A Plan from 1946 for the Intelligent Spending of Money

A user (/u/nope-nobody-ever) on the /r/financialindependence subreddit recently shared with the group excerpts from his grandmother’s budgeting journal dated 1946. I found what was shared fascinating, and took permission to share the journal with you (thanks again /u/nope-nobody-ever).

Join me as we saunter down memory lane and study the budgets and expenses of nearly 70 years ago.

Here is the faded cover of the journal:

1946 budget

 

Inside the back cover it says “PRINTED IN U.S.A. BY THE CAREY PRESS CORPORATION. NEW YORK”. The poster’s grandmother resided in NYC at the time that she made use of this journal.

The diary has two days per page, with the date and day printed, to be used to make journal entries.

But, in addition to giving one room to bare one’s heart to Dear Diary, this journal includes: a compound interest chart, a social security benefits chart, and blank tables to track insurance, war bonds, income tax deductions and cash account flow!

And then we come to my favourite bit, the weekly budget system:

A plan for the intelligent spending of money which will, if followed, help you save.

1946 budget

 

For weekly incomes ranging from $25 to $150, this system takes into account the number of people in your family (2 to 5) and makes a recommendation for how much you should spend in each category.

There are seven categories: shelter, food, clothing, operating, advancement, insurance and investments.

Here is how the diary explains those categories:

1946 budget

 

For example, for a weekly income of $30, for a family of 4, the recommendations are:

  • $7.50 on shelter. This is 25% of income.
  • $11.25 on food. This is 37.5% of income.
  • $5.25 on clothing. This is 17.5% of income.
  • $1.25 on operating. This is 4.2% of income.
  • $3.00 on advancement. This is 10% of income.
  • $1.25 on insurance. This is 4.2% of income.
  • $.50 on investments. This is 1.6% of income.

According to this CPI calculator, $30 in 1946 has the same buying power as $403 today.   

 

Here are some of my observations:

Rent in NYC was apparently way cheaper in 1946. 25% of $403 is about $100. Good luck living in anything other than a cardboard box under a bridge on that weekly budget in NYC today.

The budget allows for some lifestyle inflation as one’s income increases, but the increase in spending is not proportional to the increase in income. For example, at $30 a week for a family of 4 food is $11.25 or 37.5% of income. At $150 a week spending on food for a family of four shoots up to $27, or 18% of income.

Similarly at $30 a week, the budget recommends saving a measly 1.6% of income, but at $150 a week this category is up to 17.3% of income. While 17.3% is certainly a respectable savings rate, this budget is clearly not set up with financial independence or early retirement in mind.

 

While shelter was cheaper back in the day, both food and clothing seem to have been much more expensive than they are today.

At the $100/week income level, clothing is 15% of the budget. In today’s dollars that works out to taking home $1343.54/week and spending $201/week on clothing. If I was determined to spend 15% of my income on clothing, I would need to be decked out in designer labels from head to toe.

At the $100/week income level, food is 21% of the budget! Compared to the 1940s our grocery bills today are dirt cheap. Groceries are an area of my budget that cries out for optimization, and we don’t spend anywhere close to 21% of our income on it.

 

I found it very interesting that while categories like clothing and food scaled up with the number of people in the family, the categories of shelter and operating do not! You will notice that at every income level the amount spent on shelter and operating expenses remain the same irrespective of family size. E.g. at the $100/week income level, it is recommended to spend $23 on shelter and $10 on operating (utilities and home supplies) whether you have one kid or three.

This leads me to believe that the idea that every child needs their own bedroom is a more modern American idea, and the America of old was more like my homeland of India. My sister and I shared a room for most of our lives, and this is true of all my friends and cousins. In fact, some of my cousins grew up in a one bedroom apartment and they were a family of five (and they hosted us when we visited them for Christmas)! While we often talk and blog about questioning expenses like the cost of our cell phone bills or cutting cable, it might be worth our while to consider whether we really need a three bedroom house just because we happen to have two children. Large portions of the rest of the world do not hold this to be a self-evident truth, and apparently neither did the Americans of yore. While it is fine and dandy to save $50 a month on our cell phone bills, how many thousands could we be saving a year if we settled for smaller houses?

 

One final unexplained mystery: While most categories in the budget either stay flat or go up as the number of children increase – advancement and insurance actually decrease with more children. Does anyone have a good theory about why this might be true?

I hope you enjoyed this blast from the past as much as I did, and I hope that you have your own plan for the intelligent spending of money which will, if followed, bring you much happiness.

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16 thoughts on “A Plan from 1946 for the Intelligent Spending of Money”

  1. Hahaha, this is so cool! Thanks for featuring this! I really need to get on Reddit; there’s some cool shiz on there. Prudent money management and frugality never go out of style y’all. 🙂

    1. You should come hang out on the FIRE subreddit – there are some good conversations to be had, and it is generally fun watching such a large group of folks trudge together towards FIRE.

  2. Indeed fascinating! I love these look back in time kind of glimpses. I don’t have any strong theories on why advancement and insurance would decline with the increase of children, other than they expect food and clothing to rise and the money has to be squeezed out of some other category. Note the absent of any kind of debt, right? Purchasing power and also priorities has really changed in America over the last 100 years. You are absolutely right about clothing. We buy ‘disposable’ clothes now where as in the early 1900’s clothing was a big deal, but expected to last a lot longer. You also had just a few of each kind of clothes and not a different shirt for each day of the month! This is why I think the tiny house and minimalism movements are taking on more steam. People are starting to rethink all the madness. However, there is still the overwhelming majority that are mindlessly after more, more, more.

