Saving money

[mayerling]

The thread about being good with money got me thinking. I liked the advice somebody gave about treating savings as you would bills. I don't think we're particularly good with money. We moved less than a year ago and, while we have some savings back in the UK, our new savings started from zero. We pay rent and don't manage to save much per month. We're very good with putting money in our son's college fund, though, and have saved a few thousand in less than two years. I wonder, though, whether we should use that money for our savings so as to have enough for a house faster and worry about contributing the college fund later. Any advice?

 

[sonnyjane]

The thread about being good with money got me thinking. I liked the advice somebody gave about treating savings as you would bills. I don't think we're particularly good with money. We moved less than a year ago and, while we have some savings back in the UK, our new savings started from zero. We pay rent and don't manage to save much per month. We're very good with putting money in our son's college fund, though, and have saved a few thousand in less than two years. I wonder, though, whether we should use that money for our savings so as to have enough for a house faster and worry about contributing the college fund later. Any advice?

Since you're in the UK I don't know if it's different, but here your own personal savings (retirement and emergency cash, home ownership if you wish) should come long before a college fund. That's something that should be last priority because your child can always get scholarships or loans for school, but nobody is going to give you a loan for retirement!

 

[sonnyjane]

Wanted to add it's kind of like the oxygen mask on the airplane - they always say to take care of yourself FIRST, then assist your child. You're no help to your child if you're not financially "safe" yourself.

 

[TooPatient]

Wanted to add it's kind of like the oxygen mask on the airplane - they always say to take care of yourself FIRST, then assist your child. You're no help to your child if you're not financially "safe" yourself.

Yep!

If you've got debts, you should look at them to see if they should be paid off first. You aren't saving anything if you stick it into an account to sit (earning little/no interest) if you've got a credit card or loan with high interest. (that can add up fast! $70 here, $15 there, $8 here, another $40 there...)

Look at what you are spending and where. You may be shocked how much is going out just a little here and a little there. I looked and found that we were spending 2,000+ per month in just groceries (not eating out, just groceries!) for just the two of us
Nothing huge. A $10 trip here, a $5 trip there, $20 at this spice place, etc. I was able to cut that in half (and then some) for the three of us by watching for sales, planning meals, not buying perishable stuff just because it is on sale (but knowing when a sale is really great and changing the menu plan to match!), and cooking what we need instead of having an odd amount left.

Same thing goes for books, dvds, cds, coffee, meals out, clothing, and anything else you spend money on. Actually add up what you are spending each month and decide if it is reasonable or if you should limit it some. (don't give stuff up entirely, just be aware of what it is costing so you can make your choices accordingly -- do you really want that $5.00 Starbucks or would you be happier bringing a cup of tea from home?)

With the money we're saving, we're paying off what little debt we have and getting the airplane put back together

 

[mayerling]

We have zero debt. But we don't own a house so I was just wondering whether we should stop saving for our son and just stick to saving for a house.

 

[asscherisme]

Wanted to add it's kind of like the oxygen mask on the airplane - they always say to take care of yourself FIRST, then assist your child. You're no help to your child if you're not financially "safe" yourself.

I agree x 1000! Retirement savings and emergency savings come before college savings. I have saved what I could for college but my retirement fund is solid and growing. I treat savings like a bill. I have it automatically deducted every month. First max out retirement next put money into general savings. Then comes college funds.

 

[chemgirl]

We use Mint.com

DH and I are engineers so we treat everything like a math problem. We made a budget in excel that covered everything. Categories included dining out, coffee, alcohol, cat food, medication etc. Savings are their own categories and come out of our account every Friday automatically like a bill. We also made sure that there was roughly 10% to spare for those last minute sort of things that you do, but don't plan for, like tickets to a concert or sporting event.

Mint tracks everything automatically and let's us know if we're getting close to maxing out any category. Then we know that we've spent for example $50 on coffee this month and decide to make some at home instead!

While we were saving for a house we also saved for retirement and emergencies. I would highly advise against throwing everything into a house. 2 weeks after we moved into our first house there was a carbon monoxide leak that cost $7,000 to fix! Glad we had emergency funds to take care of it.

Eta: we rarely use all of the extra 10% so we let it accumulate in an account that we've labelled the vacation fund. So it's almost like accumulated vacation time at work.

