“There’s always something.”
Heather Young, who my readers my might remember, spends a lot of her time thinking about money. She runs an online group designed to help women get their spending under control (The Frugal Females Challenge). But even for Heather, life happens. There’s weddings, bachelorette parties, and … home supplies run low. So at the end of the recent month, financially-disciplined Heather was left with $56.79.
“It makes me feel sick and I have immediate buyers remorse for shopping. But … I went heads down for months and didn’t get anything extra. I binged a bit but I also was running so low on things,” said Heather, who lives near Seattle. “Plus there were gifts everyone is having babies and getting married.”
I wrote recently about a groundbreaking new book called The Financial Diaries. With painstaking research, authors Jonathan Morduch and Rachel Schneider used day-by-day spending and income diaries from families to explore why they are struggling even when their annual incomes seem sufficient. Among the book’s great insights: Even solidly middle-class families are poor a few months out of the year, partly because even those with steady full-time jobs have wildly unpredictable incomes. You can read more about that in my story here.
The book provides a critical answer to one of the chief questions that kept coming up in my Restless Project stories: Why are people who seemingly *should* be doing OK struggling so much? These near-poor experiences are a good part of the explanation. So is the concept of the Great Job Shift. Corporations share more risk with employees now, leading to wildly variable incomes (based on commissions, or variable hours, or tips).
The book and that story got me and my readers thinking: What else can be learned from financial diaries? So I’m starting today, I’m going to invite people to send me their own financial diaries. Heather, good sport that she is, agreed to go first.
(A moment of ground rules. Obviously, folks who share such information are making themselves vulnerable so we can all learn something — empathy, I hope. As such, any name-calling or sanctimonious commentary will be immediately removed and the author will be recommended for therapy based on his or her need to kick people when they are down. See this story.)
So, onto Heather’s diary from last month.
Note that Heather’s rent is low for the Seattle area — she lives with several roommates. That really helps her keep current with that pricey student loan. Also, the income doesn’t represent pre-tax contributions she makes to her 401(k) payments, and for health care.
Here are some notes she supplied with this detailed spreadsheet. First, the credit card line up there is includes extra to pay down a balance she’s carrying. The $400-plus eating out line seemed high to her (it wouldn’t for much of America), but that also counts as entertainment and positively impacts her grocery bill (She’s “not always able to cook dinner.”)
The shopping line irked her most. But she’s a cyclist, and when the sun comes out in Seattle, it’s time to ride. Much of that cost involved new biking clothes. Not to mention the baby gifts.
“For example, I had three weddings (this year), all destination. Bachelorettes and ceremony. How to say no to people you love so much?” she said. “There were supplies for the house too.”
I asked Heather for more specifics on her shopping “binge.” Here’s what she said:
“There were obligatory necessities for the house paper towels and the like, but because of the stormy winter we had a decent amount of yard clean up. I bought the Financial Diaries (that’s my fault), a new pair of shoes because a pair broke, a new pair of pants, and a few shirts for work. We also garden every summer so getting our annual seeds and veggies going.”
Part of the premise of the Financial Diaries is the reality that income and expenses swing dramatically from month to month. The authors defined “extreme” as more than 25% plus or minus an “average” month. In their sample, the average family lived “extreme” 5 out 12 months each year.
I asked Heather if April were extreme. Turns out, an average month is hard to define.
“It’s hard to have a baseline month, to bring it back to your (and) the authors’ point, because there’s always something,” she said. “Not usual is how much I spend shopping. Probably more typical is eating out budget but April was also tax return so I did go drinking a bit more than usual. So I guess the expenses going out are similar but the categories vary.”
May isn’t looking too good, either.
“This month it’s mechanic repairs and dental work.”
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