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

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 two-to-a-room and don't have the latest widgets, well, they can learn to live with it.

This stuff is very basic and has been known since the dawn of commerce in ancient Mesopotamia. There is no tricks - just simple discipline and wanting the end result more than the immediate gratification. It's the same for any valuable human endeavour, really. People convince themselves that somehow their ship will come in, so they don't have to worry about living within their means. Self delusion in this respect is the most dangerous of all attitudes. Time is the most important commodity in accumulating wealth, and it's the thing people seem to place the least value in.

It's true, but we would still be saving more than OP if we made $90k, and that's without the adjustments to our spending that we would no doubt make if our income fell so much.

Well, there's debt and there's debt. Right now my wife and I have three major debts: mortgage (4%), student loans (4.5%), HELOC (1.75%) -- and those rates are all effectively lower because the interest is tax deductable. When you're talking those kinds of interest rates, I don't think it's unreasonable at all to put money into retirement accounts (especially if those too are tax advantaged and/or if your employer matches).

But yes, if you have any kind of credit card debt, you're probably paying 10% or more on that, and you should be paying that down (and not adding anything new!) with money you'd otherwise earmark for savings.

Your sentiment is right, as is your focus on credit cards, but just to be clear: not all debt have higher interests rates than what you can earn. Specifically, student loans (which has has), tend to have very load rates. Also, I once had a mortgage at a stupid low interest rate..also with respect to mortgages, a lot of them have rules about how/when payments can be accelerated (if at all).