 

[smitcompton]

Hi,

If you are a UK citizen, why wouldn't you send your children back to England for their education. The costs over there are nothing like the US. I would look into that possibility. But of course you must take care of yourselves first, so put money into the categories suggested by the other posters. First, an emergency fund, second; saving for a house, third, max out any retirement benefits he gets through his job.(401K, Roth IRA.especially if his job matches your contribution.


Annette

 

[mayerling]

Hi,

If you are a UK citizen, why wouldn't you send your children back to England for their education. The costs over there are nothing like the US. I would look into that possibility. But of course you must take care of yourselves first, so put money into the categories suggested by the other posters. First, an emergency fund, second; saving for a house, third, max out any retirement benefits he gets through his job.(401K, Roth IRA.especially if his job matches your contribution.


Annette

I'm not a UK citizen but he and I are EU citizens. Yes, he could conceivably go to the UK for his education but that would still cost something. At this moment retirement benefits are not a high priority because retirement where I live works differently than in the US. I will reconsider the house-college fund split, though.

 

[iLander]

If you can reduce your monthly expenses by buying a house, do that asap. If you can buy a house, save $200 a month over rent, that's $2400 a year toward the college fund.

But be realistic. What do you pay with your rent? Does it include sewer, trash, water, taxes, heat/cooling, lawn maintenance, building fire insurance, a plumber every so often? If yes, figure out what that would cost you with a house. People tend to focus on the mortgage and not much else.

 

[TooPatient]

If you can reduce your monthly expenses by buying a house, do that asap. If you can buy a house, save $200 a month over rent, that's $2400 a year toward the college fund.

But be realistic. What do you pay with your rent? Does it include sewer, trash, water, taxes, heat/cooling, lawn maintenance, building fire insurance, a plumber every so often? If yes, figure out what that would cost you with a house. People tend to focus on the mortgage and not much else.

This is actually something a lot of people don't look at.

We had been paying $2300 for an apartment (included water/sewer) + insurance + garbage + electricity + cable, phone, etc

The house cost about $500/month more than that (but that included tax & insurance). Our water has to be paid separate now (not that bad since we aren't on sewer) and our garbage costs more. BUT our electricity costs less and since we have the option of more providers for other services, they cost less too.

After calculating all of that AND the tax deduction, we actually SAVED about $500 per month buying the house.


Clearly, those numbers don't work that way for everyone but it is worth considering. DH also pointed out that we could make payments every year on some other guy's building and have nothing at the end or we could make payments on a house at it would be OURS at the end.


That said....
We have a water leak out at the meter that we're going to have to pay to have repaired. (easy fix but in a tangle of pipes & wires so we won't even try DIY!)
Our chimney is popping the mortar and letting water into our living room so we have to re-build the top part of the chimney (about $3,000) and repair the water damage (unknown how bad yet).
The sprinkler system has multiple broken heads and a broken pipe (or two).
And that is just so far this year... We've had to replace the fence (as it actually rotted and fell down), rebuild the deck stairs (since they were OVER the septic cover ), replace water damaged flooring, replace more appliances than I can count any more, etc etc etc...

I think they are far better than apartments and look at it as part of our plan for retirement, but there are big expenses that come up (often with no warning)

 

[mayerling]

We don't have enough for a down payment.

 

[TooPatient]

We don't have enough for a down payment.

If you look at what you want in life and your finances and decide that a house is right for you, I would absolutely suggest saving for a down payment (plus moving expenses plus emergency fund) BEFORE saving for your son's college. You'll have lots of years to save for him and he will get benefit from your house too (place to live, have friends over -- not a quiet thing when they are teenagers!) and you may be able to save for his college faster if the house costs less than the apartment.


ETA: We bought with no down payment. I don't suggest this if you can manage something different, but for us it cost less (even with the higher interest rate) to buy with no down than to wait while saving. We refinanced later (NOT taking cash out!) to a much lower interest rate (since we'd been with the mortgage company for a few years, they paid all fees & closing for us so the refi didn't cost anything).
Anyway, down payment is best but wanted to toss this out there as it wasn't something I knew was an option until a real estate agent friend mentioned the possibility.