A couple questions

1. How much spending money do you give youself per week or month? A percentage of your income? A set dollar amount? None?

2. According to almost all financial advice, saving for retirement should be a priority in your 20's. The advice says start as early as you can and save, save, save. I am starting to wonder HOW this is possible with student loan debt, a potential wedding, down payment for a mortgage, and day-to-do living expenses in a time period of life when most people are making low(er) salaries straight out of college.

Yes, there is compound interest to consider, but what about practicality? Wouldn't it make more sense to get rid of any debt, buy a house, and then from age 30 on, put as much money as you can in savings? Especially when your income might be a little bit higher and there is breathing room?

Thoughts?
1. Right now, barely any money. I was unemployed the last few months, and we just got married in July (and bought a new house then too). So luckily most of my time has been busy either honeymooning, fixing up the new place, or just spending time enjoying the new house. Luckily I just got a couple of sub positions so now that we will have a little extra money we will have a little more spending money. We don't give ourselves a percentage or dollar amount, because we don't spend much, but when we do want to buy something we just discuss it and then decide together.

2. Right now my husband and I are 25 and 24. Right now besides our savings acct (which is luckily just above where we started pre-wedding planning), the only retirement savings we have is through work. I have one with the state being a teacher, he has a 401k through his job. Once we pay down the student loan debt, we'll only have the mortgage to consider. I think that is when we will ramp up our retirement savings.
A. It depends on the week. Some weeks I barely spend anything, and some weeks I go buy new clothes and shop and I spend a lot.

B. I have had an RRSP for almost 5 years now. I got one on my 16th birthday and my dad started charging me "rent" and putting it in there. I am 21 now and each month I put in about 100-150 dollars. It is a huge priority and although I am pretty much broke most of the time, I don't touch that money and I have it taken out of my paycheck so I don't even see it.

I don't want to be unable to retire when I am older so I make it a priority. I am having a smaller court house wedding instead of a huge party. I am doing the college THEN university thing and I work as well as go to school and have thus far been able to avoid any student loans. I live in a 2 bedroom apartment with 5 roommates and I don't eat out. I work my ass off in school for good grades and so I get bursaries. Basically I barely make ends meet, but I want to only have to do it while I am young and not again when I am old, so saving money and making coffee at home is worth it to me (I use to have a 7 dollar a day latte habit and when I cut that out I started saving that money).
This is the answer to the 2nd part. You have to make it a priority any way that you have to. I had a tiny wedding as well, with a JP, outdoors. It cost me basically nothing. I worked full time through school and went to community college so I don't have to take out crazy student loans. We bought a house at a very reasonable price because it is cheaper than rent was. The difference between being able to save for retirement is basically just all about where your priorities are, not that it's a bad thing if someone does want a big wedding etc etc.
1. Basically, whatever's left over after mortgage, bills, husband's child support, insurance, and savings (we opted to save 5-600/month for emergencies and a personal thing we need in a few years). We try to go out for "date night" x2/month because it's good for our relationship and my anxiety.

2. We had a super small wedding, so we saved on that. Also, I got an awesome deal on my house about 2 years ago, where they "gifted" me the downpayment and I have a 97% loan without having to give over a lot of money (I'm pretty sure that kind of stuff isn't available now, but it doesn't hurt to look). He has a crappy 401k for work, but he's still in school. I have a 403b and a pension that I'm lucky enough to have and my employer is really good at matching our submissions. I also have long term investments through my life insurance that my dad set up. I'm so bad with money and accounts/investments, I don't get it. I'm just glad my husband is going to be an accountant.

ETA: we don't have school loans coming through yet, since he's not done with undergrad and I'm not done with grad school. I'm hoping with some pay increases, we can continue to live the same way when we have to pay those.

Edited at 2010-09-26 01:40 am (UTC)
If his 401K is crappy, he might do better opening a Roth-IRA somewhere else and using that instead.

We're looking into retirement options for my brother. Since his work 401k doesn't offer any matching, we're planning to set him up a Roth-IRA elsewhere.
1. Ehh, varies. My expenses fluctuate a lot. I stock up on stuff I need when I can and when it goes on sale.

