August Mortgage Update: On feeling comfortable about spending more than we earn

Last month (July):
Years left: 1.6666666667
P =$1,121.04, I =$93.36, Escrow =$809.48

This month (August):
Years left: 1.583333333
P =$1,125.48, I =$88.93, Escrow =$809.48

One month’s prepayment savings: $0

Yes yes, I know spending more than you earn, no matter the circumstances, is heretical among certain segments of the PF community (particularly the early retirement community, though presumably not all of them are living off dividends, some of them must be drawing down based on some % rule post-retirement).

This year I’m at half-pay and our housing, health insurance, and daycare expenses are approximately doubled.  We could actually make that work (barring big emergencies) without spending more than we earn if we didn’t eat out, cut down on organics, didn’t spend money on activities for DC1, were less quick to throw money at problems, and so on.  Essentially, if we cut down our discretionary expenditures from what we were spending before we got to Paradise.

But we planned and saved for this.  Right before we started having to spend out with deposits, moving expenses, and so on, we had saved 84K in checking earmarked for this year.  (Technically 20-30K of that is emergency fund and money for next summer when I’m not paid at all, but that’s still at least 54K earmarked for increased expenditures and riotous living.)

We want to be able to enjoy living someplace where there’s things to do and food to eat.  We want to take day-trips and go to restaurants and have the ability to say “yes”… just for a year before we go back to our small town where we have to drive 2 hours to get to the nearest real city.  Where it’s harder to spend money.  There’s lots of free things we want to do around here too, but for the year, we’d like to try some of the not so free stuff as well.

And gosh darn it, I want to be able to do it without feeling guilty!

How best to do that?

Well, one of the things that bothers me is when I have to transfer money from savings to checking.  DH’s paycheck goes to checking while mine goes to saving.  Whenever we spend more than he makes, I have to transfer money from savings to checking.  That always provides a check on the spending… if I have to transfer more than the usual amount, I feel guilty and cut down on spending.

But in this case, I don’t *want* that guilty feeling or that check on spending.

Still, I also don’t want us to go hog-wild.

So… I sat down and figured out how much over our regular amount we should be spending, multiplied that by 12, and transferred that lump sum amount from savings into checking.  (The interest rates on both savings and checking are small, but the rate on checking is marginally higher.)  When that amount is gone, then we really will need to put the brakes on spending.  There’s still plenty extra left in savings as a cushion, but depending on when we run out of the checking money, we will be able to re-evaluate at that point if we want to transfer more, cut down our spending, and so on.  Rather than making adjustments every month, we’ll make an adjustment if the money runs out.

Will the money run out?  Previous experience suggests that we tend to spend a lot of money when we first move to a place, and then settle down into predictable less spendy patterns wherever we are.  I imagine that will happen here within 12 months as well, after we’ve done the museums and zoos and tourist traps and have figured out where the best low-cost and free things are that will make up our regular routines.  We’ll get closer to spending what we actually earn, possibly a little less.  But we’ll see where that crossover point is!

Do you ever feel guilty about spending money when you shouldn’t feel guilty?  Or the opposite– do you sometimes not feel guilty spending money when you think maybe you should?  What do you do to manipulate your feelings about money so they match up with your thinkings?


19 Responses to “August Mortgage Update: On feeling comfortable about spending more than we earn”

  1. Leah Says:

    I saved up money to study abroad in Europe. Totally outspent my nonexistent earnings there. It’s one of the few times I have guilt-free spent fairly wildly. For me, I knew how much I had, and I somehow worked it out to make it almost to the end. I think I had to borrow $300 from my mom once I got home to pay my CC bill before my summer job paychecks came in. I did what I could to economize (no cabs, stayed in hostels when I traveled, ate from the grocery store most of the time, even when traveling) in areas where I didn’t mind economizing. I splurged on museums and experiences — went up the Eiffel Tower twice (day and night), just because I wanted to.

    I don’t have any tricks. You’ve just got to remind yourself that this is a one-year splurge, and you will be back to frugal enough living next year. You’ve saved for this, and you are prepared.

