Be the expert: How should this guy manage his monthly expenses?

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Here’s a recent email from IWT reader Richard A.

How would you answer his question?

“I have no idea why I’m writing this but you seem like the only person that would even care and/or be eligible to say I told you so.

I live a pretty normal life. House, car, girlfriend, occasionally going out. I max out my 401k at work and put enough away each month to hit my Roth IRA yearly limits. I put away money for an emergency fund, vacation and gifts (bday, xmas, etc). Other than that I don’t wear fancy clothes or drive a fancy car or do/own anything I’d consider “rich people” things. I make a good wage so I’m not the kind of person to sit down and look at numbers very often, set it and forget it right?

And yet I spend $140 over my monthly income each month on just basic expenses, savings and retirement! WTF?! I MAKE $90 fucking thousand a year (pretax of course). How am I spending more than that a month? I just don’t understand. My lifestyle hasn’t changed from when I was making $50k/year.

It’s really just shocking and eye opening and I’m sitting here dumbfounded. Thought you might enjoy. And for shits and giggles here is my list of monthly expenses.

car payment – 300
mortgage – 1400
car ins – 260
water/elec/gas – 230
misc expenses (netflix, gf cell etc) – 70
gf bills – 600 (car, ins, medical, etc)

roth ira – 400
emergency fund – 500

vacation – 240
gifts – 80
spending cash – 400

mind blowing. mind blowing.”

Be the expert: What would you tell Richard? BE SPECIFIC and consider not just the numbers, but the psychology of spending.

Leave a comment below.

 

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485 Comments

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  1. While the car insurance looks a little high – and I would consider shopping for a better deal and/or negotiating a lower rate immediately – the big red flag is $600 a month for the girlfriend’s bills.

    Why are you paying any of anyone else’s bills if you aren’t able to stay within your budget?

    • Caroline F. Lee Link to this comment

      I agree. You are not married – this is what married people do b/c there is a contract in place. With a girlfriend there is no contract and no obligation. She should pay her own way or tie the knot.

    • The red flag for me was also the girlfriends bills. Until they get married I would not consider that a shared expense. Why isn’t she working? How much of her bills does she pay herself?

      As an unmarried female, I wouldn’t expect my boyfriend to pay my bills. I make $50,000/year right now with my part-time security and I take care of myself. That $600 would be better used so that he can build up his emergency fund, add to his travel account, pay his mortgage off early, or have extra spending money.

      If he doesn’t want to make his girlfriend take care of herself then he can cut back on his discretionary spending fund ($400) and be more miserable.

    • Samantha hit the target!!

      Lose the bloodsucking girlfriend, Richard.

    • I actually know a couple that have been together for over 30 years and do not plan to get married, ever. They are very committed to one another. Some people don’t care about official things like that.
      Also, I don’t see why it’s suddenly completely okay for Richard A to pay his girlfriends bills if she was his wife.
      Maybe she’s between jobs, maybe she’s ill, maybe they’re focusing on having children, and maybe she’s lazy. No way to tell from this story.

  2. Yes, why are you paying your gf’s bills? That makes me wonder what else you spend on her (gifts, eating out, going out) that you aren’t aware of.

    Missing expenses: car gas, food, clothing, annual expenses (car registration), your cell.

  3. Samantha covered the big one: why the girlfriend bills?

    Aside from that, I would suggest figuring out what’s most important to him, then going down line by line and working out what can be reduced or cut out.

  4. Does this girlfriend live with you? Have to agree with Samantha. You help her get through school and she leaves you for a better model.

  5. what i don’t get is that the expenses don’t line up with his income. It only totals $53k per year in expenses. If he’s making $90k in income pre tax, thats what, $60-$65k after tax? Probably more than that since he owns a house. He should easily have an extra $1000 per month. I would say he needs to figure out where than $1000 is going rather than arguing over $50 for insurance or paying his GF’s bills (which, while expensive, could easily give him more than $600 elsewhere could ever buy).

    • Other than all the GF notes here, I’d add to just knock down your emergency fund contribution. It’s an illusion that you have $500 available for this. This should be pretty obvious. No reason to stop saving or go on weak vacations as others have mentioned. This seems pretty easy to me.

    • Totally agree Brian. There’s a big hole in his pockets. I once learned if you don’t give money a place to go, it will find a place to go.

    • Bri: I’m with you. The numbers didn’t add up to me.

      Minimally, he’s not including his tax refund as part of his income. I could imagine putting the whole thing towards next year’s Roth and decreasing the monthly Roth withholding, for example.

    • I wouldn’t assume he’s taking home more than that. My income is in the same range as his and after taxes, 401k, and group benefits such as health insurance, life insurance, disability insurance and the FSA account, I bring home just over 56% of my gross income. If he is making $90K, using the same ratio of 56%, that’s take home pay of $50,400. The cost of his benefits, etc. will vary but I think it’s likely that his net income is significantly less than $60-$65K after tax. If the number he gave of overspending $140/month is accurate, based on $53,000 of expenses, then he’s taking home $51,320 or 57% of his income. Seems right about in line based on my experience with my own paycheck.

    • He said he is maxing out his 401k, which is $15,000 a year. That puts him a lot closer to your extra $1000 a month.

    • The extra money comes from the 401(k). If he’s make 90 pretax, let’s say 30 after tax…plus contributing $17K/YR to 401(k), that takes it down to $53.

  6. As a follow up, if he’s contributing that $1000 to his 401K (which isn’t accounted for in his expenses) then he just needs to recognize that he is putting a significant amount towards savings/retirement (almost 30%). Depending on when he wants to retire, maybe he could back that down a little bit and have the extra money there.

    • Right. It’s the missing information that’s most important here. If only I’d read these previous couple comments my superfluous comment down at number, what 453?, wouldn’t have been needed.

  7. First of all, why are you saving so much if you can’t afford it? You should probably try to not accumulate a debt by saving.

    If you’re paying for your girlfriend’s expenses, does that mean you’re paying all of the mortgage and energy bills too? How can you afford another person beyond your own expenses?

    Also, rather than socking away money for a $3000 vacation, maybe you could go on a cheaper vacation for $1200 instead? The vacation budget alone could fix your problem.

    If none of those work, I would suggest to try to cut down constant cost. Is there a cheaper energy provider or insurance policy you could get? If you can shave expenses off things that will be the same from wherever you get it, you won’t notice any change beyond the savings.

  8. Three things I see:

    1. Assuming you don’t drop your car after your lease is up, your $300 a month car payment will disappear and you’ll no longer be spending more than you’re making.

    2. Your lifestyle might be the same, but you’re also spending money on your girlfriend’s too, which can add up fast. She’s the most expensive thing after your mortgage and savings.

    3. I think your main problem is that the more money you make, the more you think you can diversify your priorities. Little increases add up fast. So, for example, if your priorities are long term, then you can choose to take care of a mortgage and savings. But, now, you’ve added on other priorities like travel and a girlfriend’s expenses. Having two major priorities (and the resulting expenses) can break up a large paycheck really fast. Now your expenses have reached nearly $50K a year.

    • Whitney, you make a fantastic point about priorities. It seems so basic when you say it, but I find myself doing that, too. In the past three years I’ve had two large jumps in salary (from pretty low to now reasonable) and each time I got stuck in the same thinking. I wanted to throw it all at retirement + student loans + vacations + liquid savings…you get the idea.

      Sometimes you have to pick one or two priorities and be patient about the rest. As long as you’re building toward a goal or two, you’re making progress, not staying stagnant.

  9. Richard,

    The most glaring problems that can be highlighted from your email are the Girlfriend tax, Emergency fund and 401K.

    If you don’t have a handle on your own finances don’t take on other peoples. When you say you are paying other peoples bills you basically tell me that you are fine with people living above their means and there is always a solution.

    I’m guessing that you are from 25 to 40 and I will also assume you are healthy. There for you should be focusing on paying off your debt rather than “saving” in an emergency fund and 401k. Eliminating your mortgage debt should be the highest priority, it is the only expense you listed that will/could make you money in the future so don’t let your profit be eaten by interest.

    Here are some hidden costs you have not listed:
    Car Fuel, Car Maintenance, Food

    Jeff

    • Disagree with this one. Compounded savings is the single biggest advantage a young investor has. Mortgage rates now are very low. Keep your 401k.

    • Disagree as well. Assuming his mortgage is less than 5%, it’s hardly a priority – that’s cheap money!

    • William Lipira Link to this comment

      While I agree that he has not listed a few things, having an emergency fund is vital. Of course, once you reach your goal number, then stop paying into it (unless you are replenishing it).
      Not contribute to your 401k? Really? You are wrong in this, very wrong.
      Your idea about the mortgage is also wrong. Whether one rents or pays a mortgage, there will always be this expenditure (for the most part), so this isn’t a “debt” one should worry about paying off, post haste. Also, you get to use your mortgage for tax purposes (I don’t know the details, but having a ,mortgage is very good taxwise – other please fill me in, and/or correct me on this) Other debt is bad, like credit cards (any plastic), etc. that you can’t pay off completely on a monthly basis.

    • My opinions are based on Australia mortgages and tax.

      I should have read up on Mortgage rates what the difference between a 401k and Superannuation (Australian) but I was lazy.

  10. The two major things that stand out to me “occasionally going out” and “My lifestyle hasn’t changed from when…” The first one, I used to think I didn’t go out that much but once I started tracking my expenses using a tool like mint, I was shocked at how much I was spending eating out or having drinks, etc. I think if you really tracked all your transactions for one month you’d be surprised on how much you really spent. The second one is obviously not true, it must have changed, to be blunt your in denial of where your money is actually going and your not tracking it properly. Before you can even being to analyze your “budget” you need to raise your awareness of your spending habits. Utilize something like mint to automatically track your bank account and credit card spending, this should really open your eyes.

    • I completely agree. Take a couple months to track your spending- this in itself reduces consumption. You can’t cut costs and optimize spending when you don’t know how much you’re spending where.

    • I think you hit the nail on the head for this one, Chris. While we have lots people mentioning the girlfriend as a budget-buster, I would also be more inclined to say that perhaps he isn’t as cognizant of his spending habits as he thinks he is. I don’t think the point here was to point out that this guy spends $600/month helping his girlfriend out, that is much to obvious. I think this is more about the fact that this guy’s mind is blown as to where all of his money is going without ever really analyzing or admitting to himself how much he actually spends.”Set it and forget it” was the term used. WRONG! I respect that he is on auto-pilot with many of his expenses, however, when you’re going over your budget every month by an average of $140, it’s time to evaluate and really admit where your money is going.

    • William Lipira Link to this comment

      He is living it up. Making a boatload of money, and treating his girlfriend lavishly. Notice that they are not married, so hot-shot spending goes up. Trust me, if they were married, it would be a whole other ball game.

    • Yep, I immediately wonder about anything called “miscellaneous” or “spending cash”. And I wonder how much he (and she) spend each month eating out.

  11. The psychology of car ownership can be overwhelming. Are you an adult if you don’t own a car? Can you be taken seriously if you ride a bicycle? :)

    My perspective shifted from “I drive a car, so I’m self-sufficient and powerful” to “I ride a bicycle so I’m cost effective in terms of time and money, and I’m making myself healthier at the same time.” And by the way, I feel a lot more self-sufficient because I don’t pay for gas, mechanic, etc. And, I feel a lot more powerful knowing that I hauled my own ass to get where I am. So, it’s wins all around when you ditch the car.

    Of course, there’s an initial outlay, but then you’d be saving close to $1000 every month without changing what you do with your day i.e. same work, same leisure. Just change how you get there.

    • That’s Wack, Ira! Is the girlfriend supposed to ride on his handlebars to go out to dinner????

      Bicycling is great for exercise or SOME routine trips, but not having a car puts a SEVERE kink in one’s lifestyle.

      The Auto insurance, though, is a BIG red flag. $260 a month??? He must drive like a madman!!! Maybe, on second thought, he SHOULDN’T have a car!

    • So if car insurance is $260/month, what did he do to earn that cost? There’s more details than what we know! I am getting he feels victim to his money and what I am seeing is lack of accountability to know where every penny is being spent and to have a plan. He knows he needs to have retirement, emergency and of course a girlfriend is important and…. if we let life happen, it does! and it did for me! and we become victim to it. If we have a plan of where we are going, what we want to create, we become much more engaged in this thing called life! Blessings to you man, on your journey. Great to reach out for help, we’re all in this together.

    • I’m all for dropping the car and biking (or walking/public transit). If you live in a small town or a city, it doesn’t need to affect your lifestyle at all (gf can have her own bike!) Rural/suburb, maybe a different story. But many/most people (probably this guy) just will not ever consider it, which is a shame.

      I’m wondering what the $400 cash goes to. Also, based purely on my own experience, $230 for water+gas+electric seems steep–last time I paid utilities (admittedly in an apartment, not a house).

    • William Lipira Link to this comment

      Interesting Ira. You must live in an area where everything is right there, like a big city. Just because someone owns a car, doesn’t mean what you think it does. The way you put it means that you are ignorant. Now, if someone decied to get a mercedes on a kia budget, then ok, you would have a valid point, to an extent. Your bruhaha bs talk doesn’t mean you’re cool, either.

  12. My two cents:

    1) I noticed that expenses for girlfriend are mentioned but not income. If they’re to the point of combining finances, I’m assuming she’s unemployed and he’s helping her out. I’m not pointing this out as a source for a point of advice, but to commend him. (Without more info, I’m hesitant to make assumptions about her, let alone negative ones)

    2) Assuming he’s right about his lifestyle not changing despite an 80% increase in income, either his increase in spending increased gradually (to the point he wouldn’t notice), his saving for goals/retirement increased (because he realized he wasn’t saving enough, and decided to fix it), or something big happened to increase his spending (he got a girlfriend).

    3) There are few sources of wiggle room I see in that budget:

    -Cutting out of the spending cash would drive him nuts. He shouldn’t do that.
    -Cutting the 401k and Roth (assuming he’s young) would have a serious impact on retirement. Shouldn’t do that either.

    4) Some of his expenditures are only temporary:

    -Eventually, the emergency fund will hit his target.
    -He’ll have the cash saved for the vacation.

    5) Once one of the items in #4 is met, the monthly amount should be spent on the car payment instead to get that paid off as soon as possible. I would *not* recommend doing this with the mortgage after the car payment is finished, since that will *always* feel like throwing your money into a bottomless pit. Plus, unless he bought his house *very* recently, he’s probably upside down on it. Once he’s met his emergency fund and vacation goals, and paid off his car, now he’s all of a sudden got $1040 more per month than he has now! He can start saving for the next vacation! =)

    6) Negotiate bills – now we’re talking comparatively small potatoes, but cell bills, cable bills, etc. could maybe be lowered a bit with a phone call. Ramit’s got some great scripts in his book to use for this, but since I don’t see credit card debt listed, your mileage may vary. I would also see if a refi on the mortgage is an option. Sometimes, if you approach the same bank who holds your current mortgage, they can get you into a new one with a lower rate with no closing costs (I did it with Wells Fargo). He just needs to make sure he doesn’t get an ARM… those things are poison.

    7) For his retirement, he seems set (assuming his Roth and 401k are in something sane… like a target retirement date lifecycle fund). He can breathe easy there.

    8) He’s saving $500 for emergencies, but considers himself $140 in the red each month. Since that $500 isn’t really “spending”, I consider him $360 in the black. =)

    9) Car insurance seems a bit high. I would say it’s time to go shopping there. Unfortunately, I don’t think scripts will work on this, since I don’t believe insurance cost per coverage is flexible. Check with other companies, see if he can get discounts for combining with homeowners, etc.

    • I agree with Chris the most. Hopefully, your gf’s income is part of the $90k. Your car insurance seems high, but I live in the Chicago burbs, my brother lives in San Fran and insurance on his crappier car is three times mine. Great job on the saving for retirement, I bet you were not putting that much away when you made $50k.

      I’m in a similar boat, making just shy of $87k. Each month, bills and groceries whittle it down to nothing. I have a stay home wife and two kids. My goal is to end as much debt as possible. After we bought our house, all the appliances broke, the kids were allergic to the carpet, etc…. So I’ve been cutting spending like mad and paying off all the little loans for breathing room. I’m just about done. Decide how much you need in the emergency account, put it away and then stop. Kill off your car payment. I hope the $140 is coming out of savings and not the credit card. Is your gf in school? Are any of these payments going to stop and can you help that happen sooner?

  13. Dude, first, congratulate yourself for socking money away for retirement in both your 401k and Roth AND for funding your emergency fund. You’re way ahead of a lot of people right there.

    Where is you’re money for food/groceries? Is that under Spending Cash?

    Gifts should include the GF’s bills (and her cell, which is listed under Misc) and so should really be around $700/month. Are you (Richard A) comfortable with $700/month being Gifts?

    I know Ramit likes to focus on Earning More vs Spending Less, but you should really try tracking your spending for one month just to make absolutely sure your dollars are being spent where you think they are being spent.

    Do you have spending records (like MS Money or Quicken) you can compare your $50k/year spending to your $90k/year spending? Are you SURE you’re lifestyle hasn’t changed? Honestly??

  14. 1. 90k a year amounts to $7500 a month. The total monthly expenses provided amount to $4480. So, it seems like he is receiving only 60% of his income (4480/7500 * 100). So, 40% of his income is spent on taxes and 401 K.

    2. Next, the fixed expenses (everything excluding vacation, gift, spending cash, and emergency funds) amounts to $3260. That is ~43% of his pre-tax income.

    3. Taking into account, 1 & 2, he seems to be spending a staggering 83% of his pre-tax income on monthly. This leaves only 16% of his money for savings and spending, which is definitely not enough (just groceries for two will cost more than $400/month)

    4. I would try to reduce the fixed expenses and try to save more for spending expenses. Some thoughts:
    -Does he need to max out his 401K when he is struggling to meet expenses? It seems like the present contribution is close to 10%. Recommend reducing to 5% (which may be enough to get the employer match)?
    -Could he reduce some expenses by negotiating (car insurance, canceling netflix etc.)?
    -Lastly, as others pointed out, try to reduce expenses on girlfriend.

    • I’d start by looking at the house payment, because it’s the biggest. The highest-payoff change there is to consider refinancing. If you didn’t get a mortgage or refinance recently, you can propably reduce your interest rate. Yes, you will have to spend several weekends or evenings fussing with online calculators and pricing loans, but the savings will stay with you as long as you own this home, and potentially amount to hundreds per month. Of course, be smart about it and stick to plain-vanilla fixed-rate products unless you have special circumstances.

      Next biggest component of that house payment is insurance. Start with the deductible. I’d exprect a guy pumping $500/mo. into an emergency fund to be able to cover several thousand dollars in unexpected expenses. Is your deductible that high? If not, why not? How much would it save you to raise the deductible? Also look at discounts for combining home and auto insurance if you aren’t doing so already. Finally, shop around other high-quality carriers for a better deal. Again, several evenings of fussing and number crunching, but years of potential payoff.

      Take a look at the car insurance as well. Same questions about deductibles, combined carriers, etc.

      For cell phones, cable and other subscriptions, take a look at what you really use in your current plans. If you really aren’t using premium cable channels, unlimited text, etc. stop paying for them. Even if you like what you have, these fields are fiercely competitive, and it sometimes takes nothing more than a phone call that says “I’m thinking of swtiching…” to get “customer retention” to cough up a better deal. When the deal expires, call them again. My wife has done this to our cable provider for years.

      That’s the low-hanging fruit, where a little effort has a potentially large, long running payoff. Changes from here fall into one of two categories:
      * Really Big Changes — different (less expensive) house; rent rather than own; ditch one car and use public transit or Zipcar-type services for occasional needs. These involve a LOT of effort (not the least of which is re-negotiating some relationship understandings) but the potential savings are HUGE.
      * Small Daily Changes — Track some key expenses, and figure out a way to cap eating out or entertainment or some similar discretionary expense. Go for an easy-to-use method such as taking the budget for the month out on payday, putting it in an envelope, and when it’s gone, it’s gone. Or something like that. These require more effort on a daily basis, and the payoff is modest, but doesn’t require a massive lifestyle disruption.

      That’s how I see it…

  15. You can analyze trends from a single data point. 3% variation from your spending plan is pretty dam good. Not sure how your emergency fund is set up but I’d let it build up in your everyday account as a buffer to smoorh out the monthly variations.
    Other than that, revisit it in a few months to establish whether it is trend or one off.

  16. Richard,

    First of all, congratulations on your awareness of the problem and your attitude of seeking assistance to help you with your dilemma. Personal finance is a difficult area and one that takes time to master (and we all are ongoing students in this area).

    This list of expenses is a great start for someone who does not normally track their expenditure. Perhaps an idea would be to begin tracking everything you spend for the next 30 days either in a notebook or an iPhone. This is difficult but will give you a good indication as to the accuracy of these numbers. You then might find that $400 on spending cash is actually $527.65. The better your measurements, the better you can manage the situation.

    Next, I am curious about your view on your necessary expenses. A number of people above have stipulated that maybe your girlfriends expenses may be a discretionary expense rather than a necessary expense in your budget. This may not be the case in your personal situation, but it is wise to bear in mind that these costs are a significant factor in your expenditure.

    You mentioned that your lifestyle hasn’t changed much from when you were making $50,000 per year. Is it possible that you were spending a lot more than you made back then and that your income is now closer to maintaining the lifestyle you once were living way too extravagantly? Again I don’t know, but a look at your financial history would be a great indicator.

    Lastly, whilst you may disagree, a number of your expenses are lifestyle choices. Buying a home and owning a nice car included. Many people rent instead of buying, putting their deposit into shares or their own business. This is a sacrifice they choose to make to embrace other aspects of their lifestyle. It may be a wise idea to assess your true goals and determine what is and is not important to you. It’s great to spend money on the things that matter, but don’t waste money on the things that don’t matter.

    • I’m going to throw in with Josh on this one. This is one of the many areas in life where speaking with specificity and unadulterated truth helps, both with yourself and significant other. My wife and I had modest incomes when we were first married (and she was still in grad school). In just a few years that quickly grew 2x then 3x. While we felt our lifestyles were relatively stable, it in fact was growing, particularly factoring debt we took on with houses and cars. When we got serious about tracking every penny (maybe overkill, but it provided a “project” we both worked on) we saw areas where we were spending way more money that we thought. That gave us a good starting point to talk about what we wanted to spend money on, what was important, and where could we shift our spending to do previously unimagined ideas (a mission trip to Africa, adopting a child). It all started with having truthful conversations about wear and why we were spending money. It looks like you’ve got some clear priorities about what’s important to you with how you spend you’re money. It’s good to make sure “walk matches the talk”, even with yourself if you’re not at that stage with your girlfriend.

  17. My man, the money goes somewhere. My big question for you is what kind of neighborhood do you live in- specifically, how much do people make? In my area of the country 90,000 is roughly a median salary- so it would be no surprise you’re just scraping by on that if you lived here and led a normal lifestyle. Remember, most normal people are just scraping by with maybe a few months emergency fund, if that- so if you’re living a normal lifestyle on a normal salary, you’re probably just scraping by- its normal!

    • It doesn’t matter how much other people make. This is the kind of “keeping up with the Joneses” mentality that gets people into financial trouble to begin with. He makes $90,000 per year. He needs to make his expenses fit within the confines of his income. Period.

      Generally, areas with high median incomes also have fairly high home values. A $1,400/month mortgage means his home is probably valued a little higher than the average US home, but his income is nearly triple the median US household income.

      Coincidentally, I live in a suburb of San Francisco where a $1,400/mortgage is close to average (at least it is now…post bubble). As a family of three, we have lived comfortably for the past two years on an average family income of roughly $60,000 per year. During this time, we didn’t acquire any debt and managed to save about $25,000. I don’t say this to pat myself on the back. I provide it as evidence that if a 3-person family can do it, he surely can.

  18. There a piece of the puzzle missing. Where is your food budget? Entertainment? Are the numbers you give actual numbers from your several months worth of bank statments, or just guesses based on what you think you spend?

    If they are actual numbers, then you should be able to figure out what is going wrong. Where does it make most sense to cut back? Is the gf willing to help you cut back?

    If your numbers are guesses, then you need to look at your TRUE numbers month per month. Since you claim to be a set and forget it guy, then maybe you are spending more than you believe each month.

  19. I don’t say this to mean, but you need a reality check. Stop lying to yourself and start tracking your income and expenditures. Anyone who provides such and incomplete list of expenditures obviously doesn’t have a clue where his money is really going.

    “My lifestyle hasn’t changed from when I was making $50k/year.”

    Are you sure? According to your (obviously incomplete) list of expenses, you were spending 107.5% of your pretax income when making $50,000/year. Accounting for taxes, this would imply that you were actually spending 134% of you after tax income (assuming a federal and state effective tax rate of 20%).

    I’d love to know where you live that doesn’t have property taxes and home maintenance is free. Also, don’t you use a phone, eat or put gas in your car?

  20. I’d be willing to bet you didn’t have “home+gf+new car” at 50K. Nearly all monthly bills and expenses are direct or hidden costs tied to those three things.

    I’m not gonna judge on the gf thing (many of us do the same, we’d just never track/admit it), but you obviously know you’re overextending, and perhaps even over-planning considering your circumstances (likely high interest rate on the car, for example).

    PS – About that $400 “spending cash”, if you know where that’s going, why would you not say? If you don’t know where it’s going, consider the possibility that you’re not being honest with yourself about your true expenses. Try switching to card only for a month, see what you find out.

  21. It’s the 600+ you are spending on having a “gf”. Stop kidding yourself. If you are spending that much on her to keep her around, so that she can be doing whatever it is she is doing without earning money, you are a fool if you don’t marry her and have some sort of binding agreement. You are obviously being very kind to support her throughout a period of her life, but you cannot afford this expense and you have no reason to unless you are in a marriage, and you can reasonably expect it to be an equal and fair arrangement.

    All your other expenses seem to be fine, I’m not sure about car insurance in the USA but it seems awfully high for someone of your age, it is one third of that in Australia even for a 100K+ car.

    Just my thoughts.

    • The “gf” expenses jumped out a me too.

      I’d suggest applying Ramit’s gym membership philosophy to the “gf.” Cancel the monthly subscription and just pay for day passes instead. If he only hangs out with her two to three days a week, that should take care of his $140/month shortfall.

      I have to disagree about him being a fool if he doesn’t marry her though. Marriage hasn’t been a “binding agreement” since about the 1970s when no fault divorce became popular. It’s much safer to financially support a girlfriend than a wife because he doesn’t run the risk of court imposed spousal support if the relationship breaks down.

    • William Lipira Link to this comment

      As far as the car insurance goes, it’s pretty high here if you have either gaps in your insurance, tickets and other nasties on your record, or don’t shop around for the best deal. I could go on, but you get the gist.

  22. These aren’t “real” numbers, they’re estimates, so he’s not automating, which means he’s losing money through unseen expenses.

    We can tell they aren’t real numbers because 1) the itemization misses items like “groceries,” “entertainment,” and “homeowner’s insurance,” which a line-by-line itemization would yield, and 2) the itemized expenses are WAY below his income.

    If he wants to get in control of his finances, he first needs to figure out what he’s spending. Mint.com is my favorite method. Once he has some valuable data, he can actually create a plan. But trying to come up with a plan based on faulty data won’t fix anything. If you don’t know how you’re actually spending your money, how can you hope to make changes?

    I think you should tell Richard to come back in a couple of months with a better understanding of where his money goes, and then the community can offer some valuable help.

  23. To me, it looks like the big hole is the “spending money” section. That basically shows that you have no idea where it’s going, and aren’t tracking. If you’re anything like me, you’re basically leaving yourself open to buying whatever you want with “the rest” of your money, and that’s way too flimsy to base a budget around.

  24. Relax. You’re doing fine. You’re “paying yourself first” — sucking money out of your cashflow into roth, 401k, and emergency fund before you can blow it is a great habit. Keep up the high savings rate so that you feel a little stretched — it keeps you from taking on more expenses.

    A big “emergency fund” or other cash savings will let you take advantage of future situations, or take certain risks that could have a big payoff. (E.g. I parted with a few thousand in cash to complete a *really* good refi on my mortgage that will save big money; I couldn’t have done it if I hadn’t saved up the cash in advance.)

    A couple of others suggested reducing your 401k so you meet break-even; that’s crazy talk.

    If that’s a monthly number, your car insurance bill is $3120 a year! That’s incredibly high — I didn’t pay anywhere near that much even when I was 21 (it goes down a lot at 25 and I think there was another big bump down at 30). Shop around. Unless you’ve got some big past driving sins that you’re paying for, you should be able to cut that amount by a lot.

    If you want to try to trim your expenses, put everything on plastic for a couple of months. (Except the big fixed expenses like car payment and mortgage that you’re paying out of your bank’s billpay.) When that statement comes in, take a look at where everything is going: (a) do you have an expensive spending habit, (b) do you have “splurges” that you forget about at the end of the month? If this spending is on things that bring you great joy, then find a way to pay for it. If it’s just a habit that you don’t need, then drop it and voilá, you have found your extra money.

    Lastly, an IWT reader who can pull a 90K salary should have the brains to round up another $2500/year. (I.e. roughly the amount that would cover $140/month in post-tax spending.) That’s a 3% raise. Or $200/month with a little side work.

  25. The disconnect is, I think, here: ” WTF?! I MAKE $90 fucking thousand a year.” Somewhere in the back of your mind (or hell, even the forefront), you think this should buy you the ability to max out all your savings goals (401k, IRAs, emergency fund), live in a nice but not extravagant house, drive a nice but not extravagant car, take one or two nice but not extravagant vacations per year, and help out those you love without having to worry about your day to day expenses. The reality is it doesn’t.

    That you’re $140 in the red every month means something’s gotta give. The most obvious places to reduce are your car insurance (this seems pretty high, does it include homeowner’s insurance as well? Shop around and try to reduce this), your overall savings rate (401k, IRA, emergency fund, vacation fund total over $30k/yr), and your girlfriend’s expenses.

    In my outsider’s view, you can afford to help your girlfriend out, or you can afford to save extravagantly, but you can’t do both. I’m going to assume reducing or eliminating your girlfriend’s expenses is out of the question, at least in the short term. Therefore, reducing your savings rate by only $150/month would put you back in the black (I’m looking at you vacation fund.)

    Your long term strategy should be to realign your thinking around what you “should” be able to afford versus what you can actually afford. Track your spending for a couple months to see where your money truly goes. Then draw up a budget or spending plan of whatever flavor you prefer and set some targets. Think concrete numbers rather than abstract, “Oh, I have a good salary, I can afford that.” Be prepared to make spending changes that are painful.

    And lastly, think about what’s going on with your girlfriend’s expenses. Is it a temporary situation? Have you committed to them in perpetuity? Are you planning to get married? I have no advice as I don’t know your situation, just a vague sense of unease about supporting a partner who isn’t a spouse.

    • Agree with Diaphanous. Why are so many responders saying to cut funding his retirement??? That is completely ridiculous to me when he has a healthy $240/month vacation fund.

      I also think you are the first one to really get into his psychology about making $90k now vs making $50k and what he SHOULD be able to afford at $90K.

      I agree with everyone though that these numbers feel like guesses and not like he went back through the last 6 months of spending to really see where it was all going. No need to track the next 2 months….I’d wager he has a bank account and credit card statements he can use to review the past few months instead to get a clearer picture.

      also I echo ** Z ** who said as an IWTTBR reader who makes $90k/yr, he can surely find a way to make an extra $2500/yr to cover the ‘overages’ each month.

      And the girlfriend expenses are a flag too. $90K is great salary for 2 people or a family to live on, but it may mean adjustments to things like vacation funds, gifts, spending money and emergency fund…If he has 6 months living expenses saved up, that’s fantastic, and if he has a year – that’s even better. So if he has beyond a year in the emergency fund, that $500/month becomes available for other things (but only if 1 year in emergency fund and only after looking at other areas to cut and after finding ways to increase salary).

  26. Richard,
    move closer to work: take mass transit, a bike, walk, carpool. Sell one of the vehicles.

    Owning 1 car/person is expensive, unnecessary, and wasteful. Ditch the addiction.

    –Car-free 8 years and delighted

  27. Why is he paying so much for his girlfriend’s bills? Cut that out and perhaps he would have a better handle on his finances.

  28. Haha, I’d say sell the house and rent instead of paying a mortgage for something most likely more than you need, and sell the car and buy one you can afford without a monthly payment.

  29. a. Car Payment + Car insurance + Mortgage + Utilities = $2,190 or 50.46% of net income.
    Good – 50%+/- goes to “necessities”… er.. where’s the food / groceries?

    b. roth ira + emergency fund = $900 or 20.74% of net income
    Not bad – 20%+ savings on net income. Can be better

    c. vacation + gifts + Misc (netflix, gf cell etc) + GF bills (car, ins, medical, etc) = $990 or 22.81% of net income
    Generally a lot of “feel good” spending, especially GF’s bills which makes up 60.61% of this “feel good” spending.
    Assuming she’s “worth it”, better start cutting down somewhere else like (d.). Else… :P

    d.) spending cash (on ???) $400 or 9.22% of net income
    Groceries? Spas? When U can define it, U can’t see, track and manage it.

    Bottom line:
    1. It’s a choice of reducing “GF bills” or reducing “spending cash”, which ever is lower priority to U – no right/wrong per se.
    2. Just a thought – IF your GF is working, then U should combine your net income to calculate the partnership’s “Income & Expenses” data/statistics right?
    IF she isn’t working – it’s back to (1.), priorities – U can have ANYTHING U want but not EVERYTHING :P

  30. Most importantly, I think you’re focusing on too many things at once and this is frustrating you. You’re saving for retirement in two different ways AND emergencies AND a vacation. If I were you, I’d calculate how much you want for an emergency fund vs. how much you have. Then stop saving for retirement and roll your vacation savings into your emergency fund. Given your current savings levels, I suspect you should have a fat emergency fund in six months or less if you put all your saving energies into it.

    Yes, this means you won’t max out your retirement this year. Don’t worry about it; missing a few months of savings isn’t a big deal in the long run.

    Once your emergency fund is fully funded, go back to your usual saving pattern, minus adding to the emergency fund. That will leave you running a $360/month surplus.

    Then:

    1. See if you can do something about the auto insurance situation. I don’t know your particulars, but that seems awfully high. (If you’re paying your girlfriend’s do the same for hers.)

    2. Review the whole lease situation. Leases are often terrible, financially. You may want to take that $360/month surplus and put it into savings for a car down payment once your lease is up. Is driving a nice car important to you? If it isn’t, you could save a lot getting a decent late model used car.

    3. Investigate the possibility of a mortgage refinance.

    Finally, if you are paying $600/month toward your girlfriend’s basic day to day expenses, you’re behaving like a married person. This would be fine, except you aren’t married. If you and your girlfriend are planning on building a life together permanently, I’d look at getting married. If you aren’t, I would rethink my spending in this arena. Being financially married without being actually married seems imprudent.

  31. Cut back on the emergency fund and negotiate for a 10K raise at work!

  32. Your car insurance seems very high. I like to keep housing pretty low as well – 1400 seems high to me. Its nice to see you’re pumping a good amount into emergency and IRA each month. Personally I’d really focus on your Mortgage, Car Insurance, and GF Bills. You also might consider that you are saving a bit too much for vacations. Even if you take a vacation every 8 months – that’s nearly $2k.

    Good luck

    • I’m curious to hear your thoughts on how he should “focus on” his mortgage. Without a full-on refi, moving (assuming he isn’t upside-down on it), or falling into money to pay it off, that seems like a pretty fixed cost. I’m pretty sure that’s not something that can be negotiated with a script.

  33. 600 bucks for your gf bills?? You got to be kidding me. You are loosing $7200/yr. That’s a pretty big number given your situation. Tell your little gf to get a job. Its your hard earned money and no one has the right to take it away from you.

  34. Well, it looks like this is an incomplete list of expenses. I don’t see food on here. My guess is that it’s wrapped up in “Spending Cash” but $400 seems very low for that, especially if he is also taking care of his girlfriend, what a nice guy. My fiance and I spend $800/mth on food and we could spend a lot more if we ate out as much as we used to. Also, when I do my budget, I leave a heavy allowance for “leisure spending” – movies, concerts, etc. It could be that some of the one-time expenses like buying concert tickets or whatever (every month there is always seems to be something) is slipping through the cracks. I would recommend setting aside $140/mth for unexpected expenses. It’s great that he knows that he always overspends by a certain amount, that way he can compensate. I would recommend getting that extra $140 from either his emergency fund or the 401K. Even though those things are important, $140 is not that much money and he is already spending a lot each month on those two things. It sucks to know that you’re putting away less money each month, but I think that’s better than the constant frustration of overspending your budget.

  35. Why are gf bills in one category and gf cell phone in another? Maybe there are more gf costs than he admits.

  36. You appear to be having a 140 dollar a month emergency an are failing to make appropriate use of your 500 dollar a month emergency fund. At some point your vacation and spending cash should be dropped by 70 each or you may eventually have an emergency.