2. Seriously. My fiancee (getting married in 2 weeks! yay!) and I are focused on driving down debt. We have a student loan of 20,000 and owe ~68,000 on our house. We plan on starting serious savings in 3 years when I get out of school. I'm going into nursing, so I feel confident I will be able to find employment.
1. I spend whatever I need--some weeks more, some weeks less. I've had variable income over the past few years, but it's settling down at the moment, so I should probably decide on an amount and stick to it.
2. The cost of retirement is spiraling out of control, so the advice to save as much as you can as early as you can is because we have no idea how much it's going to cost to retire 10 years from now, let alone 40 years from now.

Your idea to wait until you get out of debt makes several assumptions, such as your income might be higher in your 20s than your 30s, that you won't have expenses later on that will replace the expenses you had in your 20s, that buying a house is a sound financial decision, etc.

It's tricky. I wish I knew what the right answer was.
Paying down debt *is* saving for retirement. "The magic of compound interest" works when it's against you, too.

You do have to consider tax incentives and employer matching, though, to figure out what account it's best to put stuff in.
2. Kids these days! *shakes fist* ... Nah, really, it's quite the squeeze esp with good jobs in such short supply. I think a lot of the advice is dated and reflects better economic times and smaller student loan burdens. If your employer matches any part of your retirement savings, then you are literally leaving money on the table if you don't take full advantage. Beyond that, IMO it's better to pay off high interest debt and save for upcoming expenses. Homeownership is sadly overrated IMO.
I'm a little older now (27) so I'm making more than I was straight out of college.

I rented a 2br apartment that I could just barely afford on my own and sublet the second room. My roommate gives me $450/month which I deposit and take out $300 to cover groceries, eating out, and any expenses that aren't bills and gas.

I got a 5% raise when I turned 25, and that became my retirement money. I have 5% of my pre-tax income deferred to a 401(k) plan through my employer. Since I never let myself have that money I never missed it.

Everything that is left over after my rent, bills, and allowance goes to my savings account. I have a direct transfer set up on pay days so that I don't even see that money in my checking account. Any time I get "extra" money (tax refund, annual bonus, overtime, etc.) I give myself 10% for a treat and the rest goes into savings.

I'm hoping to have enough for a downpayment on a place of my own in the next year. I'm looking at properties that cost about as much as my current rent, and allocating some of the money that goes towards savings now for retirement for the last couple of years of my 20s and beyond.
2. I think it's all about priorities. It's possible to have a really cheap wedding and put off buying a house, or buying somewhere cheap so that your housing costs aren't huge, so that you have more money in order to save toward retirement.

At least, that's what Art and I opted to do.
Yeah, I think a lot of the 401k saving advice assumes really low interest on debt, or really high return on savings. It doesn't make sense to me to make low payments on my insanely high student loans, sitting at 7% or whatever, and meanwhile make less than 1% in savings, or 2% in a CD, or whatever. My parents put my college fund in the stock market, and ended up losing more than they put in, so... unfortunately sometimes it's really hard to figure out the best way to really save.

Either way, right now I'm still in school, making a net loss, so I can't save at all.
My 401k spending comes out of my paycheck - 6% pre-tax... I don't even miss it. Since my work matches up to 6% ...it's a no-brainer. The earlier you start, the more you save...the more interest you gain. Is not investing $100/pay period (or whatever you can afford) worth having to work well into your 70's? For me, the answer is no. And if you have that much debt that your worried about, I would hope that a huge, lavish wedding wasn't a priority. But that's just me.
I try to set aside $50/month for an allowance, but it goes by the wayside if we have a really tight month.

As far as retirement goes, I haven't even been able to start saving. For me, a house comes first. Then I can start saving for retirement.
From working oncampus and other savings, I had about $5000 saved to use for gradschool expenses/living on my own. I'm not in gradschool, but I am living on my own. I did some math, and I've spent about a fourth of that, and will earn it back and start to save again soon. (I couldn't find work for about a month and a half and had a lousy budget.)

