Ask HN: Hacker Finances? / How much do you save each month?

I save about 20% per paycheck and next year I plan to up it to 30%.

I rent, my girlfriend pays 1/3 of that I pay 2/3. 1.5% to student loan (my only debt). I spend a lot eating out and I like my electronics but my savings is pretty good so I shrug. :)

I am notoriously bad about saving money. I spend about 15% on rent, 15% on food (mostly eat out), 10% on entertainment (netflix, xbox, etc.) , 20% on friends/family, and then "invest" the rest in different projects (outsourcing, marketing, books, etc.). In any given month I maybe manage carry across 200-300 dollars.

Uh, I spend about 5% on rent, another 5-6% on drugs, and go out for food occasionally. No other expenses. I don't, um, save, though, so you might want to listen to someone else.

"Without a jot of ambition left

I let my nature flow where it will.

There are ten days of rice in my bag

And, by the hearth, a bundle of firewood.

Who prattles of illusion or nirvana?

Forgetting the equal dusts of name and fortune,

Listening to the night rain on the roof of my hut,

I sit at ease, both legs stretched out."

    Ryokan (1757-1831)

My 'hack', as you put it, is to work on iphone apps on my laptop whilst on the train (2hrs/day). Makes the trip go faster, and supplements my monthly income by 50% at this stage.

Income is ~50k a year running my own business.

28% Rent / Utilities

7% Groceries

5% coffeeshops and restaurants

2% random socializing(theaters etc..)

10% misc.

Save the rest of it.

Generally I've told my kids that if they are carrying a credit card balance across months they living beyond their means. That being said, we've talking about finances and while my wife was much better at these things than I was in school, if you have a couple of thousand dollars in your 'emergency cash' fund (that is so you don't suddenly need to carry a credit card balance) and you don't carry said balances except for long term debt (student loans, mortgages, car loan) and you are able to add something to your savings each month then you are in ok shape.

Things that eat at your money are bills {phone, power, sewer, internet, various subscriptions), eating out, and 'impulse' buying (clothes, toys, books, movies, Etc.). You have to be very aware of them to keep them in check. Eating out is particularly insidious, since spending $10/day on lunch is $200 a month. Of course bring in a sandwich and a piece of fruit can feel dorky but don't let that discourage you, people will be more impressed than you know.

If you can't motivate yourself to do that for yourself, then do it for your marriage/kids. Nothing sours a relationship like money trouble, and money trouble can come from not everyone in the relationship being on the same page with respect to what things cost or the value of frugality.

Camping is a lot of fun and a great way for your family and you to get out without spending a lot of cash as well.

Final thoughts. I started contributing to my 401k in 1987. I always put in the max. They told me it would be worth over $3M now. They were wrong. I'm glad I have what I have, but sometimes you have a second great depression. Life is uncertain, do not give up your life so that in the 'future' you can do cool things. Find cool things you can do now and afford (there are lots) and you will be happier.

I made a throwaway, because I don't want friends to know the details of my finances.

Your categories (after tax):

A. Rent - 10% B. Debt service - No loans, no pending CC debt. C. Discretionary - 30% D. Net (savings) - 60%

How do we do it? Well, we make a lot of money (me, $225k, she, $100k, this before tax), so that's one thing. We have no kids. We travel a bit but not a ton because I am something of a homebody. We don't have lavish tastes. And we were lucky enough to have parents that paid our way through college.

What I mean by the last thing is that I feel no pressing need to own a house, an expensive car, a boat or a plane. My hobbies are inexpensive relative to my means (computer gaming, reading, skiing). And she and I are of one mind on finances.

My advice around saving (from when I was making much less): as a hacker you should be thinking about what you are spending money on. The simplest way to increase your net is to reduce spending on non-necessities that cost a lot of money. That is, focus on the inner loop, the big ticket items, the cars and AC replacements, backyard pools and mortgage payments.

I have no idea the scale you are talking about when you say home improvement, but it can easily be a non-necessity depending upon the condition of the house. If you bought a house that requires 35% of your income in mortgage payments AND needs expensive fixups AND you are carrying significant personal debt, you may have overextended.

That's not the end of the world, provided that your home improvement costs are efficiently appreciating the value of your house or you are willing to cut on your other discretionary spending. Appreciating your existing assets is a form of saving. But biting off more than you can chew is risky.

