On Saturday evening, I had a chance to chat with my friends Wally and Jodie. You might remember them from a reader case study from last August. They're the couple that wants to get their finances in order but they're worried because they're starting with less than zero.
When we chatted in August, Wally and Jodie had over $35,000 in debt. They had variable incomes, but somehow seemed to spend exactly what they earned — about $3000 per month after taxes. Worst of all, they were behind on some payments.
Now, eight months later, their situation has improved.
Over smoked German sausage and beer, Wally and Jodie told me about their progress. (My dog, Tahlequah, was eager to take part in the conversation. Or maybe it was the sausage she wanted?)
Taking Baby Steps
“Based on your advice, we've worked hard to increase our incomes,” Jodie told me. “We've both been picking up extra shifts whenever possible. And I started a second job that pays pretty well.”
“So, you've been able to get a gap between your income and your spending?” I asked.
“You bet,” said Wally. “By working more, we don't have time to spend much money. In August, we didn't have any gap between our earning and spending. Our gap was zero. Now our gap is almost $2000! And we've been using the debt snowball method to get out of debt. We've already paid off a bunch of smaller stuff and now have $438 extra per month for debt payoffs. Plus, we have an emergency fund.”
“This all sounds amazing,” I said. “Great work!”
“It is amazing,” Wally said. “This is the best shape I've ever been in financially. But we're struggling to figure out what to do next.”
“What do you mean?” I asked.
“Well,” said Jodie. “We're getting married in September. We don't know how much to budget for that. Meanwhile, we still have a lot of debt. We owe about $10,000 on Wally's car. We had to replace my Mini Cooper last winter, and that brought us another $10,000 of debt. Plus, I still owe on my school loans.”
I did some mental math. While the couple's cash flow has improved, I was a little nervous that they hadn't actually decreased their debt since the last time we talked about money. That said, I know Jodie's old car had been a thorn in their side. And they have paid down nearly $10,000 in miscellaneous debts.
“The real issue is that we can't seem to find balance,” Wally said. “We're burned out. We've been working so much that we never have time for ourselves. Or each other. It's affecting our moods and our attitudes.”
“Yeah,” I said. “That's tough.”
Wally nodded. “Now I have a friend who wants us to fly out to his wedding,” he said. “We've done the math, and we can't afford it. He's offered to pay for the trip, but we don't know how we feel about that. We want to go, but even if we do accept his help, it'll cost us a few hundred bucks — plus whatever income we lose while we're gone.”
“What should we do?” Jodie asked. “We thought saving more would reduce the stress, but we're just as anxious as ever. Well, maybe not anxious in the same way, I guess, but still. We're worried about money — even with a $2000 gap each month.”
“Trust me,” I said. “The money worry never goes away. Everybody has money anxiety, no matter how much they earn, no matter how much they have saved.”
Worrying About Money
“Do you worry about money?” Wally asked.
“Yes, of course,” I said. “I'm basically financially independent, but I still have money anxiety. In fact, I'm so worried about it that this year I'm tracking every penny I earn and spend. And, just like you, there always seems to be something that comes up for me to spend on. There's my heart-attack scare, which now looks like it'll cost me $7500. I just paid a huge tax bill. And there's all of this travel I've committed to this year. It's always something.”
“Should we fly to my friend's wedding?” Wally asked. “I haven't seen him in a long time. I can tell it's important to him for us to be there.”
“That's a tough call,” I said. “And it's an example of how personal finance isn't just about the numbers. There are relationships and emotions to consider too.”
“From a financial perspective, I don't think you should go. But it'd be hypocritical of me to tell you that. My cousin Duane is still fighting cancer, but he wants to make another trip to Europe next month. At first, I was reluctant to join him. Like I said, I'm trying to cut expenses this year because I feel like I'm spending too much. But you know what? I'm going. So, you see, my advice and my actions are at odds here.”
I didn't know how to tell Wally and Jodie, but my biggest concern with their situation is that it seems like they're getting ready to stop the race when they've barely begun. They're not out of debt yet. They've made some excellent progress, but there's still a long way to go.
