No Debt MBA

Let me be explicit here and for the record state that we don't have a budget.  I don't have a budget.  Sure I check in on my spending once and a while and I have an idea of how much money will go to general categories of expenses but I don't have targets for each months much less a written budget or an Excel sheet.  I don't worry about blowing a budget I just worry about spending imprudently.

Anyway, there's definitely a fairly consistent level of spending around here. Between the two of us it's a grand total of low $2k-2.5k a month-ish.  There's a lot of variance, but that's the ball park we've averaged over the last couple years.  So we're solidly under $30k a year, closer to $20-$25k.  With that as context, I found this note from ERE pretty interesting:

The Wheaton Eco-scale explains this in a brilliant way. Consider people living at different budgets, e.g. $100k, $80k, $60k, $50k, $40k, $30k $20k, $15k, $10k, $7.5k, $5k, $2.5, $1k, and $0k. Now, what Wheaton observes is that people who spend one or two levels below you are inspiring to you in terms of budget reductions. People who spend three levels below you are slightly nutty and people who spend four or more levels below your are crazy or downright extreme. This holds no matter where you are. If you spend 60k, then 50k and 40k is inspiring, 30k is nutty and 20k is crazy. If you spend 30k, then 20k and 15k is inspiring, 10k is nutty, and 7.5k is crazy. Conversely, people who spend at levels above you are considered prodigal or wasteful.  Early Retirement Extreme

I'm seeing this on two levels.  First, and most obviously, some of my classmates' spending is slightly eye-popping to me.  $60 party ticket plus another $60 in drinks and a $25 cab ride makes for an entire month's worth of going out spend for me (or more), but is a regular night on the town for a more than a few folks I know.  And I am completely guilty of judging them.  Can't say I'm proud of it, but I definitely do judge.  Never mind that many of these same kids are sponsored by their employers or are eligible for reimbursement if they go back for two years.  That's potentially $50,000 a year less in tuition that they're on the hook for.  That buys a lot of parties.

On the other hand right now I'm not sure how I would further reduce our expenses, much less be able to Jacob of ERE's $7,000 a year budget.  For two the budget becomes $14,000 a year, just under $1,200 a month.  And he's paying out of pocket of his own health insurance.  We'd have to slash an average of $800 a month to get there, possible if we stuck to very bare bones and had no surprises or irregular expenses.  But that seems completely unrealistic and, to be honest, completely miserable to pursue for us.

I imagine many of my classmates might say the same of my budget.  So while I'm not making any changes to our spending (there's neither the time nor the energy right now - I'm giving us twenty thumbs up for pretty much maintaining) it does have me thinking about what we consider possible versus ridiculous in our spending and in our lifestyle as a whole. 

What would be a budget or spending level you'd consider crazy?  Wasteful?  Do you judge others' spending habits?

So let's say you'd like to be financially independent or retire.  You've become accustomed to a certain standard of living and a level of monthly expense.  How much are those expenses holding you back or helping you on your way to retirement?

My SO and I are both interested in becoming financially independent.  It's not that I don't want to work, it's more that I like having the option to not work or to choose or switch work situations without regard to money.  Once I've got a goal though I tend to be a little hell-bent on achieving it.  So I've been campaigning to slash our expenses for two reasons:

1. Work (and my income) is ending soon and won't start up again for a while unless I find a really good part time job.
2. The less we spend the more likely I am to meet my goal of paying for my MBA in cash and the sooner we can get to financial independence

So I decided to do a little math.  I made a spreadsheet that did a rough estimate of how monthly living expenses affected our years until financial independence.  Hitting financial independence was defined as having a savings nest egg that could cover expenses with a 3% withdrawal rate.  It ignores Social Security since we're not planning on it.  Check out the results graph:


The algorithm assumes you have no money now, expenses are always constant and ignores investment return.  Basically, if you spend exactly what you earn or more retirement is impossible since you will never get ahead and the closer you get to spending all your take home pay the faster your number of years to retirement increases.  The scale on this isn't very meaningful though since there's no way in hell we're spending more that $5,000 a month continuously.  So here's the graph zoomed in on a more realistic range of living expenses:


With monthly expenses of $4,500 we're about 80 years from retirement, but with monthly expenses of $1,500 we're about 10 years away.  Realistically we're somewhere between 15 and 35 years depending on what level of living expenses we'd like to maintain from $2,000 to $3,250.  What a big difference!  What you can see is that years to financial independence and monthly expenses are somewhat linearly related in this section of the curve.  For us this means that for roughly every $50 we cut from our monthly budget (permanently) we reach financial independence one year earlier.

