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:
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.
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:
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.