  37. Short and sweet. Dump your girlfriend:

  38. Get a new girlfriend who can pay her own bills

  39. Here is some good advice.

    Sign up for Mint.com. I did it 8 months ago and it is amazing. It will track all of your monthly expenses, with interactive graphs. It is the best, free budget program out there. Before I used it, I had no idea where my money was going. Now, I can tell you how much I spend on every item, over time, how much I am saving, how much credit card, mortgage, debt I have, you can set savings goals, it tells you your net worth, it does everything.

  40. Tell your girlfriend to get a job and start paying her own bills.

  41. Find a side job and earn more money. Or use some of your savings to buy a car for cash to get rid of the $300/month.

    Or negotiate a raise.

    Or get a girlfriend that can pay her own way.

    You car insurance is also high. Just get real low insurance. You have enough savings to cover a higher deductible. Unless you drive like a douch and hit people a lot.

    But seriously, that much for the girlfriend? She must be frickin hot.

  42. Unless your girlfriend is unemployed, temporarily down-and-out etc., why are you paying for her cell bill?

    If you need to do this to keep her, something is (deeply) wrong.

  43. Quit paying for the girlfriend! Duh!

  44. Obviously you can’t afford to save $500 a month in emergency savings – guess you can really only afford to save $250 a month.

  45. 1 – Try and renegotiate on your car/home insurance (bundling can result in significant savings)
    2 – Look for ways to reduce the stuff you are spending on your girlfriend, without messing with your lifestyle. One way is to get a rewards credit card to help pay for your vacations with your purchases.
    3 – You can try the scrooge strategy of eating dinner at home and going out for appetizers.

  46. A few observations;
    1. What do you eat? There is neither groceries nor eating out listed in your budget.
    2. Do you drive? Gasoline, maintenance and repair costs need to be budgeted.
    3. What do you wear? Got to figure clothing into the budget. You are going to buy it, so you need to budget for it.
    You’ve got the recurring bills accounted for, but of the big four (Food, Clothing, Shelter, and Transportation) you only have shelter accounted for.
    Kudos for including to GF expenses, if that is where the money is going, you need to be accurate in your planning.
    My observation is that food, clothing and car expenses are where the rest of your money has gone.
    A great way to control these is to use the envelope system. Pay the envelope like you pay your monthly bills. $500 (or whatever) for groceries, $400 for gasoline, etc.

  47. From the statement that you are maxing out your work 401k you are probably putting in 30-40% of your income into that while also contributing to your Roth IRA. Maxing out your 401k is great, but it’s not great at the expense of your credit cards. To stay within your budget, consider pulling back your work 401k to something more reasonable, maybe 25%. Also, consider asking your girlfriend to get a part time job to help out with expenses. You are probably going to get married and have kids within the next couple of years. After pulling back on your 401k to a more reasonable amount, put whatever is left over in your ING savings for the future. Weddings and kids are expensive and you can’t really tap into that 401k to help finance.

  48. Richard. Chill out.

    You’re over budget by $1,680 a year, with an annual salary of $90,000. This is not a big problem. (You’re over by less than 2%.) It sounds like your savings plan is very aggressive. That’s awesome, but if you can’t sleep at night, maybe you need to take it down a notch. You could also eat out less, and stop buying $4 lattes. But IMHO, you can’t save your way to wealth.

    Here’s an idea. Figure out how you can make an additional couple of hundred dollars a month. That’s less than a good waiter or bartender makes in a night. Less than most consultants make in an hour. Hell, you could babysit your way to an extra $140 a month — probably in one night when you consider the money you make plus the money you don’t spend going out that night. Get a raise from 90k to 92k. Renegotiate your car insurance, or refi your mortgage.

    And this is really the safe approach. If I were in your place I’d swings for the fences and try and bring in a few extra thousand a month.

    • Maybe the *girlfriend* should be figuring out how to make an extra couple hundred a month—or cut back on *her* expenses.

      Obviously, I have no idea what the situation here is (though it’s fun to speculate) but it does seem like the burden is disproportionately on Richard. Even if the GF is in school or doing an internship or whatever, picking up her bills is awfully generous.

  49. (am the first liz) again the same info for the health insurance and other expenses for the gf. But, if a temporary set-back, that is a different story. But it sounds like this is “routine” not an anomaly.

  50. I think it s good the way he is spending and saving his money. I wish I was making what he is making in line of work I do.

  51. He’s spending over $7K a year on his girlfriend? Ditch her, she’s taking up 12% of his take home pay… (unless she’s studying to be a doctor and and will support him later on;-)

    Depending on where he lives, the mortgage and car insurance seem a little high…29% of his likely take-home pay for housing; consider downsizing.

    The IRA and especially the emergency fund are good…you never know when you’ll get laid off these days. Take cheaper vacations (e.g. stay close to home)

    The big thing missing from this accounting is the cost of med insurance and the bite taxes (fed, state, local, and real estate) are taking out of his likely $58.5K/yr take home pay.

  52. The girlfriend’s expenses NEED to go. When she’s your wife and officially part of the household, you can work together as a couple financially – not before.

    Also, depending on the car (how much you owe, how much it’s worth, etc.) maybe sell the car, buy a very inexpensive one, keep making your car payment TO YOURSELF, and THEN buy a better car (with the proceeds from selling the beater plus your new savings.)

    Also, total was $4,480 = $53760 annually (net.) I’m guessing this is after 401k, so combined with his Roth he’s actually doing a decent job saving. I’d like to know what the total amount of savings is (retirement, investment, and liquid) and if there’s any debt (appears not to be.)

    Biggest suggestions: Lose the car payment and the g/f and you should be set.

  53. So here’s what I see….

    -Car insurance looks a bit high especially if this is monthly. I pay around 600 per half year. That’s 100 a month. See if you can’t whittle that down

    -any reason your go can’t contribute more to her own bills? Her mortgage/rent is definitely taking a huge chunk.

    -I think your 401k or Roth is a bit high on deductions. You only want to really go a bit above the match. I socked 18% into mine for 2 years. They matched up to 4% lol. It’s all yur money but figure your ROTH or an index fund might do much better with the excess money.

  54. Derek Epperson Link to this comment

    Although I wouldn’t expect you to do it often – take about 30-60 minutes and detail your spending. Apparently you have a grasp on where it ‘generally’ goes, but detailing it once every few months will find those red flag areas.

    As for the GF – she must be smokin’ hot and a great emotional match, since you “spend extravagantly on the things you love.” But as Ramit points out, you have to cut mercilessly on the things you don’t – what are those things to you?

    Playing off of many of the other comments:

    (1) Start with your emergency fund savings…what’s your goal? 6-12 months of income or expenses? Where are you in the goal?
    (2) Make a few phone calls to get the insurance (both yours and hers) lowered – hell, if you are putting $500 away in emergency fund, you could max out your deductibles with no sweat.
    (3) What all is included in spending cash and misc expenses? I mean, $400 doesn’t go a long way if you are using it for clothing, groceries, eating out, entertainment, etc. This is where the spending detail would be helpful.

    Hope this helps.

  55. I’m going to be blunt here and address something that nobody is dealing with head on. You stated to Ramit ““I have no idea why I’m writing this but you seem like the only person that would even care.” If this is actually true you need to dump your girlfriend because I’m pretty sure she’d like to know that you are overextended. You need to have a serious sit down conversation with her and tell her you two as a group are overspending by $140 a month. (I trust this the real number. Based on your list of expenses I question whether it actually is the real number but I’m going to assume it is the real number.) Tell her that unfortunately you both are going to have to cut back. Have some ideas of where to start. With any luck she’ll have some ideas too. Don’t accuse her or blame her. That’s not the point. The point is to make her aware of the situation and create a game plan together on how to tackle it. Have both of you start tracking yoru expenses in detail. (Mint is a good application for that.) If you can’t have this conversation with your girlfriend then frankly, you shouldn’t be paying for her 600+ in expenses. (Also, as an aside, you GF’s cell phone bill should be classfied as GF’s bills. Not under Misc.).

    Good luck. I’ve got faith you two can figure this out!

  56. I like Elizabeth Warren’s 50/20/30 principle on how to allocate your take-home pay (50%=must-haves, 20%=savings, 30%=wants).

    in the budget listed, the expenses would categorize as follows:

    must-haves: car payment, mortgage, car ins., utilities
    savings: roth ira, emergency fund
    wants: misc expenses, gf bills, spending cash

    so, richard should first check out how much he is taking home each month (the 90k pre-tax means nothing), and then be sure to properly allocate the amounts as outlined above.

  57. I’m betting if he took his credit cards out of his wallet and worked on a cash only system, he wouldn’t go over budget every month.

    There’s a psychology behind plastic that makes you forget what you’re spending for which goods and services.

    Other than that, he could try to negotiate lower bills on some things or take a few less vacations, but…switching to cash (after the automated payments have been made) should flip the switch.

  58. gf bills? Is she working? Is she a dependent? Are you getting any sort of tax break??

  59. I recommend reading Elizabeth Warren’s book All Your Worth. Her recommendation is 50% must haves, 20% savings, and 30% wants. It works.

  60. I’d renegotiate like everyone’s said, then cut vacation and spending cash 10% per month

  61. For some reason, he feels the need to pay gf bills/cell. My guess it to show that he can take care of her and that this will portray him a better boyfriend. However, until he breaks this track of thinking he will always be spending more than he makes.

  62. How long-term is your relationship with her? You’re currently spending over $8000 a year on her. I’d recommend you commit (and combine your incomes) or drop her.

    Also, your emergency fund is probably plenty big by now, but that’s up to your discretion.

  63. Sign up for mint.com so you can see what you are really spending money on. It’s easy to spend more than you think you are especially when you start making more. if you make 40k plus more a year I guarantee you aren’t living just like you were when you were making 50k. Especially with the 140 dollar gap.

  64. where’s the “food” bill? toiletries, paper towels, toilet paper, etc.??? is this in the “spending cash” area?

    As everyone else has said. why the GF expenses?

    $260/month car insurance (as stated before, shop around annually to reduce this).

    as stated by others. the $$$ don’t add up with income and expenses.
    is misc expenses covering clothes,

  65. Dude. Stop paying your girlfriend’s bills. Immediately. Also, if you have an iPhone, try using the AceBudget app to track your expenses a little more closely. You might find that you’re spending more on miscellaneous things like “going out” than you think.

  66. The first thing I’d do – even before judging him for paying his girlfriend’s bills – is help him understand exactly where his money is going right now.

    I’d suggest that he set up a Mint.com account – it takes 15 minutes or less to do and within a month he’ll know exactly where his money is going, and which expenses he’s not currently taking into account. Data doesn’t lie. Once he sees how everything adds up he can make conscious adjustments based on what his priorities are.

    As a side note, based on the math it’s not surprising that he’s overspending each month:

    $90,000 a year income
    minus $13,500 in 401K contributions (if he’s putting in 15%)
    minus $21,420 in taxes on the resulting $76,500 (based on a 28% tax rate)
    = $55,080 in net spendable income. That’s $4590 per month.

    $4590 per month
    minus $4480 ($300 for car, $1400 mortgage, $260 car insurance, $230 utilities, $70 misc expenses, $600 girlfriend, $400 Roth IRA, $500 emergency fund, $240 vacation, $80 gifts, $400 spending cash)
    = $110 left. And that doesn’t include food.

    • Here’s a Mint.com-like picture of his monthly expenses:

      $4590 per month
      minus $1730 HOUSING ($1400 mortgage + $230 utilities)
      minus $530 CAR ($300 car payments + $230 car insurance; I’m going to assume this includes gas too)
      minus $900 SAVINGS ($400 Roth IRA + $500 emergency fund)
      minus $720 LIFESTYLE ($240 vacation + $80 gifts + $400 spending cash)
      minus $600 GIRLFRIEND
      minus $70 MISCELLANEOUS EXPENSES
      = $110 left. And that doesn’t cover food, cell phone, etc.

  67. This is an easy one.

    Tell your girlfriend to get a job to pay for her own crap.

  68. 1.The numbers don’t add up. There is nothing there for taxes, his cell, credit card interest if he’s overspending, . There is obviously some spending that’s happening that he is not aware of. Step 1–write down EVERYTHING you spend money on for one month.
    2.Why is he paying for his girlfriend?
    3.Car insurance looks high. Is there a history of bad behavior accounting for that?
    5.Psychological issue–I make $90K/year ergo, I’m rich. I can spend what I want and don’t have to account for it. Also, I am funding my retirement very well ergo I am building wealth.

  69. Richard is only earning around $58,500 after tax. Which may not go as far as he’s thinking, so as a preface to this conversation, let’s get real here about how much we really have to work with.

    1. The car payment isn’t huge so I’m assuming he could pay it off by using some of his savings (which may be a no-no for some but if he’s running over his budget anyway, knock it out with savings on hand.)
    2. Cut the cord on the real estate – I’m a fan of income-producing real estate (I own a good portfolio of cold, hard real-estate) but I still live in a rented apartment. Drives my wife nuts. So in Richard’s case, I’d suggest looking for a way to get out from under the house. It’s a lot better to service a loan for $20k w/ a payment of $200-250/mo than to continue to hemorrhage money at the tune of $1400/ mo for something that is most likely not gaining value. And I’d bet that Richard’s mind would ease if he didn’t have a $1400/mo payment staring him in the face each month (aka huge mental relief.) Buying a house today, TODAY, is ridiculous unless you can buy it for SIGNIFICANTLY less (think wholesale) than what it sold for in the past 5 years (50-75% off previous selling price.) Even then, do it ONLY if you need it or are a seasoned investor (or have the funds to learn the ropes and become a seasoned investor) or are actually looking for and need a home but don’t buy purely for “investment’ purposes just because your broke uncle advised you so! Chances are high that Richard bought a home at “retail” prices from a smooth realtor (or homeowner who knew how to play the game) and is now stuck paying for it while quite possibly has dropped in value. The value will return but it could keep him in a cash crunch for years to come and should be liquidated in order to move into a better financial position.
    3. Negotiate everything- Your salary, your car insurance and other expenses, as mentioned before.

    Anyone is welcome to rip me on the above-remarks but consider this: I make less than Richard, am married and have an almost 1-year old child. I don’t take government subsidies of any kind as I despise them, I wasn’t raised rich and yet I have $30k/yr extra that I put towards debt and appropriate savings.

    It can be done.

  70. I think it’s funny how he thinks his lifestyle hasn’t changed since he made nearly half of what he makes now.

    I think a quick, easy win would be to lower all car insurance payments, if at all possible. It seems high to me, but I admit that I don’t know what they drive, where they live, or anyone’s driving record.

    I wonder why he’s paying his girlfriend’s expenses, but, again, we don’t know circumstances here. I noticed there are medical expenses every month, so maybe she’s got medical problems? Negotiating those down would also be a quick and easy win, too.

    The next thing I would do is pay off the car loans as soon as possible. Take the extra savings from lower car insurance premiums and discounted medical bills, and apply towards getting out of auto loan debt. I would also stop contributing to the vacation fund and possibly not contribute as much to the emergency fund, as well, in order to accelerate getting out of debt.

    All of the above can be setup in 1 day and is super easy to do.

    What about earning more money? Maybe it’s time to ask for a raise at work? Maybe it’s time to look for another job that pays better? Even just a simple 3% increase in gross income would cover the gap in his expenses, and that might actually be the easiest thing to do here now that I actually think about it.

  71. Simple: Pay off the car. No car payment completely rectifies the problem.

  72. I love helping people figure out good ways to spend/save their money and still meet their goals. It sounds to me like Richard A. is in the same situation I was: Makes plenty of money, hardly spends any, isn’t “flashy”, but is still “poor”.

    There is a good amount of information in the request, but I still need a few more pieces of information.

    1. Having an emergency fund is great. What is your goal and when will you reach that goal so you can get that $500/back? Treat your EMF as a debt and pay it off just like anything else in your snowball.

    2. Vacation Fund of $240 is great, same question: What is the goal amount? Treat this like a yearly expense (you want to vacation every year right?). Take the the amount of your vacation and divide by 12 to arrive at the monthly amount to pay. A little further and I would say to wait on any of this until your emergency fund is where you want it… so add the $240 to the $500 and you’ll be saving $740/mo. Your emergency fund will be taken care of faster and you’ll be able to move on to your vacation with the piece of mind that you are one step closer to your goals.

    How many times do you go out per month? A single evening out per week is $100 for you and your GF. So that is $400/mo. You’re not including things like groceries or other things.

    I would love to speak further with you on the subject, including how to have your house paid off so that you’ll have job freedom, an early retirement and $1400/extra per month to play with. Its easier than you think.

    Thanks for the ability to help out!

  73. WTF 260 dollars on a 300 dollar a month car for insurance? HOW? cancel that crap, problem solved. Find a better insurance company.

  74. For one, those numbers are pulled out of his butt. Instead of saying OH WOE IS ME WHERE IS IT ALL GOING, do some actual inventory.

    Recently got a large increase in income but you seem to still have the same money problem? It’s what I call the goldfish syndrome. A goldfish will stay tiny in a small bowl, but drop that same goldfish in a 100 gallon tank and suddenly that sucker will grow to fit it’s new bowl.

    Same thing happened to me when I doubled my income in one year by switching careers — same mortgage, same car payments, same investments, and yet suddenly the extra money evaporated!

    Here’s what I did:

    Automate your income/expenditures, and funnel income/outcome to 2 major sources – an Amex and an ING account.

    ING Account:
    – Leverage putting away money before you see it with auto-transfers. Paycheck goes into ING, every week auto-xfer to savings, investments, etc.

    Amex:
    - All payments are made with the Amex wherever possible. I pay for everything except some local utilities with my Amex card.

    Accountability:
    - Set a day every month to review your purchases. Amex has a great online tool for sorting your expenses and getting REAL data on where you’re money’s going, instead of just throwing your hands in the air and saying it’s evaporating.

    Blaming his choices of spending is a cop out. If he wants to spend $400/month on SpanX or on his Gold Digger woman, that’s his prerogative. It’s knowing where your money goes that’s more important, and then determining whether one should A) Cut back or B) MAKE MORE MONEY.

    But all of this is from IWTYTBR. :)

  75. GF expenses have to go. Let her pay for her own car insurance and stuff. The car insurance is too much, I would shop around and see if you can get a better deal.

  76. $600 for gf bills? I know a lot of people have harped on this in the comments but allow me to reiterate…find a new squeeze, you putz! If it was your wife, I’d cut some more slack, but The fact is, unless she’s disabled; inbetween jobs (and actually looking for employment); or her name is Adriana Lima, cut your losses.

  77. Tell your gf to get a job to pay her bills. In todays society the women also work! I would probably pay a partial part of her bill not all of it.

  78. Look to earn 1k more per month with #Earn1k. :-)

    It’s a peculiar problem similar to as stated in Murphy’s Law – “Work expands to fill up the time available”… and “Junk expands to fill up the space available.”

    When you say my life style hasn’t changed – I doubt it. Because I’ve been through it. When I earned 30k my mobile bills were 1k, i went for cheaper plans and cared about internet usage, never looked at expensive restaurants, branded clothes. Now when i earn 90k i don’t care about plans, buy branded clothes(though i shop once in a quarter or less), every purchase ends up on expensive side and inside I still think that my lifestyle hasn’t changed but when I look closely – phone bills are 5k, misc expenses have increased to 25k, house rent has drastically gone up. I believe the devil is in the detail and you’d have to look closely – if you are concerned.

  79. Hmmm the more you make the more taxes you pay. You may want to adjust your withholding

  80. Richard,

    Unless you have cash in the bank, the only way you can spend more than you bring in is if you are using credit. Suggest you limit your spending my putting in a highly visibly hard limit — even if it’s $0. Use your debit card and turn on low balance notifications or carry cash. It doesn’t matter WHAT you spend your money on. Give the spending process visibility and hard limits; everything else will fall into place because you will naturally identify the non-value spending.

  81. Others have mentioned it, but besides the whole gf expense thing, I think the big issue here is not actually knowing where every dollar is being spent.

    Small expenses can rack up really fast. After spending $400 one month on going out to dinner at restaurants my wife and I decided to stop eating out as much. But the next month we were in the same spot financially.

    But when I looked at our spending, I saw something odd. Yes, we stopped going out to sit down restaurants but spent WAY more on fast food, snacks at the grocery store, sandwich shops etc. It’s the most obvious thing, but while you’re doing it, you don’t think about it and you actually “feel” like you’re saving money.

  82. People GF expenses are a choice…. what if it were Wife expenses or Family expenses???? Would you still hammer him for that. It’s just a prejudice that you should get off your heads.

  83. First off, I don’t think that this is shocking or that the original poster should feel at all badly. I think, for a lot of us, it’s really easy to go over our income, especially when we are saving large amounts (it sounds like the original poster is saving almost 30% of his pre-tax income, which is a lot).

    The first thing I would consider is not maxing out the 401K. Is Richard getting a full match for every dollar he contributes? If not, I would drop the amount down to the full match amount.

    I don’t know Richard’s personal life, so I’m hesitant to bring this up, but why is he covering so many of his girlfriend’s expenses? It looks like you are covering her bills, cellphone, etc. This may be the arrangement you two have (e.g., she may be in school and you are paying for her now, but if you go back to school she’ll pay for you), but I would consider reviewing why you are incorporating her expenses into your budget.

    I would recommend lowering the retirement spending for a bit (or the gf expenses) and paying off the car. That will free up some additional cash each month that you can use as a buffer if you don’t change anything else. It’s also not worth going into debt to try and kick-start an emergency fund. If you really want to keep your retirement savings at the current level, you might consider dropping down the emergency fund payments by a couple hundred dollars for a bit. I know that, when I don’t have a solid buffer in my checking account, I feel out of control and am more likely to make bad decisions or feel anxious. Not sure if you feel the same way, but having an additional $300 in your checking account might make you feel more secure.

    Just my two cents!

  84. Since I really don’t know Richard and would have to ask more questions before throwing out certain opinions about his mortgage, getting rid of his car, girlfriend, etc. Richard, you’re estimating your expenses. Signup for Mint and spend sometime categorizing things. It’ll help you get a true understanding of where it’s all going. Too bad you weren’t doing this back in your 50K days because then you’d have to be honest with your expenses.

    Once you have the tracking automation in place, see if there are areas you can push to save in. Negotiate with mortgage companies, insurance, etc. Hell if you only save $50 a month by calling, that’ll be $600 a year.

    Then it’d help to sit down and prioritize. Whatever is at the bottom of the list goes when you overshoot your budget. Try it a few times and then re-prioritize because you’ll probably put entertainment at the bottom.

    Oh yeah and read Ramit’s book. I think that’s the comment Ramit would be looking for. ;]

  85. If you can invest more than 600 bucks in your gf – you can invest a couple more bucks in Ramits’ stuff. Eventually you don’t need to shoot yourself.

    Only half kidding.

  86. The numbers add up exactly right if he is maxing out his 401k to be $1400 a month in contributions, and taking taxes into account. To me, this seems like a lot of ‘infrastructure’ (house, utilities, insurance) etc to take on as a single guy. Along with the gf expenses. He should consider if his home ownership and support of gf would be his choice if he were to get a redo today. Maybe a smaller house or townhouse? He probably drifted into the increasing expenses without considering them as choices. However, he is to be commended!!! for his very disciplined savings. My advice: take a hard look at the large fixed expenses of home ownership (and gf support) to see if they are value-added for your quality of life.

  87. The Good News: You’re “only” $140 a month over budget.

    The Bad News: As has been pointed out in previous comments, your listed monthly expenditures, when calculated over the course of a year, only add up to $50,640. Even if you’re paying 35% income tax on the entirety of your income – which you aren’t – you should have an after tax income of $58,500, which would be an approximately $8000 surplus – or around $650 extra each month.

    First, you need to find out where that extra $800 or more is going.

    Second, again, you’re only $140 over. The easiest thing to cut would be your Roth IRA. Clearly, that’s not necessarily the most intelligent decision, but I don’t know your priorities. If it means a lot to you to pay your girlfriend’s bills, then by all means, pay them. If you want to spend $2800 a year on vacation, go for it. If you legitimately can’t find a better deal on car insurance, then that’s fine too. That said, changing any one of the above should allow you to find an extra $140 each month. Changing a combination of your expenditures would obviously work as well. Identify your priorities, then cut spending from the place you prioritize least. Or whichever expenditure is easiest.

    Also, when you say you’re “maxing out” your 401k, does that mean you’re contributing the maximum amount your employer will match, or you’re contributing the maximum amount under the tax code? Contributing up to how much your employer will match is a good idea; anything beyond that depends on your financial situation. Make sure you’re on top of this by contacting HR or the equivalent if necessary. And, as other folks have stated, it doesn’t make sense to save when you’re going into debt to do so. That goes for your emergency fund as well.

    However you decide to find your extra $140, you still want to track down where the rest of your money is going. If it’s something that you didn’t want to share, that’s fine, as long as YOU KNOW where that money goes.

    Lastly, the little Dave Ramsey that lives inside me won’t let me stop until I offer the following advice: you can’t spend money you don’t have if you always spend in cash. That doesn’t necessarily mean cutting up all your credit cards (take that, tiny Dave Ramsey!), but it does mean, once again, being aware of your expenditures.

  88. He can switch to a regular IRA, one that would be tax deferred and save quite a bit of his over-budget right there. What does eat out occasionally mean? If he is committed to his girlfriend enough to help her with her expenses they should both also be eating in more. Vacation fund can be managed differently and go on $2000 vacations instead of $3000. If he is in a situation where he can drop the car, he should do so. You can save so much by renting a car instead for special trips when needed.

  89. I think the problem is mostly what you don’t see here, which are incidentals. I was in the same boat last year wondering where all my money was going. I made more money than ever before, bills I figured were the same, and yet I was in the red more often than not. These were the things I wasn’t considering…

    1) never underestimate the cost of the morning coffee and bagel. It adds up very quickly.

    2) the debit card is a hole in your pocket. Its quick and easy so pulling out for a quick lunch (nothing is cheap anymore), magazine, etc is too easy to do and the little expenses add up quickly without you noticing. I also stopped carrying credit cards with me. That forced me to come back after thinking about it if I saw something I wanted to buy.

    3) if you are paying your gf bills, I’m fairly cerain the she is a nester. Basically meaning she lives with you and sponges off your resourses without throwing anything into the pot. Did you consider the addition of double expenses? Double the groceries… Double the gas, water, electricity… Double the dinner bills? Also spending cash… Does this sounds familiar… Baby, do you have 20 bucks I can borrow for a cab? It adds up. No wonder your vacation allotment is so high… You are paying for both of you I bet.

    We all don’t know your situation of why on earth you are paying all of her bills. It could be heath related or whatnot, so I apologize in advance if so. But, chances are in favor that she is just a sponge. Tell her to at least kick in her bills and you’ll be fine. Even if she makes minimum wage, $600-700 a month is easy, especially since she isn’t paying rent.

    Problem solved.

  90. Real problem is his assumptions. He says he’s spending on the basics, his spending hasn’t changed much since he made $50k/year. This is obviously not true if he’s making $90k now and is $140 short every month. He thinks he knows where his money is going, but doesn’t really. Needs to do some conscious spending, and an analysis of where he can make some small wins.
    So 1950′s of everyone to blame a woman for a man’s problem.

  91. Dump the gf.

  92. WHY is he paying his gf’s bills??? $600 in bills that aren’t even his? Wow. IF YOU’RE WORRIED ABOUT GOING $140 OVER YOUR BUDGET, QUIT PAYING FOR ALL YOUR GF’S SH**!

  93. I try hard to remember the idea of spending on what matters to you and cutting mercilessly on what doesn’t. Otherwise, it’s terribly easy to judge. Bearing that in mind:

    1. Look at all of your expenses to get a solid picture. I recommend a tool like Mint.com or something to pull it all together and provide an easy reference to figure out what’s happening. You might be spending a lot of money in small transactions that don’t really matter to you, in which case getting back in order could be easy. It may all be in the unlisted food budget.

    2. Shop for car insurance. $260/mo seems high, even in perpetually-uninsured Texas. I dropped my annual insurance bill by ~$1000 ($83/mo) with a quick comparison shop.

    3. GF bills. This could fall into “spending on what matters most” and it’s the easiest one to judge harshly from a distance. $650/mo is a major piece of change, and it doesn’t factor in the other expenses like meals and entertainment for two. The “girlfriend tax” might very well be closer to $800-$900/mo.

    I don’t know anything about your relationship, so take this for what little it’s worth: every decent guy I know has been in a relationship where he’s been taken advantage of. I have – and, certainly, many women have been as well. I hope that’s not the case here. Then again, it’s far better to learn that lesson before crossing the marriage threshold.

    4. Trimming everything else back as fits best, starting with spending money and then vacation money, assuming the latter is more important to you.

  94. I’m not sure I agree that he’s overspending. I mean, the guy is maxing out both of his retirement accounts, right? 401(k), which is what, $15,000 a year? And his ROTH IRA, which is what, $5000 a year? So $20,000 of his $90,000 is going towards retirement. Plus, he’s putting $6000 in an emergency fund, PLUS he’s setting aside cash for vacations, gifts and spending, totaling $320 in savings for gifts and vacations ($3840/yr), $400 for spending during the month.

    While I can see where he is freaking out over the fact that he has allocated $140 MORE than per month than what he’s making, he’s not actually spending that much money. He’s allocating it for future use. Which means that he still has it.

    Where I think that he’s running into issues is that he has accounted for every dollar (every dollar has a purpose, right?) and his brain is telling him that he’s spent it. He’s SAVED $29,840 per year towards things he wants (retirement, vacation, etc.). Looking at his budget, he’s allocated $4800/yr ($400/month) for spending cash, which doesn’t seem all that much for a guy making what he’s making AND who is as prepared for the future, money wise as he seems to be.

    Basically, he needs to find some way to get over the mentality that if he doesn’t have money with no place to go, so to speak, at the end of the month, that he’s failed in some way. He clearly (at least to me) has a plan and is preparing for future expenses in a way that will allow him to easily pay cash for what he wants or wants to do, while still creating that solid future for his later years.

    If he’s concerned about that $140, I would trim off funds from the gifts, vacation, and spending cash allotment. That would still give him the fully funded retirement accounts, and the growing emergency savings account, although I would ask him what his goal amount is for that account, because once he reaches it, he can allocate those $500 to a different account should it be needed.

    I would also ask why he’s paying $600 for the girlfriend’s expenses. Why can’t she pay for them? Is she a freeloader? Does she pay for any of his expenses or help out with the utilities, etc? I hesitate to bring this up, as I don’t want to judge anyone’s choices regarding getting married, dating, etc. but I’m going to anyway.

    If she’s his girlfriend and NOT fiancé or spouse, I’d say figure out why HE’S paying for her shit, and why she can’t or won’t take care of her own bills. There may be extenuating circumstances but $600/month is a lot of money to be fronting for someone you are not legally obligated to take care of. While it may be nice to be the guy that can help his girlfriend out with her money issues, that $600 is a part of that $140 overage that he’s so concerned about.

  95. Personally I’m not gonna hate on you for spending 600 on your GF. she’s probably the most important thing on that list.. people are more important than stuff. Of course she could pay for herself, but if you like to spend on her (eg, its what you like to do then do it.)

  96. The best way to figure out “where did all my money go” is to track expenses for a few months or even just 2 months and analyze the non-fixed expenditure categories.
    I don’t understand why so many commenters here latched on to his paying a few bills for his girl friend!! That expenditure is not the reason he has no clue where his money has gone! After he figures out the biggest offenders this category could be debated as whether it is a wise choice or not. Until then pointing to that category is premature.
    Going out sometimes can often total to pretty high amounts over the course of the whole month. He could set himself a reasonable monthly/weekly budget for groceries and going out expenses and start seeing some savings soon. But definitely start with tracking expenses first.

  97. Being that all the figures are rounded to the even dollar amount, half the expenses are missing and the money coming in doesn’t match the money going out I’d have to say all the figures were mentally calculated and the OP has no realclue of any of the true expenses other than the 401(k) and IRA are maxed. Kudos on the paying yourself first but as was already suggested…use a tracking program like Mint. I believe the OP’s jaw will drop when he finds where his money is truly going. When trying to figure out a problem the words “don’t, can’t etc.” give the mind an excuse to shut down and not try to figure out a solution. I prefer “how can I…or what can I do to…” Can’t and don’t (in this type of situation) is the language used by people who refuse to take responsibility for themselves and their financial health.
    There is no valuable help to be offered other than general clichés until the OP even has a clue where his money is going and can provide that information.

  98. Just another “I’m entitled”, selfish, whinny American.

    I hear it in the email, “I’ve maxed out my retirement stuff, I’m so cool. I have a house! I’m so cool. I don’t wear fancy clothes or drive a fancy car or do/own anything I’d consider “rich people” things. I’m so cool. I have a big emergency fund! I’m so cool”

    Well, not really. Based on what you’ve told us you said and done these things to justify how you want to ‘play’. In themselves there’s nothing wrong with what you’ve done with the items listed above. They look good right? Congrats!

    Then we look and see that you spend a boatload on car insurance (tells me you drive poorly and could care less.) We see that you spend a boatload on the girl friend (marry her or dump her. *She’s just a prostitute now.* Afraid of commitment?) $80/mo on gifts? Trying to apologize for your selfishness? I can go on about vacation and spending cash if you like but I think you get the drift.

    In short, start to tell the truth. Things will change.

    People complain they can’t seem to lower their expenses, they want to simplify but can’t get over the hurdle. B.S. If you really want to simplify, lower your expenses, then really do something about it. Take radical steps, not baby steps. Most are not willing to do that though. They like their ‘things’. “Can’t I have my cake and eat it too?” Sorry, no.

  99. Car insurance is high. He should be able to cut it in half.
    He should utilize his Roth Payment to his car loan if his loan is above 6% (I view 6% as a good return.)
    Get his GF to work or dump her. (I hate free loaders.)
    Most of all he seems like he is paying too much in taxes. How can you be making 90K and only have 54K after taxes. Thats over the top tax rate bracket. Someone isn’t budgeting well.
    I would tell him to make more but he is making a good amount if 90k is what he is truely making.

  100. I can identify with “My lifestyle hasn’t changed from when I was making $50k/year.” Lifestyle is not the same as expenses. You can increase the size of the lifestyle, without changing it in any meaningful way: a bigger car and house, bigger utility bills, bigger lunches and guilty pleasures. Etc. It adds up, without adding anything of real value.

    More important for this situation, however, Richard seems to be asking Ramit’s permission to tell his girlfriend off. (Her footprints are just a bit too all over the mail and numbers, yet unexplained.)

    Maybe he’s even hoping for one of Ramit’s famous scripts. (“Dear GF. I love you, but if you want to keep your car and cell phone, you need to get a part-time job. I’ve already paid your Earn 1K tuition to get you started.”)

    Well, Ramit’s done him one better (of course). All Richard has to do now is show his girlfriend this thread, where “everyone” is telling him to stop helping her with her bills (without knowing the first thing about her … For all we know, she’s in the hospital, going in and out of a coma, taking and MBA and waiting tables in the hosptal cafetaria in her waking hours.)

    All you have to do now, Richard, is find the courage to actually talk to your GF and find a solution before you grow even more secretly resentful, and end up in some huge, unecessary fights. I wish I could tell you how.

  101. I agree with the majority Of the other posters. You spend a ton on your girlfriend. Unless she’s your fiancée or you are seriously considering proposing, don’t pay for her insurance or other expenses. You also are saving 500 in your e fund while going 140 in the red. It makes no sense to do that. Build that fund more slowly and match your inflow to your outflow. Several other commenters have said that your list of expenses is incomplete, since there’s a disparity between what you earn and what you say you spend. If your income and expenses were what you say they are, you wouldn’t be in the hole. Track using mint.com or cash/envelope.

  102. Investing in your personal finacial education will allow you to work this and other concerns on a long term basis.

  103. Trade the $600/month in girlfriend expenses for $460 a month in cheap hookers instead and you’ll be golden. This will probably free up alot more longer term savings you are not factoring in, such as engagement ring, wedding, psychiatric counseling, marriage counseling, divorce lawyers, divorce settlements, and overall level of well-being and happiness.

  104. There’s a $3000/month difference between your pretax amount and your estimates.
    Use Mint to itemize your transactions. Track every penny for 2 months. It helps if you use a credit card as much as possible so that you can track the receipts. Cash just disappears.
    Stop saving for retirement! Set an exact number for your emergency fund (3 months or 6 months of basic living) and hit it. Then go back to the retirement plan.

  105. Lets just use the 80/20 rule here – tell your girlfriend to get a job or get out. Done, your problems are solved. There is no reason someones significant other should be draining so much of their income. You have everything else in pretty good order, it seems, by saving so much and contributing to your 401K, etc.

    Although it shouldn’t require any futher analysis – if your girlfriend is costing you about 650 a month (“gf bills” + “gf cell”), that is $7,800 a year in after tax dollars. If you work that out to pretax dollars, it is probably about $11,000 dollars. That means about 12-13% of your total income is being sucked away.

    Thats just her bills. Add the meals you buy for her, groceries she eats, etc. And since she knows that she made you her b****, when you “occasionally go out” she probably doesn’t mind helping herself to a few extra drinks, does she? All that considered, I wouldn’t be surprised if she uses close to 20% of your pre-tax income. Think about that – 1/5 hours of your workday are spent just so some freeloader can do god knows what all day and night.