It's solid ammo to take to my SO to cut our expenses a little bit, but it's not at all robust.  I'll get hammered since it doesn't include investment return, our current savings, changes in income or a multitude of other detailed nuances I just over simplified.  So expect to see beefier versions of this coming soon. Realistically, including investment return or income growth over time would reduce the benefit you'd see from cutting your budget.

Want to see how you stack up now? I've uploaded my speadsheet to Google Docs where you can download it and try it with your own data. Fields that you should edit are highlighted in yellow.  Click here to get a copy of my years to financial independence or retirement spreadsheet.  To input your numbers either save a copy or download the spreadsheet into Excel.

To get the cut $X get 1 year closer to retirement number pull the spreadsheet into Excel (unless you know how to do a trend line in Google Docs, in which case let me know!). Use File->Download As -> Excel in Google Docs.    Once you've opened the spreadsheet in Excel, right click on the data points in the second graph and select "add trendline".  Select linear and check the box for display equation on chart.  Once you have your equation it'll be in the form y=###x - ###.  Divide 1 by the first number (the one that is multiplied by x, in the graph above it's .021) to get the amount you'd have to cut per month to get one year closer to retirement.

Right now my best estimates put me within striking distance of being able to achieve my goal over the next two years.  There are some big assumptions in there: a budget of $800/month living expenses, working full time until school starts and successfully getting paid at the same withholding rate as my last check, not owing a big tax bill, my school doesn't reduce my financial aid and that I'll get a paying internship next summer that pays about average for my school. With all of those assumptions plugged in, I'll be $100 short of meeting my goal.  That number isn't at all meaningful, of course, aside from telling me that it's possible to meet my goal but it'll be close, because there are so many assumptions playing into it at this point.

But that $100 gap assumes I use all of my liquid savings and 529 balance. In other words, my checking account would be empty, I'd have no non-retirement savings and no buffer and I'd be about $100 short just before graduation.  I'm actually really happy with that answer right now; it's way closer than I thought I would get when I originally set my goal.  However, now I'm wondering how close I can actually cut it.

I've never had a true emergency fund, per se, but I've always had enough liquid savings on hand to cover a new (to me) car, a year's worth of living expenses or more.  Now all of that has been earmarked for tuition, living expenses and so on and will very rapidly disappear.  This year I'm less concerned for;  I have enough in cash right now to pay all my living expenses plus a six-month buffer even after paying for my tuition, fees and supplies.  That buffer will, hopefully, grow through the end of this summer as I continue to work and be paid.

Next year, however, is a different story.  From my best estimates, I'll pay my business school bills and have just enough left over to cover expected living expenses and not a dime more.  No emergency fund, no slush fund of savings, nothing.  So I'm wondering how I should approach this and thought it would be better to come up with some strategies now, while I still have savings and options, rather than later when I'm already down to minimal to meet expenses.

I do have a few options, but I'm not sure which is best:

1. Wing it - It's in the future, I have family, friends and a SO who can help me out and who knows what will happen between now and then (This option terrifies me more than a little. Neurotic planner, who me?)
2. Loans - I could accept enough loans to constitute an acceptable emergency fund but not take distributions unless I'm in a real bind.  
3. Roth IRA - I have about two years worth of living expenses in a roth IRA that I'm currently planning not to touch.  I'd like to avoid dipping into them since you can't put the contributions back later.
4. Something else?  - I currently have no plans to work, I could set up a formal loan arrangement with an interest rate with my SO, or some other plan.  You guys have any ideas?

 So I'm looking for any feedback or ideas for all you smart readers and bloggers out there on how to approach this.  I'm kind of drawing blanks on how to decide.

