances haven’t been combined, but it’s something we talk about whenever we’re trying to figure out big expenses, like our bathroom renovations. For whatever reason, trying to figure out what I owe Conor after he paid the contractor made him really want to combine so we never have to have that conversation. I am so back and forth on it. Conor and I each have personal checking accounts that we don’t keep very much in (that’s how payroll and brands pay me), personal savings, and a joint checking account. The funds in our joint checking cover our credit card and all joint expenses, like our mortgage, food, nanny, and everything for Margot.

We talk about our finances collectively and have since our wedding. Our down payment was split and we have a joint credit card to cover anything for Margot and day-to-day expenses. Every few months, we’ll each transfer the same amount into our joint checking. We each pay for our own cars and other expenses. As someone who grew up in a family with zero financial security and a biological dad that contributed nothing, there’s part of me that really appreciates having my own money. That said, if Conor ever needed anything I’d be there for him without hesitation and do see the money as ours, for our family. He’s said the same thing.

My friends all seem so split, but it seems that more and more are keeping finances separate. Still TBD on this one, but what we’re doing seems to really work for us.

What money-saving technique isn’t worth your time?

Such a great question! This really depends on what you enjoy doing, how much time you have, and what you can do with the time you’ll be freeing up. If I’m picking up salads because I want to spend time with Margot or have a blog post to write, it feels worth it to spend a little more to make life easier. Conor works weekends and when he does, I’m with Margot, so we did not have time to landscape ourselves, so it was worth hiring someone. If we had the time, we 100% would have done it ourselves. I would say to figure out the thing you have the least time for or the thing you least like doing, and see how you can better and more efficiently use that time, and then figure out what you can afford.

How do you balance saving for a house renovation, vacations, and Margot?

Our savings is not broken down by category, so any time something comes up, we look at what we have and what we feel we can spend. That’s how we decided on what work to do on the house and what parts of the landscaping quote to proceed with.

How often do you end up having buyer’s remorse with pricey purchases?

I tend to pine over big purchases, so I only ever have buyer’s remorse with smaller purchases that weren’t thought out. If I’m willing to spend a good amount of money on something, I’ve definitely thought about it and really want it. Whenever I buy an article of clothing, I think about whether or not it’s something I think I’ll love in a year, and I need to like it enough to want to take it on vacation.

My biggest purchase in the last two years (other than our house) was a pair of Chanel flats. I had always loved them but they’re so expensive, and I couldn’t pull the trigger. The week before my wedding, I was walking with a friend and felt so down about family stuff. I had a few big campaigns, was doing well with my savings, and had this f*ck it, I’m going to get some Chanel flats moment. I’ve never done anything like that, but because I had loved them for so long, I felt really confident about the purchase. I had worked so hard to be in a place where I could actually afford them, so I splurged and never regretted it. Not once. I do not have a lot of expensive shoes (I own maybe 5-6 pairs of heels) so it was a one time thing.

I’m now in a place where I’d prefer to have fewer, better things.have a few pairs of really good jeans and a couple great coats that will last.

What costs should hopeful parents plan for pre-baby?

Childcare has been the biggest one for us and health insurance is second. Whether you opt for daycare, a nanny, or nanny share, it’s all expensive and felt like a huge, overwhelming expense at first. It’s still a lot but the shock isn’t there like it used to be. You can buy clothes so reasonably and babies don’t need much, so I’d say a place to sleep, gear (stroller, car seat, and baby seat), childcare, and if you’re not going to breastfeed (I did not) the cost of formula.

Are you saving for college?

We have not put the funds into 529 since that money can only be used for college and we might want to invest it before then. It is definitely our plan to help Margot with college, but we’re not sure that a 529 makes the most sense for her/us. She will also have her Italian citizenship (through Conor) and could go to college in Europe very reasonably as a citizen, but I can’t assume that’s what she’ll want to do.

What % of your income do you save for retirement?
Does your husband do the same?

I’m only 3 years into having a SEP and typically just put an amount in at the end of the year (whatever is recommended by my accountant). Our entire team (cofounders included) have set salaries, but with paying for half our wedding, buying a home, having a baby, and saving up to invest in a rental property, I wanted to see what was left at the end of the year before committing to a set number each month. I would recommend sitting down with a planner or doing a little research and coming up with in investment plan that works for you. It’s so important to save for retirement but it’s also important to make sure you have an emergency fund, and that you’re saving for your more immediate future plans (owning a home, car, investments etc).

The last few years, I put away about 15% of my earnings in retirement, but it was a number that was decided at the end of the year vs pulling something out each month. We have seen very steady growth, but not knowing for certain how much we’ll make is reason enough to be careful and see what’s left at the end of the year. Conor put away whatever his accountant advised based on what he made as well.