  106. You car insurance is a bit high… shop around a little there. How much do you have in your E-Fund and how much is left to pay off your vehicle? Depending on these numbers, I would look into pulling back your E-Fund contribution a little and work to pay off that car ASAP. That will free up $300 / per month once paid off!

    Here’s a quick question, what does your tax returns look like? If you are getting a return big enough to cover your shortfall, rework your W4.

    Now, those ideas above are the small gains and they don’t address your spending “issues”.

    Since you are obviously taking care of your future unlike millions and millions of others, you are free to veg out in from of netflix if you so choose. However, Netflix = $8, plus cable internet = $30-$50 per month, that’s $40-$60 per month just for netflix… unless I’m missing something and you are able to have netflix without high speed internet… Do you have cable? How much and how often do you use netflix?

    $400 spending cash… what are you spending that on? $5 lattes? Nice dinners? Lotto tickets? Candy Bars? Soda Pop? Do you honestly love and enjoy whatever it is your spending it on, assuming you know that?

    Conscious spending. Before going to ANY store, force yourself to write done on a piece of paper (a shopping list) what you are going to buy and how much you are going to spend. Preferably do this before you leave your home and even wait a a day before going to the store. In the store and see something you really want? Still find a piece of paper and a pen and write down the item and the amount before buying it! Chances are you will have to put in a little bit of effort to find paper and a pen. Then after writing the it down you will have to consciously think through what you are doing and if you really want it! This tip alone will work miracles on your non-conscious money wasting. (Ramit I can’t tell you how amazing this technique is, if you use it, in your mentioning of it could you show some love and mention my name? :) For those that think this isn’t enough then carry around a little notepad with your financial goals, life goals, and values on the cover, and require this notepad be the paper you write the item on… the goals and values on the cover will force you to recall what you are doing! Good luck! Let me know how this works for you!

  107. I have a feeling this was a trap set by Ramit.

    Basically, most commenters pointed out some of the red flags in the expenses. But I have a feeling the real problem we’re supposed to key into here is the fact that this seems like a very disorganized set of numbers.

    Chances are, if Richard A. had an actual system in place, there’d be more clarity in where money is going that he doesn’t know about. And, more specifically, if there was a system in place like the ones Ramit subscribes to, he wouldn’t be *able* to go over budget; money would be set aside from the things Richard deems important (bills he knows the monthly values of, savings, etc) and then the rest of the money he’s allowed to use as fun money would be available for the rest of the month, until it’s used up.

  108. Car Payment + Insurance:
    $560 per month. What year make/model is this? Consider selling your car payment to someone else and getting a used car that’s paid outright in cash. Doing this, my car payment is $0 naturally and insurance per month is $60. My car’s KBB value is about $4000. With the amount you’re saving on the car payment and insurance, that’s about 8 months before the car begins to ‘pay’ for itself. Once you’ve cleared that hurdle, square $200 out of the $500 in savings towards a fund for maintenance/repairs. That’ll still net you $300 per month in savings.

    Girlfriend:
    $600 – $670 on Girlfriend each month. Is she independent? Does she work? If yes, then spending on social outings is expected. However, bills are not. Potential ~$600 savings. Realistically, she probably wouldn’t respond to you not paying for anything drastically. See the discussion in the IWTYTBR book on having the ‘finance talk’ and discuss paying in bills in proportion to each other’s salaries if you live together. If you don’t live together or aren’t that serious then…you might wanna re-examine that situation.

  109. It is easy to beat up the expenses related to a girlfriend without knowing the whole story – the BIGGER issue in my mind – and some have touched on it – is this isn’t his “budget” this is a whole lot of numbers on a page that really don’t mean much.

    No money in this for groceries (typically a large budgetary item), car upkeep (on apparently two cars: gas/insurance/oil changes etc.), etc.

    The best advice for this guy is to go back take a couple of hours set up Mint.com or something and track where the money REALLY goes – then look at it and determine where to cut back or adjust. He needs clearer information before anyone can really “help” him in any meaningful way.

    The insight here is that most folks have no idea where their money actually goes – and it is a reasonably daunting task to take on figuring it all out – so most people never do it.

  110. First approach was to run some number scenarios, and pretty quickly came up with some spending solutions. Then it hit me how easy it was to pinpoint this complete stranger’s financial shortfalls, especially when I agonize over my own. What if we all submitted our own numbers and reviewed each other?

    Back to Richard A. Numbers aside, the glaring admission is that you claim your lifestyle hasn’t changed after an 80% salary jump, and yet you’re still in the red. And it’s not that big a problem. Guarantee you didn’t max out your retirement options at 50k. Your taxes have also likely gone up, so stop thinking of your new salary as “90k”. “I make xxk.” is a status symbol, not a means for accounting. It’s time to multiple the amount on your paystub by 12 (or 26 for biweekly) and subtract your yearly savings goal. This is the number you should view yourself as, then start looking at individual expenses.

  111. Drop the free-loading gf like a bad habit and you will have an extra $600 a month, problem solved!

  112. I’m not concerned with the girlfriend expenses, but he’s left off most of his expenses. I didn’t see groceries, his cell phone bill, what he spends on toilet paper, etc.

    For some reason he didn’t include any of these basics in his own life. Spending cash is too broad and too low a number for groceries, take-out, dish soap, pet food (?), etc.

    He’s leaking by $140 a month because he doesn’t have a whole picture of what he spends. You can spend $800/month on groceries if you don’t think about it.

    I’d start with the groceries and work from there.

  113. Psychologically, he is afraid to look at the hard numbers of his expenses and does not take them as seriously as he pretends (i.e., “for shits and giggles here is the list of expenses…”). He is also assuming that he is not “one of those guys” who lives beyond his means. He isn’t putting in the time for serious accounting because he doesn’t take it seriously given his high salary, otherwise he wouldn’t pay so much for his girlfriend, who has no contract to stay with him and enjoys the benefit of having her expenses paid for without any of it considered debt to him that will have to be repaid in the future (I’m sure he hasn’t kept track of how much he’s paid for her). If he isn’t willing to change his circumstances with the hole (financial and physical), I’d write him off as “whipped.” There’s no reason for a single guy (I consider anyone not married as single) to be paying for a live-in girl, that’s just a high-cost call-girl for a lot less sex, he should playing the field and finding some real winners with his salary and house.

    Lastly, I suggest he look up common-law partner laws where he lives and see if his “girlfriend” isn’t de facto his wife now if it has been a long-term relationship. This guy could be asking for some serious financial burden if he doesn’t take control of his life.

  114. Move town/state/country. Create an opportunity to re-start your costs by cutting with old habits and start a ‘new life’. New job, new house, get ride of car (ride a bike), new girlfriend ( … why not….).

  115. Are you fisting me? You pay your girlfriend’s bills?
    DUDE.
    Wake the Freak up. Before we can even address your finances, let’s start with a clean slate. That means STOP PAYING BILLS FOR PEOPLE THAT ARE NOT YOUR LEGAL DEPENDENTS. Jesus Christ.

  116. My gut reaction is to ask why he’s paying so much of his girlfriend’s expenses.

    This may not be the situation for many other period, but my wife and I have been together since 2005 and married since last June. Not once have I outright paid for her expenses for anything. I’d they’re her expenses, they’re her responsibility. When one or the other of us is in need (for example my wife lent me about 2 grand so that I could put enough down to get a much better interest rate) we’ll lend one another money, but it will always be repaid.

    Psychologically, this may be a unique situation because we’re both engineers and look at finances without getting emotional about them. However, numbers don’t lie unless a politician has touched them.

    There are probably several other ways to improve the situation, but telling the girlfriend to start pulling her own weight is a big start.

  117. You are overspending because you are not giving yourself enough spending money. $400 a month is rather low for someone in your income bracket. Do you realize that you are spending more on your girlfriend than you allow yourself to spend?

    How many months emergency fund do you currently have?

    Don’t you want to invest some of your money?

  118. If he had stated that it was his wife instead of GF would there be any issues with him footing the bill? Sounds like too many people are focused on that. I’m going to give this guy the benefit of the doubt and pretend that she’s supermodel hot.

    He states “WTF?! I MAKE $90 fucking thousand a year” like he’s Kobe Bryant pulling down 30 a night for the Lakers and there’s no way he should ever need any more cash. Guys only $140 short every month. He’s making $90K, why doesn’t he try to make $10K more? He’d have ~$600 more bucks he could spend on his internet hated free loathing GF. I’m sure a “Ramit-style” talk with his boss would lock this up.

  119. Here’s how I would answer his question:

    BASICS:
    car payment – 300
    car ins – 260
    Car: 560

    mortgage – 1400
    water/elec/gas – 230
    misc expenses (netflix, gf cell etc) – 70
    House + Comms: 1700

    gf bills – 600 (car, ins, medical, etc)
    GF bills: 600

    Basics Total: 2860

    FINANCIAL SECURITY:
    roth ira – 400
    emergency fund – 500
    Total: 900

    NICE TO HAVE:
    vacation – 240
    gifts – 80
    spending cash – 400
    Total: 320 + 400 = 720

    “Set it and forget it”

    His current expenses are 4480 per month, and his target is 4340 per month.

    1. Reduce/eliminate expenses that “don’t matter”

    In this category, I’d put expenses that he ‘needs’, but where paying less wouldn’t detract from his quality of life.
    An item that pops out in this category is car insurance. Given he says that he doesn’t drive a fancy car, what makes his insurance equivalent to the cost of his car monthly payment?

    Can he renegotiate these rates or understand why they are at these levels?

    Equally, items on his GF’s list: insurance, medical and phone may benefit from a round of renegotiation.
    I’ve found that reviewing items on the Misc expenses list also help to trim expenses on these items.

    If he finds it a pain to review these expenses and re-negotiate these contracts himself (despite the scripts in your book), he could get someone else to do it. A friend who’s particularly good at negotiation may love the challenge in exchange for a great dinner or some gift vouchers – or concert tickets; or someone from a service like Task Rabbit may be the perfect person to set that up.

    Putting an annual review in the dairy may sound a bit geeky but would be worth it.

    2. Get more bang for his buck
    Here, the two items that struck me were money for gifts and vacations. My sense is that if he focuses on getting more for his money here by (again) delegating some of the research aspects of getting the right gifts and finding great bargains for his holidays

    Often buying the perfect gift at the last minute is more expensive that anticipating. In the spirit of “set it and forget it” – he can make a list of the predictable gift occasions and ideas in a Google Docs sheet.

    Equally, finding a credit card that “rewards” him for expenses in other areas with items in these areas may be great for him.

    3. Earn more
    To cover his GF’s expenses, or to have more cash for “a changed lifestyle” he could consider
    - Setting up a little side business to generate some extra cash
    - Negotiating a higher salary.

    4. Motivation
    I think the missing key here is what he means when he says his “lifestyle hasn’t changed much since I was earning 50K”. For him to make the time to action these, or other items, he needs to find his inherent motivation. Apart from recognizing that he has actioned a lot of things that other people may still have on their wish list (contributions, savings, looking after a loved one, travel), what exactly did he have in mind “lifestyle change”? Did he mean more for optionals, like a nice holiday instead of the “must haves” like covering living expenses, for example?

    Another approach may be to setting his 400/month spend to 540 per month, and then looking at savings in some other areas.

    For the time being, if he puts these actions in place, they have to generate something fun or motivating for him.

    Good luck to Richard!

  120. Dude, is that your girlfriend or you daughter? My advice would to stop being a sugar Daddy and have a little more fun with your spending cash, add to the savings, & not go over your monthly limit! And if the job market is the reason you’re her financial crutch then tell her to find some hidden talent she has and get paid! I’m pretty sure this resolution already crossed your mind, but hey, remember, “Love doesn’t pay the bills”

  121. Richard,

    A couple of things I jotted down, my notepad looks crazy with numbers. Even though that may not be the problem.

    You spend 4480 from what you tell us a month, 53760 a year.
    You make roughly 68k a year, which is about 5600 a month, since we are rounding:)
    So you have 1186 a month extra to spend. Seeing how your mortgage is 1400 a month you probably don’t live in a cheap house. Which means the things around town, gas, food, etc. Cost way more.

    If I put this into my perspective (which is truly the only way I view things, only from experience will I learn). I make 1300 a month and spend 100 on gas, and easily 200 on food (all this is a rough estimate, though true numbers, I spend more). 425 on rent. So i spend a fifth of my income on food, at least, and i eat out twice a week for lunch. I dont even budget for my food (horrible idea), (yet). Yet I spend that much on it. Because i can see i have the money, whether I need to spend it or not.

    Also after taxes you make probably 25k more then when you made 50k. So talking about numbers you should budget on what you actually make. And stick with it.
    Do you have any credit cards? It sounds like you could, and be spending them. Which unless you pay the whole balance off monthly, get rid of them:)

  122. Drop the monthly retainer for “Personal Services” you can buy as needed for less.

  123. Don’t want to judge, and, you don’t say how long this lady has been your girlfriend, but, that must be some girlfriend, who knows though, maybe you two will be getting married, so maybe helping her out makes sense.

    I have to admit, on your misc expense, (netflix, gf cell etc) – 70, I am impressed, cause this is where I see so many people F up in their finances, specially on cell phones and cable. That is actually very low as an expense, to me.

    The mistake I see people make, and I include myself, is, we think the money will always continue to come to us.

    You say, I make a good wage, (currently), so I’m not the kind of person to sit down and look at numbers very often, set it and forget it right?

    But, have you thought about what you’d do if you have to take a drastic pay cut, or worse, you lose your job or health and you have no more $90,000 income.

    I remember hearing of a guy making $300,000 per year, he bought a half million dollar home and a jaguar and he wondered why he was broke!

    P.S. Man I’d consider myself truly blessed with your income, and being able to save and such.

    Have you ever considered giving to charities, I didn’t see anything about giving to help others, other than your girl friend.

    Just saying.

    God has truly blessed you. You might want to return the favor.

    I make half of what you make and I tithe 15% to God’s work. I not only get the tax write off, but, I have God’s favor on my life also and that’s far greater than everything else.

    • Well you DID have God’s favour until you posted that comment. (Matthew 6:2)

      Just kidding, not really my department to decide who God favours or not. It’s sad that charitable giving is not on more peoples’ priority lists though. No matter what your income is the psychology of being able to say to yourself “I’m so rich I can spare some to give away” is very powerful.

  124. Tell him to make his “gf” pay her own expenses!

  125. Well he’s maxing out his 401K, so it would help if he started thinking of himself as making 73K per year instead of 90K per year (after the 17K per year he’s putting in his 401k to max. out contributions). So now he’s making 73K per year, with a $1400 mortgage payment, plus still saving a significant percentage of his other income and supporting his girlfriend and has a car payment. I personally think he’s doing fine as long as he feels good about spending the money where he is. He’s saving a lot, especially for retirement and most of his expenses aren’t unreasonable. $140 per month is not a huge shortfall and he can either focus on earning more or find it somewhere in his budget. What he really needs is kind of a reality check on what his income buys these days. 90K is a great income and a lot of people would love to make that much, but like Micah said, it’s clearly not as much as he thinks it is, especially when he’s basically supporting a second person on it. He needs to prioritize what’s important to him and either accept what those things cost and be happy about it, or focus on earning more so he doesn’t feel squeezed.

  126. Unless he isn’t giving us the full picture, Richard A does not know how to categorize expenses. Instead of giving specifics, I’m going to tr to teach how to analyze this.

    First, how is he tracking expenses? Mint is great for this, as it does 90% of the categorization for you. After a couple of months, you can really see where your money goes.

    Second, Richard needs to determine which expenses are under his control and which aren’t. For example, he can’t change his car payment, but can change the insurance amount (which sounds very high). He needs to look at the highest expenses and see if he really needs to spend that much.

    Third, as others said, Richard shouldn’t be doing more than minimal spending until he has no debt except for his mortgage. Pay off that car loan!

    This should help Richard get a handle on his spending. If he chooses to spend more, that’s up to him, but he should be aware of it.

  127. Ha ha ha ha your car insurance is what a month? 260.00? I am under 100.00 a month and im sure it could be lower but finding a new car insurance would save you estimated 160.00 bones a month so -$140.00 from the $160.00 which leaves you and xtra 20 spot and that you can add to your girlfriends budget hahaha. If this dude has to pay to get some play then he cant cut the girls budget and how do we really know its only 1 girl lol.

  128. Nothing new to add that others haven’t all ready commented on, but I was curious if groceries, going out, clothes, gadgets etc were covered in $400 spending cash. If so that actually seems kind of low to me based on the other amounts you’re spending. What’s your cell phone like, ie plan type of phone used? Are you buying apps, movies etc? If so you must have internet which isn’t included in your expenses.

    Also car insurance is high, unless you’ve had a DUI in the past few months you should be able to get that down. What about combining with gf’s insurance? Also wouldn’t you put gf cell under gf expenses?

    I’d say if you hate tracking things (which it kind of seems like you do) you might want to try mint or some data aggregator, importing just one account at a time and looking at that. You could do it slowly, ya know Ramit’s 80/20 thinking.

  129. While many of the comments have identified the “gf expenses” as a problem, we don’t have any insight into how Richard A. got to this point. Understanding this may be helpful in figuring out how to move forward. It is likely not so easy for Richard to move on from her, or else he probably wold have already.

    It is interesting how Richard set up his situation: “I live a pretty normal life. House, car, girlfriend, occasionally going out.” What are the invisible scripts that have led him to think that spending for his girlfriend in the way that he does is normal & expected? How long has this been going on, and to where is it going?

    More interestingly, he does not elaborate on the relationship — e.g. “we have been see each other since…”, or “we plan to…”, or anything else. I have seen more emotion in describing a relationship with a pet.

    I think that there is a great deal more than a money problem here…

  130. First, get your numbers right. It’s obvious you don’t really know what you’re spending habits as your listed income and expenses don’t match your “$1000 in the hole each month” comment. If you truly understand your spending you might be more successful with the “set it and forget it” concept.

    THEN… focus on the income, not the expenses.
    Help your girlfriend nail down a good job so she feel the power of paying for her own bills, or even better, help you out every once in a while.

    Then have some FUN and don’t try swimming up a waterfall! 401K, Roth IRA, Emergency fund. None of it matters if you’re going further into debt each month. Paying someone else a higher interest rate than your investments are earning doesn’t work. Cut out some of the savings until you are not going into debt and use some of the vacation fund for some current fun each month.

    Cheers.

  131. I think it’s time for “rich people things.” You say your lifestyle hasn’t changed since you were earning $50K, but, of course, something changed or you wouldn’t be overspending, right? My guess is that, while your lifestyle may have remained unchanged, the way you think about money has. You know you have more than you need, so you don’t think about little dollar values while you’re out making your “basic” expenses. I am suggesting you give yourself a reason to think about it. Isn’t there something you would like to just save for and buy for fun? Anything will do really. Just ask yourself, ‘what can I do to make this extra $40K/year worth having?’ Set your heart on something, make a goal, and then think about it while you’re at the grocery store. Some ideas; a really nice electric guitar, a boat, a big fat pledge to you local public radio station to make the pledge drive go away. You get the idea.

  132. I see $1,000 in expenses that could be changed. First, why is he paying $600+/month of his girlfriend’s bills? Is that temporary or an ongoing expectation? Next, I would be curious to know where that $400/month is going that he has earmarked for “spending cash”.

    He should make note of exactly what he is spending the $400/month on. Or he could get rid of his girlfrined….

  133. This ones easy, unless your name is Dad or your gf is a stripper (and in that case not really your gf) you have no business paying for someones bills.

    Problem solved. You just freed up $600 a month to out and meet someone else.

  134. I see a simple solution.
    If this this guy has saved enough to reach the total for his emergency fund, he already has an extra $500 free, which then makes the purpose of his posting null.
    With the extra $500, he can cover his extra expenses.
    Hopefully, he determined the total for emergency fund, which is unique to his situation. For instance, 10 K is a nice sizable emergency fund. Based on this posting, saving $500 a month, he probably has that amount saved up, and he can use the money for something else.

    Of course, if he has not reached his emergency fund, he should stop paying $600/month on his girlfriend’s bills and direct that towards the emergency fund. That way, with saving $1100/month towards his emergency fund, he can reach that goal sooner, and then help her out once he reaches this goal.

    In addition, he could use some of that monthly gift cash and buy the girlfriend Remit’s book so she could see that she is taking advantage of the situation.

  135. The most expensive item on that list seems to be the girlfriend. If she’s that important, then she’s worth going $140 overbudget.
    My purely monetary advice would be to:
    1. Pay off the car. If you’ve been putting $500 p.m. towards an emergency fund it should have enough to cover it. The $400 towards the car is simply eating from the emergency fund.
    2. For a guy supposedly living a $50K lifestyle, $1400 mortgage seems high. Refinance. Or rent it out and rent yourself. Home prices are still low, but rents seem to be thriving.
    3. Get a family-plan for the cellphone
    4. Switch off the lights and shutdown the computer and wear a sweater. I live in the cold north in a house with BIG rooms, and my utility bills have never been over $200 (average about $120 over a year)
    5. Marry the gf. It’s not fair, but married couples have lower car insurance rates, and you can claim her as an exemption in your tax return.

  136. Ugh. Please pardon and excuse my typos… thanks.

  137. 1. Car insurance seems a bit high at $2,760/yr., but again, it may not be. I’d comparison shop using Ramit’s tips, then call the current one to tell them you’re leaving unless they can match that price. It’s usually better to stick with the same place to accrue discounts, so jumping around may not be a big benefit.

    2. Mortgage _may_ be able to be refinanced. That’s another few phone calls that could get some $100s per month.

    3. You’re paying too many of your girlfriend’s expenses. Okay, okay, she’s probably really awesome and that’s the one place that is the most about emotions, so I’m going to steer clear. Let’s assume you’re not going to change this one, okay? You’re just going to roll your eyes at every comment about it. I’ll move on.

    4. Roth and emergency savings is too high if you’re not covering your expenses! Cut back $100 on both until you figure other things out. I’m not going to debate which is better right now; you have complete control over that $900 in savings, so cut it back to a still healthy $700 and you can increase again later.

    5. Ramit will hit me on the head unless I mention looking for side income. So, yeah, do that. :)

    6. Congrats on mostly having things under control. A girlfriend, good job, and finances under control are huge. You just need tweaks, so don’t stress too much.

  138. This guy sounds like “regular people”…

    http://www.youtube.com/watch?v=-1t9dg5dzQo

  139. I will ask him to get Married & stay in one place.

  140. It would be useful to know a little more data… how old is this guy? The situation for someone below 20′s could be different for 25-30 yo.

    Also how serious is this girlfriend thing? I mean, will they commit? Does he have a wedding fund (See, Ramit, I’ve learned something) When does he plan to marry? To have kids?

    Overall I think it would be a two-step approach:
    a)Expenses. First, the numbers don’t add up as others have pointed out. And yes, the girlfriend spending… well, it’s up to him but you really have to be conscious about it. And more if they would get married.

    B)Income. (Another lesson of Ramit) Can he make some more side income? And not passive “Rich dad” style. Would the girlfriend help him with it? (It would be interesting what she does with her time).

    And it would be nice to know how much automated his finances are.

  141. Below are guidelines and food for thought, not directives:

    1. There’s a math error. Listed expenses add up to around $4500/mo. After tax income on $90k/yr should be around $6000/mo. That’s not $150 more expenses than income. You should re-evaluate whether or not this is really a problem for you. If so, you likely have expenses you have not listed, and it might make sense to look at them.

    2. More income is generally better than reducing costs. A 10% raise is much easier for most people than finding the same amount of stuff to cut back on. And a 100% raise is possible, while a 100% reduction in cost is simply not. My point is not that one should skip cost reduction, however, but rather that income increase should always be considered.

    3. The car. $550/mo is very expensive (above most people’s definition of “fancy”) and most of the time all it is is a good feeling and a symbol of status. You could probably pay cash outright for a 7 yr old car that still looked nice and ran well. That would get rid of the lease/loan cost, and significantly reduce the insurance cost as well. In addition, unless you think you drive poorly, cutting collision & comprehensive makes sense to me, since you will have a cheaper car.

    4. Spending. Between vacation, gifts, and other spending, you’ve got over $700/mo listed. Nothing wrong with this, but it’s more than most can afford. There have been times in my own life where $200/mo was considered an extravagant luxury. If you decide you want to cut back, this is an area it makes sense to look at.

    5. The GF. Make sure that her things are what you want to be spending your income on, and that you’ve got an equal & honest partnership, rather than some less healthy arrangement. Unlike other posters, I don’t believe this merits anything more in depth.

    6. Saving. $900/mo is actually far better than most, and while I don’t suggest cutting back, I do want to stress that this should come after paying bills. If that $150 extra outgo each month is going onto a credit card, it’s costing you a LOT more than shorting yourself $150 from savings would.

  142. The girlfriend’s bill payments have to stop. Sure, she may have adverse circumstances, be under- or unemployed, etc. So do lots of people who DON’T have a partner paying their way. She is an unmarried adult, and she needs to be able to pay her own basic expenses.

    This sort of situation really bothers me, because lots of people jump to the ‘Gold digger!’ accusation. Don’t you see the man is just as bad for being an enabler? Gold diggers can’t exist without men willing to pony up that gold.

    If you really love her, help her be responsible for herself and cut her off. If she dumps you for that, it’s a win-win. Or if you REALLY love her, get some legal protection and marry her (and sign a pre-nup!). You already own a house, so clearly you aren’t too afraid of commitment.

  143. The one expense that really stands out is the car insurance-$3,120/yr. For a 2010 Mini & a 2011 G37, we pay $1,217/yr. Even if it includes gf’s car it is still expensive. If he is truly maxing his 401k contributions that means $17k /yr plus he’s contributing $5k/yr to a Roth. Over the next 20 yrs at a 7% return that’s $2.2 mil+. Admirable but perhaps he is being too aggressive with retirement svgs-depends on his goals, I suppose. The glaring hole in his expenses is no mention of food/dining out-maybe a lot of the $400 in cash accounts for food/dining. The enigma here is the girlfriend–expenses but no income? I don’t want to judge–she could be in school or lost her job or who knows? Perhaps he didn’t have a girlfriend when he was making $50k… Recommendations: 1. Shop the car insurance-unless he’s a horrible driver with accidents and/or tickets he should be able to save a lot of money there. 2. Track his cash spending. You can’t know where you’re going until you know where you’e been. Could discover some frivolous spending he’s rather not continue. 3. Review how much he has in his emergency fund-at $500/mth he could have enough saved and eliminate or reduce this outflow.
    The Psychology – he’s exhibiting a lot of angst over $140/mth particularly when you consider how many things he’s doing right: retirement savings, emergency fund, goal savings such as vacations and gifts, not to mention fully/partially supporting his girlfriend. He can easily find ways to balance his budget. Richard, lighten up, man! There are many more things in life worth stressing over than overspending $140/mth!!!!

  144. At least you don’t have a $1400 monthly mortgage hanging over your head for the next 30 years. And tell your girlfriend to get a job, she’s not your dependent.

  145. Food is not listed in the budget. I would guess that is where he loses a lot. I think he needs to track that spending for a month. Miscellaneous expenses seems way too low, especially $70 for a cell phone bill, must not have data.

  146. If he’s not ready to commit to her for life, marrying the girlfriend is only setting him up to owe $600 or more a month in alimony… for the rest of his life. How is entering into a contract that makes him more financially liable to her any more reasonable than just helping her out because he can and chooses to do so?

  147. I think the problem, as others have pointed out, is that you wanted to “set it and forget it”. You have forgotten a number of important things:
    Your numbers don’t add up.
    Your sample budget is missing several significant categories, like food, clothing and gas. These things cost money. Every day.
    You talk about your salary but you don’t mention your take-home pay. You can’t budget off an imaginary number.
    When you say your “lifestyle has not changed” since you made $50K, is that true? Were you single then, or were you supporting another family member? (If you are paying someone’s bills I assume you consider them a family member).
    Your problem is not this or that specific expense, but that you are looking for real money in a fuzzy Impressionistic painting. $400 for “cash expenses”? Well, what is included in that?
    If you are committed to all your pretax contributions, then start with your exact take-home pay and budget from there. In real dollars. Starting with fixed costs and working down to flexible discretionary costs. You can’t make up how much you’d LIKE to spend on Christmas and vacation, you have to base it from the money you actually have.
    You can’t “set it and forget it,” you have to take time every pay period and look things over. Twenty minutes of focused attention every two weeks will make a bigger difference than panicked flailing once a year. The $140 overage each month is the price of inattention and disorganization. It is a real cost, and you either have to build it into your budget or start paying attention.

  148. car payment – 300
    mortgage – 1400
    car ins – 260
    water/elec/gas – 230
    misc expenses (netflix, gf cell etc) – 70
    gf bills – 600 (car, ins, medical, etc)

    roth ira – 400
    emergency fund – 500

    vacation – 240
    gifts – 80
    spending cash – 400

    OK, so we see you budgeting for several discretionary priorities here:

    -Girlfriend
    -Gifts
    -Vacation

    We also see you budgeting for several discretionary monetary priorities I think most people would agree are more “important.”

    -Emergency fund
    -Retirement

    A few of Ramit’s pillars of personal finance come to mind for me. The first is to prioritize. The second is to focus on big wins. Yeah, you could find $140 somewhere in there, but it seems like it’s not going to happen, and if you are living $140 outside of your budget every month then you need to face the facts and cut something out. Ugly and unpleasant, but necessary.

    So, I am going to assume that the more money you currently spend on it, the more important it is to you. See if this matches your current priorities:

    1) Owning your own home
    2) Taking care of your girlfriend
    3) Saving for Retirement
    4) Preparing for an Emergency
    5) Driving your car
    6) Buying random stuff
    7) Going on Vacation

    How long have you been putting away $500/mo into your emergency fund? Do you have 3 or 4 k in there already? Maybe you can chillax a little, what kind of emergency are you preparing for? You could cut that by half by itself and get your finances straight every month.

    I agree that $600/mo is a little excessive for your GF’s bills, but if you’re living together and/or it’s a very committed, long term sort of relationship that you’re in, then I can see it. Maybe talk with her about a unified financial strategy? Maybe move in together if you haven’t already and get her to pay a portion of the monthly mortgage and utilities? Love and Money are like Church and State. A person should have both, but one can’t rule the other or things go horribly wrong. Separate out the love and the money as separate issues and talk about balancing the checkbook together. This might be hard to do, you might feel like you’re attacking her and one or both of you might have portions of your finances that you don’t necessarily want to talk about. Maybe approach it like being more vulnerable with each other, deepening trust and love and acceptance by sharing and working together to make it balance. She’s clearly worth $600-$800/mo to you, and probably more if you had it.

    As a long term strategy, consider over-trimming your budget. Do vacations half as often (half as much savings), investigate lower car insurance ($240/mo? I’m not saying go with Geico or anything, but there are usually better options. Are you eligible to join a credit union? Should you talk to your insurance provider about savings from bundling insurance –do you pay home insurance at all?– or good driving –the GPS plan with Progressive might be a good option.)

    Take the extra savings and pour them into your mortgage. In fact, depending on the return rates for your retirement savings and the likelihood of a climb in property values you might consider diverting some of your savings into your home. You may be able to get more out of the eventual price of the house than you will your retirement account. The mortgage is your biggest expense, and thus it is the place where you could see your biggest win. Pay it down faster and enjoy more of your money in a few years when the mortgage is gone. Maybe put vacations on hold until you pay your house off? 5 years isn’t so long to wait for an expensive getaway. Use your vacation time right now to make extra money or make improvements to your home. Or get another promotion, problem solved.

    Prioritize and focuse on big wins.

  149. Two main things come to my mind:
    1. He spends a whole lot of money on expenses that his girlfriend should be responsible for. While it IS nice that he wants to help out (it’s very thoughtful), she should be responsible for her own expenses. They are not married. He has no financial responsibility to her.
    2. I agree with a previous reader. He should use mint.com or some other site to really see where his money is going. I think the financial picture may be a bit distorted. Richard would benefit from an automatic transfer system to guarantee the necessities. This would give him a better picture for what he really does have left over to spend on his girlfriend, vacations and monthly spending cash.

  150. Your lifestyle had to have changed or you couldn’t afford these expenses. I’m guessing that you upgraded the car and house at some point after you went from $50k to $90k. Were the girlfriend bills the same amount when you made $50k or did she decide to upgrade her lifestyle too? Not that there’s anything wrong with that. I’d like to get past $50k and my apartment lifestyle one day.

    There may be some “unconscious” spending occurring, especially with a category called spending cash.

  151. Girlfriend spending? $600?? Ummm…

  152. Track your expenses. It sucks, it’s boring, but as Ramit says, would you rather be sexy or rich? If the answer is rich, sit down and track your stuff. Suck it up. Mint is a great program and makes it very easy to set up.

    Do it for 2-3 months, to get a real handle on your actual expenses. If possible, don’t use cash to track unless you want to keep your receipts.

    Once you see where the money is going, start trying to figure out where to cut down. Figure out what is really important to you. Do you really need to spend $260 a month on car insurance or could you get a higher deductible, lowering your monthly payment? Does vacationing really a big deal to you and does the location matter? If you’re happy taking a week off and exploring a big city near your home, it will cost a lot less than it would be to visit Australia or India.

    Next step (HARD STEP) is talking to the girlfriend about finding if there is a way she can cut down. Being married, I know this isn’t always a pleasant conversation but it needs to be done if you want to get back in the black.

    Once you’ve got it settled, automate as much as possible. That way you know what you have to spend on the extras without worrying you overspent.

  153. As far as money is concerned – there is a difference between overspending $140 per month and having a cash flow problem.
    Here are my suggestions: Mortgage – if you have the option, paying twice a month or better yet, bi-weekly (which is like having one extra payment a year) can free up cash. It is the timing of the income vs expense which causes concern. So ensure that payments coincide with deposits, which as Ramit has shown us, to automate payments. Other expenses can be shifted – just call and ask – take a hit this month on an over-payment to get all bills in line and you’re set.
    I do have a question about your cash use – while high do you take it out in lump sums ($400 for the month) or bit by bit via ATM? If it is the latter consider that bank charges and other misc costs can escalate if not checked regularly especially if not using your own bank to withdraw cash. Also any extra debit card use can push expenses without noticing.
    In addition, if you are going to consider paying for your GF/Significant other perhaps she could trim down her costs to alleviate the cash crunch. If she can’t then you might have to consider pairing down the vacation saving. The real thing here is that overspending is cumulative – the real cost comes when those extra costs become borne in credit (which it seems like in this case is not the issue). While I can not suggest a bullet proof solution one good solution is to look at the variable costs ( in this case $600 for GF costs; vacation $240 and misc which includes GF Cell of $70) combined nearly a Grand a month going out the door.While it is nice to do – it is a luxury, at this stage you can’t afford.
    In a nutshell:review bank statements to check for excess costs; put income and expenses in line to streamline and automate; look at a biweekly mortgage setup to increase payments and improve cashflow; finally review and trim all variable costs. Result: improved cashflow and no end of month surprises.

  154. Your budget here would be well below your monthly income if you are following this. If you are running over, I would definitely suspect that you are spending the rest on food/out to eat. I do not see this in your budget, and is one of my biggest expenses. Controlling spending there and cutting out paying for GF or consolidating bills with her (if you guys are planning on getting married or whatever) would be where I would start.

  155. Stop worrying about shaving your expenses. You won’t save much. Go for the big win which is to ask for a raise. $140 a month is less than $2000 a year. So asking for a raise that is at least 3% or more is doable. You would be the man if you can raise it by 10% or more. (you can use Ramit’s tips on negotiating your salary to do that easily).

  156. Marry the girl, get an extra 200/mo (at least!) back in taxes. Plus, you have the stability to do things like combine cell phone bills, insurance, etc, for better rates.

    I’m only half joking here.

  157. The spending looks about normal when I was making that salary. What I don’t see is a budget for all the little things that can really creep into the amount of available cash left over each month such as groceries, gas, fast food, coffee etc… These little things are probably what is pushing you over the limit. I would pull down the last 6 months of bank statements and see what it is you are not budgeting.

    All the saving are automated, owning a home, working down a car payment, and still budgeting for fun I would say this is spot on where it needs to be. Tell your girlfriend to pay her own bills and put that $600 a month into building passive income and things can only get better.

  158. I’d like to hear the response to why he thinks his gf’s bills are his responsibility.

    • Janelle (and plenty of others). Why is it presumed that he believes the gf’s bills are his responsibility. When I was dating (and eventually married) my wife, we put her entire paycheck away and only spent my … well even less than my paycheck too. This was our way of preparing for my wife to stay at home with our children that were born 1-2 years after we were finally married.

  159. I agree with all the others saying track spending on going out, etc. But I am writing this under the influence of Ramit… so here’s what I think Ramit might say if he were me and I him:

    …you already know that you *don’t* track this kind of discretionary spending, and that you should be doing so.

    So, make it really easy and take a photo from your smart phone (assuming you have one) of every bar bill, every restaurant bill, every movie ticket that you pay for. Even if you’re at a hotdog stand, take a photo of the hotdog (since they probably don’t give receipts).