Ideally I'd like to put some of that money into a Roth IRA or a CD, and then a savings account for gradschool, I just wonder how having a Roth IRA, CD, and savings account would affect my financial aid. My family was lucky and we never had to take out loans for my undergrad, and I hear getting aid for gradschool is difficult.
hey.. i've got a small ($2k) Roth IRA, and i don't think it affected my financial aid at all. i'm not even sure the FAFSA asked about it (which would make sense, since technically you can't touch the money until you're old and grey). if you've got money on a CD or in a savings account, you will have to report that.

if you're looking to sock away money and not hurt your chances of grad aid, see if you can deposit it into a niece or nephew's account (this entirely presumes you have a niece, nephew, and/or sibling sympathetic to your cause who will let you store your money in there temporarily until you're done applying for aid).

one last thing- getting aid for grad school can be difficult, especially if you're going for humanities. try to hit up more prestigious schools. they tend to have larger endowments and are more generous with their grants than public universities.
The advantage to contributing to a 401k is your company will usually have some kind of matching program. For example, they may match your contributions up to 5% (which is excellent). That is free money you really don't want to miss out on.
My employer matches $2 for every dollar I put into my 401k (up to a certain total per year), so it's my main priority.
I have a small business, while our main family income is from my husband's paycheck. His check goes to pay for bills and necessities, like gas and groceries. Out of my total sales from the business, I take out cost of goods sold, set aside sales tax collected, take out cost of my website, credit card processor, and wages paid to my assistant, then the rest is profit. I reinvest half in the business, take 25% out of the other half for taxes, and then I get to spend the rest. Usually I spend about $20/wk on me (maternity clothes, special food I'm craving, fun books) and then there's enough left over to take the family out to a casual restaurant on Saturday.

As far as saving for retirement, every time my husband gets a raise we put the extra 1% or whatever the amount of the raise is into his 401k. We don't notice it since we didn't have it before, and we're slowly inching our way up to the maximum matched amount.

Here's the thing I've found about the idea of putting more money into savings as you get older and are making more money. Yes, it's much harder to save when things are SO TIGHT. But by making yourself consistently save during the hard times, even when (and especially when) it's difficult, you are building your discipline so that when you eventually are making more money, you'll already have the habits ingrained in you that will allow you to save a lot.

The amount of money we manage to save these days is pretty small and would be discouraging, except that I know we are building behaviors that will serve us well in the future. When we apply those behaviors to a higher income, then we'll really start to see some results.

Of course none of this applies if you can't even afford the most basic necessities. I'm definitely not trying to guilt anyone into saving.
1) I have a detailed monthly budget with set and estimated expenses (like $X for gas when I may or may not need that much). Keeping the minutia as line items in the budget means I don't really allot myself much money, but it also means much there is money alloted to me ... if that makes sense. For example, my husband is a disabled veteran, and the VA is notorious for not really caring what time of day is good for you when they schedule appointments. In an average month, we spend $20-25 on "emergency coffee" (some how there will be an 8 am appointment 2 hours away and my morning will get messed up and coffee won't get made in time, or something similar). I budget for that. Our food budget is more than we really need, while being less than most people would spend (I'm extremely frugal), and part of that deliberate overage is to allow for the occasional take-out meal should we want.

I give my husband an allowance for whatever stupid crap he feels he "needs" in any given month (he grew up with money, we fight about what he really "needs" all the time because most of it is B.S.). How much he gets depends on the circumstances this month. We're still paying off a $3k transmission rebuild, so it's been smaller the past few months and nonexistent several times. We're having a baby, so that's likely to become more the norm, which is fine by me because we have way too much crap and he needs to learn self control.

2) In this economy, it seems intuitive to pay off debt before starting savings. That wasn't as true a decade or more ago. If your student loans were at 5% but the market was averaging 18% gains, paying off student loans to the detriment of investing was foolish.

Another point to saving versus paying off debt is employer matching and taxes. If you have student loan debt, it's at a good interest rate, AND your employer offers a 401k with matching, the argument to pay off the debt gets complicated. You get tax breaks for paying student loan interest, you get tax breaks for 401k savings AND you're getting free money from your employer matching? I'm going to say invest in that situation. High interest credit card debt is harder to argue to keep, but it depends on the economy.

Also consider that you can withdraw without penalty (yes, you'll pay taxes on the money but you avoid the withdrawal penalty) from a 401k to make a down payment on a house. It makes saving look more practical.
Also consider that you can withdraw without penalty (yes, you'll pay taxes on the money but you avoid the withdrawal penalty) from a 401k to make a down payment on a house. It makes saving look more practical.

