Adjust These Areas of Your Budget Immediately

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There was an article posted recently on how a couple feels like they are scraping by on $500k. I am not sure you can put (or should put) scraping by and $500k in the same sentence but apparently that is the case for some people. The couple does live in NYC and I get that the cost of living is extremely high, but after reviewing their budget, there are areas of the budget that clearly need to be adjusted. These might be areas you need to adjust as well:

Vacations

This family of 4 budget $18,000 for 3 vacations a year. Let’s say each vacation is the same cost so that is $6k a vacation ( $1,500/person). First, I would love to know where they are going 3 times a year and if they can adopt me. In all seriousness that is A LOT to spend on vacations. Second, clearly they do NOT need to spend that much on vacations.

  1. Limit Your Vacations: Just think if they took one vacation for $6k they would instantly save $12k a year. They also could take three $2,000-$3,000 vacations and still save $9,000-$12,000 a year. I just looked up flights for 2 adults 2 kids for a random week in August from NY to Orlando and the total was $1,400. You could easily keep that trip to $3,000 (hotel/food) or find somewhere even cheaper.
  2. Road Trips: road trips can be stressful but with proper planning (and food/activities for kids) they can be fun and a lot cheaper. For this family, who has 2 cars, it seems like a great option.
  3. Staycations: You can stay local for spring break or long weekends. Check out my post 7 local things to do to find ways to save money.

The point is vacations don’t need to be overly expensive. There are plenty of local things to do or budget trips.

Children’s Extracurricular Activities

This family budgets $12,000 a year for children’s lessons (sports, piano, violin, academics). That is $6,000 per child. If your child is involved in many sports or has tutors that can add up quickly. There are still ways to save on extracurricular activities.

  1. Hire a Student Tutor (High School/College)

If your child needs a tutor (I had them in high school and college) it will be cheaper to hire a high school student or a college student who knows the subject. The two websites I have used in the past to find tutoring and childcare jobs are Wyzant and Care.com. Both have great reviews and you can find students or recent grads who meet your needs at a reasonable cost. Both are extremely reputable sites and you can also run background checks.

  1. Choose 1-2 Activities a Year

Instead of having your child play 4 sports, take art classes, and play 2 instruments, have them choose 1-2 activities that they want to be involved in. This will help cut costs and prioritizes their time. If they don’t like those activities they can finish the year/season and try different ones the next year. It is important they know they cannot just switch whenever they want (can’t just quit) but they can change their minds after the year/season is over.

Car Payment

They spend $9,600 a year on car payments for a BMW 5 Series and a Toyota Land Cruiser. For this family, as well as yours, there are 2 important questions you need to answer.

  1. Do You Need a Car?
  2. Buy a Used Car

This family lives in NYC where the public transportation is amazing. Do they really need 2 cars? Do they even need 1 car? I think they could very easily get rid of both cars. I have friends who live in NYC and do not have a car. They just rely on public transportation (subway, train, bus) to get around. If you decide you do need a car, PLEASE buy a used car. I do not think a family living in NYC who drives rarely needs a BMW (but that is just my opinion). If you decide you do need a car, at least look into renegotiating your car insurance. If you haven’t called recently to get better pricing do that now. You might be able to save some money with very minimal effort!

Date Nights 

Date nights are so important for any relationship but you can do it on a budget. If you are on a tight budget instead of having multiple date nights a month have 1 night out a month. Find a local babysitter or see if a friend/family will watch your kids for the night.

If your schedules are opposite then make sure you set aside some time each month. For example, my boyfriend works second shift and I work 8-5 so our schedules are opposite. A few times a month I bring leftovers to his work and we eat dinner together in my car. It’s not fancy but we get to catch up and spend time together.

