Why Do We Make Rules If We’re Just Going to Break Them?
Kyle and I have a rule: We don’t watch important basketball games (i.e. any game involving our team, or the final rounds of the NCAA tournament) with people who don’t care about basketball (apathy is bad enough – rival fans would be inconceivable!). You can imagine the situation that inspired this rule!
So I was surprised when Kyle told me yesterday that he is planning to watch our team’s big rivalry game this weekend with people in his grad program instead of our basketball group. (I’m attending the game.) Knowing that this would result in his diminished enjoyment of the game, I blurted out “Why do we even have these rules if you’re just going to break them?!”
That conversation got me started thinking about the rules we’ve set for our financial life, and how well we follow or expect to follow them in the future. I’ve mentioned debt-free-ness several times on the blog and how that is a value of ours, but I’m not sure how committed we are to it. First, we definitely will take out a mortgage (but a lot of people don’t count that). Second, I don’t think anyone can 100% guarantee that of his future because we don’t know what tragedies might befall us. You can have reasonable insurance coverage, but something unreasonable could happen. We’ve learned over the past few years that people can become victims of a bad economy and get into a cycle of un- or under-employment. Third, Kyle and I haven’t actually positioned ourselves to remain debt-free under a variety of conceivable circumstances because we haven’t built up a good emergency fund or cash reserves. So we haven’t really put our money where our mouth is for this aspect of our financial life.
Here are some of the other rules I thought of, and how well we adhere:
Never carry a balance on our credit cards: Check, forever. I almost always pay off the charges from a given month by the end of that month, far before the bill is due. I like treating our credit cards more like debit.
Live within our means: Ummmmm, depends on how you define it. We aren’t taking on any more debt, but sometimes we “borrow” money from ourselves, or some months we go over-budget and money gets shifted from the next month or savings to cover it. Loosely interpreted, this is a lifetime rule.
Give at least 10% of gross income: I’m confident that we do this, although we don’t specifically calculate on our interest/dividend/miscellaneous income. We currently tithe to our church and then give above that as we see need. I think we will always stick to this one.
Save at least 10% toward retirement: I started my IRA in 2007 and I think Kyle started his in 2008. I initially set my contribution to be 10% but have edged it up over the years. When we have real jobs I’d like to save an even greater percentage, but we’re pretty well maxed out now at 19%. This is a good rule but I’m not sure we will always always comply, for instance if one of us became unexpectedly unemployed. We’ll see.
Never buy convenience lunch or snacks at work: This is a relatively new one for us and it’s really more for me than Kyle. Several months ago we cut our eating-out budget to $60/month – only 2 or so meals out together – so we no longer waste any money on non-date/non-social meals. I stopped my occasional indulgences at Panda Express when I got serious about my diet about a year ago. Honestly, I prefer the food I bring from home, and Kyle gets enough free food offers from seminars that I think he’s satisfied by the variety. Food bought at work is only allowed if it’s planned and for a specific occasion. I don’t expect this rule to last beyond grad school strictly, although I hope we will always be in the habit of bringing our lunches.
I guess we’re doing pretty well in following our rules now, but it’s difficult to project some of the more ambitious ones into the future. Like our basketball-watching rule, they are great guides for our life – and when we break them (sometimes unavoidably) and experience detrimental consequences, we can say “I told myself so!!”
What are your financial rules? Do you keep them, bend them, or occasionally break them?
photo by Ed Yourdon
Filed under: budgeting, choices, credit cards, debt, giving, retirement, values · Tags: rules
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I haven’t really adhered to the “save 10% rule” that the PF world seems to be so fond of, and I should start. My fear is that, when my temporary job runs out, I won’t have enough liquid money if I have to use it.
Are you saving to a cash instead? I think the point is partially to just be in the habit of saving, whether or not it’s specifically for retirement. I think it’s smart to keep more in cash if you’re uncertain about your job situation. You can always lump it into a tax-advantaged account when you have a long-term position.
Maybe I missed it, but what is your basketball team?
I’m a big KU fan. ROCK CHALK JAYHAWK! I agree with you that you CANNOT watch the game with non-bball fans. We also have the problem of having a lot of friends that are Mizzou fans. I had to learn the hard way that you can’t watch the game with your rival either – they’re obnoxious. lol
I’m being coy about the school name, but you can figure it out fairly easily based on where we live and what we’re studying. 🙂
My small group watches rivalry games together and is fairly evenly split between the sides. I say the REAL FANS wouldn’t attend those watchings! It’s not just that we would annoy each other, but I want to celebrate a win without feeling like I’m rubbing it in their faces, and I don’t want a loss rubbed in mine, even unintentionally. Best to stay separate on those evenings.
Honestly, I don’t know if I have any rules, but I certainly have guidelines that so far haven’t been violated. Like the credit card balance. I don’t carry a balance, but I could see doing so if I needed to borrow a large enough amount and I found a 0% card. I really do live in a shades-of-grey world. My view is always do the best you can. Sometimes you’ll stumble, but get up, learn something and move on.
I am an extreme person in some ways and don’t care for moderation in some areas of my life, so “rules” suit my personality a bit better than “guidelines,” though I know not many people are like me. (Thankfully Kyle is, to a great extent!) To each his own.
Stick to your rules! As you mentioned Emily having these rules suits your personality and I think having these rules will benefit you both if and when you ever incur unemployment or a health emergency.
I’ve never been big on financial rules, hence my debt issues.
Never too late to start!
These are great rules, ours are very similar.
$60 per month for an eating out budget? That’s very good. Better than me, that’s for sure!
