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Getting the Wife on Board

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SCEngineer
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Getting the Wife on Board  Reply with quote  

I've been married now for 3.5 years, have a beautiful daughter who just hit the 18 month mark.

The wife and I have been having problems seeing eye to eye on the budget. We sit down twice a month and map out where every dollar that comes in is going out to. Since I'm usually working she's usually the one shoping for groceries and cloths ect ect. So every Sunday we sit down with our budget and mark off what has been used and what we have available.

Because of overspending we recently started to take out cash for groceries and entertainment since you can't spend more cash than you have. This paycheck however she went and used the card to buy and item that wasn't on the budget. I did some shifting around and made the item fit into the budget by reworking some fluff I had built in. Later that week she says we need to buy medicine for the dog (technically we don't need it for a month, but it's on sale blah blah). Shuffle some numbers around and I come up with the money. This morning she gets a call from a credit company that she hasn't payed a bill. We actually budgeted for the amount that was spent on the card, but they are claiming we racked up an extre $45 that wasn't in the budget. I'm out of magic to work on the numbers and end up paying the extra by taking from my next paycheck.

Before we were married I was debt free and stacking $500-1000/month into stocks. Now I'm only putting 6% into the 401k so we can pay off the car (only debt) faster. Plan is to have it paid off in 13 months and raise the 401k back to 15%. I feel like we could pay it off in 9-10 months if she could get focused and stay on budget.

Any thoughts on what I could say to her so that we end up on the same page?

Thanks in advance.
Post Thu Jan 28, 2016 7:00 pm
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oldguy
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Hi, I too am an engineer. But older, I've been married for 47 years, 2 adult kids.

quote:
Before we were married I was debt free and stacking $500-1000/month into stocks. Now I'm only putting 6% into the 401k so we can pay off the car (only debt) faster.


Instead of budgeting what we spend, we budget what we save. Eg, if you invest $12,000/yr into your 401k, and use an 11%/yr generic stock fund, it will be $2,650,000 in 30 yrs. (It will be more cuz you will regularly increase the $12,000 as you get raises, that offsets inflation). We put our priority on making certain that the $1000/m gets invested EVERY month, never skip a month for a new couch, new wash machine, yada.
Then, safe in the knowledge that you are going to be multimillionaires, you are free to enjoy spending everything else. But no cheating via loans/CCs. We use a CC for everything, seldom carry cash, but the CC is ALWAYS paid in full monthly.

As for prepaying the car loan - reconsider - the math is against you. Here is an example of the power of compounding. We often refi our rental houses and remove the equity. Eg, if I refi & add $50k to a mortgage that costs us ~$268/m ($97,000). I place the $50k in an 11%/yr fund for 30 years that grows to $1,150,000.
The same concept applies to car loans - if you borrow at 5% and leave your own money invested at 11%/yr, it counts up to big money after 40 yrs or so.

My advice? Keep the car loan full term, bump the 401k back up to 15%, and grow it to $2.6M.
And ask her if she will handle the shopping/spending for the family. (Note that I said "ask", not "tell"). She will devise her own methods to spend the remaining money (except for the 15%). Sometimes you'll think her new shoes/blouse should have been prioritized later cuz you need a car part - but no need to elevate it to an argument, remember, you're going to be a multimillionaire. And your lovely daughter is going to look very pretty in the new convertible that you are going to pay for in 2032 when she starts college.
Post Thu Jan 28, 2016 8:09 pm
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SCEngineer
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The convertable got a good laugh for me. I know you have good reason to call 11%, but I find it easier to look at the inflation adjusted 8% value. Based on what I already have invested and my 6% to 401k, plus 6% employer match, plus 4% employer incentive bonus (yeah great job) I'm looking at about 1.6 million in 30 years. Please do double check my number though.

$94,000 Traditional IRA
$52,400 Roth IRA
$13,300 401k

Salary of $96,400 (won't include bonuses for conservatism)
I do my 6% after tax so its ~$3000/year
Company 10% pre-tax is $9,640/year
total of $12,640/year

I boost that to 15% and it's ~$7250/year total of $16,890



I know the math says to leave the car loan alone at 4.75% as the market does 11% but it is chewing up $600/month of income that should be going to a 529 plan and getting spent on handbags or cloths. It's only ~$20,000 left on the car and I've got a $5,000 bonus coming up in anouther month which would really take a chunk out of it. If it doesn't go to the car the wife has been bugging me for furniture for the playroom or sitting room so I don't think investing is going to be an option with it.


edit: was looking at the wrong year....
Post Thu Jan 28, 2016 8:31 pm
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oldguy
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http://politicalcalculations.blogspot.com/2006/12/sp-500-at-your-fingertips.html#.VqqQqFIkDSZ

Looks like your adjusted for inflation number is about right, the most recent 30 yrs ending 12/2015 was 7.6%/yr.

quote:
I know the math says to leave the car loan alone at 4.75% as the market does 11% but it is chewing up $600/month of income that should be going to a 529 plan and getting spent on handbags or cloths.