Wow, I never knew that! :)
I make a pretty pathetic salary for having a college degree and 8 years work experience. But I have always put money into a 401K. When life is good, I try to put in 10-15%. When it's bad, like 4 weeks of furloughs this year, I put in the minimum to get all the matching. I've built up over $10,000 - doesn't sound like a lot but it is to me, considering my low salary, I'm single and own a condo.

I think a lot of the advice about saving in your 20s is to get people into a habit. If you spend every cent you get until you're 30, there's no switch that gets flipped that says "now I'll save everything for retirement!" when you turn 30.
I first of all add up the cost of all the nessecary things per week (food, clothes, busfares, university, bills etc) THEN decide what spending money to have out of whats left. (and if theres a lot left over I put some away for a tough day.)
2. When it comes to the wedding, it's definitely all about priorities. Some people think it's necessary to blow the equivalent of a down payment on a house on a big party. I think that's insane, but it's exactly what I did for my first wedding. Lucky for me, my mother was picking up the tab. Not-so-lucky, the marriage lasted less than 2 years. I remarried a couple years ago, and my 2nd wedding cost less than half as much as the first and was infinitely more memorable. My marriage is still going strong, too.

So, if you find yourself planning a wedding, make sure you and your fiance sit down and hash out what is REALLY important to you, and budget accordingly. Unless of course, you have parents willing to pick up the tab. lol
1. I don't technically budget spending money. I budget savings and bills, and when I get my check I first transfer a set amount to savings accounts, retirement accounts, etc., and then pay bills from the remainder. Whatever is left over is my money for groceries, clothes, entertainment, personal stuff, etc - it all comes from the same pool, so if I know I have $100 to last me until next payday, a good chunk of that will go toward food and I won't spend money on entertainment, etc. Luckily for me, I don't really spend a lot of money anyway (I don't really like "stuff"), so it's not a big deal if I don't have much left over because of contributing a good chunk to savings.

2. Your theories about other expenses right now (down payment, wedding, etc) are somewhat flawed because in your 30s you will have a similar or likely more expensive list of goals that seem more urgent than retirement. If you're thinking about marriage right now, then in a few years you'll probably be thinking about expenses associated with kids. There are always going to be things that seem more important in the short-run, which is why so many people hit retirement age and have nothing saved. An elaborate wedding is not necessary, and there is no reason you have to buy a house just because you hit a certain age. I'm 26 and not entirely sure that I'll ever buy a house - I have no problem with renting, and appreciate the freedom and flexibility of being able to follow my career etc. without being tied to a house. A lot of people are now jobless and tied to their areas because of having a mortgage that is upside-down, or having a house they simply can't sell.

Also, its not a good idea to plan on your income being higher later. Hopefully it will, sure, but then again the economy may do something in 10 years like it has lately, and you could be laid off out of nowhere. If that happens, you'll be glad that you stuck with savings goals (including saving for retirement) when you were younger.
1.) My husband an I each put 75% of our paychecks into our joint accounts and the other 25% is ours (but we each have some individual credit card debt that we're trying to pay down). So after we feel we've paid enough on our cards for the month, and put some into our individual savings accounts, we have whatever is left over. For me that's usually about $100-$150 a month. Most of that will go towards a massage or two because my back gets really messed up with stress.

2.) My husband and I are both graduate students so we won't start jobs with retirement benefits until our late 20s. For Dan this might be next year, but for me its still a few years off. So we started Roth IRAs and each contribute $50 each month. Not much, but starting with something is better than nothing. Our money priorities are still paying down debt and then starting on our student loans, but we wanted to start putting something aside.
Now with less typos...
1. Usually I give myself a fixed $20/week for "spending". My budget is posted on my blog if you want to see how I got there.

2. Start small and be patient. There's a more complicated answer to this but that's the simple one. It's something I've been wrestling with myself.