    • nicoleandmaggie Says:

      The summer I spent in Spain, the flight cost was far more than my parents expected (and there were additional complications at home), so I had no spending money (what I had averaged to 1 peseta a day). Room and board were paid with the program so I wasn’t going to starve, but the other students who had more money had a lot more fun!

      • Leah Says:

        Ouch — that is rough. I saved up my summer money for two years to pay for my study abroad. I still get a little green when I think of how much I blew through (somewhere in the neighborhood of $6k), but I can honestly say that time was my only limit in doing fun stuff in Europe.

  2. Susan Says:

    Ooh, I like this. We are currently spending more that what we are making monthly on husbands salary until I start teaching again in January. I need to do this – figure out what our monthly overage is & transfer 6 months worth into checking.

    My current non-strategy is to transfer a few K whenever there is no money in the checking account which is lazy. It drives my husband crazy to not have money in checking at all times.

  3. Katherine Says:

    We are currently spending more than we earn due to my husband’s unemployment. The first few months we didn’t worry about it because we expected it to be temporary and we had a bunch of money sitting in the checking account built up from the previous few months spending less than we earned. When that ran out about the same time that our lease expired, we moved to a cheaper apartment and started tracking expenses much more closely.

    Now our day-to-day spending is just barely less than I earn, but the larger irregular expenses like car insurance, healthcare, and car maintenance put us over. I keep a running total of our “debt” to our savings account and try to put a regular amount back in every month that we don’t have a big expense that blows the budget.

    Like you, we’re lucky that we have a healthy cash savings account to carry us through this. Unlike you, we didn’t expect our household income to drop and don’t know when it will go up again (hopefully soon)!

    • nicoleandmaggie Says:

      How we’re handling this is definitely different (as long time readers may remember) than how we dealt with DH’s unemployment spell. That was much more stressful and involved a lot more tracking and a lot less spending. We were also in that situation where we got our regular spending down to less than my income, but the irregular expenses made it hard on a month-to-month basis. I definitely did more moving money between accounts each month.

      Good luck on the DH’s job search!

  4. MidA Says:

    On-topic: Yes, I feel guilty spending money even when I shouldn’t. Our grocery bill has shot up significantly since the arrival of DD (more healthy convenience foods, e.g. prepped chicken skewers, pre-assembled salads, frozen bagged dinners). But, we can afford it and it is a good thing to have less clean up/time in the kitchen (meaning more time with DD prior to bed and time with each other once she’s asleep). From my lean, early working days, I still feel like it’s a splurge to get a Potbelly’s shake or cookie 2x a month, but again this should not be something I worry about financially (or calorically at the moment–yay for BFing agreeing with my metabolism!).

    Off-topic: I have a friend who is starting to plan a sabbatical and trying to figure out housing on both ends (could be 3-4 months, could be a year), but hadn’t heard of the faculty-based website for house swapping/renting. Would you mind posting the link(s) to the websites you used? I couldn’t quickly locate the answer via searching the archives.

  5. Ana Says:

    Yes, I would feel guilty. Its ingrained in me to not spend on anything unnecessary so that twinge is always there. If it were ONLY up to me, I’d NEVER overspend, my natural instincts would keep spending pretty low and I never needed to budget. My husband, however, is not that way. To him, money is FOR spending, for convenience and enjoyment. He’s not into luxury items or anything, but he will prefer to pay to get food out instead of the hassle of bringing from home and if he wants a coffee, he’ll buy one—that kind of thing. So for us, it is extremely helpful for my sanity that we have a budget and all extraneous spending falls into an amount I’m comfortable we can afford.
    In a scenario like yours, where you saved specifically for this occasion, I agree 100% with enjoying it as much as possible! Its paradise! Your plan of coming up with a reasonable comfortable amount & transferring that to your checking is great. If I’m ever in that situation I would do the same thing.

  6. Debbie M Says:

    I think most financial bloggers much spend more than they earn sometimes, like when they buy their next car (for cash). Also, spending more than you earn is only bad when it puts you into debt or otherwise is not sustainable. Your extra spending is for a finite amount of time and is coming out of savings.