They've spent eight months on this project. From the looks of it, they have another eighteen months to go — but that's if they use the gap they've created to accelerate their debt payments. If they don't choose this route, it's going to take them even longer.
At the same time, I get where they're coming from about feeling cramped. Sure, there's a finite amount of time until they get the debt paid off, then they can loosen up. But when you're in the thick of it, eighteen months can feel like eighteen years.
Finding Balance
The key, of course, is to find balance. And I think that's what Wally and Jodie are trying to do.
They're not trying to quit the race early. They don't want to get behind on payments like they used to be. They don't want to spend their emergency fund or to stop their debt snowball. What they want is to find a balance between today and tomorrow.
I didn't mention it to them at the time, but I think they should look at the balanced money formula from Elizabeth Warren and Amelia Tyagi's excellent All Your Worth.
Warren and Tyagi argue that in order to achieve financial balance, your after-tax spending should be allocated like this:
- At least 20% should go to Saving (which includes debt reduction).
- No more than 50% should be allocated to Needs (which includes housing, utilities, healthcare, basic food, and basic clothing).
- The rest — around 30% — should go to Wants (which is everything else).
Warren and Tyagi are adamant that less than half your budget should go to Needs. If you pour too much toward necessities, you don't have room in your budget for fun or the future.
The authors are just as insistent that you should build room into your budget for Wants. “You should ask yourself,” they write, “are you making enough room for fun?”
Wally and Jodie aren't spending much on Needs at the moment, but they're not spending much on Wants either. They've been pumping most of their money into Saving (in the form of debt reduction). This is a Good Thing. But maybe it's too much of a good thing?
Making a Plan
On Sunday morning, Wally sent me an email. After meeting with me, he and Jodie formulated a plan:
- Until their wedding in September, they'll keep their debt snowball where it is today: minimum payments plus the $438 they've freed from satisfied debts.
- They'll use an envelope-like budget for entertainment, travel, gifts, dates, and personal items.
- With the rest of their monthly gap, they'll create a dedicated savings account for their wedding. After the wedding, they'll throw this money at debt.
This seems like a good, purposeful plan to me. It balances today and tomorrow. And you can be sure that I'll follow up with them in the fall to make sure they've stuck to the plan — that they've remembered to prioritize their debt snowball again.
In the meantime, I sent Wally this Reddit post in which a young guy realized that by pushing for a 65% saving rate, he was miserable. He writes:
I'm currently shooting for a 55% saving rate and I cannot tell you how much more I enjoy life. I went from feeling like I couldn't spend a dollar that wasn't strictly budgeted, to travelling with friends, going to concerts, and enjoying the pleasures of life. That 10% made all the difference in the world
As for me, I still feel anxious. I've done a good job of controlling my small, everyday expenses this year, but the big stuff is still stressing me out. I need to heed my own advice and find better balance. That will come, I think, as I consciously make better decisions about future large expenses — and as I work to increase my own income.
Author: J.D. Roth
In 2006, J.D. founded Get Rich Slowly to document his quest to get out of debt. Over time, he learned how to save and how to invest. Today, he's managed to reach early retirement! He wants to help you master your money — and your life. No scams. No gimmicks. Just smart money advice to help you reach your goals.
They feel they are depriving themselves of things and working harder at the same time. If savings and earning more feels like a chore then you are swimming against the current and eventually will tire out. What helped me switch from feeling deprived to feeling rewarded was tracking my expenses in quicken and actually seeing charts show the improvement. Since money and returns are not easily visually, having the charts show the improvements made it more tangible. Eventually I got a rush out of saving more to see my net worth increase which spurred me to find other areas to save and it became a game. This method might not be for everyone, but you have to find some way to make it fun or you simply wont do it. I think it is great that they have done this for eight months now. That is a long time to get through some of the initial pains so if they are showing signs a fatigue then they definitely need to do something different.
With all that being said, the wedding trip is a tough and personal decision. One of the most important things to being human is the connections we have with our friends and family. Vacations can be unnecessary luxuries, but if it involves being a part of a close friend’s important event or in JDs instance sharing an experience with a close friend and family member during a difficult time then it does deserve a thorough discussion. Everything needs to be done within the confines of your income, but to JDs point it can be done with balance.