Yeah, it was the easiest thing to cut when we wanted to save more for other goals. Last month I think we spent around $30, actually. In months that we travel we obviously eat out more, but that comes out of our Travel budget. Instead of eating out with friends we’ve been inviting them over to our home more.
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We don’t really have any hard and fast “rules”, but we do try to stick to a budget. I sort of think of budgeting the same way I think about dieting. If I tell myself I absolutely can’t eat any carbs I’ll want to binge on pizza. If I let myself have a slice it’s not the end of the world as long as I don’t eat the whole pie (and sometimes I do, and then I have to cut back the rest of the week). If I spend too much one day I cut back the rest of the week. Feeling “deprived” just doesn’t work for me and sets me up to overspend.
My experience has been different – I don’t care for moderation. I’m low-carb all the way and I find that easier than trying to limit myself to one serving! Once I broke my addiction to sugar I had no more physical desire for it, and the psychological desire is totally manageable. So I guess that’s why I like these rules so much. I’d rather know I’m going to save at least 10% than agonize over 8% this month, make up with 12% next month… that sort of strategy. So far no overspend binges!
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I am really, really impressed by your IRA savings and tithing on what I assume is a grad student stipend – I can only manage 10% total toward both, rather than 10% each. [long rant/advice request ahead, ignore if annoying]
How do you do it? Living off of 60% of my income (50% rent, bills, food, & gas, 10% entertainment, medical, appearance, etc), saving 25% to live off of during the summer, saving/giving 10%, and stretching the rest for travel to visit family and attend friends’ weddings just doesn’t leave me with an extra 10% at the end of the month. Do you get a funding cut in the summer, and if so, how do you deal with it? I feel like my only choices to increase savings and giving right now are to decrease my spending margin even more, which could maybe free up 5% if I never spent money with friends, bought clothes from the Salvation Army, or got a haircut again (but I’d still need to pay for prescriptions, replacement checks, etc.), and if I quit visiting family or going to friends’ weddings, which seems just sad and selfish in a different way. To save another 10% I would have to give up BOTH of these. (The other option is, of course, earning more money/getting grants…let’s just say I’m working on that and it isn’t happening yet, so I can’t rely on it.)
Sometimes I think saving 10% and giving 10% will be more possible when I have the same income year-round, and that income is higher…but then I realize that people always think they would have more freedom if they had more money. Do you have financial goals that you’re waiting for, or do you think it’s better to just make it hurt now and get used to it?
Your comment is not at all annoying! I will give you some more details about our setup, but I’m not sure how much will be applicable to your situation because it’s so hard to translate to other cities and life circumstances. I hope you find bits of it helpful. I sometimes wish for a higher income too so we could accomplish more or have more spending money, but like you said I think that is a lifetime struggle that is independent of income.
Our funding is constant year-round, so we don’t have the added complication of saving for the summer. We earn around $26k/year each – is your funding similar to that although doled out over only 9 months? If I was paid 33% more per paycheck to last through the summer I would transfer it immediately out of checking into a savings account just for that purpose and try not to think about it at all. I’m sure that’s what you’re doing already.
The way that we prioritize our budget is that we give first. We consider it a non-negotiable. I would cut retirement savings before giving (but there are a lot of other things I would try first before cutting either). Retirement is also the only long-term goal for which we are currently saving, so in answer to your last question we are waiting to save for a down payment for a house, for our next car, etc. Sometimes that feels frustrating but we are counting on that income boost post-graduation to start on those goals. Probably if we didn’t travel so much, like to weddings and to see Kyle’s family, we could make some traction on those goals, but family and community are very important to us and we want to be part of those moments.
I hope that you can find a way to cut in some less important areas so that you can save, give, and maintain friendships. The main areas that we have cut over the course of our time in grad school are eating out (currently $60/month) and entertainment outside our home (we save $50/month for this purpose, most of which is for season tickets), and it has taken time to get to those levels. While we still get haircuts (though I’m cutting Kyle’s hair at home and I only get my hair cut about once every 6 months) and buy clothes at decent stores (Macy’s, American Eagle, New York and Company – but rarely), we don’t have much of a going-out social life any more. That wasn’t necessarily driven by our budget cuts but rather that 1) when we got married we started hanging out more with other couples in homes rather than going to restaurants with large groups of friends, which we used to do more often, and 2) a few months after we got married I went on a very strict diet and didn’t want to eat restaurant food, so many times I went out with friends and didn’t order anything, which really cut down on our restaurant bills.
In answer to “how do we do it,” I think it’s important to realize that we are not making any debt payments. I used to have a car payment, and when I did I saved a lot less toward travel and retirement. We also have a fair amount of savings for emergencies that was gifted to us for our wedding so we aren’t adding to that amount. Since we’ve been married we also cut our cable and installed a fan to reduce our electricity bills. We both drive sedans so we get okay gas mileage, so our gas budget is $120/month. Our cell phone budget is $99/month because Kyle has a smartphone and I don’t. I never drink alcohol and Kyle only buys a single beer on the rare occasions we go out to bars, and we usually bring food to social events instead of beer. If I wanted to cut our budget in a big way, I would move. We’re currently in a pretty nice 2BR/2BA apartment, but we could squeeze into a 1BR/1BA at a less-nice complex if necessary. One last suggestion – if you haven’t yet, get all your insurance for cars, renter’s, property on the same policy. We got a steep two-car discount on our insurance by combining them after we got married.
I hope some of those comments are useful to you. Please write again here or through email if you want to discuss further.
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