    I like your idea to pre-withdraw the acceptable spending amount so that only the additional spending would lead to the guilt/reduction process, but I would have expected you to withdraw 1/12 per month.

    I’m getting pretty good at having the proper amount of guilt. My main tool for not feeling guilty about good spending is my spreadsheet where I keep track how much I have saved for certain things. I can always go negative in one area so long as there’s enough money to keep the total positive (basically borrowing from myself). But if I go negative too often, that’s a sign that my budget is not reflecting my real priorities and I re-think that.

    As for not feeling guilty when I should, my main tool is proper brainwashing–I mean reading personal finance blogs and re-reading The Tightwad Gazette to remind me where my real priorities lay and that I should always try to think of options other than buying something to fulfill my goals.

    • nicoleandmaggie Says:

      usually that’s a one time event, not repeated events over the course of say, a year :)

      The 1/12 per month is how I usually do it (over the unpaid summers). That, however, forces me to think about savings and spending and forces me to notice the number going down in drips and drabs and makes me feel more skin-flinty. i could set up a direct deposit thing, but then my checkbook wouldn’t balance or I’d have to update the checkbook which is pretty much the same as doing the transfer myself.

  7. chacha1 Says:

    I feel mildly guilty, occasionally, about not spending money on my work wardrobe. Especially now that I am interviewing again. I don’t even own a suit. But I have a hard time spending hundreds of dollars on a set of clothing that I will only wear (going by history) at the interview. My kind of job typically doesn’t involve meeting with clients or investors or other types of people who might be impressed by a suit. So screw it, basically.

    Am currently feeling a little guilty about overspending on food and drink the past couple of weeks. Fortunately that’s an easy one to fix (especially after Sunday’s hangover).

  8. Revanche Says:

    I think I’ve only ever spent more than I could technically afford (aka pay in full immediately if I chose) for one-offs here or there but they were pretty big at the time: my first car was financed, the car I financed for my family. I think mortgages kind of count, technically, right? Two of those.

    Otherwise, the first year after I moved up to the Bay Area I was spending pretty much everything I earned to keep the family afloat and that sucked bigtime. I did not cope with the stress (and feeling terrible about not saving) so well but that had a lot to do with feeling like I’d sink any minute.

    A lot of the time, I don’t reconcile the cost so much as PiC convinces me that I should do it and I secretly want to, so I go ahead about half of the time figuring it even out against the times I don’t do it and hoard my money instead. Then I go stare at our bank accounts and tell myself that it’s still growing so it’s ok. /weirdo

    • nicoleandmaggie Says:

      We can definitely afford this with targeted savings, it’s just that we’re outspending our income. So a little different than needing a loan.

      I’m glad those sinking times are over for you! Yay PiC!

  9. Leigh Says:

    I’ve been sort of living off of my savings account since I quit my previous job and it’s no longer weird. (I took a couple months off between jobs and then I started lump sum contributing to my new 401(k) about a month after I started that job.) Part of the reason I never wanted to lump sum my 401(k) contributions before was that I didn’t think I could deal with the tiny paychecks. Well, turns out I’m dealing with it just fine! I don’t spend any differently (I think) than if I was spending from my paychecks. It’s really interesting psychologically. I might start direct depositing my paychecks to my savings account completely going forward! (Mostly because I now get paid twice a month versus the monthly before. I miss getting paid monthly!)

    My boyfriend is really helpful with my tendencies to not spend on things I want. We’re both conscious spenders/natural savers, but he’s a bit better at the spending part.

  10. Just spend the money? Why the answer to Mr. Money Moustache is not Spend All the Things. | Grumpy Rumblings (of the formerly untenured) Says:

    […] a little out of place commenting on these discussions now because we’ve made a commitment to spending more than we earn this year (since I’m at half pay this year while our expenses have doubled or tripled).   […]

  11. November mortgage update: Spending has stabilized | Grumpy Rumblings (of the formerly untenured) Says:

    […] spending in paradise seems to have stabilized.  That’s good, because remember how I put a big lump sum into checking based on what I thought we’d be spending over and above our income?  Yeah, that’s all […]

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