Our children receive an “Allowance” at the beginning of the month $30 for the 7 yr old (based on $7.50/wk) and $50 for the 12 yr old ($12.50/wk). They are required to decide how much to put into the bank as savings and they know it has to last the month….no more crying and whining at check out counters, they have their own $ to spend and now when it’s gone….it is gone. Case closed :)

However, the last couple of years have really exacerbated the problem b/c the US (as a country) hasn’t balanced a budget since the Clinton years.

And saving 70% of your disposable income is scary in lots of ways.
1. It doesn’t scale over time.: you can’t save that much money for the rest of your life. It sounds like a “diet” decision rather than a “lifestyle” decision. If you do manage to save 70% of your disposable income for the rest of your life, you’ll die with a bunch of unused money. That doesn’t really connect with the common man.

2. It doesn’t scale over people.: If everyone in the US did what you do, the US would have a whole different set of problems. Look at what is happening to the Chinese with their 25%+ personal savings rate and you’ll see what I’m talking about. Having a population saving 70% of their income is so obviously wrong that it doesn’t connect with the common man.

3. It can’t be done with a median income: If you took the median US family income and then stripped it bare of anything that wasn’t a long-term health requirement, you still wouldn’t be able to make the average family (not just person) save that much money. Again, your number fails to connect with the common man.

So Boshden, bully to your for your successes, but please realize that you just seem like a crazy person to the “common man”. This means that no one is going to “get behind you”. No one is going to tell all of their friends I want to live like Boshden, b/c it just doesn’t make any sense to them.

1. You “JUST realized that Americans are spending way beyond our means”?!?! They/we have been doing it for YEARS! And you JUST took notice? BTW, American savings are back “up” to around 3% — it only took a global economic near-collapse to make that happen. Go Yanks!

2. Congrats to you and your high horse for saving all that disposable cash. Now I know why it took you so long to take notice of worldly affairs — because you never leave the house and don’t pay for cable! Paying rent and saving isn’t much of…anything.

Apologies to you and the other users for the “attack” but come on, listen to some wise old men and they will probably tell you that you can’t take it with you. It’s called “disposable” cash for a reason, not “hoarding” cash. Try saving 65% and go out and blow the other 5% on life and living! Go have a beer! If you are saving up for a down-payment then have a beer and return the empty.

In a Capitalist society, it really IS all about money, but life ISN’T all about money.

The typical pair restaurant goer orders an appetizer each costing at least half to 2/3 as much as the entrees. They also order a drink or two each. Add the two entrees on top of that and desserts, and you have a hefty bill. The worst part is, the pair rarely finishes all the food, and in many cases, a major portion of the food is still left uneaten.

It’s no wonder the United States only has 5% of the world’s population, but consumes 50% of the resources!

I, on the other hand, am on the other extreme. I save about 70% of my disposable income after paying for rent.

Sharing money is definitely a learning experience…. What we’ve decided is to put a percentage of our incomes into our shared account for shared expenses & savings. This is due to the fact that we have really different incomes and we also cannot understand each other’s spending habits (me on food & fashion, him on big ticket items and sports). We decided the best way to avoid fights about money was to do it this way. We have barely had any fights over money in the 8 + years we have been together…

On the other hand, we know quite a number of people who pool their money and have allowances and it feels like all they seem to do is to fight about money. But perhaps this has more to do with their personal budgeting than anything…

I think every couple does what works best for them…

SmileS, oddly enough, while my husband has been eating up his spending money, I have a few hundred dollars sitting in a savings account to be used for Christmas gifts.

Our paychecks go into a joint account that pays the bills and savings.

So far so good… but we will have to look at this again when we have children. Just one of a number of things that will need a major adjustment. :-)

We were really unsure of how much discretionary spending we were doing, and it always felt like my wife spent too much. We implemented the $40 ea. a week (Cash) “allowance” and funny enough, im usually spent by the end of the week and she still has a $20 or more.. hrm not as frugal as i thought, it’s all that Subway and sushi I eat :).

We’ve also committed to keeping our budget line items, which means if something comes up that is not in the budget, the discretionary is spent. We find alot less “needs” coming up now…

This month, we actually sat down and made an honest-to-goodness budget. To encourage sticking with it, it includes line items for big things we want, like new energy-efficient windows and kitchen cabinets. We each also get $100 to spend how we want.

