A 50 Percent Raise

This is a guest post by Clinton, a 37 year old teacher from Ontario, who also wants to retire at 45.

When we first got married our personal spending seemed to be out of control.  We never knew who was spending what and our personal savings would quickly dwindle between pay cheques.  We were about to purchase out first home and knew we needed to make a change.  In order to rein in our spending habits and create a savings strategy we decided to limit our personal spending to a fixed amount every two weeks.

We have our work pay deposited into a chequing account  for family expenses and then every two weeks we would automatically deposit a fixed amount into two savings accounts – one for each of us for personal expenses.  We would then use this amount to make any personal purchases.  This has been the best strategy for us to eliminate extraneous spending.

Our family expenses includes mortgage, insurance, car loans, gas, utilities, groceries, anything for the kids, meals out when we eat as a family, and clothing.  In general, things that are more of a necessity than a want, or decisions that we have made as a family, like a family vacation fall under this category.

What we consider personal expenses are any meals outside of the home away from the family, gifts to each other, books, gadgets, going out to movies, going out for drinks, specialty clothing, etc.  In order to make bigger purchases you need to save up your fixed amount in your savings account over time.

Do we ever go over the limit?  Well, I can’t speak for my wife, but I have been honest about keeping to our budget.  I usually bring my lunch from home to work 95% of the time.  I might go out once every month or two for a beer and a plate of fries with my friends.  I used to get most of my books from the library and only bought a select few.  There were times that I didn’t have enough money to make a particular purchase, so I just waited until I could.  Sometimes I would forget and didn’t bother going back to make the purchase.

But … there was one time …

Being a typical male, I totally admit overspending my savings and not having enough money for my wife’s birthday gift one year.  I had to take out $20 from our chequing account.  I felt guilty that I had not saved enough, and paid the money back to the account the next week.

Well, this month was a real turning point for our personal expense budget.  I had announced to my wife, with some grandeur, that it was about time we gave ourselves a raise in the personal expense department.  After paying ourselves the same amount for the last decade (it really has been that long) we finally increased that amount by 50 percent.

At the beginning of this month we moved from paying ourselves $50 to each of our savings accounts every two weeks up to $75.  That’s a 50% raise!

I admit it, the change was all me, my wife was happy with $50 every two weeks.  I thought I could use the extra money to buy a few more things for myself, mostly hard to find books.  What is really funny, is that it now seems like I have more money than I can spend in that two week period.

So how do you keep you spending in check? And when did you know it was time for a spending raise?

3 thoughts on “A 50 Percent Raise”

  1. Sounds like an arduous way to save.

    You should start investing in some small cap stocks, maybe I am lucky but after a lot of research and dedication to watching the markets doubled my saving in little over a few months!

    Canada has some interesting companies that could pay u back mega bucks if you know where to look!

  2. Years ago we briefly tried setting aside a little money for personal spending but found that once that money was tagged for spending, then you can be sure we’d find a way to spend it. It was almost as if a bit of dumb spending had been preapproved in our budget so now I could spend it whatever way I wanted. I was often far less selective about how it was spent than I should have been.

    Now the frugal mindset is our normal mode and we rarely spend on anything nonessential. Acquiring stuff just isn’t fun or interesting anymore. It just seems wasteful at this point. Because we so rarely spend on nonessentials, I see no point planning for it in our budget. Our essentials (mortgage, property taxes, utilities, insurance, food, gas) are covered with about 55% of our income. The rest normally goes to one of our savings categories: RRSPs, TFSAs, extra mortgage payments and education funds for our kids. We are paid on alternating weeks, and purchase virtually everything on our CC for the Aeroplan points. Every Friday once the pay is received I pay of the week’s CC charges I then transfer all the excess funds to one of the savings categories. If we decided that week to buy a book, an article of clothing or go for a rare restaurant meal, we simply transfer a slightly smaller amount that week. We’ll go weeks or months without spending anything beyond the essentials, and if we want a tiny splurge the money is there. At this point having a designated budget for unecessary spending would seem bizarre, kind of like planning for waste. I find having to manually add the splurge amount to my spending plan makes me think harder than if I had that money burning a hole in my pocket ready for a splurge. Having to add an unplanned expense reduces the projected excess for that week and draws a lot more attention to it.

  3. @anom It has worked for us and I`m not claiming that it would work for everyone. We don`t really invest in individual small cap stocks, as I dislike the lack of control I have over my investment.

    @JMK Sounds like you found something that works for you and that`s what`s important. When you consider both our incomes the amount we are talking about is very small. In any case, like you mention, it is what you do with your savings that counts, like your RRSPs, TFSA`s etc.

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