This post is inspired by a dear friend’s well-meaning question, who was really curious about how we are getting by financially. After all, it’s no secret that I have been unemployed for 10 months and that my husband is currently in his second year of PhD studies.
Just to set the record straight, the OECD has placed our household within the 40% poorer families in France. It means that the remaining 60% of families in France (not necessarily “French”) are richer than us, based on monthly income. Now as a couple, we have been worse off in the past: for more than a year, we survived on a fixed monthly income of 600€ and an erratic 100-200€ additional money depending on my husband’s availability to give computer lessons. We endured those tough times thanks to an apartment rent well below the market price (sponsored by a cousin in law), homemade food shared with us on a weekly basis (sponsored by mother in law) and my access to a zero-interest rate student loan (I was doing my Masters Degree).
Currently we are living in one of the most expensive cities in the world, there are more of us in the family (a cat and a baby to be exact) and the need to save is more pressing than ever.
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This post is a testimony that money is crucial in undertaking a life project, but you don’t need a lot of it as long as you are realistic and practical.
In our case, the life project we took on was to have a baby. Honestly? we are earning three times less than what we used to (when we lived in Madrid)! So to put it bluntly: just as we have more “mouths to feed”, that’s when our incomes started to fall like a rock. Yet somehow, we are managing.
So how are we doing it?
The short answer:
My husband and I spend wisely and never fail to save for any kind of emergency.
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The longer and more technical response:
My husband and I make a monthly budget and truly stick to it. We are fortunate because both of us are very disciplined people with few caprices, so this is quite easy for us. The tricky part is to determine each of the budget parts by patiently listing down our income sources and expenditures each month until a pattern appears. Only then were we able to identify our income flow, and most importantly, our consuming habits. Below is a sample of such budget.
Note: This is only a sample budget. I have exempted personal expenses and savings in this demonstration. Only common household elements are being considered.
- Monthly Fixed Income is the money my husband and I can count on to receive every month. As neither of us have any other money-generating activity, “Monthly Variable Income” is equal to zero.
- Monthly Fixed Expenses are the costs the household has to bear monthly. We can also count on these expenses to reduce our fixed income in the same amount every month. (Baby’s food is included in “Food” expenses because he already eats adult food. Daycare fees are paid on a yearly basis so to simplify this example, we did not include it.)
- Monthly Leftover Money is a friendlier term than “Net Income”, but they’re the same.
- Monthly Variable Expenses are the unplanned “spendings” the household makes. Given that they are variable, neither the frequency nor the amounts are the same each month. Some of them may not even appear for months in a row! (ie: Dinner, Cinema and /or Babysitter) This line was intentionally inserted after having paid the fixed costs because as you might have observed, we can survive for some time without any of these variable expenses BUT we CAN’T NOT PAY rent, electricity, buy diapers, etc. In short, we organized our expenses into: priorities and non-priorities categories. If we have money left after fulfilling our obligations, we can start thinking about what to do with it.
- Savings: this might be strange to some because for most people, savings would’ve already been accounted for way above the budget sheet. However, given our particular situation and our discipline in spending, this method works for us. Remember that this is a household budget. Each member should then have their individual budget where personal savings could be considered right after the income is received (this would depend upon the person’s savings style: he could have a target percentage to save per month, or perhaps an “untouchable” amount, and so forth). To answer your question in advance: yes, we are able to save (a little).
If, as a couple, you are not disciplined enough with your spending habits or you are saving up for something specific then I advise you to allot an established amount to save right after paying for your fixed costs. Your budget should then look like this:
Depending on the amount of “Savings” you set aside, your “Extra money!” could be a positive amount or zero. Technically, it could also be of a negative amount but perhaps that is not wise. If you go through with this deficit budget it means: whatever negative amount on that final line has to be acquired outside the normal income sources (debt, gift, selling or pawning something and others).
However, the objective of drawing up a budget for a household is to be able to estimate (and perhaps even project) a family’s finances for its better management. So perhaps it would already have ocurred to you to simply adjust the amount assigned for “Savings”. This adjustment could be such as to at least reach a balanced budget (where “Extra money!” is equal to zero- basic algebra).
There are specific know-how that work for us as a couple…
Husband’s style: He is very stubborn when it comes to purchasing and uses the internet to gather necessary information.
- First of all, for important things like mattress, baby’s crib, TV table, kitchen appliances, etc… he prefers buying them online. According to him, there are more chances of finding lower prices and better deals on the net. If he can’t find the item online, he proceeds to number 2. UPDATED: In Paris, there is a considerable market for second-hand goods, both for buying and selling. Most vendors could be found online, but there are also stores as well as weekly and permanent flea markets (“marché aux puces”, “brocantes”, “vide-greniers”) who could also be selling antiques. We have a couple of furnitures bought this way, one of them being the diaper station.
- He is very persistent in comparing prices. It could take him days before finding the “ideal” store which offers a good price-quality balance.
- At the same time, he never fails to look for comments about the chosen store and/or product online. He would patiently look for reviews locally and internationally (for example, he ended up buying our baby’s nasal aspirator from China).
Karessa’s style: taking advantage of knowledge-sharing and my desire to JUST KNOW
- I talk to people who have more experience in certain purchases (mostly mothers with older children or people who have been living here longer).
- Once inside the store, I speak honestly to the salesperson about my needs as well as my budget. Luckily, the French love to explain things and are quite helpful to foreigners trying to strive in their country
strange land(as long as you speak their language, that is).
- I also compare supermarkets’ own brand of products. For instance, now I know that for the same items Supermarket M’s home brand is slightly more expensive than that of Supermarket C; but for certain groceries this difference is worth paying for (ie: ice cream, pound cake, toilet paper, dairy products, body lotion…).
- I rarely give in to “2×1” sales unless the promoted products are basic for our household (but supermarkets rarely have promotions on what we consider basic products like olive oil).
A few notes on: Savings
Some people open up different bank accounts for different purposes: to receive and keep income, for paying monthly bills and expenses and for holding their savings.
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I’ve even heard of those who open up various accounts for different types of savings like emergency situations or a specific project. Personally, I’ve never tried this method because oftentimes opening more than one bank account would entail more costs (they may be in the form of fees or the need to maintain a constant monthly balance).
Lastly, it’s not a bad idea to set some money aside on a time deposit where your savings can grow. Just make sure that the conditions fit your needs. Particularly, make sure that the restrictions to access your savings are compatible with the reality you are living. Either that, or forget about that amount for a while.
On Emergency Funds
This is something non-negotiable for me and my husband knew about this from the beginning. I don’t care for a travel fund or a fancy dinner fund, but I have to have an emergency fund which I don’t consider available for use- save for an urgent situation.
Definitions of an urgent situation might vary from one household to another. In ours, it refers to a life or death situation (cat included, of course!).
Having an emergency fund gives us the confidence to make certain decisions, knowing that we can face at least the financial consequences of it.
– The End –
Annex: Peculiarities of the European Social Welfare System
It’s very important to mention that there is a psychological factor that supports our choice to live this kind of life. This factor happens to be the branches of social welfare system set up within the European Union. Examples are: the healthcare system, unemployment and student benefits (entrance fees are sometimes free or discounted, while cinema tickets are always discounted during weekdays), child care assistance and tax discounts, to name a few.
In a way, knowing that we have government support gives us more security in spite of our unstable situation. For example, it is true that we don’t spend much on healthcare (thank God!) but the existence of these mechanisms relieves our “Monthly Fixed/Variable Expenses”. This allows us to either save more or spend extra in leisure.
Don’t hesitate to share your thoughts or ask questions below. You may even write to me at: email@example.com