Yeah, the math says that the earlier the money starts earning 11% (and has 30 years in the oven) the better the outcome. Think of income-stream as a finite flow, ie, if you prepay that $20,000 loan, that $20,000 had to be pulled from some other directive - ie, it comes from your 401k input. In general it's better to direct your income to its 'highest and best use' than it is to make more money (or spend less money).

Eg, if A places $5000/yr into an 11% fund you'll have a million in 30 yrs. And B, who uses savings accounts, would has to place $33,333/yr into his account to have a million. Ie, same end point - but A has way more money to spend on handbags & shoes.

The 529 wasn't available when our kids were growing up - the govt plans seldom survive one kid-cycle (altho I think the 529 is now about 18 yrs old). We used a taxable fund at Vanguard for college, for rental houses, yada.

I would bump the 401 to 15%, have it auto-deposited, and put all the remainder into the checking account. And then ask MrsSCEng to manage it, handbags, shoes, clothes.

Here is an exercise (not a working budget.) List your annual costs, all of them, Fed Tax, State Tax, SS, Med. Then do a "descending sort". That display helps separate the "significant few from the insignificant many". ( Pareto Analysis). You'll see that $1500/yr for lattes is small compared to $24,000 for house payments, $12,000 for Fed Tax, $7500 for SS/Med, $7200 for car payments, $3000 for purses/shoes, blouses. Pareto points out that cutting 10% from a $24k item is more important than 100% of lattes. And it puts $3000 worth of purses, shoes, handbags into perspective. And like I said, with the 15% going to investing, you're on-track to be a multi-millionaire - so why kick up a fuss over $3000 for clothes?
Post Thu Jan 28, 2016 10:53 pm
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dozulu
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I have to chime in here for your wife. All my life, my husband earned, I stayed home, took care our elderly parents, childcare, shopping, cooking, etc. All my life. So I understand what your wife is saying. If you are the one buying food, you figure out that your food bill can be greatly impacted by buying on sale rather than when it is bugeted in the numbers. Some of these sales are cyclical.

In my world, it is essential that we have Tillamook cheese. The 2 pound standard chedar block is normally $9.84. When I was feeding teenage males, we needed 2 per week $20. Every 2 months it comes on sale for $5.84, roughly half price. If I bought regular price this us the cost per year...

1 year regular cost 2 block $1040
1 year sale cost 2 blocks $624

That is a savings of $418 yearly....just on my preferred cheddar cheese.
So when it was on sale, I paved the bottom of my second fridge with cheap cheese to hold me till the next sale. Was it in the budget to do it that month? No. But it saved in the long run. If you replicate this strategy over your whole purchase cycle, this money not spent adds up.

My husband, in the early years, rapidly figured out that how well I did with the shopping and cooking could make enormous differences in the budget.

My late husband did exactly what Oldguy recommended.

He turned the 'not fixed' restaurant, grocery, and clothing money over to me and stepped back and watched. He did not micromanage. Beginning of the month, and quarterly, I reported my expenses.
Occasionally, he would ask how we possibly ate all month for so little. I told him it was because I had purchased half beef two months before...used large backlog of pantry supply and did not need so much...garden was ridiculously productive, etc..

I jockeyed the $$ to build myself a nice little slush fund to cover the purchases that exceeded the monthly budget so I could take advantage of sales more efficiently.

It became somewhat of a game for me. How much could I sock away and still not have my people notice any change in the level of comfort? Well, about two years into this, my husband had a $1,700 unexpected expense. He complained about this so I went to what was called my pin money, and gave him the cash. When I hit $3,000, I walked it in to him in the study. He told me to keep it and whatever I was doing, keep doing it.

Of course, I improved in all of my duties over time. That said, I am not one of your $60 fake fingernail women. And why anyone would want a $300 purse is beyond me. But that is another subject. I was talking about the variable food budget. How much I cooked and baked and what I cooked and baked for the herd, made a substantial difference in cost. During any given summer fed about 4-5 young males, depending who was down for a month stay. If you have ever seen a herd of young males eat, you will know how much I was cooking every week.

The one great tip I learned early on, besides timing my purchases, was to make a week or two schedule of dinner menus ahead. If anyone had a special request, they could write it on my white board and I would add it to my menu rotation. It reduces stress because you know what you have to buy. You do not have the continual "what am I going to make tonite" brain racking that happens daily if you do not plan ahead. If you are short on ideas or ingredients it is so easy to default out to take out. Since restaurant and convenience purchases of food are a whole other magilla budget wise, I am going to go over the top of that subject, although it can add up to huge money over a year.

