We cleaned out the filing cabinet the other day. You wouldn't believe some of the cool stuff you might find in your filing cabinet. Here's something we found:
What is this? This is our actual written budget from March 2000, 17 years ago. What a riot! Remember having a “long-distance” bill? Remember newspapers?
Where were we at in life 17 years ago? Well, we had been married (and budgeting together) for 9 months. We lived in a condominium we owned which her parents had co-signed for. (Both clearly mistakes, thankfully only one couple paid the price for their mistake.) We had no children. I was an MS1 and my wife was 2 months out of college with a degree in athletic training and dramatically underemployed as a physical therapy aide. Our main income was my Health Professions Scholarship Program stipend of $973 a month. We were excited about that because it was an increase from $928 a month the year before!
On the left was the plan at the beginning of the month, on the right was what actually happened. Looks like we went out to eat one time that month, to the Margarita Grille, where we spent $19.87, and that pushed us over our $140 food budget by $2.59 for the month. It also looks like not only did we not save a thing that month, but we actually dipped into savings for a couple of hundred bucks.
Lessons Learned
There are a ton of financial lessons that can be learned from this budget. Let's go through a few of them.
- # 1 When your income sucks, don't buy a house. 47% of gross spent on housing was insane. No wonder we needed a co-signer.
- # 2 When you're living on $19K a year, you've got to budget to the penny (and we did.)
- # 3 When you're living on $19K a year, boosting your income, even a little, will have a much larger effect than scrimping some more.
- # 4 If you're frugal, you may be able to live without government assistance even on a low income.
- # 5 The income tax code is very progressive. Check out that $60 tax bill for the month!
- # 6 Economy cars burn a lot less gas than Toyota Sequoias. Wish I could fill up for $15 now.
- # 7 You don't have to be rich to give money away.
Fast Forward
Get business done early and you can go heliskiing too.
17 years later, I took a look at our March 2017 budget. My how things have changed. Let's just look at the various expenses:
- Mortgage $2,803 (Glad that's gone.)
- Charity $3,705
- Taxes $23,478
- Utilities $514
- Insurance $1,804
- Long-term Savings $31,000
- Short-term Savings $2,500
- Trips and Travel $2,500
- Everything else $5,000
Amazing how much larger everything has become. We spend 4 times as much on housing, 10 times as much on insurance, and 391 times as much on taxes. We give more to charity, spend more, and save more.
[Update March 2020: It was interesting to go back and review this post for republication. Originally published in September 2017, now being republished in March 2020, our typical monthly expenses are a little higher, but mostly we just pay more in taxes, save more for retirement, and give more away. And of course, we spent a ton on a home renovation, but that is (hopefully) more of a one-time expense.]
Take-Home Messages
There are a few take-home messages from our more current budget that might be useful to you.
- # 1 Getting rid of even a low-interest rate, reasonably sized mortgage causes a dramatic reduction in required monthly cash flow.
- # 2 If you hemorrhage money like we now do, you're going to need more than $1-2 Million to maintain your standard of living in retirement. Luckily, we save enough that that shouldn't be a problem.
- # 3 Holding expenses relatively constant and dramatically increasing your income causes a dramatic increase in your savings rate as applied to your net income. Looks like a 62% of net (42% of gross) savings rate for us this month, and that assumes the short-term savings and trips and travel is money that is spent, not saved.
# 4 We have a very progressive tax code. In 2000, our effective tax was apparently less than 4%. In 2017, it was about 32%.
- # 5 If you take care of business early in your career, it is relatively easy to live the good life later. Notice what is missing from the budget — student loan payments, car payments, credit card payments, etc. In fact, by the time this article runs, there probably won't even be a mortgage payment.
Lots of fun there. I hope you enjoyed that little romp through the filing cabinet as much as we did. If you've been budgeting for years, go pull out one of your old budgets. You'll get a kick out of it. Remember that a budget is a written financial plan for success, not some constraining document keeping you from having fun.
What do you think? How has budgeting helped you in your life? How does your current budget compare to your previous ones? Comment below!
This is really cool! It motivated me to see how far back I could check on our budget. We use Quicken and started in 2003 so 2004 was our first full year. What a difference! Back then we had a mortgage and a car payment (of almost $500/month) – we’re debt-free now. We had a young child at home, yet our grocery budget was lower. That’s interesting. Our donations – just $520! In recent years we’ve donated more than 10x that amount. Sure, we made less 13 years ago but still that’s a sad amount as a percentage of income. It’s neat to look at the progress. I might even chart this out a little and review some of the changes over the years. Could be interesting.
