An Experiment in Spending Less – Maternity Leave
I’ve always known that my biggest spending weakness happens during the day when I’m at work. But I never was able to test it for more than a couple of days in a row. The lure of lunches out and afternoon snacks was too strong.
After being on maternity leave these past three months, I’ve been able to see what it would be like if I nearly eliminated spending during the day. My husband and I share one car which he uses to go to work everyday. Therefore if I want to go anywhere during the day I have to walk and I have to take my son with me. Since we live in a fairly residential area, it’s a real hike to any exciting shopping options.
So waht have been the results of this unintended experiment? A big change in my spending habits. Typically, I spend into my ING Direct overdraft before my paycheck arrives. On maternity leave this doesn’t happen. It’s even more impressive when you factor in that my income has decreased 20% during my leave.
When I go back to work in June, you can bet I’ll be bringing my lunch to work and watching the snacks. I know I can do it now and have witnessed the huge impact it can have on my finances.
Trent at The Simple Dollar wrote a far more comprehensive post on Trimming the Fat from Your Work-Related Spending.
Tracking my spending
Mrs. Micah at Finance for a Freelance Life is challenging her readers to manually track their spending in February. This is something I’ve been meaning to start up again. A couple of years ago, I read “Your Money or Your Life” by Joe Dominguez and Vicki Robin and it really changed how I look at my finances. I tracked my finances manually for several months and learned a ton about where my money goes. I know for a fact that my biggest weakness in eating out. I’ve cut way back on dinners out but still have a terrible time bringing my lunch from home. With all the changes we have coming up, I feel like this would be a useful exercise to help prioritize our spending for the baby and a possible mortgage.
Currently, I’m using Mint to keep track of my expenses. I like how easy it is to check in on my finances. My favorite feature is the trends analysis. Mint creates a pie chart of your monthly expenses broken down into major categories and then you can drill down into each category to see all your expenditures. There are several drawbacks to Mint though. It doesn’t keep track of how much I save each month in relation to the other categories. In addition, because we have many accounts that we transfer funds between, it really screws up the tracking in Mint.
I truly believe that tracking and analyzing spending by hand is the most powerful way to understand where your money is going. Once you have that understanding, then you can start making significant changes.
So here goes.
Feb. 1, Sunday – total $140.80
Breakfast and to-go bagels from Einstein Bros $17.70
Last purchases at Babies’r'us before baby arrives $123.10
Feb. 2, Monday – total $27.12
Drinks and snacks at CVS $4.86
Lunch at Potbelly $6.69
Dinner at Boston Market $15.57
Join in at Where’s my money going?
How much of a house do you need?
I’ve been out of town for the holidays and haven’t had a lot time to write. However, being away did inspire this post. Due to the nature of my family – divorced parents and grown-up siblings – we’ve stayed in several homes this visit.
Each of the three has a very different space. One has a huge finished basement where they entertain most nights. Another has a much smaller house but they use the space very well. And the last has a large house that is far too spacious but is tough to give up.
As my husband and I currently live in a one bedroom apartment outside of Washington DC, space is at a premium. Things can be tight but we make due and we don’t really need extra space right now. That’s going to change once the baby comes, but we are mostly happy in our 700 square foot apartment.
Back in my hometown, real estate is far cheaper. My little brother owns two houses – he rents one out – but his primary residence is a spacious and comfortable 4,100 square foot home. Given that my husband and I may never own a home this size, it really points out how our choices (location, occupation, etc) affect how much house we buy.
The average square footage of a US single family home in 2007 was 2,521 sq. ft. Two of the three houses we stayed in are larger than the average. It’s been over a decade since I lived in a regular home. With college, grad school and then living in a pricey locale, I think 700 sq ft is the high water mark. To us, 2500 sq ft would be luxury!
Now that we’re moving, I really want to upgrade to at least two bedrooms but three would be great. With the baby and the increased visitors, three bedrooms would provide all the space we could ask for. However, a three bedroom apartment or house in our area could easily set you back $2000/month or $24,000/year. A mortgage would be a similar amount or potentially more.
To me the increased space comes with a high opportunity cost. Paying such a high amount in rent significantly decreases the amount of saving, travel and little luxuries that we can afford. Is it worth it to have the extra space all year instead of saving for the future or nice trips? Paying high rent also delays our buying a house. Given the market conditions, I and our potential lenders will feel much better if we have a hefty deposit.
So what it really boils down to is how important are marginal space and luxuries on a daily basis versus making progress on long-term goals?