I would highly encourage them to think about what really matters for them in their wedding. When you take the consumerism out of the wedding industry the only thing that truly matters is having your friends and family together to celebrate. When I think back to my wedding, all I remember is the fun I had having all my friends and family together, dancing and talking. Even the morning after hanging out at a condo one of my aunts rented was memorable. Its being together that matters way more than the type of flowers you had, the place settings, the venue, etc.
Y not YNAB? 😉
It’s just so easy to plan ahead with it…
YNAB categorizes those big items as “true expenses” (strange name), and helps you budget for them.
I’ve tweaked my YNAB to where I budget monthly according to BMF ratios, but those allocations also feed into big expenses like deductibles and copays (these go under “needs”) or big fun purchases (under “wants”).
I used to be a YNAB skeptic but I’m a huge convert now. Price has gone up lately, but I’m lucky I locked in at a moderate rate. Still well worth it—a cheaper cure for anxiety than than whiskey haaa haa. Yep.
Damn, my reply was for JD but accidentally posted under Spencer.
Would love to have editable comments in 3.0
Editable comments seems like an easy-enough thing to implement. We could probably do it now with some sort of plugin. Tom, are you reading these comments? 😉
It doesn’t seem like they can afford to get married. As much as it sucks to hear, I would have told them that. Anyway, I am also fighting for balance. I save > 50% of my income, and am struggling with taking vacations. I don’t want to spend the money, but I know the spouse desperately needs a break. So do I give in to the spouse’s needs, or do I push back in favor early retirement? Do I sacrifice our happiness today in favor of our far off, future selves?
So…are they going to the wedding?
Balance is tough, need to have some fun along the way though.
I am curious to hear how they jumped their income. What part time gigs pay that much?!
It does seem like they are not having a great time getting their finances in order. It is hard to improve your finances unless you are really motivated by it. I found that the best way to cut costs and stay happy was to cut my expenses as much as possible, live like that for a while then determe what I missed the most and eventually adding that back in.
Whether they go to their friend’s wedding or not, the real budget-buster can be their own upcoming nuptials. Friends and family and societal expectations can all conspire to make one spend MUCH more than is wise or necessary. With planning and an adventuresome attitude, Jodie and Wally can end up with the best wedding ever–for very little money.
When my DH and I got married 22 years ago, we had a “tea dance” on a Saturday afternoon —- we rented a hall in our apartment complex, brought in potted palms, and inexpensive tea pots and cups from a market in Chinatown (those became the gifts for all who had helped us). I called on good friends to help me out with the food (in lieu of wedding gifts, which we really did not need). They supplied champagne, cookies, tea sandwiches, all kinds of goodies, savory and sweet. Our wedding cake was a gigantic sheet cake, very inexpensive, piled with fresh champagne grapes and seckle pears then in season—it was gorgeous. We had the ceremony and rearranged the chairs and tables for the tea and the dance. For about 100 guests, it all cost a few thousand dollars. Friends still tell us how much they loved it.
Twenty-two years later, we celebrate our anniversary with seckle pears (because they are in season each year at the time of our wedding).
A great wedding is not about how much money is spent.
Wishing Jodie & Wally SUCCESS in their financial goals. They can do this! And wishing them a wonderful and frugal wedding—and, most importantly, a Happily-Ever-After life together!
Yup. People get wound around the axle about what is, at the bottom, just a party. I know it’s important, but some people seem to think their wedding is a reflection on how much they actually love each other.
When DH and I married we were poor college students. Our wedding was small. We didn’t hire a caterer. We ordered pieces from a couple local restaurants and grocery stores. We set up the reception room ourselves (which was in our church). And I started shopping for my wedding dress on the sale rack and found one I loved.
It is really really easy to feel like the more you spend on something the more its worth. But that isn’t true and it’s especially true for weddings. I’ve seen beautiful dresses for less than $100 (mine was about $300). There are a lot of tasty options from grocery stores and local restaurants.
Or there’s always Vegas. I’ve known several people who have eloped and I don’t think I’ve ever known someone to regret it.