    Then send the photos to a neutral gmail account that you sent up specifically to receive just these photos like ‘shafik.dumbass@gmail.com’. In the subject of the emails label them something easy like “food” or “dog collar” or “kung-fu movie”. Do this for 2 weeks. Set up a reminder in your smart phone calendar at the end of 2 weeks to check out your email. In the meantime, just shoot and send, shoot and send. Don’t even look at the repository gmail account until after the 2nd week. Then when you do check your email, you can see all of these emails that will tell you where this money is going simply by checking out the subject lines of your emails. You won’t really have to open the emails to see that the majority of your spending is going towards stereo gear or flowers for your gf.

  160. Sell the dog!

    …errr, I mean the girlfriend.

  161. Let’s see. Broad examination with percentages based on gross income.
    1) 30.8% income devoted to savings/retirement … EXCELLENT!
    2) Housing (presumption is $1,400 is PITI + $230 basic utilities) 21.73% … GREAT JOB!
    3) Personal transportation costs 7.47% – not bad, although I’m hoping that $300 is a car payment and not a lease, because the $300/month ignores the initial payment.
    4) GF costs are 8% or slightly more because he merged “misc” & GF cell.
    5) Spending cash is only 5.33%. This is rather low, although if he’s like my wife and I when we were dating and saving for wedding/house, we rarely went out to movies/dinner. Currently we feed our family of 6 (2 adults + 4 kids) for $775/month. He is spending about 3x more than we do, so I don’t see this as being impossible.
    6) Vacation 3.2% … not bad, and gets him probably 2 vacations a year.

    What kind of communication device does he have/use? It mentions GF cell, but nowhere does it mention a cell/landline for him. Maybe this is in “spending cash”.
    I doubt that he can benefit much from the mortgage insurance writeoff, since he’d have to be paying on either a shorter term mortgage, or lower property taxes. He’d have to get above $9,500 limit before it would be effective for itemizing.

    If I were to fix this at all, I’d suggest first merge insurance (homeowner’s, car, life … if he has that). Secondly see if GF could work a little to help out (especially if she could make a measly $140/month to put towards her own bills). Then consider lowering the emergency fund to offset it.

    • Once the “bleeding” is contained, then begin working on increasing the income through other means.

  162. If you break this budget every month it seems like the obvious answer would be to lower the amount that you’re putting into categories that aren’t fixed. I’m going to ignore the fact that you’re paying gf bills even though I think its ridiculous because I don’t know you and those would be fixed cost if they’re actually necessary.
    That said, cut first from:
    spending money
    vacation
    gifts

    You can get 140 there easy, but for the sake of it cut next from misc expenses that you don’t care that much about and rethinking your car and insurance. Last would be lowering the monthly contribution to emergency (if you have 4-6 months in there you shouldn’t be contributing either).

  163. So many responses just tell him what to do rather than what to consider. The instructions were “What would you tell Richard? BE SPECIFIC and consider not just the numbers, but the psychology of spending.” (emphasis added) I guess the “unwashed masses” don’t follow directions…

    • Well, here’s the thing: he doesn’t give us enough info to get into his psychology, just enough to speculate wildly. He has a very high personal savings rate (especially retirement), he pays some of his girlfriend’s bills, and his car insurance bill is unusually high. He also doesn’t include all of his bills.

      The only concrete things anyone can say is, “track your stuff more clearly because it’s hard to know where you could cut” and “your car insurance could be renegotiated.”

      If I’m being super-nice, I could say “yeah, he crashed a Corvette and he’s gotta wait it out – it is what it is” and that the deal with his girlfriend is his business and that it’s Good Good Good that he’s saving almost 40% of his non-tax/insurance income.

      But I don’t know if that’s true or if Richard A. is simply martyring himself for a bunch of personal “shoulds” that will cause him to have a heart attack and not enjoy his retirement millions.

      I mean, if he’s happy with his situation, then the answer is “do a round of big win bill negotiations on the debt and recurring bills, then earn some side income and make sure you’ve openly communicated the limits of support to your partner.”

      If he’s NOT happy, well, then he should do the first one anyway, but then it’s time to do a self-inventory.

      So you know, I can’t make recommendations because I have no insight into how Richard feels about any of his big expenses.

  164. First, two things:

    1. You make $90k/year; congratulations. Many people who make $200k/year throw most of it away on status symbols and indulgence, so making $90k/year doesn’t mean that you can be careless, BUT…

    2. Good for you! At $90k/year, you certainly have the tools to turn this ship around. Be glad that you actually have the money to solve your problems, which others making $20k/year don’t have.

    You appear to be waking up from a deep sleep about your money. Better late than never.

    Now, two questions:

    * Are you willing to give up your vacation for JUST ONE YEAR to get this problem under control? Imagine if, a year from now, you had this all figured out, and then could take your next vacation 100% guilt free. Would you like that? If so, then try emptying your vacation fund to stop the bleeding while you figure out what’s really going on.

    * Do you feel comfortable that you’ll still have your job for at least another year? If so, then you can probably stop contributing to your emergency fund for, once again, JUST ONE YEAR. You might find out that your vacation food isn’t even enough to cover your shortfall. That’s OK: once you look closer at the numbers, you might find out that it’s a little worse than you described. Whatever the numbers are, you might need to give yourself some breathing room to deal with it. Between your vacation fund and your emergency fund, you probably have what you need to stop the bleeding.

    Now that you’ve stopped the bleeding, you have ONE YEAR to figure out what’s going on. Depending on your personality, you might prefer to automate your committed spending as much as possible, or you might prefer to track every penny in and out to get an accurate picture of where your money has gone. EITHER WAY, I recommend that you answer one question for yourself: “What am I spending money on that I don’t really value?” Pick ONE THING PER MONTH to consider cutting spending on, even if it’s tiny. If you cut $20 per month every month for one year, then you’ll have cut $240/month by June 2013. According to your numbers, that would solve the problem.

    I did this quite aggressively, and it really helped me, but some people prefer to save money a little at a time. Every time you cut $20/month in spending, you can put that $20/month back into your emergency fund. That means you’ll have $1,560 by June 2013. Sure, it’s not $6,000 like you planned, but better to save $1,500 painlessly than $6,000 painfully, no?

    You’ll be surprised what happens: you might just decide on a handful of things you don’t really care about, and stop spending on them, ALL PAINLESSLY. No big deal. With less to worry about, won’t it be easier to negotiate a raise? or make $100 in a weekend on the side? or have the hard talk with your girlfriend about her spending? Won’t you find it easier to deal with all that when you’ve dealt with the immediate crisis?

    So deal with the immediate crisis. It only costs you one year of vacations and less than one year of your emergency fund. When you look back on that in 10 years, you’ll laugh at it, just like I laugh at my money worries from 10 years ago.

    What do you have to lose?

  165. 1. car ins – 260
    Your car insurance seems very high. You should be able to pay a lot less unless you had a car accident in the past five years.
    -$60 by shopping around.
    2. water/elec/gas – 230
    Your utility bill is very high for one person. Do you live with your girlfriend? Is she contributing? Do you cook everyday and take your lunch to work? Save the energy and water. Just by turning off the light when you leave the room, or outlets when you go to sleep, you can save a ton of energy.
    -$30
    3. misc expenses (netflix, gf cell etc) – 70
    Since you pay for your girlfriend’s cell phone bill, would you consider to add her to your line?
    -$20 at least
    4. gf bills – 600 (car, ins, medical, etc)
    Does she work? I am sure she is appreciative that you pay for her bills. If she doesn’t work and contribute to your bills and stay home, she doesn’t need a car and car insurance.
    -$500
    5. vacation – 240
    You can’t afford to take expensive vacations. Remember your budget doesn’t balance and you overspend by $150 every month. Take cheaper vacations and be creative where you can go and how you can save.
    -$40
    6. gifts – 80
    Be specific. Who are you buying these gifts to? Your girlfriend or your family?
    7. spending cash – 400
    -$50 you simply don’t have the money to spend cash left and right. $400 is a lot of money every month to spend. I don’t believe that you had this much when you were making $50K.

    Totals $700 in savings.

    Making $90,000 is a lot of money however with your spending habit, it is nothing.

  166. First, congratulation on making $90k. Seems like you are doing well and enjoying life. I didn’t read most of the comments, but some I saw commented on your paying the gf bills. Screw that, pay ‘em. Consider it an investment in your relationship. If it makes her happy, your relationship should be the better for it. To each his/her own.

    My concern is the following spending:

    Emergency Fund – 500
    Vacation – 240
    Gifts – 80
    Spending Cash – 400

    You spend $240 per MONTH on vacation and you are putting $500 away for savings? On top of the vacation, you spend an extra $400 per month on other things. I’ll assume bars (That used to be my monthly drinking limit).

    Seems to me, these are the areas that need to be refocused. Gifts, go ahead and keep. Pay the gf bills. Pay your bills. But the emergency fund, vacation, and spending cash allocations need to be adjusted. Using Ramit’s technique of setting up the process and forgetting it, you are leaving too much in checking for vacation and spending cash and allowing yourself to spend more than you have in that area. Allocate more to your emergency fund, and what’s left is what you are allowed to spend. Then be steadfast, and do not allow yourself to spend more than is available in the account.

  167. Cut it all down – live in a tent and invest in stock like Warren Buffett!

  168. Wives are cheaper than gf’s. Get married!

  169. From his budget, I get the impression that Richard has not identified what it is that will make him “feel” rich, in the sense Ramit describes in his book. In other words, his expenses look very scattered out to me, instead of focusing on his one true passion and cutting back on everything else.

    For example, Richard may need a car (certain cities and parts of the country don’t have good public transport or the weather prohibits biking half the year). But, if so, how much of a car? Or Richard and his girlfriend may need cell phones (for many people, they are a want, not a need). If needed, though, a prepaid phone can cost as little as $10/month with a reasonable number of talking minutes. (Are there any businesses that require texting instead of talking?) And does Richard need, or just want, a house? Renting, if you figure in maintenance and property taxes may be cheaper, especially if a cool home isn’t what makes Richard feel rich.

    In short, I would suggest Richard re-read Ramit’s book and figure out what makes him feel rich. Then he can concentrate on funding that and cutting back on everything else (except saving, of course). He will find he can stretch $90,000 dollars a lot further with that attitude than with an attitude of trying to have it all.

  170. I lost count on how many comments there are about the girlfriend.
    Keep her if she’s a good gf.

    If you automate your payments (everything gets paid automatically in the beginning of each month) do you still have 400 in spending cash left?

  171. 1) Track your expenses better, at least for a couple of months.

    2) Call & negotiate:
    car payment – 300
    mortgage – 1400
    car ins – 260
    water/elec/gas – 230
    misc expenses (netflix, gf cell etc) – 70
    gf bills – 600 (car, ins, medical, etc) (at least half should be negotiable) – 300

    total 2560, with a simple 4% reduction… 100 less each month

    3.A) Increase your income by 1000/year with a lil side job…
    3.B) Check the “better tracked expenses” and cut something (50/month)

    And you’ll be able to pay the gf bills, gifts, vacation, savings… :)

  172. I have two glaring suggestions for this guy:
    1. Your car insurance is insanely high. I pay half of that amount for a leased car (which means that the minimum coverage required is pretty high)
    2. Your girlfriend needs to start pulling her own weight… jus’ sayin’

  173. Michael Yamamoto Link to this comment

    One potential problem could be whether or not you were saving for retirement at your previous job. I am in a similar position with my current income just over 90k. My previous income was through an internship where I made around 45k, but received no benefits. Because of this, none of that income was being taken out for a 401k. I was also not considering retirement at the time. When I got my current job and started earning double, I maxed out all of my retirement accounts. However, this effectively reduced my income by 22k. If you weren’t putting money away into your emergency/vacation fund, your income will be roughly the same as at your previous job. Of course, this is fine because you now have a great nest egg growing on top of being able to maintain the same lifestyle you were living before. If you are seriously concerned about your expenditures, it may be worthwhile to reduce your retirement contributions. Just remember that if you reduce your 401k contributions, you will only see about 75% of that reach your take home pay.

  174. The list of expenses are almost $54k. I think you are leaving out other expenses. Where’s your grocery/food dude? Do you have debts from loan sharks or dealers we’re not accounting for (kidding)? I think you’d better look closer because you’re saying your monthlies are $140 over. That’s $4,600 a month lifestyle. At your income that’s only 61%. What’s your after tax? Can you reduce it more with better tax planning? Because if you went from $50k to $90k then taxes have gone up. Maybe way up.

    Finally, it’s not like you have kids to support. Others are giving you heck on spending $600 on your GF. If she’s awesome, you’re being cheap. Having a pet can cost more. It’s not like you’re going to join the monastery. Plus no one really understands the nature of your relationship better than you to give you that kind of advice.

    • Wow, I have no words to describe how I feel after reading this line – “If she’s awesome, you’re being cheap. Having a pet can cost more.”

  175. Dude! Get rid of that car payment! If you make 90k a year you should most definitely be paying cash for a car. You probably have way too much of a car for your salary, also probably why the insurance is so high.

    I understand why people like nice cars, but if you want to have a car that is above your pay scale, you need to make sacrifices in other areas like eating out, travel, etc. You can’t have it all :)

  176. Alexander Boland Link to this comment

    Forgive me if I made a horrible careless error, but this doesn’t add up to nearly 90k per year. What’s not being included in this list?

    I imagine somewhere there is a decisive choice that leads to a domino effect (see Tim Ferriss on “domino foods”)

  177. Richard,

    It is difficult to get a clear picture of your finances without more detail of where your money is going. As previous posts have mentioned, your list of expenses is generalized and incomplete. If you track your expenses carefully for a few months the problems and solutions will become more apparent. Until that is accomplished the only logical course is to reduce your discretionary expenditures toward the emergency and vacation funds.

    The most obvious problem from the information you provided is your budget for your girlfriend’s support. Until you are legally married you are not responsible for another person’s bills. Of course you know that. You are taking on responsibilities of marriage without the legal benefits or contract. Think this through very carefully for your emotional as well as financial well-being.

    God Bless.

  178. 1. Get a new girlfriend.
    2. Take Ramit’s course on how to bag an extra $1k per month.
    3. Have girlfriend take Ramit’s course on how to bag an extra $1k per month.

    If #1 is not an option, then #2 and #3 will work.

    Good Luck.

  179. 1. Forget about saving so much and pay off your car loan(put just enough to get the company match). You are probably paying more in interest even if your rate was as good a 3.5% vs what you earn back on your savings.
    2.If you’ve been stacking $500 in your emergency fund every month you should have enough for 12 months ? don’t contribute more than that
    3.What kind of car do u drive ? Mercedes Vs a Camry ? Fuel consumption rates ? INS rates? All matter
    4.Check you INS rate
    5.LIST down all your expenses…the ones you have provided are more ball park, get specific…
    6.Can you rent out a room in your house ? This should bring in another $600 or reduce your cost by about that amount.
    7.Can you start something on the side ? Some consulting work ?
    8.I would cut you vacation and spending cash to a more conservative figure…unless you go out every week and vacation every 2 months…$100 for each item (in my opinion)
    9.Why is your GF so expensive ? ask her to get off her fat ass and get a job and or get some side gigs…(Take Ramit’s advise)
    10.If you’re a subscriber to Ramit’s emails and you still have this kind of problem…I would start reading his emails rather than just deleting them.

  180. If you are spending $240 a month for a vacation fund, that works out to $2880 a year. Nice vacations can be had for $1500 (or even less), so cut that down to $125. That will take care of $115 of the $140 in shortfall. Also, cut the $400 in spending money down to $250 and that is another $150 in savings. Right there, you have $265/month, which leaves an extra $125.

    There is also the car insurance of $260/mo. Maybe if you got a car a little less nicer, you would have lower car insurance as well. (I’ve never paid more than $95 a month for car insurance, but let’s say that you get a car than you can insure for $200 a month just to be on the safe side, which will also reduce your property taxes.)

    You could also wean your girlfriend off your expenses to find a way to cut that money down.

    With the $125 from the first two, plus at least $60 for the car insurance, you are looking at least $185, possibly $200, extra per month. You can use this money to fund your retirement or other investments.

  181. The numbers here don’t add up. You should have an extra $1000 every month. Since you don’t, it’s would be valuable to find out where that money is going (we discover this in our own expenses every few months).
    Once you do, you should probably decide what kind of spender you are: the kind that spends a lot more when there’s money in the bank or the kind that it doesn’t matter.
    I find that when I think I have money, I get lazy at keeping track of my expenses. So instead of letting the excess stay in a bank account I have easy access to, it goes into another one I don’t have a debit card for. That way, I never think I have extra money and am careful of what I spend.

  182. Yup. I’m with everybody else on this. Easy way to cut back on expenses is to have his girlfriend contribute to her bills. It’s interesting how he didn’t even think twice about this. Or maybe he has but he just doesn’t know how to tell his gf and this will be a way to break it to her??

  183. My first piece of advice is to figure out what you mean by “emergency” and likely just contribute $140/month less to that fund. Problem solved. Are you interested in saving more? Cut more spending. Make more on the side. It’s math. A simple equation.

  184. I have had this come to Jesus moment myself!

    Two things that have helped me:
    * Credit cards are great tools, but they introduce some delay into your cash in- cash out analysis. As an exercise, try withdrawing the money in cash, in advance, that you plan to spend. It can be a real eye-opener, especially when applied to food and entertainment expenses!

    * Keep in mind that if you put money away into savings, and then overspend in another category… you’re not saving as much as you think you are. Try calculating how much you actually saved at the end of the month, when you can see if any categories were overspent.

    Last thought. You worked hard for your money and it’s right that you spend it on whatever brings the most value into your life. That decision is personal and belongs only to you. As long as you are not spending any of your dollars twice, and your decisions match your values, you are doing it right.

  185. From my point of view, even a mortgage isn’t basic, but once a person starts on one, they’re commited. Paying a girlfriend’s expenses isn’t basic either. I say kudos to the savings plan. However I find it odd to say he’s $140 over his income when he’s putting away $900 each month. With $90,000 income it makes sense to put away some savings, but not if it’s over the budget.

    Psychologically speaking I think it makes more sense to budget based on the income figures first. 90,000 is a lot of money and it may seem like a person can spend whatever they would like in whichever way. However I would suggest he take his monthly income and divide it up on how much he wants to spend in each area of his life with the consideration of what he actually has to work with.

    “set it and forget it right” To me that says automation. It doesn’t seem his expenses are automated properly right now. I suggest he reconfigure how much he’s spending on each area and then he can “set it and forget it right” again.

    I also wonder what else he’s not including in there. The total of those numbers times twelve equals 53,760. I don’t know how much he would lose in taxes, but that’s a big discrepency. I wonder if food is included in “spending cash.”

    At first glance those are my thoughts.

  186. Okay, it’s been said: RED FLAG your paying too much for your GIRLFRIEND. I’m married, we live off of one income, we have 4 kids, make less than you, and my HUSBAND is not paying that much for me. We drive 2 cars for about $675 /mo (insurance & gas not included) so it seems liks GF could downgrade if she’s taking a free ride…

    Girlfriend needs a job, bro. If I were your mom (the 4 kids are all boys), I’d say she’s taking advantage of you and probably not like her very much… how does Mom feel? Moms (though we hate to admit it at the time) are usually right.

    So don’t cut your 401k or IRA… cut spending on your GF. She should be able to provide for herself. Her car & cell, etc, shouldn’t be your financial burden and I hope she’s not trying to convince you that they are!

    Good luck!!!

  187. Richard, the first thing you need to do is identify where your money is actually going. These numbers don’t add up. This isn’t the whole picture. You say you’re putting $500 a month into your emergency fund and $240 to a vacation fund and have a shortfall of $140 a month, which means you’re actually still saving $600 a month, not including retirement. If this is actually the case, then you’re doing OK and need to chill.

    But you sound pretty stressed about money for someone who is saving a lot. What signs do you see money is tight? Do you have any credit card balances from month to month? Not enough money left to hit your savings goals?

    Here are some important areas of life where you have no money budgeted:
    -Gas for your car
    -Gas for girlfriends car
    -Groceries
    -Going out to eat
    -Bars, concerts, and other entertainment
    -Clothes
    -Household goods
    -Electronics and other shopping

    Though you’re probably paying for a little of this in your cash expenses, these expenses could easily slip past $1,000 a month between you and your girlfriend.

    So here’s what I want you to do:

    1) Go sign up for Mint.com (or similar website), and start tracking your expenses. Download their app on your phone so you can add cash expenses. Set up a basic budget. Total time, 1-2 hours.

    Once you’ve tracked expenses for a month, go make sure Mint put them all in the right categories, and see where your money is actually going. And don’t forget to include some allowance for those couple times a year expenses.

    Send me your actual data, and we’ll go from there.

    • You used the “B” word…Budget. Gird your loins for the full force of Ramit with a word like that.

      I’d hazard to say that if he doesn’t have money budgeted in those areas or going to those areas on a regular basis, they aren’t important to him.

      The bigger issue is whether his priorities (What’s most important to him) match his expenditures. (Is he spending the most on his priorities and the least on his frivolities)

  188. First off, the others are right. If you are spending beyond your means the most obvious bills to cut are the ones that aren’t your’s i.e the GF tax.

    Next your totals don’t add up. You have substantially less listed than what you should be earning after tax.

    Next look at your emergency fund. If you have enough saved in there to equal six months of income you can cut that expense or atleast reduce it.

    Another thing that caught my attention is that you said you max out your 401K. Why? You should not be contributing anymore to your 401k than what your employer matches. That’s basically free money. Anything beyond that amount that you want to save for your retirement should be put in a roth ira. Just think of what your tax bill is gonna be on that 401k when you do retire. Remember you pay taxes on the total amount. How much of a damper is that going to put on your retirement plans when you go to draw out your million dollar nest egg and Uncle Sam takes 30-35% and then your state wants its cut. Compare that to your Roth where you are paying a much lower percentage of tax on each contribution. If you are already maxing out your Roth, talk to an investment broker about things like annuities. Even an annuity with something like a 3% return will produce far more than what that money would sitting in a savings account.

    • Ummm, “Maxing out your 401(k)” usually DOES mean allocating the maximum amount matched by your employer.

      …At least that’s how we all used it back when I was still employed by someone else.

  189. Unless this guy is the world’s worst driver, he’s being looted by his insurance company. And “gf”? – what, he forgot that he added a concubine when his income went up?

  190. Very simple to solve. STOP PAYING YOUR GFs bills! Or get a GF that doesn’t need or ask you to.

  191. First and foremost, relax. I have to say you are doing a fantastic job. The problem isn’t in your budget but your mind. You have automated your emergency savings, retirement, vacation fund, etc. which is why you’re in a great position. You’re not “spending” $140 over your monthly income each month. You’re paying yourself – there’s a difference.

    My advice: do what makes you happy.

    If your girlfriend gives you phenomenal massages, then by-all-means reward her with a $600/month allowance. If deep down you feel it’s a one-sided relationship, then re-prioritize.

  192. If you’re paying the girlfriends bills then she better contribute towards your retirement. But she won’t. You know why? because ..
    SHE’S NOT MARRIED TO YOU.!!!

    Wake up Richard or Bob or who ever you are!

    My then boyfriend and now husband let me live in his house for 6 months while he was deployed for the military. You know what I did in return? I took the $1200 that I saved by not paying rent and utilities, to a ING Direct Savings account and put it in a “Wedding” sub-account.

    You’re a sugar daddy my friend. Wake up !
    AND P.S – $260 a month is way too high for auto ins. Use Ramit’s tips and negotiate it. And maybe you live in the city if you’re paying that much auto ins. Maybe you don’t even need a car?

  193. Who is this guy? Normal life?
    I’m calling bullshit.
    Keeping a girlfriend and carrying $600/mo of her expenses is not “normal”. Are you shitting me? That’s about 12% of his take home pay. Besides which, I’m sure she receives some of the gifts and accompanies him on the vacations so she costs even more than he’s reporting.

    “OMG, I’m spending $7200 per year buying my girlfriend’s affections and I just can’t figure out where all my money is going.”

    He’s right about one thing though – “mind blowing”.

  194. He says he’s going over budget by $140 each month. Looking at his expenses, I’d reduce the vacation savings by $140. Ta-da! Now everything balances, and he has an incentive to find ways to save money. Every time he wants to spend, he has to think, do I want this expensive dinner, or do I want to increase my vacation savings? That can be a powerful incentive to cut costs.

    Next track expenses. This budget isn’t adding up. Money is dribbling away somewhere. He should find out where it’s going, and look for easy ways to cut back so he can add to the vacation spending.

  195. Track your expenses, so you know exactly where you’re spending money. See if there is anywhere you can gradually cut back. Quitting cold turkey will work for a month or two, but after that you’ll end up making up for anything you didn’t spend in the coming months.

    Why are you paying for all of your girlfriends expenses? Also, if you’re running a deficit the first place to cut is your emergency fund (assuming you have a decent amount saved already)

  196. The key mindset hurdle here is from this statement is “My lifestyle hasn’t changed from when I was making $50k/year”. If this was true, you would should at least a small surplus of cash at the end of the month. You are believing that you have maintained the lifestyle of a $50k a year person but in fact you have slowly adjusted your spending to use you current salary of $90K. A quick test of this theory is for you to track you spending for one month with no judgements on your spending to locate exactly where this lost cash is going. You will be amazed that you have subconsciously upped your spending to consume you higher salary.

    • Another mindset issue here is the “being poor” mindset that is leaking into you life. You have a major wins with a fully funded IRA and emergency fund. Once you have completed your spending tests, you will see the areas that need improvement. Also, take some time to analyze you relationship and make sure this is a win-win situation. From a distance, your GF is winning all the time and you have no victories in this relationship.

  197. Why in the world is he paying his girlfriend’s bills? Ax that and he’ll not only get rid of that $140 deficit, but he’s also have some positive cash flow. If he and his girl are not married, he should not be paying her bills. Also, his car insurance seems very high. I have a brand new Honda Pilot and owned a Hummer (when it was new) and my monthly insurance cost for each was significantly less than 30% of his monthly premium. If he has driving record issues that have inflated hsi cost, take the 10 hour class. Otherwise, get another insurer – obtain a nice quote from one of those online insurance clearing houses.

  198. From the experiences I’ve had with paying other people’s bills, let me tell you, you should NEVER be paying for anyone else’s bills unless a) you are their parent , b) they are family (by blood, not marriage!) or c) you are married to them.

    Why isn’t your girlfriend paying her own bills? Is she not woman enough to take care of her own expenses? As a woman myself, I am of the opinion that it is completely lame to rely on someone else to take care of you unless you are actually, physically unable to do so yourself (such as those first few weeks after surgery or childbirth, or major medical issue). Unless she has a GOOD reason that she can’t pay her own bills, then put your checkbook way.

    Basically, her bills aren’t your issue, ESPECIALLY when you are spending more than you make each month. If you want to make her bills your issue, then that’s probably why you are in the financial position you are in right now, and you should just accept that you’re in over your head.

    And to the person that asked if his girlfriend is supposed to ride on his handlebars for dates – does she seriously not even have her own CAR??? Or her own BIKE? Does the woman do anything for herself at all???

  199. Like many of the other comments on here (and no, I haven’t read them all) I agree that paying your girlfriend’s bills is a large and perhaps unnecessary expense. Also, I wonder if part of your gift/spending cash fund is also being spent on her? I could understand covering the bills if she needed to take time off work to raise a child (that’s a thoroughly demanding job) but am confused why there’s a need to cover her basic expenses.

    As a female, I could never imagine asking a boyfriend to pay MY bills. Occasional dinner or a movie? Absolutely, at least, that’s what society (somewhat unfairly) dictates the boyfriend should cover. But even a generous entertainment fund should leave you with more money than you have now.

    My question is, how did you begin covering bills for her in the first place? Is she employed? Would having a conversation about paying her share be a make it or break it situation? If so, how do you feel about that?

    Seeing how much money you put into savings and retirement and even an emergency fund shows that you are a smart, responsible individual. But are you taking on too much responsibility by taking on your girlfriend as a dependent? Making so much but still having money problems sounds like a stressful situation. Make sure you’re taking care of yourself before taking on someone else’s burden.

  200. One line really stood out for me: “I make a good wage so I’m not the kind of person to sit down and look at numbers very often, set it and forget it right?” This is the heart of the issue, and I know because this is exactly what I did. Richard needs to know: You can NOT out earn a bad budget or bad habits. Personally, I think the biggest mistake is that his priorities are backwards. I agree with other comments above with the one glaring category missing from his budget: FOOD.

    What do we all need, Food, Shelter, Clothing, etc… so our budgeting priorities should start there as well. And… be realistic! Do you spend $500 a month on groceries? Do you also spend $300 going out to eat? Budget it! Just one or two extra dinners out can blow your entire month’s budget… especially because he sounds like a cool guy, and it’s probably not a rare thing for him to pickup someone else’s tab once in a while. If that’s what you enjoy doing, that’s awesome, just budget it. From there, make sure your rent/mortgage and utilities are covered first, and THEN take what’s left and take care of the other things in your budget: emergency fund, roth, vacation, gifts, etc.

    Coming back around to my first point, however, you can’t set and forget everything. Make sure you’ve got the basics and necessities covered first, then you can set and forget the savings and investing with the REMAINING

    • So much agreement here with Chad. I now make 1/3 of my former pre-laid-off salary…and I live in one of the most expensive areas in the US. However, my budget is more balanced now than ever. I used to think that if I could just make more money, I could get out of debt/live better.

      It’s just not true. Yet, most of us fall into that line of thinking at some point.

      When I got laid off, I had to drastically re-think how I earned and spent money, and have had to adapt. Now, my once PT/side income is my only income. It’s not fun, and I worry about money all the time because I don’t have much wiggle room in my budget, but I’ve been far more capable with money than ever before and I know that when I do earn more money, I’ll be able to handle what I am given. I know that I was being penny smart/pound foolish for too long. Now, I have to be smart about it all.

      @Richard: Consider yourself very lucky to make what you do and live in an area where the cost of living seems somewhat reasonable (or at least, your cost of living does compared to your salary). Also, like many have said, the girlfriend’s expenses are significant. I don’t know your situation, but maybe you can learn something from mine:

      I’m a girlfriend who had–for a while–to rely on my boyfriend for support. I still do need to rely on him taking on a disproportional amount of our household expenses. But in order for him to do that, I had to step up big time. I now do all of the household chores. I do all of the cooking and grocery shopping, and have a very limited budget that I make work. I had to learn how to cook. If he needs errands ran, I do them. In helping him, I was able to help him almost triple his income. And that certainly helps the household recover from my income loss.

      If you can ask your girlfriend to step it up–help contribute to the household, help support YOU in a way that balances how you support HER–it can work out and your earning potential increases while your household expenses should decrease. If she can just learn to cook well, and if you can trust her to manage/reduce food costs, that can definitely help save you money. Then, as Chad says, adjust your budget accordingly. Keep in mind “set it and forget it” will never work with money–with budgeting, investing, etc. Markets change. The prices of goods change. Everything is relative.

  201. Well – those numbers don’t add up right. All those expenses come to about $54k. Even at a 30% tax rate – after tax on a $90k salary should be over $60k.

    That means there’s probably a “leak” somewhere other than the bills/expenses he listed. My guess this is coming from food and spending – this is probably where he’s overspending and not noticing. He admitted already that he doesn’t look at the numbers very often. And it’s really easy to accidentally overspend on groceries, eating out, small items. They add up quickly and are harder to track.

    RECOMMENDATION: get several bank accounts for things like groceries/food, spending, household items – all the areas that don’t have fixed bills. Set up automatic transfers each week – so you don’t have to manually do it or think about it. Then have a debit card (clearly marked) for each of these areas that doesn’t allow overdrafts and use this to pay for the appropriate bills. Then see what happens (you can also look more often at your online balances and check in……). If you find that you go to use your card and there’s no money left, there’s your problem. Sounds like you need to be a lot more conscious about spending in areas of your life. If you keep to this system, you’ll learn to adapt.

    This is what we’ve done and simply being more mindful of what we’re spending money on makes a huge difference. Plus, it’s super easy to maintain once you set it up. Our spending habits changed dramatically on theses areas – so much so that we expanded it to other items in the budget (i.e. one for expenses for our kid, date money, travel, etc.).

  202. 1) Girlfriend needs to get a job, pay own bills.

    or

    2) He’s saving too much.

  203. Before you can fix the problem, you need to determine what is really going on with your spending. The numbers you provided look like estimates, and leave out some important categories like food.

    I suggest that you track all of your expenses for a month. You can sign up for a budget program like Mint or just use Excel, but the important thing is to not leave anything out, not even if you bought just one item at the dollar store. Save your receipts, carry a notebook with you to write down expenses – whatever method works for you.

    If you’re sharing expenses with your girlfriend, get her involved as well. Let her know what’s going on, and ask her to help you figure it out by keeping track of her expenses too.

    At the end of the month you should have enough information to evaluate your spending. You’ll probably find that there are a lot of little things that don’t seem like a big deal by themselves, but add up to a lot. Set aside some time (with your girlfriend if sharing expenses) to decide how important your expenditures are to you. Cut or reduce your expenses anywhere you can and are willing to. If you are not willing to do without any of the things you currently buy, find a way to increase your income. Or do both.

    Set a realistic budget based on your previous spending and where you decided to cut. Continue to keep track of your finances one a regular basis (weekly is good) to stay on track. Tweak your budget as necessary, but never let yourself ignore your spending. There is no amount of money you can make that allows you to safely leave your finances on autopilot, and if you don’t know what you’re spending, you will spend too much.

    About the psychology of the situation and your lifestyle not changing from when you made $50,000:

    First, when you don’t keep track of your spending, it is way too easy to think that something is cheap / affordable without thinking about how it fits in with the rest of your financial picture. This is why it can be hard to keep track of your spending in the first place, because it forces you to decide whether each ice cream stop or shopping trip is worth it, and that’s not much fun.

    Second, when your income increases, a lot of times there are things that you ‘need’ that you didn’t need before. Before I got my current job, I ‘made do’ a lot – I lived with the bare necessities with only *very* occasional and inexpensive splurges. I still make do, but my grocery bill has more than doubled because I’m eating a greater variety of food than before, and my housing bill has gone up because I moved to an apartment from the room I was renting. These are arguably ‘needs’ (food, housing), but before my income increased they were only wants. Before, my automatic reaction to spending was ‘no’. Now, it’s closer to ‘maybe – why not?’ because I know that I have more money available. The same thing can happen at any level of income, and a jump from $50k to $90k is definitely enough to make you feel like you don’t have the same limitations as before.

  204. Ramit requested a psych focus, so here it is: No wonder he’s distraught. This guy’s life is filled up with stuff that gives him no happiness. About the only discretionary piece is the spending cash of $400, which is probably the only piece out of his paycheque that gives him any joy. He works all day at a good job yet feels that he barely has ten bucks at the end of it.

    He’s somehow accepted or accumulated these recurring expenses, like all the things others mentioned – the car, the gf’s car, the house, and all the other associated spin-off costs they generate. It’s the opposite of automatic savings, it’s automatic expense. The money is allocated and he practically never sees it.

    The antidote is to reorganize these automatic expenses. Unsubscribe to whatever doesn’t improve happiness — maybe get rid of the car or downsize the car or share a car with the girlfriend, maybe downsize or get rid of the house, maybe take a different kind of vacation, whatever. Just get costs out of those automatic categories and get more into discretionary if he wants to improve his happiness and mental comfort by feeling like he has control.

  205. As bf/gf you should keep your own finances. Heck, I’ve known married couples that keep their finances separated. ;)
    Anyway, it’s sobering when you add it all up per month, isn’t it? Here’s another fun activity: compare a 1950′s budget to a 2012. You’ll notice income and prices have changed quite disproportionately.

  206. The GF definitely raises a red flag for a lot of us – but I think if this is something he WANTS to do for her, we shouldn’t suggest that he stop supporting her. I don’t know what the circumstances are but whatever the case, I think he should help her out and get her on track – since he’s already taken on the responsibilities to take care of her. If she’s got health issues and can’t work – get her on disability. If she’s unemployed – buy Ramit’s Dream Job course to help her get a job =). Maybe she does work but she can’t manage her own money – help her learn how to do this! This is especially true if he’s planning to be with her long term: Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.

    The other thing I’d suggest is to lower the cost of all negotiable bills: insurance, medical, cell phone, etc.

  207. Personally, I would not spend money on a car unless I’d saved up cash to do so. So I’d find a way to dump the car, and replace it with something you could buy with cash. Stop saving emergency fund money and roth and everything else until you can build up enough cash to buy out the lease or whatever, and then buy a used car. This would free up a lot of money a month, once it is straightened out. Use an auto-savings method to do this (send money straight to a savings account, automatically each month) and just make it your “car fund” instead of your retirement fund. I’m assuming you don’t have cc debt, but of course you might, bc you are running “negative” each month. Use this method to pay off any cc first (i.e. stop saving for retirement) then tackle the car. My BF and I drove 1 car for 16 years and I think this was huge in keeping us financially healthy… such that we had plenty of savings during the economic downturn. You might be able to do this with your GF if one of you can commute via public transportation, or use a carshare program.