Good article. I wish I had kept a budget that far back. I do remember the income my wife and I got by on during med school and residency. We were cash spenders so we didn’t spend what we didn’t have. Have a vague idea. Just finished spending review for August, and yes things have changed mostly in the same fashion with keeping ratios the same (though we are actually much better savers now too).
Also funny to think back about a time when I didn’t have a cell phone or an internet bill every month!
Remember Amoco??! 🙂
My wife and I do not keep a budget per se. We tried early in our 28 year marriage and it led to too much tension. Instead we make a decision once a year about how much to invest long term as well as save short term. For all intents and purposes we spend the rest without worrying about it. Well, she pays the bills so I don’t worry about it. The self-check on the system is the credit card bill. If for some reason the monthly bill exceeds what we think we can afford to pay then we know to dial it back so that we don’t carry any interest. I know, not a very precise system, but it works for us. Throughout a 20 year military career and 15 years of higher paying employment post military it has allowed us to meet all our goals: retirement paid for, 2 kids through college, home, vacations, etc.
Same boat about doing a budget with wife. It just caused problems. Now i will say though that although those conversations werent fun, they probably were helpful so not all just problems. Sometimes you have to “argue”. One of the funny things about participating on different financial sites is there is usually someone trying to decide if they want to get married where the prospective spouse has some differences at least at the moment on financial matters. Sometimes its really a big difference like willing to spend recklessly vs super saver but sometimes its practically a 5% difference in stock to bond allocation yet still there are tons of people who will tell the person to not pull the trigger on marriage.
Frankly that excel spreadsheet looks like WCI stole it from my house. I actually still keep a sort of budget but what i budget now is to make sure im going to save enough to max out my tax preferred accounts and have a specific amount for after tax as well. After that, i dont make a fuss if we spend more than i wanted. Well actually i dont bring it up very often would be more accurate and i certainly dont harp on it too long.
We actually don’t really budget either we just consistently spend waaaay less than we bring home. End up having about 30-40% of our take home left to decide to allocate to loans, savings etc.
Glad you found a system that works for you guys and allows you to meet all your goals!
I don’t remember if it was 1999 or 2000 but during that time I was paying $0.79/gallon for gas in my little 2 seat Honda CRX. I could go about 300 miles on 12 bucks. That was nice. Now I have solar panels on the roof and a Tesla so I get infinity miles to the gallon. Don’t think I will ever recoup the cost of the 25K in Solar panels and 100K in Tesla, but at least I feel good about it ;). Times have changed.
It’s also our goal to get rid of our mortgage to reduce our monthly cashflow requirements for FIRE. I know many people prefer to keep their mortgage, but in our case, that’s an extra $1,000/mo+ to cough up when you’re living on passive income. I’d rather push back my FIRE date and have a little security!
I’d be interested to see the breakdown on your insurance costs. Have you dropped or significantly decreased your disability and life policies at this point? I was reading an older post of yours…
https://www.whitecoatinvestor.com/when-to-dropreduce-disability-and-life-insurance/
…and we are nearing a point that we are thinking about decreasing or dropping our policies. The fact that our life policies are so cheap makes me want to keep them, but money is money.
Motivating and thanks for sharing. The progressive tax code is the most amazing. While I Don’t mind paying taxes to live in this fine country, the fact that I have already paid taxes well over 3 x my residency salary by September 1 is mind blowing.
The cash flow aspect of life is important too. Paying off the mortgage and student loans make a big difference.
Two things jump out at me, more than the mortgage – $160 of tithing and $0 on car insurance. Your church must do a much better job of laying on the guilt than mine. 😀 When I was in college I’d just put a few bucks in the basket, maybe a $20 at Christmas.
Was it a situation of someone else paying your car insurance, or what? Even back in 2000, I think almost every state required some minimum coverage. I’ve been paying anywhere from $400-$200/mo for car insurance since I was about 16. Clean record.
We’ve been asked to pay 10% to our church. No more and no less. If you decide that to be 10% of your net or your gross, that’s up to you!
I don’t know how you’ve always paid so much for car insurance?!? My wife and I currently pay $55 a month to cover our 2 vehicles. We have never paid more than $80 a month for 2 cars since we switched to GEICO so like 6 years ago. Maybe you have just always driven nicer cars than me? I’ve got an 02 Alero and an 05 Sienna.
Ahhh….you didn’t realize Craigy only drives fancy, new cars that are expensive to insure. 🙂
I think we were paying the car insurance in a lump sum every six months or something, but it’s been a long time. Maybe we paid it on the 30th of the previous month and the 2nd of the next month. I dunno.
Weird that you would donate money just out of a feeling of guilt. Not sure I’d keep attending a church where I felt guilted into giving anything. But I guess if it’s just a $20 here or there, it’s not a big deal. I always found the “pass the plate” approach where you had to give in front of everyone else in the congregation to be out of sync with Matt 6:1 and Luke 21:1.