    Boy, look how much is supposed to be in ‘advancement’ category for 10%!

    1. That is a most reasonable theory actually. Those categories decline because _something_ has to give. Good point about the lack of consumer debt.

      The clothing thing reminds me of my childhood – ready made clothes didn’t really make an appearance in India until the markets opened up, so for about half my childhood new clothes were things that either an Aunt visiting from abroad bought for you, hand me downs from cousins or they were things that were tailored a few times a year.

  3. Time ravel… nice. Great observations on spending on housing.

    a possible theory (same as frommrsneed2save) – the budget needs to respect the income. Hence, as some parts increase with more children (food, clothes), the difference needs to come from elsewhere. It could mean that by design those people are underinsured in certain areas or have a higher deductible. OR they have less budget to invest in advancement. Could it be a hidden message that you need to balance income/kids/advancement to your budget? Lie earn less, have less kids (I am not saying I support that idea…)

    We do have a plan in place to guide our spending on different categories. The one that gets more funding now is travel. And over time, it might be that investing drops to 0 as we adapt towards a life style that brings happiness sooner.

    1. Yep, that seems to be the prevalent theory in the comments section and I have to agree. It is hard to argue that travel is a category not deserving of priority in a budget. How nice that you and your family are getting more travel in now, building all these great memories with your kids.

  4. Thanks for sharing, that is a fascinating glimpse into the past.

    As for the bedroom thing, I have a 3 bedroom house, and 5 kids! They are all daughters, which is what makes this possible: They all sleep in one room! We have an open spare bedroom! We could move someone into it, but no one asks. We’ll see how long we can ride it out (the oldest is 12), but we have not convinced them that they need their own room, and thus they love all being together. (What do you need a bedroom for besides to store clothes and sleep ……?)

    I don’t know why insurance would go down with more people?

    1. Love that your daughters share a room! Is this common among their peers too? If none of their friends share bedrooms, I wonder if that would cause them to want to follow suit, especially since there is a spare bedroom to be had. I know that I loved sharing a room with my sister when we were little (it was always less scary at night, in the dark, to not be alone), but as a teenager I really, really wanted my own space.

  5. I wonder if advancement and insurance go down more as a reflection of reality than because that’s recommended – at some point, there was a ceiling on what people could realistically earn, wasn’t there? So if other costs like food go up with number of people, because you can only choose to ration so much food, I’m guessing that you stop spending so much on the things that don’t directly impact your day to day survival. Most things in both categories count as not-survival money, as far as I’m concerned: travel, entertainment, education, savings, charity, gifts.

    Plus with more people in the family, and a limited income, I’m pretty sure that travel was much harder to accomplish back then.

    So that’s my grand theory.

    1. Yep, that seems to be the consensus amongst my readers, and I have to agree – it is a solid hypothesis. Agree with you about travel too – I think back then international travel was truly the domain of the rich. For most ‘ordinary’ folks travel was probably road trips and camping.

  6. I was thinking along the same line as Revanche @ A Gai Shan Life. I am sixty and my husband and I raised 5 children. As we accumulated more children our vacations by necessity became less Disney and more primitive tent camping. The first four children were boys who loved the outdoors so this worked for them. We felt it was more important to save for their education and find free things to do on vacation. Often those free things were educational so it was a win-win for us. We’ve always been thrifty, me more so than my husband. I was raised by a mom who could squeeze a penny hard enough to make Lincoln cry “uncle”. I still live that way, but we have so many extraneous items we think are essentials that the money just flies out the door. Our problem is saying “no” to our struggling children when they need our help with making ends meet in their households. Good article.

    1. 5 kids and 4 boys! Hats off to you Ellen. “I was raised by a mom who could squeeze a penny hard enough to make Lincoln cry “uncle”. Hahahahaha. Nicely put.

      I can imagine struggling with that too. My daughter is yet a toddler, but I can easily see myself wanting to help her out financially if she needs it much later in her life. I know that this is true of my parents too – if I indicated that I needed it they would rush to help, even to the detriment of their own retirements. Luckily thus far (knock very firmly on wood) I have no need of their help and never intend to ask.

      Thanks for stopping by and taking the time to comment.

  7. I find it funny how it says in the explanation that “insurance is self-explanatory”, while I’m thinking: what kind of insurance? Health insurance? Housing insurance? Insurance-against-old-age? Life insurance?

    Still, a very nice mirror to the past.

    1. Ha! I thought exactly that too. I’m guessing they only had the one kind back then and felt that there was nothing interesting to say about it.

  8. Wow this is truly amazing. I love how it’s an easy to follow guide. I wonder how many people actually followed through and used that to really guide them. Also I don’t know why it stood up but the number 56 in the blue pen reminds me of how my grandma writes. She was born in Brooklyn and would have been about 24 at the time of this book’s printing. I wonder if they learned penmanship from the same curriculum 🙂

    1. I bet it wasn’t that many. I don’t think people have become worse with money over time. If they seemed less wasteful back then it was probably because they had less disposable income, more children, and fewer options for things to buy.

      I’m glad the writing brought your Grandma to mind. I wish I had known my grandparents longer, and had had more time to learn about their lives when they were in their 20s and 30s.

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