Okay guys, I have a reader who needs our help. I received an email from Missy (who may or may not be a mega hot model) asking for ways to save for retirement on a budget that’s already stretched pretty thin. I have my own thoughts about what she can do, but what fun is that? You guys listen to me yap all the time; I want to hear what YOU think!
Some rules before we play: Remember, this is a real human being asking for information and advice. Don’t be mean. If you can’t form a comment without being rude, email it to me and I’ll help you. Also, if you want to help, make sure you read all the information so you don’t offer useless advice.
Missy’s Income – $3912
Missy brings home $3550 a month from her job. She also receives $362 a month in child support.
Missy’s Expenses – $4933
Home ($1438): Includes cell phones, cleaning service, home improvement items, utilities, and rent. Missy recently cut out her home phone, cable, and internet access.
Child ($658): Includes school tuition, band fees, lunches, school trips, and photos. Also includes $100 a month toward miscellaneous expenses.
Daily Living ($485): Includes groceries, dry cleaning, dining out, and meals at work.
Transportation ($372): Includes gas, insurance, repair fund, car washing/detailing, parking, and annual registration.
Entertainment ($100): Includes bowling, movies, etc.
Health ($310): Includes prescriptions, copayments, pet supplies for 2 dogs, vet expenses, and life insurance.
Vacations ($300): Missy has a goal to put back $300 a month.
Tithing/subscriptions ($365): Includes newspaper, tithing, and donations to charity.
Personal ($430): Includes clothing, gifts, haircuts, gym membership, stockpiling sale grocery items, and pedicures 4x/year.
Financial/Misc. ($475): Includes emergency fund, blog expenses, dietary supplements, and bank fees.
A Few Things to Note
First, Missy’s budget is very detailed (what I typed out above is nothing compared to what she sent me). She has a lot of categories and every item accounted for under those categories. Personally, I would have heart failure if I saw everything broken down in this much detail, but it’s working for her. I think it’s awesome – I just don’t think I could do it for my own budget.
Second, I’m sure you noticed that Missy is over $1000 short every month. However, she has no debt. How does she do it? She overestimates practically everything in her budget, which makes up for the shortfall. There were a number of items that had me scratching my head, like the fact that she designates $50 a month for a cleaning service, yet has only used it twice in two years. In fact, my number for her total monthly expenses is actually lower than what she sent in her email, because I took out all the items that are still accounted for and shouldn’t be (like internet and home phone that were canceled at the beginning of the month).
Finally, Missy has a decent income, especially for a single parent. She isn’t struggling to make ends meet; she’s just struggling to allocate her money in the most efficient way possible.
EDIT: In the comments so far, I’ve noticed that you guys are picking up on the same problem I am – by padding various areas of her budget, Missy has made it difficult to see exactly what she’s spending. Even if I had included every number for every expenditure, you’d be just as confused. I think that’s a huge issue because it makes it easier NOT to know exactly what she’s spending each month. When you don’t know what you spend, you can’t make changes easily.
While Missy wants to find a way to save for retirement, there are a few things she is not willing to give up to do it. Here are the non-negotiables in her budget:
- Her house. Her rent is only $893 a month; she is not willing to move or downsize and I don’t blame her.
- Her phones. If she didn’t need the level of service she has, she would cut back. But the cell service she has is needed and works for her family.
- The dogs. If you have pets, you probably understand this one. Yes, the pets cost money, but the benefits are worth it for most people.
- Dining out. Missy doesn’t spend much money on food at all. We’re talking $255 a month for dining out and meals at work, or 6% of her net income. This is not an area she wants to change at this point.
- Entertainment. $100 a month isn’t a lot to spend on occasional trips to the movies or the bowling alley. Missy enjoys this time with her son and that’s that.
Okay, What Do You Think?
Now that you’ve seen Missy’s income and expenses, what do you think she could do to free up money for retirement savings? As I said, I have my own ideas, but I want to know what you think first.
Remember, be nice! It takes a lot of guts to put this out there for the world to see (even anonymously).
Have a financial issue you’d like some help solving? Email me and I’ll post it (you’ll be anonymous) for other readers to discuss!