By living paycheck to paycheck you are running a great risk in the event that anything happens to your income. At a savings rate of 2-5%, it takes you anywhere from 7-17 months to build up a single month of mortgage payment buffer, and that's not including the cost of putting food on the table.

I'm not well versed enough in real-estate to say whether selling your house and getting something more manageable is the right choice for you. But I can say, not knowing the composition of your discretionary spending and assuming zero transaction costs, I would probably downsize if I were in your shoes.

Of course you could always just start making more money, and that is advice that HN likes to throw out there, but I personally think it's easier to spend less than to make more, especially in the short run.

Oh my god, read "The Millionaire Next Door"

I used to be on the same treadmill - making more money than I could spend but somehow spending it all - now I make less (since stopping freelancing, oddly enough), and yet save more.

I put between 10% and 30% of my income into savings - never less than 10% and sometimes more than 30% (as far as I'm concerned, that 10% doesn't exist except to be taxed upon - I can't spend it).

Bear in mind I'm in the enviable position of not having a mortgage - but I do have debts to pay and so it's a constant weigh-up asking myself "is this money going to make me more by being saved vs. going to debts?"

It sounds like you're covering everything else FIRST, then putting what's left into savings. How about putting 10% into savings first, then allowing the rest to be spent on everything else?

This only makes sense if you have plans to invest it wisely.

Read that book!

I feel anyone who has any sense feels worrisome no matter how much they are socking away.

I got a lot more mileage than I thought I would out of books like I Will Teach You To Be Rich by Ramit Sethi(http://www.amazon.com/Will-Teach-You-Be-Rich/dp/0761147489/r...). It rubs some people the wrong way, but it has some really good points about automating finances, and just handling companies via some social engineering.

Some of the things I think a bunch of people working day jobs are the insane benefits their companies offer. Make sure both your and your significant other are maximizing their 401k benefit(at least to kick in the employee matching and more if you can afford it).

The savings accounts should just keep compounding on each other. Possibly toss some other money into a Roth or into the stock market. Also have a rainy day/emergency fund for when the roof leaks and other unforeseen circumstances.

If you have a side project, that money should be coming out of your personal spending money. It should be thought of as your hobby and not impede on the family as a whole(this is for day jobbers).

Obviously finances get a bit rougher if there is no day job and it is just startups, it gets more difficult. One of the plans I had envisioned was to have an account setup and once it reached a certain percentage of drainage(aka burn rate for funded companies) that was agreed upon in the family, then there would be a meeting to discuss hanging it up and looking for a new day job to refill the fund to try again.

If you luck out and get funded and/or someone buys a project, that money should go first to replenish the project fund and then go into emergency, savings, and a little left over to celebrate(vacation, new back door, etc).

I haven't had to budget anything hardcore yet just food, tuition, toiletries, and entertainment but it might be better if you find out what you can be frugal about.

An example would be that I pretty much live off a diet of beans, rice, vegetables with the occasional pizza thrown in and it helps me save a lot of money in a given week. This isn't really hard for me though because I love beans, rice, and vegetables.

I don't get this thing called early retirement. You only have one life, stop worrying and start living!

Let me ask you this, if you do save enough and can retire at 35, what would you do then?

Any money put into savings beyond petty cash for emergency situations is money lost if you have debts. The interest on your credit card debt is going to be at least an order of magnitude greater than any interest you're going to get on savings or investments. Pay off your debt first, save later.

The real answer is that you need to break down what is in that 45% because that's where "non-essentials" are going to be.

I save 30-40% of every paycheck (not including 401K), but I live at home and don't pay any rent (also no loans), have no wife/kids, no mortgage and my work offers free lunch and dinner.

One thing that helped me save more though, was creating a spreadsheet that I update every weekday with all of my account balances (through Mint). I have some formulas built in that basically then calculate when I will be able to afford a down payment on a home. http://twitpic.com/7i78rb

I put both Mint and this spreadsheet on the list of default tabs that get opened when I open Chrome, and the minute every morning I spend updating it and seeing the date it spits out really keeps me on top of my spending and finances.

Translating my current financial picture into a concrete date for a goal also helps make things more real, and motivates me a lot to save more.