Of course I also need to figure out what size of emergency fund is appropriate for my situation.  Here are some factors:

1. I have good health insurance
2. I'm not planning on making money while in school, though I might take a job if it was a good fit
3. I won't have dental dental insurance 
4. My SO will continue to work and has a separate and large savings slush fund, but we maintain separate finances and I would like to do this on my own.
5. Cash on hand when I apply for financial aid again this spring might ding my financial aid for next year
6. My fixed costs are very low once the business school bills are paid.  Rent is $400 plus utilities and groceries are $12.50 a week for my share and that's about it.  (Thank you mom and dad for the family cell phone plan and car insurance.)  Realistically irregular expenses and utilities will keep my minimum spending above $500 a month but I might be able to get down to $600 in a crunch situation.

 So, all my wonderful personal finance gurus and amazingly opinionated readers, tell me what I should do!

Buying in bulk is often a great way to cut the unit price of whatever it is your buying, groceries especially.  It's a tactic we use in our $25 grocery budget and makes even more sense when their are more than two of you in the house.  We buy things like toilet paper in bulk since I know we'll use it eventually and it doesn't spoil.  However, there are several drawbacks when buying in bulk and sometimes it just doesn't make sense.

• The food spoils before you can eat it all
• You won't use everything you've bought
• It disrupts your cash flow or you can't afford the larger quantity
• You buy and use more than you would have if you hadn't bought in bulk
• Buying in bulk isn't actually cheaper or is more expensive per unit than buying individual items
• You have no place to store it

It's important to consider all of these pitfalls when you consider buying in bulk and these are some of the reasons why we only buy large quantities of a few key staples that keep well.

Do you buy any of your groceries in bulk?  In what other areas has buying in bulk produced savings for you?

As I've mentioned before, I'm on a tight budget trying to pay for my MBA in cash.  However, I don't usually feel deprived on my budget because all my basic needs are met and I have a little wiggle room for small indulgences each week.  I use that wiggle room to hit some of the occasional cravings I have and to feel self indulgent while still keeping my budget intact.  I find if I'm proactive with this and am a little looser with small purchases I never find myself with a hundred dollar or more spending spree.  Here are some of my luxuries:

• Small plates - We turn clearing out the fridge into something fun instead of dreaded by making a few small plates out of the leftovers.  Artfully presented and with a little extra sprucing up it's not a problem to finish what's left.
• Fresh herbs - We lucked out with a neighbor who loves to garden but can't keep up with the enormous container garden she's created with herbs.  So we've been welcomed to take a few snips here and there just to keep things tidy.  Fresh herbs can make any meal feel a lot nicer or fancier than it might otherwise feel.
• Call your food fancy names - I don't do this literally.  I would have had a hard time keeping a straight telling my SO that last night's dinner was going to be "herb encrusted roasted eggplant over a bed of fettuccine with an olive oil garlic sauce" since it was eggplant we got as a steal but was going bad in our fridge that I threw on the grill, neglected to put enough marinade on, and later added whatever looked good in the herb garden, garlic powder, and extra olive oil with on top of the pasta we had on hand.  But it was pretty good and it's better than many meals we've had out.  I try to give myself credit where credit is due and feel good about what I put on the table so sometimes my SO and I will come up with the restaurant name for what we've just made.  It's entertaining and reminds us that we really do eat well.
• Buying what I want - On occasion I make sure to satisfy a craving.  Most nights when I want dessert I'll ignore the feeling, but sometimes I'll go out to a store near us which sells small chocolates for $.25 each and buy two.  The walk is good for me and the serving size makes it hard to overindulge in cost or consumption.  
• A mug of something hot - Coffee with milk or tea with sugar and mint feels like manna from heaven on a cold winter day or when you're a little sleep deprived. Giving myself the space to sip from a mug without stress or distraction until I'm done feels very civilized and wealthy.  I actually don't get the same level of calm or enjoyment at a coffee shop that I do at home since Starbucks and the like tend to be busy, loud, and have terrible taste in music. 
• Doing something cliche - A typical dinner and a movie date can run you over $50 after tickets and without even ordering wine with dinner.  Instead, we opt for romantic cliches like long walks holding hands, picnics in the park, watching the sun set over the water, or splitting an ice cream cone together. 
• Trying something new - We found pluots on sale 8 for $1 and bought them to have something new to try.  (For those of you not in the know, a pluot is a plum apricot hybrid) They replaced our usual apple, orange, banana or strawberry mix for the week and helped make things feel fresh.
• Letting something go to waste - This isn't the best advice, but being able to just hand wave and let something go to waste without worrying makes me feel like Marie Antoinette, completely isolated from financial reality.  Those pluots we bought?  They were okay, but after six I was sick of them.  When I found the other two in the back of the fridge a week later into the trash they went without regret.  At $.25, it was a small price to pay to feel rich.
• Being lazy - Cutting myself a break in other areas helps my overall stress level and makes me feel self indulgent without spending any money.  So if I don't want to do dishes one night and feel worn out, I won't do dishes.  They can wait until the morning.  Like everything else this isn't a regular habit but an occasional indulgence.  Usually in the morning after a good night's sleep I'll tackle them without a problem. Plus I've found that being lazy can save me money.