    Once your finances are running positive again, feel free to blow money on a lease or whatever. I’m not opposed to leasing a car, honestly, but I am opposed to it if you are running negative financially. It’s a luxury.

    Make sure you have negotiated the cheapest car insurance that makes sense. Go through it line by line and make sure you don’t have duplicate coverages with your medical plan, AAA, for examples. Find out the minimums your state requires for the various components and use that as a target. Figure out your net worth (outside of IRAs) and then you also have a ballpark on how much you need to have coverage for, in terms of personal liability. You’ll want more, but maybe not a huge amount more. Find a good book that lays out the components of auto insurance like Die Broke or maybe Laura Brody. Do the same for your GF.

    Set up your vacation fund as a separate savings account and put a fixed amount of money in there each month, NO MORE.

    Keep a lid on the big expenses, THEN worry about the small stuff.

  208. GF Bills…HUGE RED FLAG! There are a lot of things she could do as extra PT work to make that amount each month to cover her own bills. And, think of what this guy could do with that money for himself and his future?! A little help is one thing but putting that amount out monthly? He really needs to evaluate that.

  209. Ok, hate to be harsh, but why the hell are you paying all this money towards your girlfriend? Does she not have a job? Unless she has some dire health condition that is preventing her from working, I don’t see how it is fiscally responsible for you to carry her weight. While you may make a good wage, it seems as though you think watching your budgets and numbers is for people who don’t make a good wage. Sorry to say, but managing your money and looking at your numbers is good for anyone regardless of good wage/bad wage. Lastly, you need to check that car insurance. It seems to be rather high.

  210. A few things come to mind…
    1. You pay your GF’s bills. Maybe you live together and it is more than just a GF, but what does she contribute to the household?
    2. Your emergency fund. How much do you already have in here? I’ve heard different ideas, but most “experts” recommend having between 3-6 months worth of expenses in your emergency fund. Enough to cover your mortgage, car payments, insurances, utilities, food, etc… for 3-6 months.
    3. Not sure of his age, retirement plan, but maybe its best for him to be in a regular IRA and not a roth. We would need to know more info and whether or not he expects to be in a higher tax bracket when he retires.
    4. What are his retirement needs? Is he saving way to much more than what he really needs for his retirement goals?
    5. What does he spend $400 on a month? Drop that back $140 and cha-ching!
    6. Must go to some nice places for vacation… necessary? I am fine with it, but it is a quick way to save.
    7. Does it make sense for him to own his house? A lot of items would be drastically reduced if he rented a place. His homeowner’s insurance would be replaced by much cheaper renter’s insurance. His emergency fund would need to be significantly less since any emergencies to his place would be paid for by the landlord.
    The cost of renting vs. owning in his case needs to be determined. If he rented he wouldn’t have to pay school taxes, and any extra money on interest.

  211. Sure hope he didn’t co-sign for his girlfriends car loan…

  212. It’s interesting to me that so many people are upset that Richard is helping his girlfriend without knowing anything about their situation. My advice to Richard is that if you are treating your girlfriend as a domestic partner, you should try to take advantage of potential savings that come from that. Can you consolidate your auto insurance, medical insurance, and/or cell phone plan to decrease spending by $140/month?

  213. I drive a nice car and my insurance is $120 a month. Your insurance is more than twice that, which leads me to believe that you either DO in fact drive a fancy car, or that you are simply carrying way too much coverage.

    Also, it’s hard to believe that you’re going into the negative when you are able to max out your 401K, IRA, and have the comfort of a $500 post-tax emergency fund. These are all luxuries that many people don’t have.

    Additionally, the fact that you’re a home owner means that you are itemizing deductions and therefore keeping more of your income than those who don’t itemize.

    I simply think you have a skewed view of what struggling with money means, becuase when I take these factors into account, plus the $7,200 post tax you give to your GF each year, it seems like you have plenty.

  214. Richard isn’t spending $140 more per month than he earns, he just thinks he saving more than he is. Assuming his monthly savings for 911 fund, vacation, and gifts are automated (“set it and forget it, right?”) he just needs to reduce them by a total of $140, so it reflects his reality, and go back to enjoying his life with peace of mind.

  215. My webbrowser ate my first response….

    You’re living below your means, 1/3 on shelter, 1/3 on the rest of your living expenses.

    You’re supporting your GF which is fine, my wife and I supported each other through school, and it worked out pretty good. But that should be temporary.
    Your car loan should be paid off eventually, which will improve your cashflow. If you want your cashflow to look better, pay it off quicker by shifting some money from your emergency fund.

    You’ve got 20% going to savings after tax, this is a LOT, assuming you have pre-tax savings too it’s a huge amount of savings.

    Take out the temporary spending and the savings, you’re living way below your means, which is pretty good. The 3% you see as being over is small, heck it’s a small amount compared to just your savings rate.

    I’d relax, and be glad of where you are.

  216. Why is his car insurance so high? Unless he had a DUI or something similar. I have 2 cars and pay not even half that much. 07 4runner and 12 Odyssey – not pos’s. Otherwise cut the girlfriend off or ask her to contribute. She is soaking him for 700 a month. If she had a full time job making minimum wage she could pay for herself. Unless of course she has a gold plated ….. and then maybe she’s worth it.

  217. Guys, quit it with the “make the girlfriend get a job” or “stop paying the girlfriend’s bills” talk. Whether or not paying her bills is justified (certainly it is in some relationships and not in others – perhaps they are soon to be engaged, perhaps she supported him for a while… we just don’t know), it is an emotional decision as much as it is a financial one. Perhaps more. He can afford to pay it, he decided to pay it, and he gave us no sign that he felt even remotely unhappy or resentful about it.

    The car payment jumps out at me as being highly wasteful. How quickly could he pay off his car if he lowered contributions elsewhere? He’s contributing a LOT to savings. As admirable as this is, as long as he already has a halfway-decent fund built up, it would probably be better to have the car paid off (and to wait to buy the next one with cash).

    Also, when did he get the mortgage? It may be possible to refinance and end up paying hundreds less a month, if the rates have gone down in his area and his credit is high enough. (I know Mint has been telling me to go refinance mine!)

    Finally, I would try to keep in mind… 90k sounds like a lot, and IS a lot, but there’s a giant difference between 90k as an individual income and 90k as a household income, and given that you are supporting your girlfriend to a great extent, you are the latter. You could think of it more like two people making 45k. See if you can make that mental shift. When you think about 90k, your brain is saying “I’m almost at 6 figures. I may not be rich, but I’m doing DAMN well.” When you think about 45k times two people, the math feels different. At 45k, you’re still doing better than most households in the country, but you can’t afford to live extravagantly either. You can live modestly and build up a good savings. So maybe with a mental shift, it won’t be so flabbergasting that you can’t spend like a single person at 90k.

  218. Cameron Miller Link to this comment

    On surface make more spend less ask for raise at work, confirm that your IRAs are yielding the strongest return by comparing to comparable wealth management plans. Same goes for mortgage and car perhaps refinance and place the savings into new business creation/exiting business boost to make more money with saved money!!! As for GF if paying her bills is a must go for it however reducing gradually or cutting 100% will yield 5-10k extra per YEAR$$$$ Show me the MONEY$$$!!! Kind of tough being sugar daddy/mommy and still being negative each month

  219. At 90K and technically single, you’re starting to move into the income range where some idiots in Congress start to think you’re rich and should be taxed accordingly. Pay careful attention to your tax rates. If a notable proportion of your income is from incentive payments like commissions or bonuses, be aware that money will be taxed at significantly higher rates than your base salary. You might want to check with your employer to see if there are some pre-tax expense payment or reimbursement options for some of your spending – flexible spending accounts, cell phone or internet service allowances, car mileage reimbursement, etc. Those expenses won’t be deductible post-tax unless you meet a fairly high percentage of income threshold. If you’re doing Earn 1k work on the side, be sure to track related expenses (phone, internet, printer ink, software, etc.) to deduct directly against your freelance income to prevent rate creep.

    Also, the car insurance is definitely on the high side.

    • In the US, bonuses aren’t taxed any differently than normal wages and salary.

      The employer may be required to withhold at a higher rate when issuing bonus checks, but that doesn’t mean you actually pay taxes at a higher rate when you file your return.

  220. Richard,

    I would say, you are very disciplined, and seriously investing in your retirement. So congrats for that.
    Now, let’s face it, $90k for a single + GF is a relatively comfortable income, and you should be able to balance your budget!
    The good news is $140 is not much.

    Looking at your budget, you look to me as someone very cautious but who like nice cars and nice vacations and making nice gifts. You could easily save on each of these, but I believe that those are important for you, and is your reward for your hard work. Let’s keep those as is.

    (note: if you don’t really care about cars or nice vacations, there is some potential cut to be done here!)

    A little bit of optimization of your expenses could help a bit (car insurance might be one…), but I tend to think that you may already done that.

    As opposed to most, I don’t think stopping paying for your girlfriend is a great idea. Unless of course you’d like to be a single again.

    Are you saving TOO much?
    Your emergency fund don’t need to grow at that pace indefinitely. You can budget $350 a month for the next 12 months. Then your other reserves (vacations…) could be raided if a big emergency happens.

    Also, I would suggest to reduce Roth IRA contribution to $100, and invest thru a broker the remaining $300. The money is then available in case of emergency, but also for other big expenses that will come (wedding etc.)

    As for your mortgage, it happens that renting might be cheaper, but the cost of selling your house might make it not worth it. However, once you built up your emergency fund to a reasonable level (1 mo of net pay), you might want to divert that money to accelerate reimbursement of the house.

    If you are increasing your “spending cash account”, I would encourage you to plan your Entertainment and Clothes.

    You own your home, you maximize your 401k, your Roth IRA, have a emergency fund… You are young. Money is here to be spend, now and in the future. If you performed all the optimizations Ramit suggests, then relax, save a bit less, and don’t be stressed because you are putting less aside…

  221. If you get a new g/f who could pay her own bills, you’d have a lot more money.

  222. Do you need to be putting so much away for retirement? You should do an analysis.

    $500 for emergnecy fund a month? Until when, in perpetuity or until you have a certain amount.

    I see a lot of lack of planning and money dumping for the sake of dumping. Prioritize your spending, if anything cut the mergency fund by $140 a month at least that will stop the leak!

  223. This one is SUPER easy. Stop paying for your girlfriend’s bills.

  224. Ramit would probably tell you to automate everything, but I think for you the problem is you have too much automated. you don’t actually know what you spend. What you have presented to us is what you think happens, an imaginary budget, that you break any time you want a new TV or to go out to eat again. Sign up for mint.com add all of your accounts, and actually look at what you spend for a few months. Then adjust what you don’t want to be spending on. You have no clue what you are spending. Otherwise you wouldn’t have to ask why your money all goes away. Making a lot of money doesn’t make one rich. It is the management of those funds that is important.

    • I like your thoughts Andrew. I recently considered signing up for mint.com, but the idea of providing all of my financial info to a website left me hesitant! I haven’t yet signed on, but would like to have a system stare me in the face with data I am certainly avoiding. And I also acknowledge that there are likely pieces of my financial puzzle across the internet already, that could be linked together……or accessed in other ways. That info is probably for sale somewhere! What thoughts did you have about keeping your info secure, and how did you resolve those questions? I would appreciate your thoughts! Thanks in advance for any input you have….Kevin

  225. Apologies if this repeats what someone said above, I only got through about the first 50 comments. There’s a lot of great advice up there, but some of it is based on assumptions about the missing pieces in this story.

    From my perspective, the solution comes down something only Richard can decide: prioritizing—the spend extravagantly, cut ruthlessly tenet. If you’re coming up short each month, you need to revaluate what’s important to you—is it saving for retirement, supporting your girlfriend, travel, funding your emergency fund, leasing your car? If you’re coming up short something has to give—at least right now—so juggle the numbers (or figure out a way to earn more money), and keep checking back as your situation changes.

  226. Hi Richard A.,

    Consider taking a step back to see if you “really” spend what you say you do, where you do. Try Mint.com for a 2 to 4 weeks to see where your money is going. Or, you can try something as detailed as I’ve done, and track your daily expenses in a spreadsheet. Before I knew exactly where my money was going I had a “mental” budget (much like you). My exercise revealed that I spent twice as much on food in reality compared to what I “thought” I spent. Once you get an accurate assessment of where the dough flows, make adjustments from there to achieve your financial and lifestyle goals (increase $$, reduce other expenses). Best of luck!

  227. I don’t see food listed in his list of expenses. This is one of the places most of my husband and my income goes. Also, I think he needs to look a little deeper and decide what will make him feel like he’s treating himself and what doesn’t. Drop what doesn’t and spend on what does. I think he will feel better about money in general.

  228. I am not really concerned with why Richard is paying for his GF’s bills. That’s his business and should be none of out concern.

    I would first suggest that you try mint.com and link up all your financial accounts. When you first join, the site will let you know exactluy how much you are spending in each of your areas.

    One thing that people always overspend on is food and alcohol. Try to itemize how much you spend on groceries, work lunches, going out to eat, at coffee shops, restaurants, fast food, etc. I have a sepearate budget for each, and have mint.com send me an email and a text when I am approaching my limit.

    In addition, there are always discretionary money spent each month on stuff like doctors, dentists, amusement, etc. Try to determine an average of this amount. And it does not appear that you considered gas for your car, or for any parking expenses. Parking expenses includes valet, metered parking, etc. Any other transportation costs you might have forgotten, inludes taxis, metro, etc.

    I applaud you for your efforts in calculatations. It might sound like a lot, but once you determine the ‘hole’ or where you are spending the most, then you can best tweak your monthly spending.

    Another issue is where the extra $140 is coming from that you are spending above your monthly intake. Does this come from credit cards? If so, total that in as well.

    Again, I definitely recommend mint.com. Spend a couple of hours looking over everything, then set up a monthly budget and go. I spend roughly 1.0 hr each month looking over my monthly budget and making minor changes according to the partiuclar month. Haven’t had a problem sense. I gurantee you it will change your life.

    Best wishes, and please let Ramit and us know how it goes.

  229. If your a younger guy I would minimize my 401k contributions right now and max out your payments on the house and car to get rid of those interest rates your losing more money on those than your probably making by maxing your 401k also tell your gf to get a job and pay half of her bills untill she is self sufficient financially cut out the eating out start cooking at home it’s healthier and cheaper in the short and long term, fix your car insurance why pay $200 more than you have to be?

  230. I’m going to chime in here to say something a little contrarian: I am not worried about the fact that you’re covering a lot of your girlfriend’s expenses. I’m going to assume that you love each other, and this is something you’re doing to make her life easier.

    (Dear other commenters: Yes, I’m a woman, but I have paid this much — and MORE — a month towards my then-boyfriend’s living expenses. So suck it. I’m an equal opportunity sugar mommy.)

    However, I am worried that it’s a sign that you’re actually trying to cut back, and not thinking longterm. Why is your girlfriend depending on you for financial help with her bills? Is it because she’s in med school, and not bringing in any income? Or because she’s in a job that doesn’t pay her what she’s worth? Because if it’s the latter, and you really do love her, I would recommend spending *more* on her a month to help her move towards another path. Ramit often talks about investing in yourself, but if you want to build a life with this woman, and you can afford it, it’s worth thinking about making an investment in her as well.

    Remember the “then-boyfriend” I mentioned above? He lived with me, rent-free for a year, eating my groceries, watching my cable. And then he wrote a best-selling book, we got married and he out-earned me every year for the next decade. And no, I’m not Ramit’s secret wife :-)

  231. I agree about the car insurance, it seems high. Shop around, that can be a big win there to get the car insurance lowered. This guy also needs to dig into his finances and find some specifics on how much he is spending, do a money diary, keep track, and once you have more information it is much easier to see trends. He needs to make a discussion about his spending cash if that is really how he wants to blow his money. Otherwise break it down into what he is using it for, and cut back because that seems to be his cash drain black hole. Focus on the big items, and don’t worry about the miscellaneous.

  232. LOL!!!!!!!!
    I know where this guy could save about $660 a month if you know what I mean….
    I never understood why some guys think they need to pay for ALL of their GFs expense!!!?
    I would say “Tell that chick of yours to get off her pretty little ass and get a goddamn job.” of she refuses because shes too good good for a job, then trade her in for someone that is a productive member of society….not a leach.
    And I’d tell that guy to grown a set of balls and stop complaining about making $90k.

    Thank you

  233. Figure out what your priorities are. Either move to a smaller house, or sell the car and get a second-hand for cheap, or stop supporting your girlfriend*, or cut down on your savings. You can’t do all four.

  234. Richard, your lifestyle has obviously changed since you were making $50K/year, as you’re now spending more than $90K/year. Face that fact.

    You have to get control of your spending. With your income, there is no reason you cannot live within your means.

    Leave your savings levels as they are. You’ll thank yourself later.

    Take all of your expenses and multiply the monthly amounts by 12 to find out how much you are spending in each category per year. Then look at each line item and ask yourself, is that worth it? If not, you know where to cut.

    When I compare your expenses to my family’s, I wonder how high on the hog you are living. Your mortgage is larger, your car insurance is nearly twice what we pay for 2 cars, and your car payment and some other expenses are about the same as we spend on 5 people. How can you spend that much on 2 people?

    Because, let’s face it, $600/month budgeted in for your girlfriend’s expenses means you’re paying for 2 people.

    There are probably other little items you are not being honest with yourself about. Those are usually the ones that bite you in the butt.

    Good luck!

  235. Get rid of the girl friend and find a new one that pays her own bills, has a good job and takes you out to dinner or a movie once in awhile.

  236. 1. Why the hell are you paying your GF’s bills? $600 a month? Doesn’t she have a job? If she doesn’t then she has no business having a car loan.

    2. You’re paying too damn high for car insurance. Have you tried to rate shop? You might wanna talk to an insurance broker, or get quotes from at least 6 companies and choose the best.

    3. I wonder what state you live in. Why are your utilities so high? $230 is more than double what I pay. I pay about $80 for water, thrash, sewer, gas and electricity. You need to look into that. It’s not like you’re operating a barbershop or a factory.

  237. 1) Car insurance is too high. Mine is way less and I’m under 25 and live in a big city. Shop around.
    2) Not sure what the situation is with the gf, my guess is it’s temporary so it’s not too big of a concern beyond seeing when she can be self-sufficient
    3) Easiest way to drop down: take out $100 from the emergency fund, $40 from the vacation fund. It’s not going to kill you.
    4) Monitor your spending cash to see where exactly it’s going (automatically if possible) and see if you can take $100 out of it

  238. One of the first places I would look is that emergency fund savings. How much is in it and how many months of all your expenses would be covered. Everyone’s magic number is different but if that account has a comfortable cushion for you – maybe think about reducing that monthly contribution. You will still be contributing just at a slower rate. If everything was true and accurate about your story it sounds like your budgeting might be pretty solid. I’m trying to avoid cliches like consume less and save more lol. Hope that helps!

  239. For someone who makes 90K a year and apparently has no kids, it seems that socking away $500 a month for emergencies seems to be over doing it. By my math you would need around $15000 to get by for 6 months; you could easily scale that back to $350 and more than likely hit that mark fairly quickly. It sure beats cutting your girlfriend’s money off and having her be pissed at you!

  240. I think your mortgage payment is high. Better try to find another bank with less interest payment for refinansing.

  241. In the spirit of Mr.Sethi, start a side business or lease your girlfriend.

  242. I hate to say this and everyone else basically has. But ask your GF to start paying your own way. The $600 is too much. Now this maybe temporary and that is fine, but if this has been going on for a while it is time to take a closer look at things. Is your GF unemployed or doesn’t earn enough, ok then help finance an education course for her. It will help commit your relationship and help her understand that this is for the long run. If she doesn’t like this idea, it is time to think long and hard…

  243. I think the key is to reframe our understanding of his spending. Some here have questioned why he is spending X dollars on his girlfriend’s bills…….since they aren’t married. Understanding the psychology behind his decision to do so is paramount. For whatever his reasons, he is willing to assume her financial obligations. What did he learn about money growing up? Does he view his role as one of a more historical or traditional husband / spouse ‘provider’ for her? That might explain why he seems to fail to recognize her monthly expenses are negotiable / re-assignable to her. Ultimately, if the arrangement isn’t good for him……it will impact their relationship anyway. It may go against the gender roles he learned and his expectations for himself, but this couple are likely at odds within their relationship. The solution is for each of them to disclose and discuss their expectations as openly and honestly as possible. They might benefit from working with a licensed marriage counselor, a professional adept at navigating the rifts between two individuals.

  244. I don’t know where he lives, so I can’t say whether or not his bills are outrageous. I’m guessing it isn’t San Francisco, New York or Boston, based on his mortgage. That said, you are paying a ridiculous amount for car insurance. My mortgage is comparable, and my car insurance is $47 a month.

    He could probably save some here and there, like negotiating better insurance rates. But there are 2 glaring things that contribute. First is what everyone has mentioned, paying the girlfriend’s bills. If that’s what he wants to do that is his prerogative. He needs to realize that isn’t living single on $90k, he is in a 2 person household on that salary.

    Otherwise, I would consider gf’s bills part of his discretionary spending/spending money. He says he budgets/spends around $400 a month. That is practically nothing. At $90k a year he is essentially leaving himself 5% of his GROSS salary to spend on things he enjoys/entertainment. If he has a girlfriend serious enough that he pays her bills, then they are probably blowing more than that on eating out alone. $1000 (the current $400, plus the $600 for gf’s bills) is a much more reasonable amount to set aside each month for discretionary spending.

    So all that said, either the gf needs to contribute more, or they need to stop having a life.

    If he is maxing out retirement, depending on how much is already in the emergency savings he probably doesn’t need to keep putting $500/month towards it.

  245. Just cut your expenses. Think of your income as a business. Realize that you will have to make some changes. Find the difference from wants and needs. And then decide what you want…think give up something to gain something..think logically about spending money vs. emotionally making money decisions.

  246. He should get a rewards Credit Card to pay for his expenses and rack up points for vacations & other perks. Scale back on GF’s expenses.

  247. There seems to be some cognitive dissonance going on, he needs to realize where his money is going and that he actually is spending more than he thinks (no food, cable/internet, entertainment or going out in the budget).

    I’m not concerned about the gf spending, it’s obviously very important to him and not something he wants to give up. I think all the posters commenting here telling him to dump his gf need to get a clue, normally iwtytbr readers are better at not being judgmental about a person’s spending. We have no idea what their relationship is like, how long they’ve been together etc. Is he possibly being taken advantage of? Yes, but we have no information to reach that conclusion.

    She is probably one of the few people that bring some happiness to his life and not someone he’s going to get rid of to save a few hundred dollars a month. I would have a discussion with her about household finance though, maybe the two of them can brainstorm a few ideas on how to reduce some of your bills (switch to basic cable or lower car insurance perhaps).

    Most importantly though, here is someone that has gone from making 50k to 90k so he is obviously talented and he very likely has more earning potential. I would focus on that, perhaps negotiating a raise at work, taking on additional responsibility to get a promotion, perhaps side work is an option etc

  248. If “gf bills” means girlfriends bills, stop paying them. You’d save yourself $600 a month. She can pick up the slack and not only will you be out of the red, you’d be back in the black plus a few hundred to spare.

    If not, cut back your vacation account. You can find great deals online and take a more budget conscious vacation as vacation isn’t a must, it’s a ‘nice to have’. When you’re in the red, cut the non-necessities

  249. Wow, I have no words to describe how I feel after reading this line – “If she’s awesome, you’re being cheap. Having a pet can cost more.”

    @shrmaj – You can’t put a low price on awesomeness. Ask Ramit! I hear his courses are awesome.

    Seriously though. Did anyone asked why he’s paying her bill. Is she in grad school? Is she disabled or had a serious accident? That can totally change how you give advice to a client or friend. The pet reference actually came from my neighbor that paid a vet bill of $5k when her black lab lost an eye from a rock thrown at him. But some might have interpreted that I’m comparing the GF to a dog. I’m not. Costs were. It would be heartless to say dump the GF or the dog in context to disability or a vet bill.

    If there’s going to be expert advice focusing on psychology, think about your bias and neutrality. Somethings you can shave costs and not lose utility like car insurance. But the GF issue has emotional ties and some advice will come across insensitive and plain wrong. Can you really expertly quantify what’s gained or lost there? Plus I can assure you, that there’s a good chance that offering GF financial advice will lead to a nasty argument and possibly an awesome person dumping the guy. As an expert, steer clear of relationship meddling. That’s why reducing taxes is better. No one I know cries when their taxes dropped.

  250. Christine Gonos Link to this comment

    1. I would reevaluate why I am spending $560.00 a month supporting the use of a car. Btw, it must be a pretty fancy car for that kind of premium…..unless there is more to the story….
    2. I would reevaluate why I need a Roth, a 401K and an emergency fund to the tune of $900 plus a month? I’m assuming your 401K contribution is around $200 a month or so? So we are at $1100 or so a month. What are you thinking? And why?
    3. What do you do about food? Eat out, in?
    4. why is your mortgage payment $1400 in this interest rate environment? Can you get it down?

    Finally, if your gf were your spouse, you wouldn’t be getting all the flak about supporting her… However, a gf habit can be expensive :)

    Bottom line, there’s a lot of q’s you need to answer before proceeding with an appropriate course of action. I think you can support the quality of life you want by looking a little more closely at why you are making the choices that you are making.

    Best wishes.

  251. Re-evaluate your current spending. Determine a financial goal (ex) spend $140 less so you don’t go over your monthly income. Create a cash flow sheet, reallocate monthly distribution and stick to it. (ex) 10% cash to spend, 5% traveling funds 10% girlfriend, etc. Fixed costs are fixed costs, but other costs that are not fixed you have control over. Creating a goal is important, but executing it is even harder. Live within your means.

  252. 1. Reduce car insurance by
      A. Shopping around
      B. increasing deductible 

    2. Increase take home pay for you and your gf
      A. Making sure w-4 is filled out correctly
      B. work a few more hours if paid hourly
      C. get a second job
      D. Check health/life insurance to see if you are over insured

    3. Reduce other expenses by
      A. Paying off the car with and extra savings you might have (this will also help with the car insurance )
      B. eating out less

    4. Optimize accounts by
     A. Getting a good credit card with rewards – like starwood’s CC
     B. paying all bills with said CC and paying the balance off each month
     C. Using the cc rewards for vacations, travel, etc

  253. Seems like Richards priorities are to save money (IRA, 401K, savings, emergency fund) which is great. However, he seems to get rather emotional about $140 over monthly income. Realistically, $140 is not that much. That means that it shouldn’t be hard to control it.

    Ramit mentions that cash can be very bad because it’s harder to keep track of. Richard can trim down his $400 spending cash to $200 spending cash and that will take care of a) that $140 and b) keeping track of where that cash is really going. If he wants to keep maxing out on 401K and such he’ll have to figure out where to trim down the spending (which meant figure out where it’s happening) and re-adjust his budgets.

  254. What struck me as odd is how much you out away to your emergency fund each month (at least I think that’s what you meant; a little difficult to interpret). Anyway, I’d say leave enough in your EF account for just that, emergencies and out the rest towards paying off your car. While it is good to have money set away for a rainy day, it would be better to pay off that car faster and save on the interest…also you can renegotiate your insurance once it’s paid off. After the car is paid, put the money you were spending towards your mortgage; it’s called snowballing payments and helps pay down balances faster. I would comment on the GFexpenses but I don’t know the situation there so I won’t. Hope this helps!

  255. The douchebag is paying $600 for the bills of his gold digger girlfriend to whom he is not even married!????!!!

    WTF???!!!!

    If he cannot see this mistake he sure does not deserve any advice..

    Truly common sense is uncommon

  256. “car ins – 260″
    WAY too high. Get liability only and put the “savings” into your emergency fund. No reason to pay a company for something you can do yourself.

    “gf bills – 600 (car, ins, medical, etc)”
    What is this I don’t even…see other comments about wives vs. gfs.

    “gifts – 80″
    While this may be admirable, who are you spending $960/year on for gifts if your gf expenses have already been outlined separately?

  257. You pay your girlfriends’ bills??????

  258. I think these numbers are probably rough estimates. If he did more precise tracking he’d probably be surprised that several of the expenses are actually higher.

    I noticed there’s no separate category for food. If he doesn’t cook and gets takeout every day, he might be spending $15-$20 a day on food. However, since the cost of each meal is small, he forgets about this expense. It could be as large as $600 per month.

  259. Okay, don’t know if anyone has said this before, I got through about 100 comments and then started to get frustrated at people.

    First, keep the girlfriend, the car, the house, and the retirement. These are lifestyle choices that you can afford to make. Don’t let anyone tell you to dump your girlfriend because you’re paying her bills. That’s just ridiculous. They have no idea what your situation is and have no right to make judgments. Also, it would probably be less expensive to bike everywhere you went, but that’s also a ridiculous proposition without knowing your situation. Come on people, he’s over budget by $140 and you’re telling him to ride a bike? Please.

    Here’s what I noticed (like some other people). The way you phrased your email shows that you think 90K is a lot, and also shows that you have an aversion to “rich people” things, which is a topic too deep for this comment, but I just want to point out that if you resent “rich” you’ll never get there.

    But here’s the point – you aren’t SPENDING $140 over your budget. You’re saving a relatively large portion of your income. And you can’t SAVE more than you earn, by definition. Also, with an excess of 2-3% as other people have pointed out, “mindblowing” is definitely not the word I would use. You need to realize that 90K isn’t millions, and from your “expenses” (and saving) above, a psychological change and a couple tweaks would fix your “problem” pretty easily. You shouldn’t really need a financial guru and his 300 apostles help.

    Cheers :)

  260. A few major issues in my mind:

    1) He is getting killed on taxes if he really only nets 60% of his pay (granted there is some 401(k) deduction included

    2) He needs to rethink his philosophy of living in the now! He is deferring so much money and won’t be able to use much of it. He has the right mentality to become wealthy just a lack of understanding how to really do it.

    Go ahead and skip the ROTH IRA until you fund your emergency fund to your comfort level, this may only take a few more months if you apply $1000/month and have been putting away the $500 every month.
    Once this is funded then start contributing to your ROTH, which in all reality, could be an emergency fund if really needed as you can withdraw your contributions.
    IMMEDIATELY start doing some research and education on how to lower your taxes and learning how to invest for immediate cash flow and accessibilty to your money, you’ll need it before your are 59 1/2 or retired. You have the right discipline, just an old fashioned and uneducated approach to achieving wealth and investing. Once you understand how to invest for immediate and tax beneficial returns you could consider cutting back on your 401(k) to maximize your company match and invest the difference in you.
    Finally, what is really important is finding balance. It seems you have a pretty solid foundation as you are willing to cover your girlfriends expenses but if you are stressing yourself out with your savings habit you have earned the right to back off a little and enjoy your money.

  261. i want to be rich yes

  262. Wow….reading the comments is almost as interesting as the original question.
    Most people have already pointed out the obvious….it looks like Richard doesn’t have a handle on where his money really goes. I’m disappointed but not suprised to see everyone jumping on the GF expense like a pack of rabid wolves. Seriously, put your money into the things you care about…if it’s $600+ a month on the GF that’s his decision and not our place to judge. Richard needs to figure out where he’s really spending his money, what he wants to be spending it on, and then automate to keep it there. I suspect he’ll find he makes more than enough to cover his expenses.

  263. I think the comments about Richard needing to actually track what he’s spending are spot-on and I wasn’t going to chime in until I read the hundredth comment about his “gold-digging” gf. The fact that “medical expenses” is included in his list of things he is covering for her was the first thing that caught my eye. Maybe it’s just because I’ve helped a former SO financially when he was disabled and struggling through the SSDI process, or maybe because I’ve been dealing with a “pre-existing health condition” since my mid-twenties (after being fit and healthy up to that point, TYVM) and insurance companies now look at me like I’m kryptonite–but I’m less quick to rush to judgment on that count. If you’re unemployed or underemployed and have a pre-existing condition, you either can’t get health insurance or you get crappy bottom-tier health insurance with anywhere from a $300-$900 MONTHLY premium and a sky-high deductible. And while we like to think this can’t happen if we’re young and healthy… it does. A lot more often than you think. Fate is cruel and so is our healthcare system. If this is what’s going on here, I commend him.

    Of course, had he actually itemized his gf costs we wouldn’t be here wildly speculating where all that money was going…

  264. The girlfriend is a leech. Have her get her shit sorted out, if she doesn’t, DUMP HER!!.

  265. He’s leaking cash somewhere. I’d pay all the bills the usual way – card, check, online, whatever. Then I’d take out cash for everything else – gas, clothes, groceries, entertainment, anything that you don’t mail away each month. Keep track of where the money goes, make categories of spending – snacks, meals, whatever. Gas, clothes, work expenses. There will be something there – I don’t know what, but you’ll see it and know what to do.
    The people I’ve done this with have discovered they were spending $5,000 a year on maintenance eating out – not for fun, but because they were too stressed or lazy to cook, or caught without groceries at home. That’s a big chunk of money, and they solved the problem by coming up with 3 things they’d make sure they could make for themselves at home – eggs, frozen stir fry vegies with shrimp, canned soup and sandwiches. Sure, it was boring, but they lived. They began to grocery shop better, began ‘double cooking’ dinner – make twice as much as normal, freeze some for later. A huge amount of money is spent making eating interesting, but it doesn’t have to be. Our ancestors ate the same thing every day and only varied diets with the season.

    How much do you spend dry cleaning clothing? Suits only need it a couple times a year unless you spill food on yourself, most ‘dry clean’ shirts can be washed carefully without having to iron much more than the placket. Sure, you need ‘perfect’ work clothes occasionally, but not every day. How crisp does any shirt look at 12:30?

    Figuring out how much you spend a day or a week on your own maintenance, and ruthlessly cutting it can easily save you hundreds each month. Once it becomes important to you, it’s even fun. Especially if you let the leftover cash pile up in a glass jar on the mantle.

  266. I doubt you really need $500 a month for an emergency fund. Cut that back by $140/the amount you are short.
    Also, are you paying for your gf’s expenses? I mean, that’s awesome, but certainly an area that could be reduced.

  267. >How am I spending more than that a month? I just don’t understand. My lifestyle hasn’t changed from when I was making $50k/year.

    What really matters is your spending not your lifestyle. If the prices of major things in your lifestyle have gone up a lot so will your spending.
    You may also find that your spending has crept up without notably improving your lifestyle. Looking at your actual spending could find areas where you could cut back without losing much quality of life. The money went somewhere- If you are interested you could track it: I suspect you use credit cards and online banking. You should be able to account for 80-90% of your spending by looking at online records that will tell you what you are really spending money on, as opposed to what you think you are spending money on.

    However, if you don’t really care exactly where you spent more and just want to stop overspending here is a plan:
    Automate all of your fixed payments- mortgage, car payment, insurance, Roth IRA, other savings etc. automate anything you are not willing to give up- like paying gf bills. That will decide most of your income and expenses. The money left from your income is your real flexible spending limit. At the very least you should have $480 from the spending cash/gifts categories.
    Now you want to create barriers to too spending too much. Here is what I suggest:
    #1 Keep very careful track of how much flexible money you have left. You could use a separate account or card to make it easy to track. You need to know this number every day so you can know if you have money to spend. Knowing how much you have left prevents you from blindly over spending because you are doing faulty mental accounting. Each time you are thinking about spending beyond your flexible amount ask yourself- is buying this item worth taking money from my vacation fund or emergency fund? Because that is how you are ultimately going to pay for it.
    I think that knowing alone might be enough of a barrier to encourage you to wait until next month. But it also forces you to make an explicit decision to spend more, no more blissful ignorance. You could write down your reasoning and amount of additional spending in a journal and then you will know exactly why you are spending more.
    You could use social pressure to make it harder for you to overspend too. For example every time you want to spend beyond your limit you have to tell someone that will give you a hard time about it.
    -Rick Francis

  268. One look for a cheaper Insurance, and why are you paying your girlfriends Car insurance and medical? She needs to get a job and work like the rest of us! I would put a little less away for vacation! But that is just me! there are a lot of things that you could do that are free! Or semi-free! There are a lot of great deals as far as vacations ever considered 1/2 off deals, you can find some nice places to go and do things with an all inclusive deals. I would cut half of that money on vacations. As far as the Mortgage, Refinancing at a lower rate , could bring that cost down considerably!

  269. Ramit, to be honest with you, the actual guy you wrote about is sort of boring. The most interesting part are the comments and what people’s thoughts are on the “girlfriend.” THere are far too many comments to have read them all, but from the ones i did read, comments like calling her a leech, and asking why he is paying her bills. I’d be curious to know how this would be taken if he had said his “wife’s bills” or had even lumped in the bills are “our bills.” The way it is presented is extremely interesting and I didnt think that people would be attacking the “girlfriend”.

    As far as the actual email, this guy is worrying too much. He’s worked up over nothing.

  270. Dear Richard,

    First off, you’re only below your plan because you’re still building your emergency fund. You’ll be up $360/month once that’s full. But you can still improve on that…

    After taxes, your three biggest expenses are your house, your girlfriend, and your car. Let’s focus on those big items.

    On your house – what costs can you lower? Can you refinance the mortgage? Can you raise your insurance deductible now that you’ve got an emergency fund? Maybe you can figure out how to lower your utility costs?