Why the heck are you saving any cash when you have credit card debt, and how the heck did you get a mortgage with 50% back-load debt ratio?

You need to cut back on your spending, and with rent our your too-expensive house or walk away from your mortgage.

I spend around 10% on rent, 10% on food, 5% on booze, 10% on gadgets, 5% on other expenses and another 10% on very high risk investments. I have no debt and I'm single, so I save almost 50% each month. PS: I live in India.

The spouse and I are both a tad into 6 figures

20% housing (includes mortgage, insurance etc)

2% Vehicles (both paid for, this is for gas and insurance)

5% student loans

10% Child Care

5% medical

5% gifts to parents

25% living expenses

6% 401k

~22% into non-retirement investments

Will be cutting back on quite a few of these categories come 2012 as we fall back to 1 salary.

This varies on a lot of things, especially housing which varies based on location (as does transportation).

But...

You should have a breakdown of that 45% (you might and you just don't want to share it, that's fine)..it's the biggest piece of the pie, and it's the most likely place to optimize.

Also, rather than think in terms of "what % should I save", you should think of it in terms of how much money you need to retire at the age that you want to.

You also seem to think of "savings" as putting money aside, which is wrong, wrong wrong. Do you pay more interest on your credit card or mortgage than you get from your savings? If so, you'll "save" more by paying those down first (of course, you need to understand your mortgage to know what you can and can't pay down).

Personally, I'd find 80% of my money going into housing and "other expenses" unacceptable. But, I live frugally, I no longer own a car (or the insurance, or the gas that goes with it), I know how to cook, I don't impulse buy (my Kindle 3 is going to last me for years), I no longer own a tv/cable.

And I hate to be one of those guys, but I can safely say that giving up a car and tv have caused huge gains in my productivity, health and happiness.

To answer your specific questions: a - 25%: but, I live in Hong Kong, where the rent is stupid (but everything else is awesome cheap) b - 0 (CC is automatically 100% paid every month), moving from owning to renting and giving up driving cleared me from any loans...happy days. c - 25% on "other expenses"..which is more of an average due to spikes (like buying a new bed, moving, getting a new macbook).

I'm working abroad in Asia, no wife or kids, but hold an investment property back home.

Rent - 14%

Mortgage - 12%

Expenses - 11%

Tax - 6%

Entertainment - 10-25% (staying in drinking vs going out travelling)

Savings - 32-47%

I'm not going to be able to calculate the figures easily for myself, but they are out of whack at the moment for a variety of reasons. In the past I have managed to have periods where I saved 40% of my income, and currently I'm probably going backwards by about 10% per year due to an expense/income disparity. Principally for me this is mortgage related but not yet enough of a problem to go nuclear and dump the house.

First thing to thank yourself for is for even recognising that you have an issue. Most people live in denial right up until they are on welfare of some sort at an old age.

Second thing to realise is that expenditure always rises to meet income. There would have been a time in your (maybe recent) past when you lived on less income, and were probably happy enough. So the solution is rarely to try and increase your income. It's to get control of your spending.

So here's my tips, although at the moment it's a case of do as I say, not as I do.

You've got to prioritise your spending. I've always said overpaying in rent is OK if it can relieve pressures in other parts. Ie, living inner city and not having a car, or saving on long public transport commutes. But make sure you can justify the big expenses like rent or mortgage and be realistic.

You've got to pay yourself first. This means taking money out of your income and automatically place it into some type of savings vehicle which you cannot access easily. An online savings account with no attached card is a good start.

You've got to budget. Yes, everyone pays lip service to a budget but hardly anyone does it. You should be tracking your expenses in something like quicken or similar, and know where your money goes. Pay a bookkeeper if you must, they aren't that expensive. Make a budget and stick to it.

Dump the consumer debt. If you can control your credit card urges and pay it off each month, have one. But if you ever carry a balance for more than 60 days, immediately cut up your card and get a debit visa instead. If you have purchased new or near-new cars, sell them and buy a good used vehicle, or better still, don't replace it if you can get away with it (see point 1). Don't sign up for store cards or any other types of credit.

Be prepared to sell stuff. This is two-pronged - first you can sell stuff while it still has some value (ie, 1 year old electronics, kid stuff) which keeps a little income trickling in. The second part is that it stops you accumulating junk which occupies both mind and property. If you look at the average overstuffed garage or junk room and calculate the per-sq foot value of the stored junk you can realise you're paying thousands per year for floor space to hang onto a bunch of stuff you probably will never use again. Get rid of stuff you're not using. You can always buy it back if you need it in the future.