What are some of your frugal indulgences?

For all the talk of extreme couponing, frugalistas, and the new frugality these days and in the wake of the recession, it is still pretty unacceptable in some circles to be watching your wallet more than everyone else.  If you're in the land of conspicuous consumption and, for whatever reason, need to blend in and keep up, then you need to find inconspicuous savings.

So to still save and avoid the questions, notice or even derision of your acquaintances or colleagues you might want to find invisible ways to save.  Areas you can cut in your budget and no one but you and your piggy bank knows the difference.  So if you need to keep your frugality under the radar here are a few good ways to put it to use without anyone the wiser:

1. Car insurance - Shop around for the best rate and raise your deductible to what you can afford to self insure. 
2. Cell phone plans - There may still be pressure to upgrade to a smart phone but no one except you has to know how much data or text messages you use.  If you don't really use your phone or need to find savings, cut your data plan to the minimum.  Of course, you'll need to monitor your usage since going over can be pricey, but most carriers have phone numbers or websites that make it easy to track.
3. Buy some of your groceries generic - If you're the only one who sees them then why do brand names matter?
4. Use gift cards for stores you regularly shop at and buy them at a discount online - The fact that your gift cards all cost you 80% of face value can stay between you and me.  This can discount your keep up with the Jonses wardrobe.
5. Use coupons and sales when you shop alone - How often do friends or co-workers join you as you shop for toiletries or groceries?  Go ahead and penny pinch to your heart's content here.
6. Avoid bank fees, paying interest and other invisible money pits - When money leaves your hands it should be bringing you value.  Interest on debt, parking tickets, overdraft fees and so on don't do this.  While you're at it, make sure your investments are in low fee accounts and vehicles.
7. Negotiate your bills - Call Comcast, Verizon, your power company and who ever else you have regular bills with and negotiate.  Politely ask for better deals or to have advertised deals matched.   How much you pay for your DirectTV is irrelevant when you have the guys over to watch ESPN 10 1/2.
8. Thrift store or vintage shops - The fashionista movement has made this more acceptable, but if you can find quality brands of barely used clothes at a fraction of the price you might just save some money.
9. Mind your taxes - Use a 401k, FSA, HSA, or 529 accounts and every available deduction and credit to your advantage.  Plan ahead a bit and minimize your tax burden.  When tax time comes around and everyone complains, keep your savings mum and try to sympathize.

 Of course even if you aren't in a situation where you need to hide your frugal, you can still use these strategies.  I use them and I have the fabulous and true excuse of a looming tuition bill to get out of pricey outings or conspicuous consumption.

What's your experience? Do you keep your interest in personal finance or your thrifty habits under wraps?

Beans are a staple in our house but they are often a much maligned and neglected food.  In one of my favorite childhood books, Mr. Popper's Penguins the severity of their financial situation is demonstrated by needing to eat beans when trying to make room in their budget to feed their new pet penguin:

"But what worries me is the money. I have saved a little, and I daresay we can get along as we have other winters. No more roast beef, no more ice cream, not even on Sundays."

"Shall we have beans every day?" asked Janie and Bill, coming in from play. "I'm afraid so," said Mrs. Popper.