    Your girlfriend. If you’re going to spend that much on her, how can you lower the bill? Can you two use the same car insurance? Can you add her to your health insurance plan? How about adding her to your cell phone plan? Can you claim her as a dependent on your taxes? Can you help her become self-sufficient?

    Your car is your third largest expense – what can you do to lower it? Can you pay off your car loan? Can you raise the deductible on your insurance (that’s part of the benefit of an emergency fund)?

    Finally, write a will. Your GF’s screwed if you die, and you clearly care a lot about her.

    The $140/month that you want is 5% of the above three costs. You can definitely cut a measly 5%.

    xo,

    CR

  271. To channel my inner Remit I’d say that this guy has some invisible scripts. One says “If I make $90k I should be all set if I don’t live an extravagent lifestyle.” Another invisible script is “If I make enough, I don’t have to worry about the details… set it and forget it”.

    I’d challenge both of those statements.

    I’d also point out that if you are putting $900 into an emergency fund + a retirement plan, you can’t aren’t in the red by $140/month. If you want to put that much away AND still maintain your current checking balance, either save a bit of your bigger expenses or consider bringing in a modest side income.

  272. Whether we’re talking about the missing dollars (from going out most likely) or throwing his money down the well (e.g. girlfriend’s expenses), it’s very clear:

    This guy is dedicated to not knowing where the money is going. He has some other motivation (probably – again – girlfriend-related), and is blind to the obvious realities as a result.

    (Fact: That’s all of us to some degree or another. Denial is really hard to overcome, whether we’re talking about little foibles or really problematic behaviors.)

  273. The problem is that Richard set up his spending and saving pattern without creating a conscious spending plan. Everything here, even what people attempt to provide solutions for, is guesswork without a real honest & budgeted spending plan.

    -Bold

  274. Dude,
    You’re budgeting $500 a MONTH for your emergency fund…but your complaining you’re over budget? Uhh…I have to believe you’re all set for your emergency fund at this point(?). Holding on to the caronce it’s paid off would help…and maybe trim the vacation savings a bit.

    -Jeff B.

  275. Helen McDonald Link to this comment

    I am impressed with Richard’s savings; seperate amounts each month for vacations gifts and emergencies, maxing out the 401K and a Roth. Way to go. I am earning about half of Richards salary (also pre tax). I do not have any of his car expenses and my mortgage is a just over a third of his, my savings are one general account to cover everything that gets 250 a month and all travel, gifts etc have to come out it. I also have a Roth that gets 300 a month, but my pension is a 403b into which I put the amount needed to get the employers match and then a voluntary extra 300. I am assumign that Richards spending cash is mostly groceries/meals as that is probably around what I spend on food each month. I do not think I can see any major areas that could be pared back really. Most people might be spending more on utilities/condo assessments mine are around 320 a month plus another say 60 or so for gas/electric. I suppose what Richard is saying is not so much that he overspends but that he is short saving 140 a month less than he would like ? if I have understood correctly. Otherwise I would congratulate him on what look like good saving habits for retirement and everything else.

  276. Most of the comments seem to be geared towards tactics (here’s how you save money on car insurance!) or choices (drop the girlfriend!) but I would argue that it doesn’t matter what Richard spends his money on — that’s up to him.

    It’s a hard one to figure out because the numbers are baffling and not specific enough. I think he needs to step back and actually figure out what he’s really spending his money on. Three months of credit card statements and more information would help him figure out what he’s actually doing (for example, food?), and from that, he can add up what he is and isn’t ACTUALLY spending his money on. The email looks like the information is a crude guess – the total hits about $55K, which is reasonable, but still indicates that something is missing, particularly if, as he says, he says he spends more than he makes.

    Making more money or saving money is hard to do when you don’t have enough information about the current situation. What you do or don’t spend it on is up to you, but figure out where the discrepancy is, and then figure out where you can either earn $200 more per month or cut $200 per month to make the income-to-expenses ratio back to black.

    PS, as a personal opinion, I agree: why are you spending $600 on your girlfriends’ bills? Is this something that you are choosing to do, or how did that come about? That’s a really tough conversation to have, but that might be pretty important… “Hey, I’ve been helping you out with your rent and insurance for a while, but I won’t be able to do this after June 1.”

  277. Hi Richard,

    Grab a spreadsheet enter your “fixed” costs and along with your income translate everything to a daily figure. That’s the amount you can spend on “stuff that isn’t a fixed cost”

    Once you have a daily figure, track what you spend, one cell per day and stay under that “stuff” amount. I suspect you’ve never seen how much you spend laid out before and you’re in for some pain finding out.

    Good luck, budget well =)

    ~Daniel

  278. So…………….. Are you paying the mortgage by yourself, paying the girlfriend’s car and insurance AND CELLPHONE bill???

    And a old school song :Why don’t you get a job!!!

  279. Wow, 300+ comments in one day. This one might surpass the wedding spending post! People on the Interwebz sure do love being asked for their opinions.

  280. Honestly, there’s no need to spend so much on gifts and spending money– some of the BEST activities are simply time-based– a nice long walk, a movie ON Netflix.

    I don’t even get 16k a year busting my butt and trying to make sure my son goes without. Must be nice! His college fund would be fantastic if I was making 50k a year!

  281. I hate when people tell me to cut my expense.
    Instead, take the 900$ in emergecy/roth ira for 1.5 year and invest it in dividend paying stocks of 5-6% per year (yes, they exist). That should balance the books…

  282. I think all of these comments are traditional advice, which is not Ramit’s style. We all could make a better budget, but would we stick to it? We all can negotiate better rates for expenses, but do we do it? I don’t think this guy is doing bad at all. He is maxing out his retirement accounts and contributing a significant amount to savings, as well as budgeting for things like vacation so I presume he is not using a credit card.

    We don’t know the story of his girlfriend to judge whether or not he should be giving money to her, not to mention, that’s just too obvious.

    Yes, he needs to not go over budget but what is he saving for? If he is spending $140 over his monthly budget, he must just be pulling it back from savings since again, I don’t see a credit card bill or payment listed. The easy part is finding $140 to reduce from his list of expenses, as everyone mentioned. The harder part is discovering the purpose of the spending or saving.

    - Irving

  283. This guy is so lucky! He already has 263 advices and plus he is making so much money!
    I wish I had so many personal comments on my financial situation which is much worse!
    :)

  284. Liberty Gaither Link to this comment

    As has been said, your gf costs should be nonexistent. Make her pay her own way. She needs a job, if she doesn’t already have one. She should not use a guy that she is not married to (I am assuming that you also do not have children together).

    And your spending costs could be cut just a tad, I’m sure. Any non-necessity can always be cut in times of dire circumstances.

  285. What kind of car costs $300 a month, but is $260 a month in insurance?

    What is he spending $400 a month cash on? Need a breakdown in order to see where he should cut back.

  286. First off, this is the first time I’ve decided to take part in one of your “assignments”, though I’ve been reading your emails for quite some time now. I hope you aren’t terribly disappointed with me on this…

    Well, right off the bat I can tell you that $70.00 for misc expenses is, no offense to Richard, a joke.
    When I finally took a moment and added up 1 month of my own “miscellaneous” spending, I was sick to my stomach. [tangent] Cigarettes in Chicago are $8-$10 a pack and I smoke the brand that’s $10. Even when I drive to another county and pay $56/carton plus gas I’m still pissing away at least $168/month on killing myself slowly. And that’s JUST the tip of the iceberg. We eat out a lot. It’s gross how much we spend on that. Spending on Christmas last year was RIDICULOUS. [end tangent]

    I also noticed his $240 for vacation he included, which I can only assume is the dollar amount he’s tucking away each month in anticipation thereof so when he goes on vacation he budgets out $2880? On a 2 week vacation planned through Orbitz this guy, who nets $71,183/yr, is flying coach and staying at a 2 star in old Vegas.

    So my biggest question to this guy
    Why are you lying to yourself?

    Followed up by:
    * Do you use a debit card as a credit card? If so I hope you get rewards.
    * Do you eat out?
    * What cellphone plan does your gf have??? because I’m clearly getting ripped off
    * How much do you blow on Christmas or Hannukah each year? And don’t lie to yourself. I only make $30k/yr and I blew $2.5k in Dec. That’s my entire month’s pre-tax salary!!! (and I don’t own a credit card!)
    * Who’s your travel agent?
    * BTW, Roth IRA max contribution is $5k/yr, at $400/mo you’re only depositing $4800 so you aren’t maxing it out. Based on this alone I already know that you’re “guesstimating” your expenses.
    * Do you pay property tax? If so, is it rolled into your mortgage payment/escrow account?
    * Why are you paying your mortgage every month? (Based on how much you spend planning your future, ie Roth contributions, you would think you’d care about paying off your mortgage sooner and not pissing money away on interest).
    * Do you have cable/internet? If so, how much is that bill?
    * Lastly, Richard makes no mention of credit cards? So you mean to tell me that I’m not alone and there’s actually someone else out there that has $0.00 credit card debt???

    OK, so I’m going to stop here, only because I’m afraid that if I continue I might end up having to re-evaluate my own spending…damnit.

    Thanks,

    Susan

  287. I’ve read most of the comments, and I think the issue isn’t whether or not he’s supporting his supposedly indolent, layabout girlfriend or putting too much into his 401K and Roth. It’s that the money is going someone, and he doesn’t know where. I signed up for Mint.com on Ramit’s recommendation a couple of years ago. I was skeptical as hell and figured it was going to be as effective as an online weight-loss site, but it showed me I had exactly the same problem as Richard: where the hell is my money going?

    Look at all of the things Richard isn’t tracking: coffee, lunch, dry cleaning, and EVERYTHING that falls into the etc category in miscellaneous expenses. As long as you don’t keep track of it, you can blow a ton of money.

    Get some way of easily tracking every transaction for a couple of months, and see how easy it is to spend. I really like Mint, but it doesn’t matter what tool you use. Once you can see your own spending, then you can decide what the remedy is.

  288. Ramit, this is an interesting case study…

    For one, this man is putting a LOT of his money into savings and emergency funds BEFORE he pays off his debts. He needs to concentrate on getting rid of his car repayments before worrying about an emergency fund. And, what’s the point of putting all that money into an account you can’t touch until retirement when he could be using it to reduce debts he has now.

    He mentions that his lifestyle hasn’t changed but doesn’t seem to realise that he’s not just supporting his own lifestyle – he’s paying for someone else’s lifestyle as well. Why is he paying all his girlfriends’ bills??? This seems odd to me.

    Oh, and no mention of wanting to make more money to support these extra bills. His mindset seems to be more about reducing the money he spends rather than about finding money to cover his bills by hustling, entrepreneurship, asking for a raise etc.

  289. She’s your girlfriend, not your wife….So stop paying her bills (unless you can consolidate, like getting her on your various insurances, which would be cheaper). Also, do you really need to spend $400 on misc. stuff? $80 for gifts? $240 for vacation funds? All of these numbers seem really arbitrary

    For your bills, definitely try to haggle down the insurance rate and the cable/satellite tv, internet, etc – Many of these companies will happily lower the bill to keep your business. If they won’t, let them know you’ll be switching to their competitor. Stuff like that is super-negotiable.

    And how much are you spending week to week on things like eating out, random presents, auto gas, snacks?

    Dude knows what he’s spending, but not why, and nor is he thinking about how to reduce spending because he’s all freaked out by going over every month. Calm down, and think it through.

  290. In looking at Richard’s breakdown I see some things missing: he has not factored in groceries, gas, if he takes a toll road to work, if he has a gym membership, HOA fees, or other expenses that he might not be considering. Of course he might not have any of the latter expenses, but I feel there is a bigger piece of the puzzle missing here.

    I totaled up his expenses and figured his monthlies to be 4480 and that he is spending about 53760 on bills alone in a year (forgive me if my totals are off, I was an English major and am not good with math, which is a reason why I read this site!)

    I can’t help but read his breakdown and wonder what he means, and if his definitions for things are different than mine.

    For example: he says he does not go out ‘often,’ but what is ‘often?’ Every meal? There are 21 meals in a week. So every other meal might not be often to him. And eating out adds up, especially if you are paying for two, or ordering drinks and appetizers. Does he bring his lunch to work? Does he go out on Fridays with co-workers? Was food not listed because he spends nothing on it or because he forgot to factor it in? And if he did forget, WHAT kidn of food is he getting? I can say for certain that a cartful of groceries at Publix and a cartful at Whole Foods could be a difference of three decimal points in price.

    As far as making more money, people tend to spend what they make, as I have learned from this site and from my own personal experience. When I am saving every penny and living paycheck to paycheck, I buy store-brand products, stay in a lot, or find cheap things to do. A date with my boyfriend is a picnic at a nice park, or going for a long walk, or watching a movie and making a nice homemade dinner. I would be spend 20 dollars, TOPS, as we are both struggling financially- he is in college and just starting out, and I made some bad financial decisions while in a former relationship. When I am making headway with my savings, a date is a night at the movies, maybe going to dinner, or buying him a present. I buy name-brand products then, take him to nicer restaurants, or buy items for myself that are more expensive. “I’ve earned it,” I think.

    What kind of car does Richard have? What does he spend on gas every month? What does he spend on car upkeep? Does he get his car washed, or do it himself? Can he take care of his own fluid levels or does he just go to a mechanic?

    And what are Richard’s spending habits? If something breaks or falls apart or just looks scuffed, does he immediately replace it or does he try to make do?

    Does he have any social obligations that require him to spend money, such as doing things with friends, getting gifts for people’s birthdays, (I see he has factored in gifts, but what does that mean?)

    And what are his tax rates? Does he live in a state that has income tax (I’m from Florida and have no idea what income tax is or how it works lol!)?

    What is he spending on bank fees each month, if anything?

    Does he have a house? If so, does he do the lawncare/house maintenance himself or pay someone?

    What are his interests? Are they expensive?

    My biggest question is how is Richard able to account for some of these expenses, but not all? For example, can he look at his account balance and recognize every single charge, or are there too many to count? If the latter is so, then that would be a good place for him to start figuring out WHERE exactly his money is going. I note that his figures are all rounded off, as if they are estimates instead of, say, last month’s figures–that is a major indicator of someone who might not be as aware of his money as he thinks he is.

    I hope this exercise and everyone’s advice helps Richard out! He was brave enough to seek help in a public forum, I hope it pays off for him.*

    *(hurrrrr please excuse my terrible pun!)

  291. He seems to be doing just fine if he has maxed out IRA contributions, has an emergency fund, has basic expenses covered. Far be it from me to criticize.

    Aaand..So What if he covers some GF expenses–that is his choice! He already has his own *** covered. I am sure she would do the same, but not be so public about the whole affair.

    If he wants to rein in that extra 140 overage, I am sure he will–if he really wants to do so.

    My best advice is to read Ramit’s book, and highlight pages that show one how to ramp down expendable extras, negotiate with those companies with recurring expenses, maybe automate a few bills. Maybe mint.com? Maybe a simple app or two.

    There are more ways than one.

    His best bet is to hire some PCA friend to show him where his 140 is going so he can then do it on his own. I have a feeling he not have the free time for doing it on his own time–whatever path takes you there….

    So, my advice–bring Ramit’s book IWTYTBR to said CPA Friend, hire said friend to do work for ONLY three months tracking expenses, then CPA Friend pushes him out of the nest, and he tracks himself on his own.

    After that, do self-check for once a quarter. And yes, have him mark it on the calendar that he uses for everything else–like everyone else.

    What-ev’s. He is not doing that bad, he can actually do this on his own, and enjoy his life.

  292. That was exactly my point. By my calculations, based on his net income and just the expenses he listed, he should be coming out at least $1,400 ahead each month. And that’s exactly the issue, it’s based only upon the expenses he listed, which I guarantee he was estimating off the top of his head. I noticed he took the time to let us know that he makes 90k/yr PRE-TAX. This tells me he clearly doesn’t even know how much he’s paying in taxes! I can answer this for ya, roughly 15-18k/yr depending on if he bothers with deductions and itemization.

    Mint.com is a great start!

  293. William Lipira Link to this comment

    Well, first of all lets break down his salary. 90,000 a year should equal 2700 per paycheck (a bit less with 401k contributions). a 300 car payment is either for a really cheap car (my montero sport pmt was 650 in 2001, 25,000 car/my 2006 scion pmt is 400, 16,000 car), oryou’re leasing it (bad idea). 1400 a month mortgage should be for a 375,000 house (or a cheaper house with high interest). Car insurance is about standard. Utilities, there is no way that 230 is paying for that big a house. So either there’s guessing on some things, or you’re lying about some things.

    Moving on. You are what a sucker (putting it nicely), if you are paying all of your girlfriends bills, just wow. Is she unemployed? Can’t work for some reason? Or is this just a temporary thing while she finds another job? If she’s able, then get her ass working to pay her own bills.

    Roth IRA, ok, that’s a good idea. Emergency fund. Have you reached your goal (6 months expenses or so). If so, then put the money elsewhere.

    Next, vacation, gifts, and spending cash. Hmm, BS flag just went up.

    Your claim of going over your monthly income by 140 for basic expenses is a lie, flat out. Funds that you can free up:

    All GF bills: 670
    vacation: 240
    gifts: 80
    spending cash: 400 (there’s a reason I added this)

    Thats 1390 right there. Your paychecks should be 2700 a piece, totaling 5400 for the month. Your total expenditures for the numbers you gave us: 4480. If you are maxing out your 401k, then you should have roughly 2200 per paycheck, or 4400. Remember these are educated guesses here, since you didn’t give us the real numbers for your paycheck (net).

    So, let’s do some more number crunching. Let’s say you bring home 4400, and you are spending 4480, you are in the red 80. Now if you take the 4480 and subtract 400 (spending cash), then your expenditures are 4080, meaning that you are in the black (positive) 320 per month cash flow.

    What I am seeing when I read your email is that you are not giving us everything. I assume you have credit card debt? Maybe, yes, no? Regardless, you have major spending problems. The first and foremost is that you have no idea where your money is going (we know, that’s why you sent the email). Secondly, you have (I’m assuming here) an able bodied significant other who can work, and by what you are suggesting, she does not. Also, does she live with you (stupid question, but not really)? Third, and this is the most important, you are being untruthful about your lifestyle not changing from when you were making 50k a year.

    I know this because when I was making 60k a year, plus having my wife work (20k per year), we were still in the red, and our bills were about the same as yours are in this email (cost wise). We had plenty of problems. I made her work, because on my salary alone, we were in the red. As you can guess, from our spending habits, and poor decisions in general, we were a fincancial mess, one of the reasons for our divorce 2 years later.

    Now there are a few things you can do, as I said, but, I will reiterate:

    1. stop paying for all of your girlfriends bills (you are being a tool here)
    2. stop putting money aside for vacations and gifts (be a man, and fund this with your spending money)
    3. If your emergency fund is funded, redirect that income toward your investing (please follow what Ramit says, the man is a genius – funny how having common sense, and being practical makes one a genius, but we are the fools, not he)
    4. Re-evaluate your living situation. 1400 a month for a mortgage? Do you honestly need a house that expensive? Sell it, if you can, and move into something more practical. I understand with the economy being what it is, this may be hard. Also, I am thinking that you are very upside-down, and may be ashamed to say it.
    5. Truly evaluate where your money goes, and how and what you spend your money on. Do as Ramit and others say, log it for a few days, and see where it all goes (down the rabbit hole).
    6. Be honest with yourself about your spending habits, and what money really means to you. Ask yourself why you have the things you have and live the way you live. Ask yourself if you could see yourself living a bit more modestly, and still have the necessities that you feel that you truly need.

    Look in the mirror and look at your bank statements and at the environment around you (and the people around you), and ask yourself if there isn’t anything that you can do about it.

  294. I agree with those that say the girlfriend is an unnecessary but acceptable expense. I think this person’s problems simply stem from an incorrect assessment of where his money goes and an unrealistic attitude about money – he thinks he shouldn’t have to worry about it at this stage of his professional life. The phrase, “I make a good wage so I’m not the kind of person to sit down and look at numbers very often…” says it all. We think that once we reach a certain income (whatever we define as “a good wage”), once we have “made it”, we are entitled to the good life without having to plan. And then we get really surprised to find that, like our former poorer selves, we have money woes.

    When my income doubled, I was surprised that my standard of living didn’t double as well. I had assumed that I would be on easy street now that I had more money since I had lived on so little for so long. But when more money came my way, along came more ways to spend it. For instance, when I was living on less, I put very little money into savings and none towards retirement. When I had less money, I had less health insurance and no property insurance. When more money came my way, I was able to put money towards the emergency funds and allocate money towards establishing financial security. Which all left me with the same meager amount to spend on my lifestyle. When this person made only 50K per year, did he support a girlfriend then? I would bet that it is his salary increase that has made him willing to cover her expenses too. Also, we forget that higher income also means higher taxes.

    No matter how much money you make, you have to keep an eye on it because there will always be more ways to spend it. Even a large number is finite.

  295. Agree with most people that the alarming item would be the girlfriend’s bills.
    That’s almost $700 a month gone.
    Assuming that if you are paying all/most of her bills that she is not contributing to the mortgage?
    Re-assess if both of you need a car EACH, considering you do not have dependents or children.
    What is you end-game? While putting aside money for emergencies and IRA, you have not allocated resources for investment purposes. Imagine having approx $700 to invest in a Managed Fund or save up to purchase stocks?
    Perhaps look to cut down the vacation budget into half of $240 a month – does your vacation savings include both YOU and your girlfriend?

  296. I’m confused. 90K per year = $7,500/month of cash on hand to disperse into savings, etc.
    Where is his grocery money? What does he spend on eating out?
    I only added up to about 4,480 here. That sounds like “I’m doing OK. Let’s to out tonight, honey” to me. What does he spend on internet? Electronics? The spending is way off someplace. I see a spending diary as helpful here to help him understand where it may be going.
    House Expenses? Car repair? Gasoline? Dog? Taxes? There’s just a lot left out.

  297. A monthly check on expenditure doesn’t cut it! And all that spending on your girlfriend is not doing you, her or your relationship any favors. 

    At your level of income, it seems OTT that you are making car payments instead of owning a car already. What type of car is it? How much interest do you pay on those car payments. Cars are a liability, not an asset (they do not increase in value) so don’t spend up big on a car. Ideally you should start with a small car you can buy outright and then save for something better. Never never buy a car on payment plans – it’s the biggest debt trap for Generation X and Y! Baby boomers rarely made that mistake!

    Secondly, what’s up with the $400 monthly spending money? You are not sufficently specific. If that equates to leisure activities then you are overspending. Eat at home more and watch DVDs instead of going out if you can’t handle your budget better! 

    Okay okay have you considered increasing your income? A pay rise, earning money on the side, learn how to budget better and write a blog about your transformation then release an e-book… 

    But right now, while you are working on your one big idea to earn $1000 monthly on the side, get real and track your expenses daily. You’ll probably surprise yourself and learn a lot along the way. 

    After paying your 401k and Roth IRA, track the remainder of your monthly income by utilizing categories as follows: 
    1. Tithe/charity giving 10% of gross (a proven principle)
    2. Savings – at least 10% of gross
    3. Mortgage 
    4. Household grocery, alcohol, clothes & hair, garden/yard expenses
    5. Utilities and cell 
    6. Auto – all auto expenses including petrol!!
    7. Leisure activities, eating out, vacation, gifts (5% is reasonable)
    8. Insurances
    9. Miscellaneous
    10. Business expenses that are tax deductible.

  298. Stop working for your GF, she is clearly the financial priority on your cashflow statement. Stop paying for her bills.

  299. Hah, hah. Feels like you all fell into Ramit’s trap. :) When I read posts like these, I automatically think, “Okay, what’s the question behind the question?” What’s Ramit trying to “test” about our psychology?

    The psychology part (I think) comes from this part: “Other than that I don’t wear fancy clothes or drive a fancy car or do/own anything I’d consider “rich people” things.

    He’s got this perception of “rich people” fancy-things as somehow being an excuse for exceeded one’s budget!

    Also this part: “I make a good wage so I’m not the kind of person to sit down and look at numbers very often, set it and forget it right?”

    So who exactly are these “kinds of people” who look at numbers? He thinks just because you make a “good wage” you don’t have to rely on yourself to make the numbers add up at the end of the day? Only “those kinds of people” who don’t make much $ need to pay attention? It’s like someone who’s 50 lbs overweight saying, “I don’t know why I keep gaining weight! I mean, I’m not one of those obese people. I just eat what I want, set it and forget it, right?”

    Those of you going crazy over helping out the girlfriend? Sheesh. Settle yourselves down. You’re showing your inner psychological demons. Or does that show my own defensiveness demon in that I’m totally cool that my boyfriend helped me with part of my business rent for 6 months while I started my biz and I’m SLOOOOOWLY paying him back now that I can pay it on my own? You’re harassing this guy because he’s generous? Okay, yes, if he’s enabling her by paying her bills, or if he really is “hurting” with that extra $600/mo, then yes, he needs to re-evaluate himself.

    *** At the end of the day, isn’t it obvious that the guy is just “guessing” on his numbers? $400 is like $12/day for food. He’s not actually looking at his expenses. And he doesn’t need an accountant to help him with this. Just use mint or a friggin’ Excel sheet!

    • Natalie, you have TOTALLY nailed it!

      Richard’s statements about ‘i am not the kind of person to sit down and look at numbers’ and ‘i don’t buy rich guy things’ or whatever the wording was is EXACTLY the thing I think Ramit was trying to get us to evaluate. There is never a point in your life where you should not carefully manage your money. Just because you make enough to cover your bills doesn’t mean you can buy whatever you want the rest of the time, a lesson I learned the hard way!

      And you’re right, Richard is absolutely and adult and can pay for whoever he wants to. Therea are a lot of people who seem to interpret ‘girlfriend’ to mean ‘moneygrubbing scrub’ lol! I’ve no doubt that maybe he’s underestimated what he’s spending on her or isn’t being 100% objective about what is a ‘gf cost’ and what isn’t (for example: would he consider it a girlfriend cost if he went out to dinner with her but they went dutch? That’s still spending money! And is she living with him, and paying for her own groceries/paying half the utilities?) but he’s at least aware that he spends money on her.

      Richard just needs to take a hard look at his expenditures and account for every dime of his spending. Otherwise nothing will change.

  300. You mention 90k/year without taxes. With taxes, you net $75k/year. Your expenses add to 55k/year. Where is the other 20k/year going? I dream that 16.5k/year goes to roth401k and is matched, but likely it’s not. The real root of your problem lies in the unaccounted section. I imagine your $70 ‘misc’ section is actually closer to $1500/month.

    In the accounted section, there’s no reason you should spend 600/month on your GF’s bills. That you write ‘gf’ instead of ‘girlfriend’ or ‘loving soul companion’ only reinforces this. Spend 100/month letting her know how much you love her and save $5000 a year. If your relationship is to last, that’ll be more money both of y’all can use to, say, buy a house, or retire. If your relationship is held together with money, cut your losses now.

    Sell your car. If you live close to work, get a bike. Share a car with your girlfriend only when/as needed. If you’re too macho to stomach not having a car, sell your girlfriends car, still get a bike, and let her use your POS (you do have a POS, right?) as needed. $360/mo insurance implies you are getting taken advantage of or are a bad driver and shouldn’t be driving anyway ;).

    assuming your emergency fund is still getting funded, it’s not full yet… once it is, you’ll have that money to invest elsewhere. Fund your Roth all at once, if possible.

    Everything else is about normal, although $3000/year for vacations likely is a bit munch considering the financial pressure you’re feeling right now. In general, 3k/year is fine, but not when you’ve sent an email to a financial self-help website.

    Have a wonderful everything.

  301. Most of your expenditures seem reasonable. I would be more specific about your spending cash and gifts numbers. What kinds of things are you spending cash on? What are you spending on entertainment, movies, dining out? Is there anything there you can cut?

  302. dont know if this has been mentioned yet but, have you read Ramit’s book and automated your finances. I think the point is for you to dummy proof your finances so you wont over spend. 90k should be enough for 2 people to live on especially seeing as how you’re paying 1400/mo for your home.

    Besides that i would say stop living like a married couple and tell your girlfriend to find another way to get her bills paid.

  303. Richard, you can’t pay all your girlfriend’s bills. That’s one of the biggest drains on your cash-flow. While I commend you for taking care of her (lucky girl!), if she’s truly her own, self-respecting woman, she will pay for a number of things for herself. Namely, her car, the insurance and a number of other things. You could also cut down the spending cash a bit. You’re probably buying a lot of knick-knacks/stuff that you don’t REALLY need but just have the money to buy so you do.

  304. Hmm – many questions.
    How many pre-tax deductions are you taking? 401k? Medical? FSA? assuming absolutely no pre-tax deductions, and you’re filing as a single person, and your state does not have an income tax you would be looking at the following:
    $7,500 – gross monthly income
    -465 FICA
    -109 Medicare
    - 1,610 Federal Income Tax
    = $5,316 month available

    So, adding up the expenses declared, you have a total of $4480/month – and should have an additional $836 to use given the $5,316/month example.
    GF expenses = 13.4% per month
    Car total is: $560/month or 12.5%.
    Mortgage = $31.25%

    Given only the information provided, I would a) renegotiate mortgage & car payments or see if you really need to own a home (cf Ramit’s post on Home-owning) to get out of debt and negotiate or find less expensive car insurance.
    Since Car + House = assets that you can sell (though car at a loss);
    reduce GF to 300 to make up extra $300 if you’re dead set on paying for GF. Tell GF that you’re setting aside $200/month for children’s future college fund & $100 so you’re not in red. Suggest marriage for less expensive couple medical insurance plan.
    Renegotiate utilities (oftentimes people stay with old plans when new promotions exist).
    Good luck!

  305. Maybe the problem is his lifestyle hasn’t changed relative to what he spends.
    Being rich isn’t about saving money, it’s about making it. He needs to maximize profits maybe?

    I can’t really tell him to stop spending money on certain things. I have no idea where he lives, his costs, and other stuff like that. I can’t really nitpick on the expenditure, but who wouldn’t benefit by more money.
    I also won’t talk about the girlfriend (although it did pop out at me first). Do whatever you have to do. I’m not here to judge you on how you live your life.

    If you ask me here’s the main psychological issue: “I make a good wage so I’m not the kind of person to sit down and look at numbers very often, set it and forget it right?”

    If you are having problems, your current wage probably isn’t good enough, is it? Either change your expenses or make more. Don’t “set it and forget it” and later realize your in a budget shortfall. The current system doesn’t work. Make the system work, then kick back. You’re going to have to look hard at the numbers at some point. But maybe that’s just me, I’ve always been interested in finance. Peace and good luck.

  306. Sure you could try negotiate some of your bills, or restrict your spending money a little, but I think I see a bigger problem. If GF = girlfriend, then I think we have found it. Why are you subsidizing your girlfriends living expenses? At more than $600 per month she better be doing A LOT of cooking and cleaning! Get her to pay her own way mate and you’ll have more to spoil her with as a result.

  307. As has already been mentioned- why is he paying his gf’s bills? Is there more to that story?

    If that is non- negotiable, he could consider ways of making $140pm in side income, which really isnt that much, and could be earned in one hour!

    He could also look at shopping around for insurances & utilities to see if he can save on these.

    Are his payments automated?

  308. First of all, I’d question how vacation and gifts qualify as basic essentials.
    Seems to me that if you are spending more than you net each month, those essentials should be changed to non-basic elements.

  309. Moika Ori Isaro Link to this comment

    Heap I second Samanta. Girlfriends bill is too high. Please drop her allowance down she doesn’t deserve to earn that much from you.

  310. I need a “like” button for Lindsay’s post #236. This is what your girlfriend should be doing for you if you’re paying all the bills. Fair is fair, and if she can’t work, then she can “work at home”.

  311. How about moving in somewhere cheaper? The $1400 mortgage is quite hefty.

  312. Had the same thing happen to me and its why over 6 figures doesn’t feel rich. Your pie expanded via making the slices bigger NOT just the “free cash” slice as we would picture in our minds. Income roughly doubled, tax slice more than doubled, 401k contribution roughly doubled etc. At 50k you look at different cars than 100k so there is expense creep, and in the end you spend more on all the same things. In my case I went from a 30 year to 15 year mortgage because I could. This lead to a push of lifestyle payoffs to a later date for that part of the cash. Same in your case if you look at say retirement. You vastly accelerated the retirement date if the 50k you or you fixed the same date and created a 90k you in retirement or you could have held that slice constant at 50k levels and had more free cash today which would change your perception of the income change. The main issue if there is one is that you’ve made these decisions without consideration. In effect you’ve automated your expense creep. Works both ways.

  313. I would say the GF would be the expense I would cut because clearly she cannot manage her finances and is relying on Richard to bail her out, unless she has recently been put out of a job, she really needs to toughen up and get a better job with more money or cut her expenses

  314. I think the biggest mistake Richard is making is the psychology encapsulated by his statement below:

    “I make a good wage so I’m not the kind of person to sit down and look at numbers very often, set it and forget it right?”

    Sitting down and looking at the numbers has nothing to do with your wage, so I have no idea how that correlates to you being ‘that kind of person’. I think there is some sort of guilty, underlying fear, that you are spending your money badly and you are unafraid to track your expenses to confirm it. I know he has listed a bunch of monthly expenses, but as pointed out by many others, there are some phantom costs that are not being accounted for. I think until you track every penny of where your money is going, you are not going to be able to make an honest evaluation of where you are going wrong. It’s easy to say that you are living the same lifestyle, but I’d be willing to bet that the data says differently.

    Oh yeah, and the girlfriend thing.

  315. I was in your place a few years ago. Single, making around $90k per year. That’s when you realize how high taxes and car insurance can be. I would:
    1. Continue maxing out the 401(k) and Roth IRA especially if the 401(k) is matched.
    2. Reduce spending on girlfriend. If you marry her, your taxes will go down (assuming she makes quite a bit less than you). Otherwise you shouldn’t be supporting her. Only exception is paying for eating out (I’m old fashioned).
    3. Is your Roth IRA account over 5 years old? If so, you can withdraw those contributions in an emergency penalty and tax free. That can serve as your emergency fund account.

  316. Well, it’s hard to give advice, because these obviously aren’t the only expenses or it would add up to somewhere around $90,000 when you add all the numbers together and multiply by 12. It seems like there are some major spendings that he isn’t wanting to factor in. If he wants to pay for his girlfriend’s expenses there is nothing wrong with that, but he’ll either need to spend less or save less to balance the budget. It’s simple math.

  317. So I just started re-reading IWTBR after buying the book when it first came out. I would tell this guy to write down every time he actually watches Netflix and go the a la carte route if he’s not making it worth the watch. Red Box/Hulu could be better options. I would also make an envelope for personal care funds. Also sit down with moochy girlfriend and see what she’s contributing to the relationship financially. Read the chapter about having the discussion regarding who pays for what and how much. Don’t attack, but it definitely needs to be examined.Definitely do the percentage break down. The savings goals seem like a hefty chunk and may or may not be 5-10%. He doesn’t list his own cell bill, gym fees, gas, groceries, credit card bill. Overhaul your system man. Get a conscious spending plan and open up a mint account.
    After reviewing the email Ramit, this guy has not addressed where every single cent is going. He’d probably be surprised. He’s likely avoiding that cringy feeling that one gets when closely examining all their spending.

  318. Step 1. Does your company match your 401k contribution? If yes, contribute up to that amount, and only that. For now.
    Step 2. Discontinue your Roth IRA payments. For now.
    Step 3. Discontinue your vacation savings. For now.
    Step 4. Add up your previous vacation savings, Roth IRA payments, and what remains of the previous 401k after the match and add that to your monthly emergency fund payment. Without the 401k money (an unknown right now) this equals $1440/month. Actually, forget the 401k money–that will go to cover your shortfall.
    Step 5. Pay into your emergency fund until you have 3 (ideally 6) month’s worth of expenses put away. This depends entirely on how paranoid you are. So you’re looking at minimum 13,500, maximum 27,000. This should take you (at a rate of $1440/month) 9 months for the min, 1.5 yrs for the max. Not so long!
    Step 6. When your emergency fund is topped off, stop contributing to it. Now you have an extra $1440/month.
    Step 7. You have a year to spread out your Roth payments of 5k. That’s $416/month.
    Step 8. And now you have $1024 to put towards a vacation each month. Or open another savings account to start saving for this wedding everybody wants you to have. (my advice: elope. Or do it New England style: have it in a park and make the reception a potluck dinner.)

  319. Why The’F are you paying your girlfriends bills????!!!!!

    Are you an idiot or just the most whipped guy of all time?

    Get your head out of your ar$e buddy.

  320. This dude is retarded – drop the girl!

  321. The question is are you being honest with yourself? many of us think we are spending a certain amount but tend to exceed. Do yourself a favour every time you spend money put the receipt in a ziblock bacg. If you dont have a receipt write a small note and put it in the bag. Do it for 6 months to a year. Now sit and categorise it and see where your money is going and sneaking up on your spending. Many a time a coffee here a ice cream there are the answer to excess spending. Dont tie your self to a stright jacket but once you know where the money is going reign in the spending there in that area.