I love your wedding story! DIY wedding. The wedding industry as a whole plays on peoples emotions to sell and they do a good job of it.
OMG these are wonderful and inspirational stories! Any chance there’s a repository somewhere of more wisdom like this about how to throw wonderful weddings and create great memories while innovating to escape the wedding-industrial trap?
Probably, but it’s mostly about thinking differently, avoiding obvious wedding marketing, and avoid “packages” when you can. IMHO the convenience of having the venue don food and decorations isn’t worth the price unless you already have a ton of $.
Yeap, everyone will have to find the balance that’s right for them. That’s the problem with someone just starting the journey. They cut back too much and work too hard. You can’t maintain that pace. It’s okay for a while, but you’ll have to relax a bit.
You want to find a good balance that you can maintain.
Good luck!
I think they should go see their friends. Relationships are important.
I really appreciated this post today. It’s nice to be reminded that we all struggle with these questions, no matter our circumstances. And, that our attitudes about what’s important to put our money towards can change over time.
For example, J.D. I wrote to you three years ago when you were at MoneyBoss about my goal at the time of paying off my student loans, which were approximately $143,000, and then pursuing FIRE. Well, I’m proud to say I’m down to about $28,000 remaining on my loans and expect to finish them off before the end of the year.
Once that money is freed up, I am planning on allocating more than my current 15% to retirement savings. However, I’m going to reevaluate if I’ll aim for FIRE. I’m feeling extremely burnt out in my career and it might make more sense to look at pursuing a new career now, which means looking at my financial situation in a different light.
Just a good reminder that money is a tool to be used by us and not the end all be all.
Thank you.
It’s also harder when the chunks get bigger. If you are paying off debts of a couple thousand dollars it’s easy to see the progress. But once you are tackling a $10k car loan it will take several months. I felt demotivated once I hit my mortgage. I couldn’t keep enthusiasm for years on end, so I shifted my attention to savings goals to keep myself motivated.
As far as the wedding: If they are getting married in six months then they should start looking at expenses. Don’t save as much as you can then spend all of it. Look at what a wedding costs with an eye to affordability and write a budget for it. Start with how big it needs to be to insult the fewest number of people then narrow down the venue for the ceremony and reception. The space rental, food, and dress are probably going to be the biggest expenses. And just like a monthly budget you have a lot of control over them if you choose wisely.
A wedding isn’t about impressing people but bringing your friends and family together and getting married. Plenty of people have a pot luck reception in a church basement. If you want to get really fancy there is a lot of good party food from Costco/Sam’s, and grocery stores. They even do wedding cakes for very reasonable prices.
Finally, as an aside: I did a little Dave Ramsey wince when I saw they make a base of $35k and bought a $10k car while still owing $10k on a car. That isn’t an extravagant car. But that isn’t an extravagant budget and that kind of decision can really set people back. Hopefully it lasts a while. Once they get one of those paid off they will have a lot more breathing room and can maybe stop working the crazy hours.
Congrats to them on their progress! I vote for attending the friend’s wedding! I have also found the slow progress of saving to be discouraging, so I built myself a spreadsheet to track our net worth. I update it once a month and it’s heartening to see the numbers improve year over year (one of the items I track is the growth in our net worth over 1 year ago). It keeps me motivated, but I’m a spreadsheet kind of girl. I also have a little side gig that gives me a couple hundred bucks a month that I use for my very own guilt-free and frivolous projects, so that’s fun. Last year I bought kayaks. This year I’m remodeling my pantry. You have to have smaller achievable goals or it’s all too overwhelming…
There was a mention that the Needs shouldn’t exceed 50% of your usage. But what if they do? How are you supposed to get down what you need to spend? Also, I started to track the Needs and Wants, and I would love to see a primer on how that works. Groceries are a Need. But then what if I eat out during the week? Is that a Want? is only ~25% of it a Want? I think that little tidbit raised more questions than it explained
Yes eating out is a want. Basic groceries $200/person are a need, above that level are a want. Contracts with termination penalties are a need even if they pay for non-essentials like cable or a fancy car lease.
There are reasons for all this and they are explained in great detail in the book. I read it for free at the library. Well worth the time spent.