The only good thing beans seem to have going for them in children's minds is the rhyme.  You know, the one that ends in a giggle inducing bodily function.  However, beans are a frugal cook's best friend.  They're cheap at around $1 per pound dry or $.50-$1 per can and store well so you can stock up a bit when they go on sale.  They're also incredibly healthy.  The Mayo Clinic calls them "among the most versatile and nutritious foods available".

"Legumes are typically low in fat, and high in fiber, folate, potassium, iron and magnesium. Beans and other legumes can be a healthy substitute for meat, which has more fat and cholesterol."

Beans are a great meat substitute.  Iowa State lists dried beans as their most economical source of protein followed by peanut butter and canned beans.   They note that a one ounce serving of hamburger might be $.25 while the equivalent serving of dried beans by protein would be $.04.  When combined with a grain like rice or pasta, even if it's not at the same meal, beans form a complete protein. Dietary guidelines recommend that the average person triple their consumption of beans from one cup to three.  Because of their water and fiber content beans help you feel full faster, aiding in weight loss.  The fiber also has the added bonus of helping you stay full longer than meat since it's slower to digest. In one study people who ate beans weighed seven pounds less than those who didn't.  Several types of beans are also high in antioxidants.

Convinced to add beans to your grocery bill yet?  Let's say you spend $25 a week on meat.  According to that Iowa State math you'd only spend $4 on the equivalent in dried beans.  Over one year you could save $1,092 by switching from meat to beans.  If you're buying something more pricey than hamburger you savings will be bigger.  Beans are a key part of making our $25 weekly grocery budget work.  For more than you ever wanted to know about bean consumption in the US check out the USDA's website where they note that beans are included in both the vegetable and meat groups of the food pyramid since they provide the benefits of both - a two for one deal!

Okay, beans are great but I have no idea how to cook them, you say.  No problem.  Start with canned.  It's still cheaper than meat and you get all the same health benefits of dried beans for a fraction of the effort.  I'll freely admit that we mostly used canned beans since they're so easy.  For canned beans you can pretty much just warm them up and add spices.  For recipe ideas check out Cheap Healthy Good (they're currently on a break from blogging but have an amazing recipe archive), the New York Times,  or your favorite recipe website.  Once you start looking there are plenty of bean ideas out there.  Think soups, chili, burritos, Italian with white beans, Indian with lentils or chick peas, hummus, dips and spreads.  Make sure you get beyond pinto or black beans to try kidney, cannellini, great northern, or garbanzo beans (chick peas).  Personally, I don't get tired of beans.

Do you have any great bean recipes?  Are they a favorite or feared food for you?

Prevailing wisdom in the health world is that most people should eat more slowly.  Slowing down, savoring every mouthful and putting your fork down between bites has been shown to help you loose weight, feel full sooner in your meal and it probably doesn't hurt your enjoyment of what you're eating either.  There are all sorts of tactics that have been developed to help people eat slower and thus eat less like eating with chopsticks, holding your fork in your non-dominant hand, having an interesting conversation while you eat so you spend more time talking between bites, counting to 30 before taking another bite, or chewing a minimum number of times before swallowing.

Why can't we do the same thing in our financial lives?  If you can get yourself to spend at a slower rate you will spend less overall and will be able to save more.  It seems pretty logical to me that if you can draw out a purchase you might get more enjoyment out of it.  You also can also delay additional purchases by stretching what you already have to last a little longer.  Research has shown that delaying consumption can increase the amount of happiness you get from a purchase and that several small purchases can bring more happiness than one expensive one which runs parallel to the idea that you my eat less if you eat several small meals a day.  There's general research about how you can spend your money more effectively to be happy, but what specifically can we do to slow down the rate at which we spend?

You can try putting physical distance as a barrier between you and spending.  I try not to drive during the week and it's about a quarter of a mile to anyplace where I can spend money.  So most of the time the only buying that gets done during the week is crucial stuff like groceries, toiletries, or public transit money.

I've heard of many people having a daily spending limit and a mandatory waiting period for large purchases beyond the limit that scales up with price. That directly postpones consumption and spending potentially in a big way since it's proportional to the amount you want to spend.