  322. Car insurance $260/month??? You got to be fisting me! I disagree with everyone ripping on you for paying for your girlfriend’s bills. I like to think that she earns that money by pleasing you so I won’t judge. You should consider taking public transportation and cabs each month if possible, instead of paying out of your ass for insurance. Or call other insurers and say, “Hi, I have a hot girlfriend that is high maintenance but performs in bed. Give me a competitive quote please. Thanks.”

  323. Wow. I’m amazed at all the emphasis on “tracking expenses.” I’ve done it, but gradually quit because the payoff was so low relative to the time and effort required.

    F’rinstance… Suppose I spend half an hour or so per month setting up a system that tells me unequivically, yes, I spent $134.15 on gas this month, and that is $5.27 more than last month and $3.37 less than the previous year. So what? How does this information get me to the goal of having more money in savings or investments or paying off debt every month?

    Suppose instead I spend that time talking to “customer retention” at the cable or cellular company, and walk away with a $40 month break in pricing for the next year. That’s a pretty fair hourly wage for my time and effort, and leads *directly* to the goal of having more money.

    Now, I don’t question the need for a “spending and saving plan.” I DO question the need for one that’s broken down into the “Utilities/Groceries/Automotive/Tolls/Llama Maintenence, etc.” categories beloved by personal finance software. Mine is broken down by time. There is:
    * Investment/Retirement savings: This comes out either before the paycheck hits the bank account or immediately after it arrives. The amount is set by estimating future needs.
    * Spend in the next five years: Major housing maintenance & upgrades, car replacement, “splurge” vacations, emergency fund, etc. Money market fund, set by projecting those expenses and dividing by time remaining until the expected expense hits.
    * Spend in the next year: Property tax, Christmas & major holidays, annual vacation, large planned purchases and pad for the unexpected. Total all those up, divide by 12, and that amount goes into the savings account every month.
    * Spend this month: Pretty much everything else. Utilities & other “must pay” items come out first, everything else just gets spent. I look at the accounts almost every day, both to monitor spending and watch for fraud, and if we seem to be going overboard, my wife and I talk about it and do some less-expensive outings, “eat down” existing groceries for a week, or whatever.
    *Charity: This one is not really time driven. It’s a seperate checking account that gets 10% of our regular monthly income automatically, and manually recieves 10% of windfalls, bonuses, side income, etc. Some of it is spent in monthly payments, others in annual payments to selected groups. Some is spent as “the need arises.” But once it’s in this account, it *has* to go for a charitable purpose.

    What it lacks in precision, it makes up for with a very high “payoff to hassle” ratio.

  324. Wow, you are grate lover…
    never be upset to spend 600 for your girl,
    you might do some cash from part time work,
    probably ya… you are going to lose some talk time with your girl via phone,
    I have an idea for that too. Go out shopping with her for once a week, so she never wants you to bother about her for whole week,
    So that makes reduce your Telephone bill,
    As psychology when you are talking with your Girl Friend, you feel like it’s too much and you really don’t need her. But if you meet her often and talk only once a week, makes a lot of love between you.

    So;
    Part time + Less talk time = improvement in your cash + additional $ to GF

  325. Richard,
    You are an emotional spender trying to offset those choices with what you perceive are smart (unemotional) choices. Having a plan will help meet your goals when the emotions come knocking.
    1. “I’m not the kind of person to sit down and look at numbers very often,” Become that person to gain the results you want. Results will be your reward and that will hit the emotional button you crave.
    2.”I spend $140 over my monthly income each month on just basic expenses, savings and retirement! ” Pay debt before saving and retirement. It is logical. Savings interest rates tend to be less to you than interest rates where others are making their money off of you. Less to them, more to you. Compounded. SCORE!

    Emotionally it may look like you are paying yourself with the IRA or emergency account but you are paying yourself far more by saving finance charges. PAY YOURSELF! What you have now is a false sense of security. Since you didn’t mention it, with the ROTH IRA – UNLESS – your employer matches contributions to the company retirement plan, paying down debt will be your better choice.
    3. car payment – 300
    Interest rate? Did you choose car based upon an emotional response or a need? you could have a fine looking red sports car which jacks up your insurance or you could have a sensible gas saving vehicle to brag about how you saved the environment and put money in your pocket. Why did you choose THAT car?
    mortgage – 1400 Interest rate? Term? is the home an emotional choice or a choice based upon need? Did you choose location for safety? or all the X people live in this neighborhood?
    car ins – 260 reflects choice in vehicle
    water/elec/gas – 230 negligible
    misc expenses (netflix, gf cell etc) – 70 – probably all emotional spending
    gf bills – 600 (car, ins, medical, etc) emotional spending

    roth ira – 400 pay debt first
    emergency fund – 500 pay debt first

    vacation – 240 emotional spending $2880 is a big vacation, take some mini vacations, or staycations, you can save here as well.
    gifts – 80 emotional spending
    spending cash – 400 may be emotional spending

    From the short letter, I think your biggest bang for the buck is understanding why you spend. Once you get that down you can make better choices for you. Good Luck!

  326. The first thing I noticed about the language in the e-mail and the budget is that there is no focus on growth. Not one dollar is being spent on education, classes, books, etc. A person would not leave this type of stuff out so obviously it’s not happening even with some of the mystery areas of the budget. Which brings me to my next point, if you are going to keep a budget at least list everything accurately. What about food, groceries??? If that is considered a misc. expense then we have a serious problem with priorities which obviously explains the money woes. “My lifestyle hasn’t changed from when I was making $50k/year” , there is the root of the problem right there. If you are living the same lifestyle when you made $50 k than you are just doing more of the same thing, your thinking has not changed. You will address your money issues very soon, you still have the choice to take the paved path (proactive) or roll through the thorn bushes(reactive). I would get busy and take that paved path. Try something different!!!

  327. I love the “dump the girlfriend” comments. Do you practice what you preach? Of course I do, just because I’m so awesome.

    Anyway, I don’t see a problem with this dude’s situation. All his bases are covered better than 99% of the folks in the world (including myself). My advice would be to adjust in areas of excess to account for the extra spending. Unless he’s got a psychological addiction to spending $140 over his income each month, just make a slight adjustment to the automation system in place and funnel a little more from the savings bucket to the spending bucket.

    Then take on another “secret” girlfriend and slowly work her into the mix.

    • Just to clarify, in no way would I suggest dumping the girl unless it makes him angry or bitter, or he’s doing it just so she’ll stay with him. I’m sure she provides value in other ways ;)

    • One of the best comments here. This guy does indeed “have his bases covered better than 99% of the folks in the world”.

      The only (teeny-tiny) mistake with your suggestion to adjust a little to make up for $140 is if that isn’t an accurate number, but if for the last six months he’s been $140 over then absolutely a little tweak to “set it” different means he can “forget it” again.

  328. You are spending money like a high-roller but 90k is not “high-roller” territory even if it were just you footing the bills.

    Dump the girl and whore it up with prostitute instead.

    Monthly Cost = $20 x 10 == $200
    VS
    Girlfriend Cost = $670

    Instant savings = $470 a Month and Over $5000 a year!

  329. car payment – 300 ->Why not pay this off instead of paying interest?
    mortgage – 1400->Fine
    car ins – 260->This equates to $3120 a year! I pay around $1300 so either you’re a VERY BAD driver or your car must be a Ferrari. Since you said you don’t have an expensive car I assume you must be a very bad driver. But either way you should be able to shop around and lower this at least $1000/year.
    water/elec/gas – 230 – Fine depending on where you live but it does seem about $30/month too much to me
    misc expenses (netflix, gf cell etc) – 70 – Seems fine but why are you paying your gf’s cell?
    gf bills – 600 (car, ins, medical, etc) – THIS IS THE RED FLAG! WTF MAN! Your better marry this woman or she better be giving you the best sex of your life!

    roth ira – 400 – GOOD
    emergency fund – 500 – GOOD

    vacation – 240 – This seems high so I assume you’re paying for your GF here unless you’re going to baller places. I think you can cut this to about $175/month pretty easy.

    gifts – 80 – Sounds fine and you seem very generous
    spending cash – 400 – GOOD

    All in all I think you’re doing great. $4800 in cash a year in spending cash on top of normal expenses, maxing out 401k at $16500, maxing out roth at $5000, $6000 a year in savings. Really can’t fault you for much but the GF is expensive. I would say you spend around $800/month on her ($600 bills, $40 cell, $160 vacation, gifts, etc). That equates out to at least $9000 in extras. Lots of women would LOVE to have you spend at least $9000 a year on them. Damn son….but yeah….if you cut the GF expenses you’ll be even better but can’t really argue with what you’re doing now. If anything cut down on the 401k if you need extra cash but it doesn’t seem like you do.

  330. Richard A.

    Rather than trying to cut out $140 of expenses of a life you appear to be enjoying, consider putting together a plan that provides value to your employer. Then asking for a 10% raise (~$450 extra a month) would be no issue from your employer if you’re contributing a greater value than what you’re asking.

    Alternately, you could look at freelancing part time to provide an additional income stream. This could be more useful in the long run because it not only provided additional income to allow you to enjoy your life and make you more secure in the future if you would like to consider moving on from your current position.

  331. I think you are not clear about where your money really goes, which is obvious from your email. And that there are undisclosed items in your spending, you did not mention because you simply did not realise you also spending your money that way.You should track your expenses better
    Another point is that you keep basically little portion of your earnings on retirements and savings. There is no mention of investing your hard earn cash. Why are you paying your girlfrinends bills?And on last thing, why is your car insurance so high, are you really keeping your lifestyle simple?

  332. Dude, get a pad and paper and start actually writing down what you spend! I just eyeballed your figures and it looks like you can’t be “spending” more than around $55,000. Sure, you gotta figure taxes – but that’s only gonna be about one-third of the total salary. It’s real simple – you’re missing some spending in there.
    Hey, you’re not alone – the first time I looked at the notebook where I kept track of ALL my expenses was an awakening.
    If you’re too disorganized to keep writing down what you spend (my hand goes up here too), try the expenses version of Tim Ferriss’s Flash Diet – take a picture of each receipt and note the purpose in Evernote. If you don’t have a receipt (vending machines, the flea market), try taking a pic of the item next to the cost sign or price tag.
    If you’d like to read more about systems, support and techniques for tracking your purchases, check out the book “Your Money or Your Life” by Vicki Robins (your local library probably has it).

  333. Introduce the girlfriend to Earn 1k. Reduce the emergency fund amount so you do not cross your monthly spending. Negotiate or shop around for expenses that can be(insurance etc).

  334. He may be paying her bills to financially dominate her in the relationship so he has all the power which may make him feel good. Or he could just feel good by being the hero and helping her out when she is down. Can’t say without observing them together, but either way it is not sustainable on his income.

  335. Stop paying the gf’s bills, frees up $600.
    Reduce the amount you are putting towards the 401k by 3 – 5 %.
    With that extra money add $100 towards the payment of your car and your mortgage. That will speed up getting rid of those bills. Any extra cash at the end of the month can go into savings or the ROTH, or towards a good investment like a rental property.

  336. Christian Sullivan Link to this comment

    PSYCHOLOGY OF THE SPENDING:
    First, ignore the noise of people saying “cut the girl”. If it’s $21,000 spent at the bar, or on the girlfriend, or a wine collection, who cares? Do everything else right and you can spend your cash guilt free.

    Key Steps and realities:
    A. You need to ” TRACK YOUR SPENDING”
    B. You “SPEND MORE THAN YOU REALIZE”
    C. You need to READ A BOOK. FIRST START WITH RAMIT’S. THEN I SUGGEST YOU GOOGLE 2 AUTHORS, TOBIAS AND KIPLINGER

    1. Sit down and look at the numbers!
    You have a system of unconscious spending. You need a CONSCIENCE spending approach. Use an envelope system. Initiate a FINANCIAL INFRASTRUCTURE such as what Ramit lays out in his book.
    2. Optimize your credit cards, pay down debts, and negotiate better fees to lower cost.
    3. Read what these people have to say, they seem to focus more on psychology and results than just a numbers game of you minus your girlfriend equals rich.

    103 kb April 23, 2012 at 10:39 am
    19 Andrew April 23, 2012 at 10:42 am
    136 Zib April 23, 2012 at 11:02 am
    147 Micah April 23, 2012 at 11:18 am
    196 Ira Kinro April 23, 2012 at 12:21 pm
    267 Anouar April 23, 2012 at 12:25 pm 267
    267 KA April 23, 2012 at 2:06 pm
    270 TTC April 23, 2012 at 2:11 pm
    234 Mustapha April 23, 2012 at 3:20 pm
    304 Andrea April 23, 2012 at 4:05 pm
    346 Terence April 23, 2012 at 7:58 pm
    362 Melissa P. April 23, 2012 at 10:11 pm

  337. I don’t see any expense in Richard’s list to be a luxury item. I do agree with some comments below like saving on car insurance or getting rid of the gf ;). But personally i don’t think thats going to help him save any substantial $. I think he should give part-time jobs (like tutoring for couple of hrs in a week) a serious thought. He must have some skill-set, i would guess, especially since someone is paying him 90k.

  338. Richard, do you and your girlfriend eat? I see no mention of food, groceries or entertainment (other than Netflix) in your budget. Generally, most of the previous commenters have addressed your problems intelligently and well. You just have to figure out what areas to cut back on and do it. (Except eating, of course;) In the context of your overall budget, shaving $140. a month seems like child’s play.

  339. Seems to me this is one of the situations where Ramit’s ‘earn more’ strategy doesn’t apply, as you’ll keep spending whatever he earns.

    If the monthly shortfall is going on the credit card, stop doing that! The cost of credit is almost several times what you’re getting on savings and investments.

    Then to try to restore monthly savings to the desired level, look at the bigger ticket items for ways of getting ongoing automatic savings (eg, tell the mortgage provider that you’re ready to go elsewhere unless you get a better rate – unless you’re already getting an exceptionally good rate!)

    If you’re not ‘that sort’ of person, don’t bother trying to account for your expenditure in detail. It’ll drive you up the wall and you won’t do it accurately enough to make a difference. If you like coffee, keep buying coffee, but try to catch yourself spending money just out of habit on things you don’t really need or enjoy.

    But that $600 GF expense is one of your big ticket items. Not saying you’re wrong to be paying those items as we don’t know the details of the relationship (maybe she helped support you in the past and now it’s her turn), but at least check you’re getting a reasonable deal on both car insurance policies and stuff like that.

  340. Not sure if he is really considering all factors. He has no food, clothing, home maintenance, home insurance, health costs, internet, technology, gasoline or his cell (gf cell, wtf?) as expenses.
    If he has not considered these factors, what else is he not seeing?

  341. Half of the bugdet is mortgage and car+car insurance. Maybe there is something that can be done there. Renegotiate the loans can be a posibility to reduce this expenses. Another posibility is to move to smaller house/flat. I did this, not for economical reasons but because it was time consuming to keep everything in order in a big house. Now i have more free time to enjoy instead of cleaning and gardening.

    Your GF expenses are also quite high, i think she can work get an income and help you with this. I dont think she needs a car+insurance when she is not able to pay it herself.

  342. Richard,
    First congratulations are in order. In spite of having a negative income you are saving for your future and budgeting. As much as a butt kick as this is you are hopefully not waking up 15K in the hole. First question, are you a big win or a small win kind of guy? Second question, what is your credit score? Third, while you are saying that your lifestyle has not changed since you were pulling down just 50K I assume this means same car and house, I would look at the service contracts you have. Sit down with your girlfriend, open a bottle of wine, get some pizza and highlight all the early termination clauses in yours and her contracts (cell, insurance, etc) and find out what it would cost to convert this over to a pay as you go system, remember we are looking for $20 of savings through all your contracts. Next go over your credit rating (think of it a colonoscopy for your finances) and see what you can do to improve it (if it is 700 ish it may not be worth it) by negotiating with your credit cards. If your number is already good then you can go to your insurance and negotiate with them to get a better rate. Now assuming that this is all taken care of this weekend ask to sit down with your loan companies and investigate your options to lower your payments with them. Lastly, your girlfriend, you are paying in part for your shared lifestyle. If I had to venture a guess she is making less than 80% of what you are. You cannot very well demand that she cut back on things but putting this out there as “our problem” and asking for her help and contribution is the way I would advise you to go.

  343. Hi Richard

    As many had mention you have a GF expense rather high. But you know what that’s up to you. It’s your money and you’re allowed to spend it on whatever you want.

    My 2 cents are: In math, your numbers don’t add. $4,480/month in expenses is $53K a year. There’s a huge difference, and as some have pointed and according to your expenses, you don’t eat.

    You’re missing the little things. You need to take a good look at the bills, recipts and what not and write them down on a spreadsheet and use those numbers against the 4,480 reference.

    If it does sum up to this, then maybe your spending hole is in a yearly expense.

    Hope this helps to something.

  344. Since plenty of advice centered on your finances has been given, I will focus on the psychological aspect. The first thing you said was- “I have no idea why I’m writing this but you seem like the only person that would even care and/or be eligible to say I told you so.”. First thing I notice – you seem like the only person that would even care- That tells me you might have problems with self worth or you dont have many people that you feel care about you. Just that can cause all kinds of self sabotage. Many people dont do nearly as good a job as you have with your finances when they have self worth problems. The next part I noticed- ” be eligible to say I told you so” Makes me think that you expected to fail in some form. If not, why would you expect someone to say, I told you so? You seem to feel that making 90 thousand a year is enough to not have to worry about what you spend on. That you are wealthy enough to be comfortable and have all the things you want. You dont think your a “rich” person but you do seem to think your wealthy enough to not have to think much about money. You put some emphasis on the fact that you dont have “fancy” things and that your not “rich”. Why do you feel the need to specify such things? What I find very interesting is that you are freaking out over 140 dollars a month, when you can make that very easily. It seems that you truly believed that you would not have to worry about money again and that became a part of your identity. it is not just a financial challenge but an identity crisis. You even say” I am not the KIND OF PERSON to sit down and look at numbers very often”. You associate your financial status with your identity and by doing so, your emotional and mental state will be controlled by external, material things. You have been living with a certain set of beliefs and now you have found that they might have been wrong. That is not easy to deal with, let alone confront. You have confronted it and asked for help, that takes courage and humility. On the subject of the Girlfriend. I have no idea what your situation is and I will not judge or make any assumptions. The only thing I would recommend is that you think about why you are together and if you feel like spending that amount of money on her is congruent with what you want and who you are and who you want to be. If so, then go for it. If not, dont. Try to keep things as simple as possible, they are rarely as complicated as we like to make them. Now all you need to do is decide what is important to you, go thru the advice given and see what feels right to you and start implementing. I wish you fantastic luck! Have a great life!

  345. ^ Glad I bought my reading glasses Tolstoy

  346. Michael Fitzgibbon Link to this comment

    Richard –

    I see a couple of easy wins for you. First, your car insurance is too high unless you live in New York or New Jersey (maybe LA). If you live in NYC, ditch the car & take the subway. Otherwise, shop around. I have a late model Honda Pilot and an older beater and pay $75 / month TOTAL for 100k / 300k / 100k of full coverage insurance through USAA.

    Second, you’re saving money for retirement and making a car payment at the same time. Put the 401k on hold and put everything toward paying off the car. For someone making 90k a year, that car payment is small. But you should really be debt free! There’s no reason you should be paying any interest except for your mortgage.

    It looks like you’re putting more than 15% of your pretax income toward retirement. So if you don’t want to stop contributing, you can cut back to 15% and not feel irresponsible. Take the extra money and put it toward your mortgage. Get an amortization spreadsheet (Office 2010 comes with a free template) and find out how much faster you can pay off your house with just a couple of hundred bucks a month extra.

    Here’s the giant win. Start spending CASH. For your girlfriend’s bills? Give her CASH. For monthly spending expenses? Spend CASH. Spending cash hurts – it sets off the parts of the brain that register pain. If you still want to give away $1000 in cash after doing it for a couple of months, you’re a noble guy. I don’t think you should dump her – spend the money however you want. But take out the CASH that you can spend without going over budget, and when it’s GONE, you have to STOP SPENDING until your budget cycles again.

    Good luck. If your g/f had some recent medical / employment problems and you’re just helping her out, my condolences for all of the jerks who told you to dump her. But if she had those big bills before the two of you met, I’d be suspicious of what’s going to happen to your relationship when the bills are paid off.

  347. The main focus should be on big monthly expenses. Could he maybe sell his house and rent (homeownership is not all it’s cracked up to be)? Negotiate a lower monthly payment on his mortgage? That might save him a lot of money.

    Also, try to negotiate car payments and insurance. Perhaps just getting rid of the car and getting a new car, with a new loan with lower interest might do the trick. Negotiate the price of the car down as much as possible. See if you can find a new car which is “over-year” (last years model, but still brand new). Remember, cars lose 20% percent of their value in the first year–why pay interest on that lost amount? Also maybe try shopping around for less expensive car insurance. Figure out why your insurance company charges you this amount. Find out if there is something that makes insurance companies see you as a risk factor.

    It doesn’t matter if you decides to spend money on your girlfriend–as long as you have this spending under control. If you’re is paying the GF phone bills and subscriptions, your could maybe ask her to look for cheaper plans. This can help reduce overspending also. However, your first priority should be taking care of those high mortgage and car payments.

    Also, you better start saving for a wedding—even if you are not planning to marry your current girlfriend (although if you are paying her bills, you are already taking a step towards marriage). Plan to save at least 20.000 USD, over the course of 5 years. Engagement rings, honeymoons, wedding dresses, etc. are very expensive. The only way you will be able to pay for all of that without breaking your bank is by reducing those big monthly payments. You don’t want to come back from the honeymoon with a huge credit card bill.

  348. Here is my humble opinion. Read the book “I Will Teach you to be Rich” and put together a proper conscious spending plan. Clearly if you have emailed Ramit, you understand his work and get where he is coming from. See what big wins are possible with your spending plan to plug holes and reduce some areas of expenditure.

    Also your girlfriend needs to learn to support herself. If you two have any sort of serious future together, she needs to prove to you that she is willing to rise up for you. She needs to shine with her own confidence and be her own person.

  349. I would firstly rank the expenses in descending order and attack the top 5 .
    1. Mortgage – Analyze if refinancing your loan is a good option.
    2. GF Expenses – If you have long term plans with GF, combine your insurances and get couples’ discount or BOGOF or 50% off sort of deals
    3. Emergency Funds/Roth IRA – Good job. Keep at it
    4. Spending Cash – Analyze where this money goes.

  350. Well, some expenses you cannot avoid paying and you can’t do anything about it. But, you can control other costs like electricity bills for example or gas bills. I don’t know how is it in your country, but I believe everywhere is the same. In Croatia, for example, if I use electricity from 22:00 to 08:00 a.m. it is much cheaper. So, I can use that time to wash my clothes. You can also try to avoid driving in your free time and save gas. But not just because of saving, I think people who spend much time in their car (like I am too) need to do more walking and going out on fresh air. Main thing that I came to conclusion recently is that we should simple think twice before we buy things. I recently discovered that I have too many unnecessary things in my house which in one time in my life I thought I need, and now I just have unnecessary things that I don’t use.
    Although, your situation is normal today, since economy is not good, prices are increased and we get the same salary as we did years ago.
    The best advice is one Ramit gave us all – find additional job. We all can find a time for that, then we will fill our time with something we like, stop having time for spending and live without guilt ’cause we’re will be having all under our control.

    Have a nice day…

  351. Refinance items at a lower rate, negotiate deals with utilities/cell. Also put your skills to work on the side if applicable.

  352. JD The Soothsayer Link to this comment

    I think you’ve heard it enough, but ONE MORE TIME: paying your “girlfriend”s bills is a poor use of your money. That is indeed what marriage is for. Until you have that partnership built on trust and commitment, you are no better off than if you were tossing that money away at a prostitute. You show her disrespect when you buy her affections, and you build a crumbling foundation of trust with her if there’s a monetary exchange involved in your relationship. Say what you will, she thinks you’re a sucker and you think she’s cheap……time for a sit-down!

  353. Terry Gillespie Link to this comment

    Forget the Roth for a while and pay down the car and house loans. There is no luxury like having a car paid for and paying a few extra dollars a month makes a big dent in the principle of a loan.

  354. I would like to analyze his spending on interest rates, fees, charges, etc., but FUGEDDABOWDIT!! Am I to understand that “gf” stands for girlfriend????? And this guy is paying somewhere north of $600 of HER bills??

    My two cents is to cut the emergency fund by half for two months while he force marches the “gf” through Ramits material and gets her paying her own way. This will also force a refinement of his own priorities re: spending psychology and…priorities. 90k does not a sugar-daddy make. He needs to figure out if the gf’s bills are a conscious spending item or a blind spot in his psychology that needs to be faced.

    I wish him the best of luck in this part of his journey.

  355. …THEN star analyzing what he can do regarding insurance, interest rates, etc

  356. @Richard A, I don’t think that you bare beging honest. You say that your lifestyle has not changed since you made 50K per year, but it has. Otherwise you would have been overspending even more then than you are now.
    Something has changed and you are either not telling us, or don’t know it.

  357. If you want to pay your GF’s bill….Fine
    If you want to spend $400 per month on misc stuff….fine

    The question you need to be asking is not what should I cut, it is how can I make more money?

    We Americans have become so comfortable in our lifestyles that we forget that we are not immune to disaster (financial or otherwise). Over the last six years or so as things have become worse in the world (finance, war, Dec 22, 2012 :) ) we are starting to wake up and realize we can’t live on credit, we can’t expect the govt to continue bailing us out and we can’t rely on our nice comfy jobs to be there on Monday morning.

    I am a CPA so I see first hand the devastation that the economic collapse has had on individuals and businesses alike. Guys/gals that work at major financial institutions, technology company and retailers are just being let go, some after 20 years of service!

    My suggestion to you sir is to build a side business. One that you can build in your spare time and eventually build into you primary source of income. We can no longer rely on our employers because that comfy 90k job could be gone next week.

    A side business will not only help you build a great financial cushion but it is great for tax purposes. You can legally write off many of your personal expenses as a business expense therefore decreasing your annual taxable income (legally).

    What are you good at, what do you enjoy or more importantly, where is there an opportunity! Even in this terrible economy with people getting laid off every day and loosing their houses there are a TON of opportunities out there waiting to be exploited (in a good way of course).

    Anyway, sorry for the long post but I am passionate about helping individuals change their mindset from entitlement to survival and prosper.

    Good luck!

  358. The numbers don’t add-up. If you are making 90K annual pre-tax, then i would assume that post-tax the number would be around 60K conservative. i.e. Around $5000 per month. The expenses mentioned add up to $4500 So you should actually be saving around 10% of your earnings ($500) every month.

    As many other’s have mentioned, the GF bills are too high. Have a fixed budget for your GF expenses. Secondly, you don’t set aside Emergency Funds every month. It should be a lump-some amount set aside for emergencies in a high yield account.

    I’d say set aside your Roth IRA, Emergency Funds, Vacation Amounts, and extra cash into a high yield and high liquidity fixed deposit account. This should easily be $1600. It could be more if some of your GF expenses can go into this account. You can withdraw money for Vacation/ Emergency/ etc from this consolidated account.

    Try to reduce car and mortgage payment by making advanced pre-payments towards the principal amount so that you get over those monthly payments sooner and have more money in your kitty and enjoy a better financial life.

  359. I didn’t read all the many comments as I am on a cruise, but his mortgage seems high. What’s his rate, and can he refinance? Terms are good right now.

    Yes, I agree about the girlfriend and the car insurance. He should be bundling all his insurance together to get a better rate.

  360. Richard tucks away $500 in his emergency fund as a MONTHLY expense? Wow, that thing must be huge! O_o Speaking psychologically, I would tell him that he really doesn’t need to make that a monthly expense and (if he hasn’t already) he should consider putting it into an interest-bearing savings account…or just take some money out and put it toward the other bills. What are the healthcare plans at his employer like?

    I would have to agree with some of the other posters on the girlfriend’s expenses…didn’t The Offspring already write a song about this? He probably does it because he has a caretaker personality and makes much more money than she does, but I am curious as to who initially made the suggestion that Richard pay her bills…was it him or her?

    Looking at the house payment, I’m sort of surprised because he says he doesn’t have “rich people things”, but owning a house when you are young and single is actually the textbook definition of “rich.” $1400 a month doesn’t seem horrible (I’ve personally seen much worse), but it is his single biggest expense. I can’t really think of a good solution other than some unattractive options like renting out a room. I’m guessing it has to have at least two bedrooms for resale value. Does his girlfriend contribute? (If she’s live-in, the one and only correct answer to that question is “Yes.”)

    The last thing I notices is the conspicuous lack of practical spending: That is, where’s his food bill? His clothing bill? Gas? Home necessities (boring stuff like ball-point pens and floor cleaner and Band-Aids)? Even if you are single, $400 can get eaten up pretty quickly.

  361. gf bills + gf cell – she should pay her stuff by herself.
    car – really needed? is bicycle an option?

  362. Let’s start with the “I live a pretty normal life. House, car, girlfriend, occasionally going out.” Is that what you consider normal or are you following someone else’s advice? btw paying a girlfriend’s bills is neither normal nor desirable, she probably resents it too. What do you want out of life? How will your current behavior get you there?

    You’re obviously making enough money for your current lifestyle. You have the luxury of making decisions about the long term. Otherwise, there will come a day, a lot sooner than you think, when you look around at all you have and ask “Is that all there is?”

    Good luck,

    Gordy M

  363. I could tell Richard to take Earn1K and earn $1,000/month more, but he’d probably overspend that, as well. According to my calculations, he should have $3,000/month left over, given his salary and spending listed. However, not all of his expenses are listed (income taxes?). He may not think he has expensive stuff, but looking at the car and car insurance, sounds to me like he has some fancy tastes. Which is OK if he can afford it. Richard, decide what your goals are, and what is important for you to spend your $$ on. If something doesn’t further your goals and isn’t important to you, don’t spend on it.

  364. I didn’t see property taxes in there. They come around twice a year & bite you in the ass if you’re not prepared for them. And the spending money seems low & vague. It would be better to realistically break it down & budget for it.

  365. Gosh this post was helpful to me. I made the most gorgeous, passion and values-based budget after reading through the comments on this post. Thank you all!

    My tip for Mr 90K is to start with practicing gratitude. Make a list of 140 things you are grateful for. Include your career, your relationship, your vacations, your car, your desire to learn and manage your finances better, your willingness to ask for support. I think this will help to calm you down, and shift your mindset and see that you have a lot going for you – including your ability to reach out for help with your blind spots.

    I would also create a budget for your current income of 90K and then also make a version that shows how your budget would shift if you were making 120K. That will help you to see where you would like to be allocating more money and move towards that goal. And that way as you increase your income you won’t run into this trouble of not knowing where the money is going – as you make more, you’ll know exactly where to put it.

    And yes, use Mint! Good luck!

  366. Richard, you have much of which to be proud here. A few suggestions.
    Long term cost management:
    If you have and use more than one credit card, consolidate them and limit spending so you don’t carry balances. This reduces stress and protects your credit (which is clearly important to you with your investments, Roth IRA, emergency fund, etc.). If you have military experience (or someone in your family does), apply for USAA and see how their types of insurance and car dealer deals are all terrific and affordable.

    An easy monthly price reduction:
    compare Netflix to AppleTV – what you pay annually for AppleTV is about six months of Netflix (depending upon your membership).

    Everyone’s referred to paying your girlfriend’s bills and expenses and I agree that unless she lives with you, cares for your children, contributes to your structured quality of life, you’re best not to do that.

  367. Stop paying for your girlfriend’s shit

  368. Also, I can’t imagine socking that much away in savings & retirement while paying a car loan. Pay cash for a car.

  369. I see most comments immediately questioning him paying his girlfriend’s expenses. What if he loves her and really likes paying for her stuff? (plus, we don’t know if she’s able/willing to work or anything else about her).
    For me, I would cut off the emergency fund once it hits 6 months of expenses, then use the extra $500/mo to do what he pleases (maybe take a vacation earlier than planned or so on).

  370. Cut the girlfriend loose.

  371. Reading a bunch of these answers and not one of them gets the IWT point! Nip here, tuck there, fewer lattes, shop for better insurance. Ramit tells us you can easily make another $1000 per month and he outlines how you can do that. Become worth more and reap the rewards. YOU HAVE 2 PEOPLE IN YOUR HOUSEHOLD – that’s $2000 per month more. Do that, then take your gf to the mountains or the beach for a long weekend.

  372. I know multiple people have already said one of the two things I noticed but I got tired of reading all of the comments. Ramit, you asked
    “What would you tell Richard, be specific.”
    1) Quote your auto insurance. Call an independent agent recommended by a friend who trusts their agent and pays a reasonable amount in insurance. Then call another independent agent and get their quotes as well. $260 feels high to me (as a licensed agent in WI, I work with a couple thousand policies a year), but depending on the actual car, the level of coverage, and his driving record, that may be quite low. Someone else mentioned checking that the car and home insurance are combined and possibly checking the home insurance, which is also a good idea.
    2) Set up Mint. Set it up and let it run a month or two. Check into it once or twice a week to “train” it on how to allocate your expenses and then check your trends. He will see exactly where all that extra money is going and how to adjust accordingly. I have now done this to myself no less than 3 times and every time I am ASTOUNDED at how much money I spend on food as a single woman.
    The other things are the girlfriend’s expenses. Maybe something to be done there, depends on *their* situation. Also, may want to consider selling his car and downgrading. Over $500 a month for a vehicle is a lot in my opinion, but I’ve never even made HALF of what he is making, so maybe its not so bad. That’s what I would tell him.

  373. I agree with most of the comments regarding the potential take-home pay, car insurance, the 401, the girlfriend (to each his own, that is your personal business). Mint and personal spreadsheets HELP ALOT when it comes to the nitty gritty of where your money is going, but it doesn’t get to the heart of why you spend. At the end of the day (regardless of the numbers), it comes down to psychology, at least for me.

    Until I realized that I was my own worse enemy, I wasn’t able to control my overspending. I had to assess my behaviors attached to spending. Why did I spend? When did I spend? Where did I spend? I finally realized I ATTACHED MY EMOTIONS TO SPENDING. You see, I grew up with grandparents who gave all their money away to their grandchildren. My grandparents enjoyed watching us experience happiness even for a moment. I realized that I, too, enjoyed spending on experiences and I don’t mean just vacations. I mean, buying a round a drinks for someone’s birthday or going that extra mile for a bestfriend’s wedding or randomly giving to the homeless man down the street. I wanted to give other people an experience of happiness even for that moment. When I understood that I wanted to save and get out of debt MORE than I wanted to give myself or people temporary moments of bliss, I took a stand and started saying “No” to a lot of things and focused on using cash. I’m seeing progress, slowly but surely…

    MY SUGGESTION FOR YOU IS:
    1. FIGURE OUT WHY YOU ARE SPENDING. I know there’s an emotional attachment to spending.
    2. Prioritize with your girlfriend (who is obviously a big part of your life for you to support her financially) what’s most important in regards to saving in different areas,
    3. PULL OUT CASH for your spending, and that’s all you get for the month! DONE! Try it. You won’t be overspending and you’ll start seeing more money in your savings. Try it!

    Or, you might just have to be honest with yourself, and don’t try to save that $140 and accept that wherever you spend that money is worth it. Then, you can sleep at night without stressing out about where that money is going. It’s all psychology.

    Goodluck!

  374. to me the problem seems like his mindset. he thinks “being rich” = expensive cars, expensive clothes. to me, “being rich” = having money to burn on vacation, supporting GF, going out to dinner a ton, etc. i think that by not thinking of himself as “rich” he is giving himself permission to spend wildly as long as he doesn’t shell out for a fancy car. there’s a disconnect there.

    i think the car insurance seems really high. try to get a reduction. does he have homeowners insurance? bundling the two should get him a cheaper rate.

    also do you have to have a car? do you live in a fancy urban area (ny, dc, sf) where 90k is barely scraping by? in those cities you can usually get by without the expense and maintenance costs of a car, which might help.

    lower your vacation budget by $50 a month. $190 still goes pretty far and you’ll save $600 a year, which should help.

    he should try tracking his spending for a month on mint. clearly, he is not reporting all of his spending, as many other commenters have pointed out. just the one month should give him a better idea. i mean, what are you spending cash on? dinners out? blow? strippers? taco bell? using your credit card and having it tracked will help you figure that shit out.

  375. I don’t think the problem is paying for his girlfriend because clearly he can afford it. But I think if you are going to have a dependent, they should live with you.

    He saves alot which is great. I think the issue is that he isn’t as aware of his spending as he think he is. Do you really take $400 from your bank account and use just that for misc purposes? All those little things we buy here and there add up.

    Also, maybe too much of your money could be being withheld from paycheck. .

  376. Do you eat? Just a question since it wasn’t listed in your expenses.

  377. That was brutal Ramit :)
    Hope you changed the guy’s name atleast.
    You knew what he was doing wrong, now what was the point of this post, for us to also see?
    I am quite sure all of us(most likely including you Ramit) do things like Richard without realizing it and just don’t want to see it.
    Blinded by vanity we all are!

    lol you are harsh dude.