I recently discovered that you can start a Roth-IRA with a savings account fund inside it...this'll allow you to build up to an amount where investing fees won't eat up all your interest. So far I've only shopped Suntrust and State Farm, but both offer the option and you can start for as little as $50-$100. Once you get started, put aside a small amount regularly. Dave Ramsey recommends 15% of your income, but I think that's a number you can work up to. (He also recommends paying down debts first.) So maybe start at 1%, pay down the student loan, then increase it to 5%

I would start putting 5%-10% into a retirement account before taking on a mortgage, but your home is a method of retirement investing, because it'll provide you with a place to live. Choose a 15 year mortgage, and you should be fully paid off by the time you're ready to retire. Not having a mortgage payment will ease the burden on your retirement savings, and it could be a source of potential income (if you rent out a room).

Anyway...there is some sense in pay off the major debt first. However I wouldn't take on another major debt until I was able to start putting aside a regular savings amount. It's not the end of the world to wait until you are in your 30s to buy a home.

P.S. My sister went to the judge because she didn't think she would afford a wedding. It didn't occur to her that my grandfather would have happily paid for it. Some people go crazy on wedding spending, but it's not necessary. The day can be special without being expensive.
Re: Now with less typos...
P.S.S. I don't always spend the same amount every week. That's just how much I allow myself. If I spend $15 on week, next week I have $25 available.
1. I don't limit it- sometimes I buy alot for myself, sometimes not. Alot of "my" stuff overflows into other categories, i.e. stuff for my daughter, things I want for the house, etc.

2. I'm 26 and just started a deferred compensation program at work a few months ago. Basically, the money is taken out of my check pre-tax and I pay tax on it when I withdraw it. I also have a pension plan through my employer (I started when I was 24). Currently, I put $25/pay towards retirement. It's not alot, but it's better than nothing. I also want to start a Roth IRA.

3. You make sacrifices for what you want. You live with roommates when you're single because it's cheaper than living alone. You work seasonal or second jobs. I moved from the city to the suburbs because I could have a house a street away from my family (who provides free childcare 3x/week for my daughter) for $1.55 or so more than my rent was. I take a crappy bus to work, but it's cheaper than driving. We didn't get married, and while my boyfriend still wants a traditional wedding, I will never be able to justify spending money on a wedding when we already have a house and a kid. My student loan debt is ridiculous (somewhere around 90k for undergrad *cringe*).

I would have preferred a bigger house, for sure. Or one that didn't need any work done, but this one was cheaper and I was still on part-time work basis from having my daughter, so we thought it would be best to have a house that we could afford even if one of us lost our jobs.

My parents are in their 50's. My dad does hard labor and it's showing. He won't be able to work forever. My mom is a nursing assistant. They're very irresponsible with money. They've always worked, and worked shitty jobs, etc. etc. I would hate to be their age and know that I had to work some shit job until I died because I'm sure, looking back, $50/month won't seem like anything.

At the same time, if you don't have ANY income, or if you're living day to day, you have to take care of your needs first.

Also, check and see if there are "family savings account" programs in your area. Our local YWCA offers one for savings for kid's colleges, down payments for houses, etc. They will match your savings up to a certain percentage. There are also some government programs that may help for things like that.
While I understand your practicality, ceremony is important for a lot of people. If your boyfriend wants a wedding, I'd give him the challenge to create a budget and a wedding plan that sticks to it. Maybe put $25/mo in a jar until he can figure out arrangement for that amount? Or if he has an idea to raise money (selling stuff, doing extra work, whatever) let him roll with it.

Traditional doesn't have to be elaborate or expensive.

I'm seeing a lot of young couples skip the wedding because they fear the expense. While I can understand the motives, I think there is something lost with too much practicality.
2. Don't take out student loans, have a low-key, inexpensive wedding*, and keep a tight lid on those living expenses.

*The Cynical Reason: It only has a 50% chance of lasting anyway.
The Realistic Reason: How much difference, really, is visible between a $1,000 wedding and a $6,000 wedding in the photos? When you get them out on your anniversary, you'll be just as sentimental no matter how much or little you spend. The ceremony is what's important, not how many pews you decorated or which designer did your clothes.
Breathing room may never happen.
I give myself $10 per week to have brunch with a friend every Sunday. That's it.

My salary has quadrupled the last ten years, but the cost of everything has kept pace. I thought that when I was making as much as I am now, I would be living like a queen. LOL. If I had waited for breathing room I would never have started saving.

Stash the cash; as much as you can. You need both retirement and emergency funds.