I sometimes find that making a single small purchase will satisfy my need for spending for quite some time.  For example, a few months ago I felt like my work clothes were all not in great shape and I'd need to replace all of them.  I went to the mall, bought one shirt and was done.  I haven't been back since and have been making do with what I have which wasn't as bad as I feared.  Similarly, when I have a huge craving for dessert I'll sometimes take my SO with me to a small store that sells single chocolates for $.30 and the craving will be satisfied for a few days.

You could put everything you want on a wish list if online shopping is your thing.  If you know you can always find it later it may be easier to put it aside for a while.  Plus with an online wish list maybe someone will buy that book, scarf or tool for you and you won't have to spend any money at all.

There's also tons of talk in personal finance blogs about how many people spend less if they only spend cold, hard cash instead of using a credit or debit card.  Research has shown that people are more reluctant to spend if they carry bills in large denominations.  Maybe you can slow your spending by only carrying one $20 bill. Just be careful once you break it.

What are the tricks you can put in place in your life to slow you spending?  Do you think this can help you spend less and still feel satisfied?

There's a stereotype about how graduate students live.  Eating nothing but ramen, riding their bikes everywhere, and generally being as cheap as possible.  I've certainly heard stories of my own parents' graduate school days of living on as little as possible featuring cold apartments in the winter, junky old cars, and buying everything they owned from thrift stores or getting it for free.  As I've mentioned before, I'll probably be adhering way more closely to this sort of lifestyle than the stereotype of an MBA grad while I'm in school (and let's be honest, probably well beyond that too).

But it seems to me that this fabled grad student lifestyle might be going the way of the dodo.  I have a lot of friends in graduate schools that live really comfortably with regular trips to bars and restaurants, a fair amount of travel, nice weddings, newer cars, and more.  This is a lot more expensive than the stereotypical budget, but I'm fairly certain that stipends for PhD's have barely kept up with inflation and I know that the cost of a professional degree has grown faster than inflation.  So what's going on here?  Are parents bankrolling a professional lifestyle for their pre-professional children? Are students bankrolling their current consumption levels with student loans?  I think that for professional school students it's mostly the latter and for other graduate school students it's more the former.

But business school students are sort of a special case here.  An MBA is one of the few degrees where it is nearly requisite to have held a full time job before attending.  So business school students have acclimated to having a certain amount of income and liberty to spend for their lifestyles.  It's also possible that they will have substantial savings to bankroll their way through school or that an employer will bankroll the experience for them.  In 2007-2008 about 40% of MBA students received employer tuition assistance, with an average benefit of $6,271.10 according to FinAid.  So in most cases employers only bankroll a small portion of the cost of an MBA, not enough to allow the student to support a six-figure lifestyle. So putting savings aside, MBA students are largely using student loans to finance their lifestyles in anticipation of a job after graduation that will easily cover their loan payments, lifestyle and more.

What happened to the idea that you could work your way through school? Heck, what happened to living cheap while you were a student?  I can't help looking at Pepsi's Indra Nooyi's description of working nights for grocery money and thinking that would a pretty uncommon sight on campuses these days.  Maybe it was uncommon in her day too, I don't know.  All I'm realizing is that I was raised in a family of scientists expecting a graduate school experience very similar to my parents' and an MBA is so not the same. 

What do you think?  Are graduate students less able to work their way through school since costs have risen faster than wages so they just finance it all?  Is the stereotypical graduate student lifestyle a thing of the past?

We've been having a lot of success with our $25 per week grocery budget challenge, meeting our goal each week and feeling really good about the accomplishment and what we're eating.  I just wanted to share our strategies for making our budget work each week.