I have my budget from back in medical school. Today people say “How can you scrimp by on only $70,000 a year?” Yet I scrimped by on $20,000 a year and never really felt like I was scrimping. Today my vacation budget exceeds my entire medical school budget. Spending patterns certainly change over time. They tend only to climb. But it is possible for you to make a change and move them back down if needed. I was enjoying life at $20,000 a year. But most people hate that option.
I don’t even know what I lived on in med school, probably about $1200/mo?
Never really felt like I was deprived in fact I had a blast.
Early in our marriage and careers, we did a high level budget once per year. We have not done much of it in the last 10-15 years, as the income seemed to grow and along with it, the nest egg. Now, as I approach my not-too-early-but early-for-some retirement (targeting age 55), I find that I am much more interested in tracking our expenses again.
I agree. We have also not budgeted for many years, and I am also starting to think more about our annual spending now that retirement is on the horizon. However, I will probably wait another couple of years until our kids have finished college before I start tracking expenses in any detail.
I never budgeted or tracked expenses until maybe 45. I knew I was ok because I was an aggressive saver. I have been tracking expenses for the last 5 years or so. I think the phone bills are the most interesting. Prior to cellphones we all had more money.
In March of 2000, I was a second year medical student, sharing a small 2-bedroom apartment close to campus. I didn’t keep a budget, but my share of the rent was $330 or $350. Call it $400 after utilities. I would guess my total spending was under $1,000 most months as long as you don’t count tuition and textbooks as spending.
And I was a happy young man living on $10,000 to $15,000 a year.
Cheers!
-PoF
I find it reassuring to see that we all lived on less than $20,000 per year at some point in our lives. In college I didn’t own a car, biked everywhere for transportation, paid $450/month to live in the dorms, and ate on $30 a week. Our $60,000 yearly budget at this point is truly a luxury.
first residency paycheck of about $1500 seemed like all the money in the world!
i literally couldn’t figure out what to do with my first attending check.
That’s the catalyst for many docs to find their way here!
In NYC renters spend at least half their in one in rent. Guess mom and dad are paying the freight
Or some of us choose to live elsewhere and visit NYC on vacation.
Most pertinent point in your takeaways: taking care of business early in your career let’s you live the good life later. Pretty much the theme of your blog I know, but ain’t it the truth…
Wow- quite a difference in the numbers compared to the early days! Congrats on the success; very well deserved.
How did you manage with a food budget of $140? I don’t see how 2 people can survive on approximately $2.33 daily each.
Eat less food? Eat cheaper food? Eat less often? Get free food at “lunch and learns” at the hospital?
Don’t forget to adjust for inflation.
You mentioned the military stipend increase in 2000. But you failed to mention the Bush Tax Cuts, that helped you too. (I can’t remember if the stipend was taxed or not. I know that there was no state tax on Active Duty pay.)
Uhhh…how much tax do you think we were paying on such a tiny bit of income? It wasn’t much.
You mentioned a stipend increase of a very small amount. Tax savings may been small, but so was the stipend increase.
So a small pay increase is good and a small tax decrease doesn’t matter?
I’m just trying to be objective.
Both matter very little, but both are good.
Is the long term saving $31,000 or $3100…
I can’t fathom an ER doc making 71k a month…
Thanks.
They can if they own a multimillion dollar business on the side.
But is it correct or a typo?
Remember this post was republished, so that information is several years old. But yes, at the time, that was a correct figure. And yes, as noted by JDDS, my clinical income is not our main source of income. It turns out you’re not the only one visiting this website and many of them seek help from my sponsors.
Thanks!
As marshawn Lynch so eloquently put it,
“Now I’ve been on the other side of retirement, and it’s good,” Lynch said. “I’ll tell y’all right now while you’re in it, take care of y’all bread so when y’all done you can go ahead and take care of yourself. So while you’re all in take care of your bodies, take care of your chicken, take care of your mentals, cuz we don’t last that long.”
Take care of y’all’s chicken, wci community
My partner and I are both incoming interns and learning about personal finance for the first time. This is a fairly basic question, but where do people recommend keeping shorterm savings, ie the trips, car… etc? Keep this in a savings account or invest in something that we can easily access? What kind of accounts would these be? Would love answers and and being pointed in the direction of resources that will help with these basic questions!
High yield savings or a money market fund is the general answer. It’s really about liquidity and return of principal, not return on principal. But it’s nice to earn a little on it.
I alternate between a Vanguard money market fund and Ally Bank’s high yield savings, but those certainly aren’t the only good options.