“Let’s just trim a little fat”
Welcome the Jolly Ledger! We are on track to retire by 45. I am optimistic we can do this! A lot of other FI bloggers have and we have pieced together our early retirement plan over the last year. The first few posts will cover what we have done so far.
After devouring Go Curry Cracker’s blog which led me to Jim Collins and Mr. Money Mustache, I started taking some action. I wanted to reduce my monthly expenses so I could increase my savings rate! It seems to me that no accelerated FI plan is worth much if you can’t do these two things. I had no time to waste. By the end of the month my budget was slashed in half and my yearly expenses decreased by about $6000. Here’s the before and after of the month that change my life.
Pre- April 2015 monthly expenses
Loans We had three outstanding loans; a student loan balance of ~ $40k, a car loan (at 0% interest) balance of ~ $9k, and a home mortgage with PMI balance of ~$235k.
Phone We live in a rural area not serviced by cheaper providers. This is service for one dumb phone and one smart phone.
Food/household $2000 was budgeted for this category and included groceries, eating out, household supplies (e.g., toiletries, cleaning supplies, etc.) and miscellaneous items (e.g., gifts, exercise classes, etc.)
Auto gas I commute ~ 145 miles per day to work. I know, it’s insane. I’ll cover the whys in another post. An allowance under this category of $250 was really a reflection of gas prices at the time. I should also note that I carpool with a co-worker so it could be twice this number.
Electric/gas This is the average amount it costs for electric and gas in our house each month
Water An average amount each month. Costs are lower in the winter and higher in summer months when I pour money onto my grass and garden for nostalgic reasons.
TV No cable here, but Netflix and DVDs mostly.
Internet These companies bleed us dry.
Garbage Billed every three months, so this is the monthly average
As you can see, we were hemorrhaging money in three main categories, loans, groceries and household, and home mortgage PMI payment. Worse, I had budgeted to spend all (!!!) of my take-home pay. Any leftover was used to pay for yearly expenses or just spent because…whatever.
Post- April 2015 monthly expenses
So, what happened here?
Loans We paid off the student loan with savings from a Roth IRA. I know there is controversy on this but it felt like the right thing to do at the time (and no, I didn’t do the math). We paid it with a cash-back credit card, by asking the agent to waive the fee. She was glad to do it since we were actually paying our student loans! In hindsight, I would’ve gotten a miles reward card (or several!) with a sign-up bonus but you live and learn. New student loan balance = $0!
We paid off the car loan with some of our savings. New car loan balance = $0.
Likewise, we paid down our mortgage to get rid of the PMI. This reduced our monthly mortgage by ~ $110. Home mortgage balance of ~$213k.
Phone No change here
Food/household I chose to split this category to better track our grocery/restaurant spending and our household/miscellaneous spending. Our food budget was reduced to $500, which is essentially groceries plus one restaurant per month. Our household budget decreased to $200. As you can see, this is a cut of $1300 per month! We wasted a lot of money here, mostly on restaurants and junk. I have also streamlined our grocery costs by meal planning, taking advantage of sales, and Costco.
Auto gas Thank you low gas prices! The drop in gas prices to less than $2.00 per gallon has cut this cost substantially. Unfortunately it is temporary.
Electric/gas No change here. However, we did install a storm door (our house is like a sieve), sold one refrigerator, programmed our heater, and turn off lights more often. I have yet to detect any change in our bills.
Water So far we have been able to maintain an average cost of $50. The real test will be this summer to see if this new number holds any…well, you know.
TV Stopped renting DVDs and switched to a cheaper Netflix plan than we had.
Internet Called my internet company to complain about the rate. I was awarded a rate of $26.94 per month for two years. Apparently, I have been a loyal customer! I cannot tell you how beyond psyched I am about this new rate. The real test is to see if I can renew it in 2017.
Garbage Again, negotiated a lower rate on my garbage service. Yay!
Yes! I am saving $2154 per month! But let’s get down to the real question, what did I have to give up? How has my life degraded? How are my husband and child handling the deprivation?
What I gave up
I had to talk to my family about our finances and had to ask them to think about the purchases we make. This was probably the hardest thing I had to do because I didn’t want them to have to sacrifice for something I want…my freedom from the cubicle. I had to ask them to give up certain conveniences like eating out when we are all tired and hungry, or buying everything they want on a whim. It was hard to ask, but you know what they said? “Sure, no problem.” Turns out, they want me to be happy too.
What I got
As you can surmise, we didn’t really have to give up much. Mostly we gave up eating out, but you know what? We gained so much more. We cook together every night now. Our plan was to make a list of everything we order and learn to cook it better than the restaurant. That way, in addition to our normal dinner standbys we would also have some special dinners too. And guess what? We can cook now! We can cook fish and chips, delicious hamburgers, pot stickers, pizza, soups (so many kind!), Chinese food, and more. We don’t have everything down yet but we have only been at it for a year! Plus our food expenses are down, sometimes as low as $250. We are eating great and have learned a skill.
We also cut back on buying stuff we want. We buy the things we need but have cut back to one toy a month. Gifts are handled on a case by case basis. Sometimes we just make the recipient something or cook them dinner. Sometimes our daughter will give away one of her toys or books. We sold tons of stuff we don’t use. I take our old clothes to consignment stores and buy from there when we have money in the account. Honestly, it is pretty easy to just want less.
What have you cut to achieve FI faster?