First off, let me state the limitations of our budget.  The $25 does not include any paper, cleaning or other household products, any eating out, or coffee.  The grocery budget is literally only for groceries.  Now that the "rules" are clear here's what we do to come out under budget:

1. Buy generic.  Neither of us has an ounce of brand loyalty and frankly we almost never can taste a difference between generic and name brand.  Ok, last week I picked up a big box of generic cheerios for $2 and SO claimed they tasted like cardboard but I bet that would have been true for name brand cheerios too (I thought they tasted like cheerios).  This week SO picked the cereal and we have name brand Frosted Flakes that were two for $5 and we bought at CVS to use up extra care bucks and paid nothing out of pocket for.  I think they taste like crunchy sugar but it will be my turn again when we run out of cereal.
2. Know your basics and stock up when they go on sale.  We eat lots of pasta, rice, beans, and canned tomatoes all of which have a long shelf life.  The generic prices of these staples are pretty stable so when we see something cheaper we stock up a bit.  By having some very basic staples around you can pretty much cook around what other things are on sale in a given week which is especially useful for buying produce.
3. Find the best place to shop.  We pretty much do all of our shopping for groceries in two places - the cheap grocery store and the weekly produce market.  We lucked out that we're about a half mile walk from both.  Poke around your neighborhood and compare prices on your staples.  Consider coupon policies if you use them (I don't) and the distance you'll have to travel.  Check out your local open air markets.  We find we can get a great deal showing up just before closing and buying what's left.
4. No impulse buys.  Impulse buys are a great way to blow your budget.  Okay, maybe we have them occaisionally, but they are along the lines of a bizarre 25 cent clearance item than a $6 gallon of ice cream.  $6 would completely kill our budget for a week. 
5. Cook at home and from scratch.  We buy almost no processed foods which can be expensive.  This also leads us to eat healthier.  Our meals basically are some combination of carb, protein and a pile of vegetables.  So one night we might have a curry with brown rice, chick peas, onions, tomatoes, green onions and cilantro.  Having the basic formula allows us to use up whatever is in the fridge or on the shelf with very little waste. 
6. Cook nearly vegetarian.  Meat is a rare purchase for us and I don't really miss it.  We use beans, eggs, tofu, TVP, and other vegetarian options in our meals instead.  Beans and a whole grain form a complete protein so don't worry about missing out just because you don't have chicken at every meal.  I'd also suggest trying different kinds of beans.  Our staples include kidney, black, garbanzo, and cannellini, but neither of us is a big fan of pinto.
7. Buy spices at CVS.  CVS sells all of your favorite spices for $.99 per jar.  My dad claims their recent $.88 sale will be permanent, the new price, but either way it's way cheaper than grocery store prices.  
8. Reusable bags.  Our grocery store gives us $.05 back per reusable bag we bring.  CVS will also give you a $1 coupon for every four visits you make with a reusable bag that has their green bag tag on it.  So we might get almost a dollar back every two weeks by bringing our own bags.  It's about 2% of our budget.  It seems silly but the yuppie bags (as we call them) are also a lot easier and more comfortable to carry walking the half mile home from the store.  Plus, I like free money.

That pretty much covers how we do it.  For more inspiration check out 30 Bucks a Week.  The couple writing that has been keeping track of their grocery spending a lot longer than us and keeps it at $30 a week in New York City.  And while I will probably never post photos of our food here they document their meals pretty well, really demonstrating how far (and deliciously) a small grocery budget can go. Cheap Healthy Good is another great resource for good food on a small budget.

I am happy to report that so far the $25 grocery budget has been a success!  We're in week six and so far have not run out of anything and have been having healthy, filling meals with no problems.  We've even been replenishing pantry basics like flour, oatmeal, and spices that are irregular purchases as we go.  Here's how our spending has worked out for each week:

Week	Produce	Grocery	Total
Week 1	$10.00	$8.38	$18.38
Week 2	$9.50	$13.97	$23.47
Week 3	$10.00	$13.68	$23.68
Week 4	$10.00	$13.19	$23.19
Week 5	$8.00	$16.29	$24.29
Week 6	$0.00	$18.83	not done

We never actually got an envelope to use in a cash envelope method, but I've had no problem just putting it on the credit card and keeping a tally.  Since it's a weekly budget we usually only make three shopping trips each week (produce, other groceries, and a oops we forgot/ran out of milk trip) and it's been easy enough to keep track of. There's a market near our place that offers really good deals on produce so we stock up at the beginning of the week with lots of fruits and veggies.  This week we had a ton of leftovers that we needed to use up (we got about 5lbs of broccoli for $1 last week among other purchases) so we decided to skip the market.