Tempted by new consumer stuff? If you want to purchase something, announce to your significant other you'll purchase it in 30 days. If you can still justify it in 30 days time, by all means purchase - if you can't get the same item pre-loved on ebay or craiglist.

Don't buy new cars, boats, RVs or anything else big and shiny. Just don't. If you're rich, buy as many as you want. This is even worse if you use finance to buy a fast-depreciating asset. Don't buy, and if you must, pay cash.

Getting rich is usually a payoff from some big event like an IPO, an ineritance, a successful project or a windfall. However, getting comfortably well off is a gradual process of spending less than you earn, and investing the surplus in worthwhile investments. You should take care of the comfort part before attempting to get rich, so failure in the latter doesn't affect the former.

While you have kids I think the most realistic amount you can expect to save/invest is about 10%. If anyone reading this is younger and doesn't have kids, you should be in the 20-30% range. As the kids get older you should creep back up into the 20% range - separate from college funds. If this means kids are stacked...

If I could come up with 1 question to ask people in order to find out whether they save enough or not, it would be:

   What type of product are you using to save your money?

People who answer "a savings account" or "I invest with some guy" probably aren't saving enough, because they don't understand the fundamentals of personal finance.

Short answer: the "hack" is to set a monthly budget and stick to it religiously.

In theory, if your savings account pays 2% and your loans charge 10%, you should put all your money into paying your debt. On the other hand, unless you have a very stable job you'd better have savings of at least 6 months worth of expenses.

You probably don't really need most of your home improvements. Unless you have serious problems like water leaks, you can always postpone those improvements to after you've paid your debts.

35% of your net income for mortgage is on the high side (average in US is about 33% of gross income). But it's probably not too bad for a family of 4 with only 1 income.

http://money.cnn.com/2005/08/26/pf/expert/ask_expert/index.h...

Your main problem might be in those 45% worth of "other" expenses. You need to break this down into something like:

a) essential recurrent expenses (food, commuting, school-related, etc). These shouldn't change much from month to month. And assuming your partner can cook, you shouldn't be spending too much on food.

b) non-essential recurrent expenses (cable, second car gas and maintenance, gym, etc). Rank those expenses in order of importance and start cutting them out.

c) non-essential one-off expenses (eating out, trips, buying gadgets, etc). Only do these if they fit in your budget in that month (or trimester, etc).

Retiring at 35 is an unrealistic goal unless you either inherited a bank or want to live under a bridge. Since you have one income and two kids, saving 3-5% is pretty good.

The easiest way to save money is to have it deducted from your paycheck and routed into a tax-advantaged account (e.g., 401(k)). There's no temptation to spend the money since you never see it. Your savings grow faster since the interest is not taxed. And your employer may match your contributions, which is free money.

If you're in an early-stage startup, that doesn't apply, of course.

I put into savings whatever I have left at the end of the month. I don't worry about it too much.

Tarsnap is my retirement savings plan.

32 years old, married, one child (another on the way), living in the Bay Area renting a house.

My salary until May of this year was $120k. My wife is staying at home with our son so we're a single income family.

Monthly expenses..

Rent: $1750, student loans: $225, credit card: ≈$2,000 (paid off in full each month)

Savings...

We have about $50k in 401k, $50k in a brokerage account, $20k in Lending Club and some mid term savings in the bank around $5-10k.

I was having 15% post tax taken out for ESPP and 14% pre tax for 401k.

The only loans we have are about $17k for my wife's schooling. We started paying cash for the last 2 years of it.

We are pretty frugal in most areas which aren't important to us (don't go out to eat much) but it enables us to be generous in areas we are passionate about (paid $5k for a kid in Ghana to have heart surgery and gave my sister $12k as a gift since they're moving to do medical work in Africa). Our frugality also enabled me to quit my job and bootstrap a startup (going on 6 months at this point).

It's interesting because it's normal (I think) to look at others and feel poor. The truth is that no one knows what a person's finances looks like. The guy driving a Mercedes and wearing nice clothes may or may not be doing so well.

I wish people were more open about this stuff.