  378. First of all, he doesn’t mention where he lives or whether his girlfriend has a job. He really needs to work on lowering his car insurance and paying less of his girlfriend’s bills. I live within a city where car insurance is considered higher than the surrounding areas and my insurance is only $92/month; that’s on a 2.5 y/o car. However, my driving record is spotless and I’m a female, if that makes a difference.

  379. Not knowing more of his situation makes it difficult to be more precise, but there are a number of questionables here. First off, and I see I am not the only one who noticed, but why is he (apparently) covering all of his girlfriend’s bills?
    Also, the combined amts for vacation/gifts/spending cash seems a little high and could be questioned.
    His emergency fund also seems high – (face value I mean). If he brings home $4340./month, with a minimum 3 months safety net ( his income is high so I am presuming that his career is in demand and he should not be out of work long), is only $13200. Has he been saving for over 2 years – if so can he consider safely cutting back.(not cutting out) Finally, if he is only $140./month “short”, has he considered setting up something as a small, work-from-home option to take advantage of the tax breaks of working from home. (even part time work-from-home jobs qualify) .Again, I am assuming here that he is not already self employed as he states that he makes a good “wage”. Simply “employing” his girlfriend for $300./month would free up his shortfall. (if she is available to receive income) Just some starting points, let’s keep in mind that everyone’s situation is unique, more info, such as a Financial Needs Analysis would help to clear up some of the questions..

  380. Richard,

    Why are you paying your girlfriend’s bills? If you simply make her pay her own way, you would have enough money.

    If you feel the need to throw money away, feel free to send your extra $440 this way. I could put it to good use.

  381. Sell the house. Everything else is either paying for necessary/important things, but the mortgage is really a millstone around your neck. You could save all the money you’re spending on it to buy a house outright in the near future, or better yet, rent something really nice for less money, and sock away the difference for more diversified investments that will earn you more money for a bigger better house later – like when you turn 80 and actually need a place to live permanently.
    I also agree about the emergency fund. If you have enough saved to cover a year, you really don’t need to pour more money into that fund, and insurance should cover any unforeseen expenses beyond that.

  382. The problem is clearly identified as excessive spending.
    The question is: “How should this guy manage his monthly expenses?”
    The solution is: He shouldn’t “manage” his spending, he should CONTROL his spending. That means hard limits on spending. He’s not suffering from an income crisis, so the solution isn’t earning more money (it won’t help this guy because he’ll just spend even more).

    Recommendations:
    1) Setup automatic payments for most of your bills. Pay these items in advance and on the day you get paid. Most likely, you are paid every two weeks. Pay half of your mortgage every two weeks. Pay half your utilities every two weeks. If you can match two separate bills that are roughly the same amount but fall in different pay periods–fine, pay those monthly. Transfer money to IRA or savings or whatever every two weeks. The objective is to start every pay period with only “spending money.” If you’ve got it all balanced out, then every pay period will leave you with effectively the same amount of spending money (to be used for foot, general merchandise, etc.)

    2.) ONLY SPEND WHAT YOU HAVE. This means cash or debit card for 95% of your purchases. After you’ve paid the bills, it doesn’t really matter on who or what you spend your money on. Hookers, Drugs, Your Girlfriends, Nigerian Scams. Frankly, IT DOESN’T MATTER. What matters is that you only spend what you have. I’m guessing you’ll run out of money for the first 1 or 2 pay periods. You’ll be irritated. You’ll be watching that bank account, wishing you hadn’t bought that stupid ___________ because, in actuality, you didn’t need that RIGHT NOW.

  383. I see a lot of people suggesting to drop the gf payments. At least someone mentioned that maybe his gf might not be able to work. Besides, like May mentioned here before me. It’s a personal choice if he loves her that much.
    Other suggestions from people are Earn1K, but again, won’t he spend that too?

    So my suggestion to him would be:
    Look into the psychology of your spending. What do you really need? Why do you spend it?

    Also I noticed that people of our generation tend to loose track of their spendings because who pays in cash? Most people use creditcards or place their order via webshops. Spending money is just too easy if you can’t control your urge to buy things. Because some people just literally buy their happiness that way. They feel the need to buy something, and by doing so, it makes them feel happy.

    So be honest with yourself and look into the reasons why you buy and spend your money. Because you need to? Or because you want to?

    • I strongly disagree with the cash vs. credit in regards to tracking spending. I rarely use cash, but when I do – I WILL lose track of it.

      Perfect example: I had $25 cash last week; I have $6 cash now. I have no idea what I spent the $19 on! If I had used a credit card on those purchases, I would be able to look at my credit card statement and figure it out.

      And no, it’s not worth keeping every little receipt for small cash transactions (for me).

  384. Richard is more than likely spending more than he has listed on incidentals. $2 here, $5 there. It’s time to go back and look at where the extra money not accounted for in his list is going.

    Cell phone bills for instance are not static and can fluctuate especially if your not on an unlimited plan. He’s obviously spending $25K somewhere that’s not in this list.

  385. He’s actually doing pretty well. But with an income of only $90K a year, he has to give up the gold-digger and find a self-supporting girlfriend/partner/wife/mate.

  386. Yeah – When I saw this email I knew there would be several comments about the $600 spent on the girlfriend.

    I wasn’t going to respond because pointing out the obvious seemed like falling into some sort of trap. We were asked to be the expert here, but it doesn’t take an expert to point out that maybe $600 on the girl friend is too much.

    I don’t really have any expert suggestions for this guy.

  387. So, Ramit, what are your thoughts?

  388. Get rid of the car, and pay cash for a decent 10 year old vehicle. Now that you own a vehicle outright, just get liability insurance. Then, sell off the house and downsize. If you’re paying 1400 bucks a month for a house, surely you can find a decent place you can buy with either a low mortgage or none at all. Then, quit paying for the girlfriend. By this point, you should have about 1000 in excess every month. Also, do you really need a vacation every month, or are you just saving up for one? I mean really, if you’re 140 under every month, you need to be working instead of loafing.

  389. Hi Richard. Allocating your money has made it easy for you to keep track of your spending but you need to have a talk with your girlfriend. My guess is she’s probably spending way over her income can provide for her. In that case, why not have a talk with her? Why not show her what you’re doing so she knows how to handle her money? While you’re at it, you can take baby steps in reducing you’re payments for her bills ($100/mo.). I’m guessing that this is a serious relationship so talking about money should be important to both of you.

    On a side note, there’s way too much money being allocated to your emergency fund.Shaving off $100 won’t hurt.

  390. When I first read this I was busy trying to figure out what “gf” was. It never crossed my mind that he was paying his girlfriends bills. I find that mind blowing.

  391. Richard needs to stop fretting the small things in life. The 600 to girlfriend and 900 to reserves suggest an excess of worry and a lack of creatively developing himself. Of that 1500, he could get pretty excited by actively investing this to putting in incremental steps to developing his own business – to create a growable and fun top-line for himself instead of living to small numbers determined by someone else. And as his own state of mind grows, coaching his girlfriend to be accountable to herself financially.

  392. I’m not going to tell you what to do. But I will tell you that I make just about what you do from salary and my savings picture looks quite a bit different. My wife and I split the bills very loosely based on our incomes (we have separate finances) and I save about 1k a month from my salary (I also max my 401k and Roth). That $1k a month goes toward fun like you, as well as saving for a rainy day, Christmas, car stuff, home stuff, etc. It spreads thin when viewed in bi-weekly deposits, but when automated, adds up nicely over time.

    I don’t feel there is much I can “cut back” on, even with a high 90′s salary. Well, maybe selling my house (my mortgage is higher than yours). But I like where I live, so why “save money” and live in a place I hate? You know how it is. So I do freelancing on the side and pull in at least $1k a month from that. This month I’m on a major project and billable hours already stand above $5k. That’s where the real play money comes from.

    Good luck!

  393. Hi Richard,

    Here are my suggestions:

    1. Renegotiate all your current bills. Do this every 6 months.

    2. Cap your emergency fund. Once you have 3-6 months, stop. Reallocate that $500 towards other obligations.

    3. You’re saving too much. Reduce your 401(k) contributions to $1,000/month. This alone would cover the deficit. Increase it as you get raises.

    4. Earn a little extra (freelance, overtime, project) to pay for one bill a month. Each month I try to make enough on the side to cover my phone bill.

    5. Paying your girlfriend’s bills is a personal choice so I won’t comment on them.

    Best of luck,

    Bob

  394. Guessing you can reduce all of these if needed, though let’s prioritize.

    But, first let’s address some psychology of spending – only spend what you can afford and on what’s necessary. Real quick, if you’re under water, then you don’t need the $240 on vacation, the $500 on emergency fund (where is this going, btw; hopefully earning interest), and most importantly the gf bills.

    You should also probably see about getting a raise with some of Ramit’s techniques to cover this. And read his book to help with cost cutting, though revenue likely more important.

    Separately, if your girl can talk you into paying for her expenses, then perhaps you could convince her to talk her employer into giving her a raise to cover her costs (or use those skills to get a job if she doesn’t have one). To be frank, even if she’s got you by the balls by simply being pretty, that can pay well in certain fields, too. I know gals who get paid to sit in bars or restaurants and just look good (outside of what some dirty minds may have just come up with for jobs), if she doesn’t have other skills, though I’m guessing she does.

    So Priorities (WAY TOO LONG HERE SO MOST PEOPLE CAN STOP READING AS GUESSING MOST HAS BEEN SAID):
    1) GF. Obvious. Everyone’s mentioned. Solves this whole thing. That # is not going down unless you draw the line. Given she’s probably high maintenance, that # is likely going drastically higher down the road, including if you get married. Kindly point out that you can’t afford to keep paying for her bills, or at least need to reduce it. Her cell; her car, her ins, her med. She needs to support herself. If she balks, then she’s not really that into you, but more your money. Suggest you practice with a female friend/relative first if you really like her.
    2) Mortgage – highest # on here. I don’t recall how Ramit would handle so will let others address. Seems reasonable # though.
    3) Water/gas/electric – where do you live that you spend that much? I have friends who’ve gotten their bills down to 10% of yours or less. Turn off some lights, take shorter showers, buy some $5 timers to turn things off. Unplug when you go on these lavish vacations.
    4) Vacation fund of $240 is probably too much. That’s a massive vaca. But then again, you’re probably paying for your gf.
    5) Car insurance is probably easy to reduce given competition.
    6) Car Payment: probably fine but you can definitely get a cheaper used car that works fine.
    7) Spending cash – could easily find the $ here. Guessing this is food, drink, entertainment, clothing? Go out with the gal 1 night less per month. Or review what your meals are. Switch to having a quick shot at home and 1 fewer drink out per night out.
    8) $80 per month in gifts? For the girlfriend again? Sensing a theme here. Seriously. Whipped.
    9) Emergency fund of $500 seems rather aggressive. Why do you need all this? Yet another simple solution.
    10) Roth is likely worth maxing so let’s not touch.
    11) Guessing there are plenty of expenses you haven’t included here unfortunately.

    So in sum, where can you NOT find $140/month and why’d you waste Ramit’s and our time. Almost every area can you find an extra $140/month. Not including asking for a raise. Nor including stay within your means. Good luck. Pretty nice problems to have when you think about it.

  395. Has it occured to anyone besides me that answer to the mystery of the missing grocery bill and the high GF expenses are one in the same?

    Maybe they’re living together and she’s picking up groceries, health insurance, and some of the other “missing” items, while he’s covering what he’s laid out here.

    I don’t *know* that, of course, but it’s a question worth asking, because it means we’re looking at only half a household.

    Be interesting to see what Ramit says when he finally weighs in on this one. My guess: We’re going to get told our collective analytic skills suck….

    • “Be interesting to see what Ramit says when he finally weighs in on this one. My guess: We’re going to get told our collective analytic skills suck….”

      lol. right. he’s gonna school us all.

  396. There is some financial vagueness in the email. How much does he earn per month after the 401K deduction and taxes? My guess was 4625 per month (90,000/12 – 30% taxes – 7500 for 401k after the tax break). The bills totaled up to 4480.
    Emergency fund target?
    Also inflation wasn’t considered. He hasn’t changed his lifestyle, but every year 2-4% of his expenses have increased– during this last recession employers have been using the economy as an excuse not to give cost of living increases. So it’s possible that his income hasn’t increased in direct proportion to his spending.

    I agree with most:
    1) His car insurance is too high
    2) He’s spending too much money on the girlfriend

  397. Apologies if there is a UK slant on these comments!

    Main Prinicipals

    - I’m assuming that anything you have listed as a monthly cost is an actual monthly payment (rather than a lump sum you’ve allocated over 12 months). Anything which is being paid monthly and charged interest on (e.g. car payment, car insurance, and some extent your mortgage) you should consider settling in one go asap using your savings first and then interest free or low interest credit cards and loans. The interest benefit you receive on your savings is heavily offset by the interest charged on these financial arrangements!

    - You say you’re living the same lifestyle you as when you were making $50k/yr, so I’ve assumed you don’t want to reduce the amount spent on car, holidays, spending money or your size of house, though obviously these are all options.

    Specifics

    - Car Payment – 300 – assuming you are actually paying for your car monthly through some kind of financial arrangement with interest, settle it using IRA/emergency/holiday cash. After that, consider taking out a 12-18 month interest free credit card if you can’t make the payment for a car at the time of purchase, and just make sure you can complete the payments before the interest kicks in.

    - Mortgage – 1400 – this is a difficult one to gauge, as there could be penalties for paying off early, but the large amount of money you have in the emergency/IRA/vacation pot could significantly reduce the payments you make each month. Plus, if you put these savings into the house, they are not lost (it is unlikely, though admittedly not impossible, that you would lose money on your house). There is an argument to consider renting over owning if you have the entrepeneurial spirit (and given you are an IWT reader I’d assume you are), but that’s another story.

    - Car insurance – 260 – as above, consider paying this off in one go using IRA/emergency/vacation funds rather than paying the high interest rates for monthly payments, as it is ALWAYS more expensive to pay monthly. This seems quite expensive at circa $3k per year (if you automatically renew each year then don’t, shop around), but obviously depends on your car size and history. Consider a 12-18mth interest free credit card or even low interest loan to pay off in future if you can’t pay the lump sum.

    - Utilities – 230 – scrabbling for spare change here, but you could use comparison and cashback sites to reduce this if you haven’t already.

    - Misc expensese – 70 – again, small beans, but if you called netflix and asked to cancel they would probably give you a 3 month payment holiday.

    - GF bills – 600 – as above, anything monthly try to make a one off payment, and shop around, ask for phone deals at renewal.

    - IRA – 400 – covered this already really, but use to pay off debts and consider putting the remainder into your mortgage to reduce those payments.

    - Emergency fund – 500 – I’m not sure what your rationale is for the emergency fund, but at $500/mth it’s pretty large. I would combine it with the IRA to pay off any other debts in one go, and the rest into your mortgage. You could consider your house your emergency fund, savings and retirement all in one (or, given the site we’re on, consider putting your money into some kind of business venture).

    - Vacation – 240 – Consider paying for the vacation on an interest free credit card if you can (I know I’ve made reference to a few of these!), as you’re not making any interest on the money you put aside. Look at how you purchase too, consider separate flight/hotel rather than package deals.

    - Gifts – 80 – as above, you’re not making any interest on this saving, consider just buying as and when they’re needed. Plus this gives you a set budget for each event, rather than just a large pot of money (which I imagine gets rinsed each Christmas).

    - Spending cash – 400 – this is actually quite low! Hopefully the changes above would increase the amount of ready cash you could spend, as I’m assuming this includes clothes, going out, food etc.

    I’m sure some people will question the amount you are paying towards your gfs’ bills, but given that A. it’s none of our damn business, B. if you were married no-one would question it (and it could well be a long term relationship on the verge of marriage) and C. if you earn significantly more money than her, there’s no reason you shouldn’t be covering these bills, I’ve left this one well alone.

  398. look up on youtube: slimm thug heard of that …and listen very closely.

    this song will solve your financial woes.

  399. Rather than saving, has this guy asked for a raise recently? If he gets just a 5% raise, problem solved. There’s always a limit to what we can save, but not to what we can earn.

    We can’t make assumptions about the girlfriend (unemployed? in school?) and I assume he doesn’t want to dump here, so adjusting that is off the table.

    I’d renegotiate any reoccurring monthly bill (cell, car ins, etc). This may be a small victory, but it’ll then be an easy, automatic savings every month.

    If all this didn’t fix it, I’d just cut the emergency fund in half. His lifestyle remains the same, and we’ve found the extra money that he wants to apply to whatever.

  400. Easy- get a raise. $140 a month over? Seriously? How about an extra $1400/month instead? I’d say that’s a “win” over cutting back somewhere else any day.
    You already have a good foundation for the extra income, and it might cure the ‘poor man’ mentality you have…. (“rich people” things? Reeeeaally?)

    Everyone here…. loosen up!

  401. Take half of your saving each month and work to pay off the car. Then lower the insurance premium. Sign up for mint.com to better track all expenses, and for heavens sake don’t marry the girlfriend. Nothing against girlfriend…marriage isn’t such a great idea any

  402. In my (quick) perusal of the comments there was a lot of talk about how to slash current bills (the car & girlfriend bills getting the most suggestions). However I agree with the “asker” that isn’t the issue. His bills are a little over $4000 a month (actually $53,760 a year), he should be in the 28% tax bracket but even bumping that up to 33% (to help account for the 401k) that brings in an accounted for amount of $71,500; he maxes out the Roth IRA so that’s another $6000? Still $12,500 under his $90,000 and an additional $1680 to account for the overage. In other words there’s a missing $14,180 a year from this guy’s idea of what he spends.

    That’s the question that has to be answered: where is that extra $14,000+ being spent? What is actually different about his lifestyle now than when he was making $50k a year? When he says his lifestyle isn’t different he seems to be referring to his set expenses, his bills (which he delineated here). Are his clothes more expensive now? Does he go out more? Does he now eat the appetizers and drinks and dessert? Have vacations gotten high because “I deserve it, I’m on vacation”? He’s looking for about $1100 a month that’s unaccounted for. After finding that he can decide how important those expenditures are to him – is it worth it decrease some of his set bills (as suggested) to have more money to spend on these non-necessities? Or can these fun things just be dropped?

    So pull out your statements, or drop the information into mint (which usually can access the last 3 months of data), and look at what all of the non-bills is actually being spent on. The hard part is picking how much should be spent on these things AND THEN sticking to it. More on that…if asked.

  403. First, order your spending, from top to bottom, as follows:

    mortgage – 1400
    gf bills – 600 (car, ins, medical, etc)
    emergency fund – 500
    roth ira – 400
    spending cash – 400
    car payment – 300
    car ins – 260
    vacation – 240
    water/elec/gas – 230
    gifts – 80

    My assumption is that you are not going to sell your house or break up with your girlfriend over $140/mo.

    My next question is why are you saving so much money at the same time you are going $140/mo over budget? $500 emergency fund + $400 roth ira + $400
    spending cash is a lot of money each month. You should continue to max out your Roth (for tax reasons), but you can cut $140 from the other two items and apply it to your deficit, for the time being.

  404. First – this budget is incomplete. These numbers total $4400/month, or 52,920 annually. You have left something out, something HUGE. (I don’t see groceries, do you not eat at home?) Are you paying down a massivr credit card debt? Student loans? Have a raging coke problem? If you make $90,000 like you say even after taxes there should still be tens of thousands of dollars a year laying around somewhere outside the equation you have provided.

    Try tracking EVERY DOLLAR you spend for one month, I suspect you are going to find you aren’t really spending what you think you are on these things.

    Second – gf bills? Seriously? I hope she cooks, cleans, does laundry and washes your car to earn this little stipend from you.

  405. I wasn’t going to comment, but in browsing through the comments no one has yet mentioned the first thing that jumped out at me about this email. It is this line:

    “I MAKE $90 fucking thousand a year (pretax of course). How am I spending more than that a month? I just don’t understand.”

    What that line tells me is that psychologically this gentleman thinks he’s making a lot of money. Unfortunately “a lot of money” is a very relative term. As soon as our minds flip the switch to thinking “I’m making a lot of money” we begin spending as though we are making “a lot of money.”

    He insists that his lifestyle has not changed much since he was making 50K a year (and presumably living within his income at that point?) Therefore, in his mind, “nothing has changed.” The only thing that has changed is his perspective toward his income.

    The entire tone of this email suggests he believes it is unfathomable that he could spend all that money! Of course, money is easy to spend, and if you think there’s no way you could spend all of it, you’re likely to make choices that will result in a lot of outflow.

    I won’t comment on the details as many others have pointed out – an incomplete list of expenses being the most obvious. And in nearly any budget there are lots of places you can cut costs if you have to. But often the numbers themselves aren’t the problem – it’s the attitude toward money that’s the issue.

    If this gentleman really wants to answer the question, “How am I spending more than that a month?” (which he asks in the message) then the only way to answer it is to buckle down, do the work and track expenses. Track ALL the expenses. See where the money is going. Of course, that’s going to take some work.

    However, I suspect “How am I spending more than that a month?” is not the real question. The real question is, “How do I get back to not spending more than I’m making.”

    I’d suggest there’s a simpler way to bring your outflow back to being less than your inflow. Start telling yourself that the 90k a year is NOT that much money. (And obviously it isn’t, if you’re spending more than that.) I’d suggest that a change in the perspective toward that amount of money would bring the spending back under control.

    If you’re the kind of person who likes to dig into looking at all your expenses, then by all means, track them, find them, and nitpick the categories where you can spend less. (And there are lots of suggestions in the comments above on how to do exactly that.)

    If you’re not so much into doing all that tracking, consider that, from what you see, the only thing that has changed between when you made 50k a year and now is your perspective on your income. Perhaps its time to try and shift that perspective again.

    Smiles,
    Laura

  406. Overall there is opportunity to save at least a few hundred dollars a month and up to $1000/month.

    The areas that seem worth the time are the car insurance, the mortgage (depending on your current rate), gf expenses and maybe the utilities.

    Also, you are saving $500/month, which is a pretty decent amount of savings. I don’t know your target emergency fund, but it would be an area to direct into more savings/investment once you have your emergency fund at your desired level.

    For ease of reading, here’s the list with my inline comments:

    car payment – 300

    Not too high, but hopefully you drive this car for years after it’s paid off and have a low interest rate (<5-6%)

    mortgage – 1400
    This is fairly high, but depends on the area of the country and city

    car ins – 260
    This seems quite high, unless you are driving a fairly fancy car and/or are under 25 years old. It should be possible to get auto insurance for < $100/month, unless you have exceptions (tickets, younger, sports car)

    water/elec/gas – 230
    This is also a bit high, but if this includes cable and internet, then it is probably typical, even it there is $100+/month on the cable+internet

    misc expenses (netflix, gf cell etc) – 70
    This is probably reasonable

    gf bills – 600 (car, ins, medical, etc)
    This seems like a lot to me, but is a personal decision.

    roth ira – 400

    emergency fund – 500

    vacation – 240
    gifts – 80

    spending cash – 400
    This could be an area to reduce, but really depends on your preferences. If this mostly dinner and drinks and your preferred area of discretionary income, then it may be OK.

    Jake

  407. When you make good money, save, not live in excess and still come up short at the end of the month, you are NOT being honest about how much you spend and where you spend it. The red flags: left out expenses like food and the comment “I don’t look at the numbers very often.” If Richard takes the advice left in other comments to track his spending for a few months and check in on those numbers, the $150 over budget will cease to be mystery and he will be empowered to do something about it.

  408. Now that there are so many answers from experts, I think he should sit down, go through them and LEARN ( it is about time;) ) to manage his own income/ budget/ expenses etc. :D

  409. 1) Tell your girlfriend that you BOTH need to cut back,
    by $140.
    2) Start paying for things in cash. I’m talking walking around stuff that you don’t even know that you do. Paying in cash won’t lie.
    3) I’m not sure why you give your girlfriend $670 per month but you are not being honest with her and with yourself to think that you can continue to afford it. You are also not giving her a chance to be proud of herself; to earn enough to pay her expenses; to learn by her mistakes; to learn to economize. It’s a false kindness.

  410. if she really loves you,, she can see your situation… i don’t think she want you to pay for all her bills. you should negotiate with her talk heart to heart. join account for your monthly expenses ( hers+ yours) . do not spend your money for unnecessary things such as vacation or gift. cook at home can save much more than eat outside.

  411. Richard,

    you are building wealth, you seem to be enjoying life, you have a “false” negative cash flow (since your are putting more than enough aside in your emergency fund. I say leave things as they are because the slight negative cash flow keeps you aware of spending which keeps you from being completely frivolous with your money. You keep doing this and by 55 you’ll be able to retire.

  412. I think the expenses look ok, but the total outflow only adds up to $4,480 per month. If you are making $90,000 a year, your monthly gross is about $7,500. It sounds to me like you are withholding too much in taxes. Possibly changing that amount so you don’t get a big refund could offset the monthly overspend.

  413. STOP PAYING YOUR GIRLFRIEND SHIT!!!! UGH..im a female myself and im very independent and i prefer to pay for my own.

  414. Richard,
    You have to realize that your monthly bills listed add up to 4480 a month, then you have the 401K contribution, groceries, gas for the car as well as trash bill from home and depending on where you live a sewer bill, as well as a cell phone, home phone or internet bill none of those are even listed. Even though your income is 90K before taxes that only adds up to around 5000 per month.. then when you take off all the listed bills of 4480 well that doesn’t leave much. Seems to me that you may need to reevaluate your spending for your GF, she should be able to support her own self and you just pay for the dates you go on, and maybe you could save money by not putting in so much towards retirement. We as human are not going to live forever, and should trust that God is going to provide for us, as he does the animals of the kingdom. Amen

  415. Here is my plan. First, how much is left in car debt? If your emergency fund already has 3-6 months of expenses in it I would redirect emergency monthly toward the car payment, cutting back on everything I could handle going without until the car is paid off. Then I would reset the budget setting aside $150 toward the next car/ car repairs and the $140 over would just be part of the budget. In the meantime is there something that you and the girlfriend could do together as a bonding/moneymaking thing. If you are doing something like writing/illustrating books together then you could cut back netflicks and movies out and you could be too busy to notice.

  416. Beside the Girlfriend spending… (which would be your Conscious spending; paying your gf’s bills is between you and her.)
    How much is exactly in your Emergency fund? From the numbers it seems as though he’s putting $500 in there each month, after doing that for a year that’s $6,000 a nice chunk of change that would cover the usual emergency ( ie car breaking down, funeral plane ticket, hospital bill/co-pay etc). I think if you have at least 3 months salary saved in your emergency fund then you can stop putting $500 in each month. Slow the emergency fund deposit down by only adding $250 a month ( which would automatically make up the $140 difference) and or move that emergency fund to a high interest savings account so those funds are working for you instead of against you. That way even though you are putting in less money the emergency fund is still gaining the interest as an off set.
    lastly, where’s the gas money? does it fall in with misc. expense, gf’s bills and or your spending cash? I ask because people usually don’t have gas in their budget its a hidden cost but with prices going up as they have you might want to monitor it’s effect on your budget items esp. the gf’s bills.

  417. I agree with the other comments about paying the girlfriend’s bills…ixne the bill pay. I also think the combination of his car payment and insurance is really high. Maybe he should get out of that Land Rover/BMW lease and drive a Passat. Also, if the emergency fund already has six months of HIS living expenses (again, forget about the girlfriend) he does not have to continue to fund that one.

  418. First off, if the guy is actually maxing out a Roth AND a 401k, in addition to $500 towards an emergency fund, he is SAVING about $2,500 a month. Which is awesome. He’s doing just fine, and if he keeps it up will be able to retire in 25 years a fairly wealthy man. I think the main question for him is to look at how to allocate the remainder of his monthly income. I get the feeling he may not be spending his money in alignment with his priorities, which is why he thinks there should be “more” left over. 90K is an extremely comfortable salary for a single person, even at his savings rate. But if you don’t pay attention to how and where you spend money, it just goes into a black hole and you end up wondering what you got for it. He just needs to think about and identify where his spending priorities really are and adjust his spending accordingly. For example, I notice that a lot of cash is going towards cars. Close to $1,000 for both him and his gf. I would think it could be fairly painless to figure a way to cut that down. Negotiate better insurance rates, sell one or both cars and buy cheaper ones for cash, drive less, sell one car and ride a bike. But maybe he’s really into his car (and his gf is really attached to her car). Where else could he cut back without feeling deprived? Would a condo be a better option? Would renting vs. owning be a better way to allocate cash at this point in his life? He assumes that because he makes $90k a year and has a fairly simple lifestyle, that he doesn’t need to worry about where he is spending money. And he doesn’t, really, I think he would be quite a bit more satisfied if he did think about it.

  419. Mortgage rates are at an all time low – refinance. Not enough information to determine how much Richard A. would save, but it might be the entire $140 shortfall.

    Depending on the community where Richard lives and his house situation, rent out the garage or a room, assuming Richard has room, lives alone, doesn’t need the space & GF doesn’t mind.

    Shop around for car insurance. $260 per month seems high. If the car is old, get rid of comprehensive coverage & increase the deductible. Do the same for GF’s car. See if it’s possible to get coverage for both him & GF with the same carrier for multiple car discount, assuming each have good driving records. If marriage is an option, get married and use one auto carrier. Do the same with health insurance – if Richard’s girlfriend has a medical plan, determine which one is better and enroll in that plan either as husband and wife or if available in Richard’s state, under the domestic partnership law.

    Use some of the emergency fund set aside for health expenses & contribute to a Health Savings Account. Such a contribution reduces Richard’s taxable income & therefore federal tax (some states too, but not all). A tax refund could eat into that shortfall.

    Turn off vampire appliances and switch to compact florescent bulbs to reduce energy expense. Every little bit counts.

    Shop around for a better cell plan, e.g., a family plan might save money for Richard & his girlfriend or switch to a prepaid phone if no cell phone contract to worry about. Consider getting rid of the land line – if Richard has one and cell reception is good.

    Get rid of or reduce Netflix plan to just streaming or just 1 or 2 DVDs per month. Also, get rid of or reduce the cable plan, e.g., keep one premium channel like HBO & get rid of the rest. Consider getting an antennae that can pick up HD signals & use Apple TV or roku or your computer instead of cable or satellite. Call your cable or satellite provider & see if there are promotions. Do the same for your DSL or internet provider. I’ve received $20 off of my $40 DSL line for a year through such a promotion.

    Cancel your magazine & newspaper subscriptions & use online sources, most of which are free (for the present time).

    Cancel anything else you aren’t using like health club memberships.

    Use a reward credit card instead of spending cash, then use the rewards for some or all of the items on Richard’s list of expenses such as vacations or gifts (e.g., Amazon) but be sure to pay the balance off in full each month.

  420. His expenses have doubled coz of the girl friend….why is he paying for her stuff and whinning?

  421. Now I see why you asked your readers to respond to his problem instead of you because you realized how pathetic of an email it really was and didn’t want to waste your time. Basically he’s a liar whether purposefully or not, his lifestyle has changed and he doesn’t know where any of his money is going other than retirement. Maxing out his retirement and 401k yet living above a 90k/yr income, what a joke. This isn’t worth my time nor yours either.

  422. I have not read the other comments so I may be repeating the same. Something is missing from the picture, montly expenses would be about 55,000 a year, HUGE chunk of money that we have no idea where’s going. Car insurance high, GF bills?? mmm, need more info on that. 80 on gifts?? He asks for help but does not provide complete info. 400 spending cash on what?? Food, bars, movies??
    blaaaaaaaaaaaaaaaahhhhhhhhhhh

  423. If he is really committed to his girlfriend then he might want to think about making it official and making her his wife. If he is contributing the max to his 401k ($17,000 in 2012), and if she has no income (an assumption made based on the fact he is covering her bills), then this will have a major effect on his taxes. Using 2011 rates, I get the following.

    1) Tax for him as a single person:

    73,000 income – 5800 standard deduction for single filer – 3700 exemption = 63500 taxable income
    Tax = $11,994 for single filer

    2) Tax for them as a couple:

    73,000 income – 11,600 standard deduction for married filing jointly – 7400 exemptions for both of them = 54,000 taxable income

    Tax = $7254 for married filing jointly

    They could potentially save $4740 in taxes a year by making the trip to the courthouse. Call me instrumental, but my DH and I got married on New Year’s Eve 1996 primarily because I pencilled out our taxes and figured we would save about $4000 if we got it taken care of before the ball dropped in Times Square. We were in grad school and that was no small chunk of change! We’d already gotten the license a couple of weeks before Christmas, but rushed to make an appointment with a judge. Huge snowstorm hit a few days before, but we made it and my mom, my sister and a grad school friend and her husband managed to brave the icy roads and came to witness. 15 years, 2 kids, 2 solid careers and a substantial networth later, we are still happily together. I had been helping support my partner in the year leading up to us getting married, and continued to do so for the next 2+ years until we finished grad school and started working (I had better grants than he did). He supported me/us when I went part time for awhile after the birth of our second child, and again when I decided to resign from a position that was making me very unhappy without a proper job lined up. Other people looking at the situation from the outside might have thought he was taking advantage of me/me of him, but we knew this was part of the long-term strategy that was in both of our best interests and would lead us both to better things. Maybe Richard and his partner would benefit from formalizing their partnership in the legal sense — only they can say, but just wanted to put in a plug for the potential tax savings!

    Figuring out where the money is going is crucial, though. We track our spending pretty religiously, and it has been instrumental in our financial success.

    73,000 -

  424. The biggest problem I see is that he is paying for his girlfriend’s expenses. Why can’t she pay her own? If this is a serious relationship and he feels he needs to pay them then he needs to have her contribute to the monthly expenses. Also, why is there such a high amount for vacation per month? If necessary, he can look into refinancing his mortgage if that is to high. Maybe it could lower the amount some. Maybe lower the emergency fund, limit the gift expenses and look into what is spending cash is purchasing. He needs to realize that taxes are going to take a big chunk of his paychecks so when he was making less he wasn’t paying as much in to the taxes. Is he the type of man that feels he needs to support his lady? If so, he needs to rethink that as his financial life can be more comfortable if he would allow her to contribute. He makes a good salary and does sound like he has a good life. He just needs to get his priorities right. There are a lot of us out here that would love to have these kinds of issues (with exception to the paying of the girlfriend’s expenses.

  425. I will take 2 steps.

    Identify one expense I could really do without.
    # car expense
    # minimize girlfriend expenses. Since he has been paying for her most of the time, the best he can do is to cut back on some.

    Step 2: Increase income.
    Do freelance gig or probably sign up for e$1k.
    Instead of putting in $500 in emergency cash every month, consider alternative investments such as REIts or stocks that give quarterly dividend income.

    Control cash flowing out.Increase cash flow coming in.

  426. Step 1: You doubled your income, but your lifestyle hasn’t changed.

    Sorry dude, calling bullshit on that one. Consider how that job changed things. Did you move? Did you go from renting to mortgage? Did you start supporting your girlfriend? These are all things that change how much you are spending.

    The first thing I would do, is look at your girlfriends bills and your own, and see if you can combine them for a discount. Talk to your cellphone provider, and see if you can save some money by switching to a family plan.

    Secondly, you can negotiate down that insurance for your car. Shop around, look at what you are actually paying for, and do some math. I can almost guarantee that you are either over-insuring, or your insurance company is taking advantage of your natural laziness.

    Also, while your emergency fund is great, you’re defeating the purpose if you are falling short every month. After doing what you can to reduce bills, consider reducing the investments into this fund slightly, so your emergency fund does not CAUSE an emergency.

    Finally, look to make a bit of extra money on the side. If you are pulling in 90k, chances are you have some synergistic skills. I’m a sysadmin, and I make a little extra going to peoples houses, cleaning up viruses and helping them set up backups. If you are, say, an accountant, see if you can tutor a kid a few nights a week. Its not a lot of extra time lost, but it can easily give you that bit extra you need to keep living the way you enjoy living.

  427. Where are groceries here? What does this guy eat? Yes, he spends $400 per month going out but if he didn’t do that he would not eat. I live in NYC and spend that much in a week going out. I actually think based on all his savings he is doing pretty well, much better than most. I make $120K a year and am single without a car and don’t save that much. Perhaps I need to look at my own budget.

  428. I am really late here, but first thing I thought was why (wtf) is this guy spending money on his girlfriend’s sh!t?? 600+ dollars?? are you kidding me?!! god knows what else he’s paying for on a DAILY basis for her that he isn’t realizing is adding up.

  429. Dude, tell your gf to pay her own bills for starters.

    Also, what do you eat? I see nothing for grocery or even dining out…

  430. Unless there is some extreme extenuating circumstance (illness/ disability, job loss but seeking, etc), I see absolutely no reason why this guy should be paying any of his girlfriend’s bills. She is presumably a big girl and capable of taking care of herself. If they are living together, then she should be paying at least some of the expenses of their shared abode (part of the mortgage, part of the utilities, something along those lines at least) and taking responsibility for keeping her expenses within the limits of her own spending situation. Sounds like this guy needs to spend a month tracking every dollar that comes in and goes out of his pockets. It’s a pain in the you-know-what to do this the very first time but then it’s effortless after that, and any leaks in your budget become immediately apparent.