Your wife is still pretty new at this house running business. Give her a little slack. If you want her to do better, find reasons to comment positively on how well she is doing at something. My husband did not have a household executive immediately. I gained skill and knowledge as I went. And he was not critical constantly, although on Experimental Recipe Tuesday, he would occasionally say it would be okay with him if I never ever made X again.

I improved in my money management over time. She has to WANT to succeed. You can grow desire for this by praising her money ninja skills. She has to begin getting as much of a hit of satisfaction from saving money as she ever got from spending money. As soon as this happens, your problems budget wise, are over.

The most important thing is that you two are on the same side of the fence, not opposing, but supporting one another. Also, do not compare your bachelor savings rate with your family rate. You have to resort and shake the new operation to an efficient financial level before you can compare.
Post Fri Jan 29, 2016 6:31 pm
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oldguy
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quote:
Your wife is still pretty new at this house running business. Give her a little slack. If you want her to do better, find reasons to comment positively on how well she is doing at something.


The Pygmalion Effect. When I was managing a group of engineers & designers I learned to identify their strong points and compliment them on how good they were, make them my "go to guy" for that skill. That works SO MUCH better than criticizing the negatives, trying to punish people to get better performance. (That mostly upsets people and they go back to their desk and seethe & pout about the boss.)

Positive reinforcement works great with many animals as well(dogs). Conversely, horses require negative reinforcement - ie, nudging with your heels increases speed until you quit nudging, when you pull on the right rein of the bridle/bit they turn right until you quit pulling. Or to the left if you pull on the the left rein. And they stop if you pull on both reins. And if you continue to pull on both reins they back up until you quit. When you reward them with sweet-feed it pleases them - but they are not able to understand that it was a reward.
Post Fri Jan 29, 2016 8:29 pm
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SCEngineer
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Thanks for the thoughts dozulu.

She's getting better with the grocery budget. She recently found a butcher shop that does meat packages on weekends that are almost half price compared to regular. She's getting better and I make sure to compliment her when she does something awesome (like finding that sale).

The stuff that gets me is she recently purchased a $50 bag off budget and last paycheck we spent almost $80 more than expected as detailed in OP. This month she's decided she wanted to be a Thirty-One sales rep. For those of you not aware of what this is, it's a pyramid scheme setup where you pay $100 to get a job as a sales rep. I sat down read through the literature and explained to her she needed to make about 8 sales to break even. She's decided she wants to do it and I'm hoping she succedes with it. As far as I'm concerned any money she makes doing it is her slush money.

Please do say something if I'm off basis here, but I asked that since she got $100 to start up her bag sales job. I asked that the next budget I get $100 to invest in my Betterment account. She agreed and seemed pretty happy with the idea. I feel satified because I get more invested. Win-win.
Post Fri Jan 29, 2016 9:06 pm
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oldguy
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Wikipedia -- ""Multi-level marketing (MLM) is a marketing strategy in which the sales force is compensated not only for sales they generate, but also for the sales of the other salespeople that they recruit. This recruited sales force is referred to as the participant's "downline", and can provide multiple levels of compensation.[1] Other terms used for MLM include pyramid selling,[2][3][4][5][6] network marketing,[5][7][8] and referral marketing.[9] According to the US FTC, some MLM companies constitute illegal pyramid schemes which exploit members of the organization""

Earl Tupper had no idea what he was starting when he had the first Tupperware Party in 1950. And Avon-Calling was a big one back in the 60's - the 'winners' got pink Cadillacs.

You'll probably need to step back and allow this learning experience to happen - who knows, it might actually be a success. Either way, the education will be valuable.
Post Fri Jan 29, 2016 10:26 pm
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dozulu
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Good for her! She is going to TRY to make some money. Whether this is profitable or not, she wants to make money. It may take more than one of these side gigs to find one, or more than one that creates an income stream. I do not have any experience with anything like this. I was up to my ears with home responsibility and my husband liked his comforts on time.

I know that if she perseveres at her desire to make some small business work, she will eventually find just the thing to work for her. Making the initial investment a repay plan to your Betterment account is a great idea. It would be good if she also puts away something after her break even point so that when she finds the next thing for side gig, she has the capital ready to go.

Her relationship with a good butcher is something that I highly recommend. Mine is one of my former students so he cuts me anything and tells me what is coming up on sale. Also, buying big primal cuts at Cash and Carry or Costco can save you if you know what to do with it. I am sure YouTube has many contributions on selecting and cutting primal cuts.

But it sounds like she has some ideas cooking for saving money as well as making money.

Now here is something that may help both of you. There is a forum of extreme frugality and high savings and early early retirement. These people save crazy amounts, 30%, 40%, 50% of their income to put away for retirement which happens decades early. They share ideas about FI/RE (Financial Independence / Retirement) . I have learned oodles there at MrMoneyMustache.com

http://www.mrmoneymustache.com/
Post Sat Jan 30, 2016 1:31 am
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