I don’t know how much that $100 allowance will slow us down. It may actually speed us up since we’ll each be less likely to cheat on the budget. But whatever happens, we’ll feel less deprived. Maybe the $100 will increase, but right now, the budget doesn’t balance with a bigger number in there.

We did pay off our mortgage this year so it’s definitely possible to accomplish financial goals without that allowance, but it probably would be hard to keep on living that way indefinitely. My wife did say on more than one occasion that we were working really hard without anything to show for it.

I think the other important thing is for both parties to have input in the budget. I wrote it down and did the math. But when it came to things like groceries, I asked my wife “How much do we spend on groceries?” and then I wrote down that number. That way, neither of us feels manipulated.

Anyway, the problem is theirs, not yours!

DAvid

A good alternative word is… BUDGET! You have a “personal budget” every month that you can spend with no questions asked, which means that there should no arguments about whether the item is a waste of money or not: if they want to spend their budget that way, it’s up to them.

Problems can arise when 1 person is always going over budget, and then you get into arguments about “fairness” and what not, but that is why discussing this in detail with you significant other is important, so that you both know exactly how the system works, and your relationship must be open enough to be able to discuss any new situations that you haven’t accounted for. Unlike some previous comments, my wife makes significantly more that I do, but when we got married (and even before that), everything was “ours”, so everything was pooled together and there is no differentiation because one of us makes more than the other. We pay all our expenses first, and we both decided how to allocate the rest between savings and spending.

To one of the earlier comments about vacation money, we set aside an amount of money each month to a vacation fund, and so when we want to go on a vacation, or plan one, we know how much money we have to work with. Basically, we estimate how many vacations/what type we want each year, and figured out about how much money per month we need to save to achieve it. Works well for us.

I find that an allowance for each is especially useful when you get unexpected windfalls or un-budgeted income (overtime pay, etc.). Instead of just spending it, my wife and I decided that we would each get 1/6 of the windfall added to our respective allowances, and that the other 2/3’s is put to savings (currently building up a down payment for a house). It works swell for us since overtime is common, but varies a lot each month. Our total budget is set based on base salaries, but we know where the extra money is going to go in advance so there are no arguments.

As you have stated, we all have limits placed on our personal spending. Mine is described on my paycheque every other week, Yours, likely similar. Should an appropriate opportunity arise, and you friends wish to learn (unlikely?) you could explain how your family budget and the certainty of expenditures lets you reach the goals you have, whether that be debt freedom, travel comfortable retirement, Vegas trips, etc.

DAvid

I’ve never really understood that and figure that whatever word you use, all couples have to make some decisions about how their money gets divvied up each month. Nobody can just spend and spend and spend with no limit.

We don’t really care what the naysayers think. The proof is in the pudding. None of our friends have their financial house in order the way we do, and we’re laughing all the way to the bank.

My husband spends most of his allowance on playing poker with his buddies. I am currently putting some of mine in a Roth IRA. So it’s not necessarily about more spending. It’s about each of us having some control over the items that we feel may be missing in the rest of the budget.

Seems like our new correspondent may be learning many things about finance if he stays around!

DAvid

Have you sent FT an e-mail with details? Are you OK with sharing details?

We have lots of pros who surf this blog with lots of good ideas (I’m just a hack :)

I’ll tell you though, off the top of my head, I couldn’t afford a house with my first job after graduation. I was working in the computers field and making $30k (2003, Winnipeg). I lived in an apartment, b/c $650 (all-in) was less that the overhead on any equally safe Winnipeg home I was going to find. I’m still in the field, now making $75k and I still don’t own a home (or a car).

Owning and operating a home tends to be very expensive. I graduated at a net worth just above zero, but even with down payment money in the bank I would not have been able to afford a home and a car and savings and maintain a positive cash flow.

In general, starting professional salaries tend to be small. Whether you’re in residency as a doctor (making 40k!), working your first engineering job or working towards your first electrician’s ticket. It’s OK, it tends to curve up very quickly (I more than doubled in ~5 years). But those first years are going to be tight. You may technically be a [insert profession here], but you won’t be able to live as one for at least a couple of years.

Of course, this is just off the top of my head. I could be horribly, desperately wrong. So drop FT a line with details and maybe we’ll have more ideas that can help keep the cash flow positive.