Student Loan Payments

My guess is they are not on an aggressive payoff plan if they are planning on paying for 10-20 years. If they didn’t go on vacations for 2 years that would be $36,000 straight to their loans! That gets rid of over a year of loan payments. If they got rid of their cars that is also an extra $9,600 to student loans. Maybe they don’t want to be that extreme but they definitely could be paying their loans off faster. Finally, I totally agree you should tithe and give to charity when you are in debt but $18,000 a year ($1,500) is a little excessive when you have a minimum of $320,000 in student loans. I would try to cut that to maybe $500/month and use that other $1,000 for extra loan payments. Check out my post The 411 on Student Loans for more details on how to tackle student loans.

Mortgage

$60k a YEAR for mortgage and $20k for property taxes?! I mean I get that it is NYC but if you are “scraping by” then move! You do not NEED a $1.5M home. I grew up on Long Island and I promise you can find places for cheaper. It might not be as glamorous and you would have to commute to work but you could save money so are you not scraping by. If you feel like your mortgage is killing you then you should either try to refinance or look to move.

Final Note: One of the only good things about this budget is the fact they maxed out their 401k contributions. If you can’t max out your 401k that is okay just make sure you are putting some money towards retirement. Also, having $7,300 left after spending an absurd amount of money is not bad at all. Most people have a lot less left over or if you are doing a zero-based budget you purposefully allocate every single dollar to a fund. I would not call having $7,300 left over “scraping by” at all. With some adjustments though they can definitely get out of debt faster and save more for the future.

For more money saving or money management help make sure you check out my updated recommendations page !

What are your thoughts on this budget? What are other areas of your budget you can cut costs?

6 thoughts on “Adjust These Areas of Your Budget Immediately

  1. I agree with you there are plenty of places to cut some fat. Vacations are especially outsized considering how easy it is from NY to drive to so many other major cities where there are great things to do. And you’re right on the car front — that’s an obvious place to cut back if you’re looking for savings.

    I do like to do a gut check on what the cost of living calculators say when you’re talking about cities that are known to be crazy expensive. I looked at Bankrate’s comparison tool and plugged in what the cost of living in NY is vs. Chicago. You should be able to afford the same lifestyle with just about half the income in Chicago. Interestingly, the tool expected someone with a $500K salary in NY to have a $1.47M home. The equivalent in Chicago is a $433K home. When I plugged in the comps for the Salt Lake City area, where I live, it says the equivalent salary is $212K. That’s more than my household pulls in, but the $295K home price it suggests is actually a pretty nice, but modest home in today’s market.

    So while I think there’s clearly room for improvement, I wonder if the numbers just seem out of whack because the cost of living is so crazy in New York.

    1. Thanks for your feedback! I am from NY originally so I know they could definitely move out of the city for cheaper or at least cut some of the variable costs. Of course NY is one of the most expensive places to live and rent alone is more than double what I pay in Greenville,SC but even in expensive cities people can make sacrifices. I do agree with you that the numbers will be higher for NY since the cost of living is so crazy!

  2. I read the article you are responding to and it made me so mad! As a social worker who makes around $45k a year it is hard to listen to a family saying that their budget is tight at $500k. I feel like many times people get used to a certain lifestyle and spend what they have instead of living below their means. Then, it becomes hard to adjust to a less extravagant lifestyle once you’ve done it for so long. I think its great that they give to charity, have lessons for their kids, go on multiple vacations and have great childcare, but I’m pretty sure each of these could be cut by just a little to give them more wiggle room. Also they have $7,000 left each year and have a good 401K?! I would barely call that scraping by.

    1. I totally agree. Having $7k extra as just normal saving and maxing out your 401k is not scraping by. I do agree with you that we easily adjust to our surroundings and sometimes we get used to that lifestyle and don’t take the time to make necessary changes to our budgets.

  3. I commented on this on your IG, but I just shared this with my husband and forgot to say some things. Lol. I wonder if they have an emergency fund because “$10k because something always comes up” doesn’t sound like it. Basically, it sounds like they’re overspending in several areas of their budget (if they’re doing a budget).

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