I am currently debating if the potential "rollover" money from under spending in previous weeks will be fair game to spend later.  On the one hand we've been doing pretty well without it.  On the other hand it would be nice to stock up on a few basics and a small indulgence or two.

Poets and Quants has an excellent article up about what CEOs were like when they were MBA students.  I really enjoyed the article since it takes these really remote figures and makes them feel really approachable and human.  Hearing about Immelt's (GE's CEO) feelings of being overwhelmed is really comforting.  It reinforces that no one is perfect or super human and that even if I can't get done everything I want to do in a day it doesn't necessarily mean I'm not CEO material. Though J P Morgan's CEO says he was always prepared for class.

Of course the article has several quotes that promote the value of the MBA degree and various programs, but it was the quotes from Pepsi’s Indra Nooyi that I found most interesting:

Nooyi recalled how she was virtually broke in her first year as an MBA student. “Those were very tough times.,” she said.  “At the end of the month, if I saved $5. I thought I had died and gone to heaven. I was totally and complete broke. I had no money to buy clothes. Nothing. Absolutely nothing. I worked the front desk of Hadley Hall from midnight to 5 a.m. at $3.35 an hour, the minimum wage. That money was the grocery money for the week.”

[...]

 When Nooyi first interviewed for summer jobs, she had no business suit, instead wearing a sari. It didn’t keep her from getting an MBA internship that allowed her to afford two suits by the time she returned to SOM for her second year. After graduating with the MBA, Nooyi first went to work for Boston Consulting Group for six years. She joined PepsiCo in 1994 as chief strategist, becoming chief executive in 2006.

It's really nice to hear an amazing success story of someone who's been in my shoes.  It's also really nice to hear that they too were on a really tight grocery budget. I've also been putting off buying a good interview suit for years.  Of course I'm not wearing a sari, just an older, less nice suit.  A budget like Nooyi's also implies that she wasn't taking out student loans for living expenses.  How much of that practice is new and if it is new, which I suspect, why did it come into force?  I imagine graduating without debt would allow you to take more risks with your career and reap more rewards.  You might also have an easier time with entrepreneurial ventures - able to take a lower or no salary and take on debt for the business perhaps.  I'd be interested to see the average debt loads of CEOs compared to their graduating classes though I know many are not MBAs.

Do you think there might be a correlation between success and graduating without debt?

My S.O. and I are pretty frugal by nature, but with grad school coming up for me and a general sense that we might be able to save more than we currently are we decided to kick it up a notch and give ourselves a challenge.  Tiny habits in spending can make or break a budget, especially in tight economies or should one fall on hard times. I know of a guy who is pursuing a masters in social work degree, but is known to spend $80 on bar tabs every Friday night. It's no wonder so many of our generation struggle with savings and finances.  As for us, we've decided to implement a $25 per week grocery budget.  In the past we've had times where our grocery bill comfortably ranged around $30 per week, but the last month or two our spending has been more than double that.  We haven't been eating like kings and aren't a ton happier, in fact, I can't even point out why our grocery bills have been so much higher.  So it's time to go back to a hard budget and get mindful about our grocery shopping.

Although originally it was supposed to be a cash-only, envelope method challenge we haven't really stuck to that part of it.  We have been, so far, successful at sticking to the $25 limit.  Actually, last week were just under $20 - we had a lot of left over odds and ends to clear out of the fridge.  We do a Friday to Friday week and this week is looking good too; we've spent $10 so far this week.

The budget covers just groceries, not eating out, alcohol or paper goods for just the two of us and the real challenge will be maintaining it long term instead of eating our pantry empty and having an expensive restocking week.  Our meals have been pretty typical for us, healthy, mostly vegetarian with lots of produce and I think we're just getting back into the groove of eating everything we buy.  We've also been grilling a lot lately which has been nice.

Once we have our usual grocery budget back as habit we'll probably move on to look at eating out (though we haven't been doing a lot of this) or alcohol (spending more than usual here) expenses.  We'll see how it goes.

What do you spend on groceries each week or month?

Update:  I wrote about the tactics we've been using to meet our $25 budget for more how-to information.