How is it, you may ask, that two lawyers in private practice have any concerns about spending and savings?
First, some background. I started post-law school work in 2011, making megabucks at a big law firm. My husband followed a year later, at which point we had 2 sexy salaries and a lot of unsexy law school debt (over $100k in student loans). After 2 years, I left the super lucrative job for a still-reasonably-lucrative government job, but took a massive (more than 50%) pay cut, and, because the job was in a different city, lost all the benefits of shared living expenses I had enjoyed while living with my husband. Before that point, I didn’t think I was living high on the hog… but I was wrong.
With my new, lower salary and my old, big-fancy-lawyer mindset, I suddenly found I was dipping into savings to cover my bills, and, of course, missing all my self-imposed savings targets. A couple months after starting at the new gig, I implemented some austerity measures to get back on track. “Frugal October” extended to become “Frugal October-November,” and eventually, “Frugal 2014.”
I don’t remember all the details of those early days, but I do remember two key aspects of my attack: first, I analyzed my spending leading up to frugal October to see where most of the discretionary spending was going. Then, dissatisfied with budgeting software I had used in the past (Quicken, Mint.com), I created my own spreadsheet to help me budget. This spreadsheet has stayed with me over the years. It is admittedly ugly (I’m strongly considering a revamp to make it more useful for new analyses I’m doing with my renewed focus on cost-cutting), but it accomplishes a key goal: it allows me to track my spending week to week and shows me how much discretionary cash I have left to spend for the month. At the beginning of each month (which I tie to the dates of my credit card statement), I input my income and my fixed and otherwise known expenses for the month, and my savings goals. I then divide the remaining funds over 4 weeks. As the month goes by, I track my additional expenditures, so that my remaining balance of discretionary cash decreases and I can see where I stand at all times.
Why do I do it this way? I needed to break things down by week; looking at things only month-to-month did not give me enough real-time feedback to address any overspending as it was happening. And, I did not want to have to track each individual category of spending; I found it easier to track overall spending and just try to keep the amount within my goals.
If you’re still reading, your attention span has far surpassed most people I’ve explained this to, who generally hear the word “spreadsheet” and then say, “wow, that sounds… intense.” So let’s keep going!
What’s the problem then? Sounds like this s* is locked down, no?
Well… yes and no. Frugal 2014 was a smashing success. With our student debt rapidly dwindling, I dealt it a fatal blow by moving into a shared apartment with random Craigslist roommates which scored me my lowest rent… ever. By the end of Frugal 2014, we had paid off the student loans in full.
But then, we faltered. Without the concrete goal of paying off student loans, we set arbitrary savings goals, which we sometimes met and sometimes missed, and generally patted ourselves on the back for saving more than the average American, which… as we all know, is a pretty low bar. It wasn’t until our mounting dissatisfaction with our jobs, the birth of our delightful first child, and some other factors kicked in that we started to think in earnest, how do we stop needing to keep making so much money FOREVER?
So here we are. Though I’ve continued to religiously track my spending and savings, my husband and I have never combined our finances. That means what he does has been a relative black box to me, and, no surprise, he does not share my obsession with spreadsheets and meticulously tracking these things. This is bad. This is very, very bad. Because guess what! He’s picked up the tab on lots of our spendy items, while I have blithely gone on “meeting all of my savings goals for the year!” while enjoying the benefit of him… not.
And, until recently, I had (foolishly!) focused on savings rather than spending. Man did I feel good — I was making lots of money, and saving lots money! YAY ME. But, as I’ve recently discovered, minimizing spending is the key if you want to (a) take a way lower paying job, and (b) make your savings last far into the future, so you can live off the money they make for you without having to save a zillion dollars to do that.
Phew. We have got a lot of work to do! Coming up next, what we’re doing to right the ship….. Stay tuned!