Monday, December 22, 2014

Down and to the right!

Certainly not the trend you want to see in your investments, but after some recent tinkering in my budget spreadsheet I was pretty happy to see (in graphical form) the impact of the spending changes we've been making.  As I briefly mentioned here we've shaved about $2000 from our monthly budget since 2011 with the heat turned up over the past 2 years after going to a single income with 3 kids in tow.  Some of the $2k was related to commuting expenses for the Mrs and some to other things not 100% applicable to everyone so I'll focus this post on the $1200 or so that is most relevant to the outside world.

I started poking around on Financial Independence blogs about a year ago after hearing about Mr Money Mustache and while I don't plan to retire at 40 (although that does sound pretty fantastic), the principles and practices put forth on FI sites are beneficial to anyone regardless of what their financial goals are.  There are tons of sites out there with tips on how to save but what I like about Mr Money Mustache's philosophy is it's focused around contentment stemming from a mindset change that helps you realize that any dollar not spent can be put to work for future you thus increasing your margin and in his words "badassity".  In our case it was a gradual process that is still evolving 3 years after we started the making changes but has resulted (thus far) in a 28% reduction in living expenses.  By basically paying less for necessities and buying less crap we don't need we've not only improved our bottom line but have been able to add luxuries such as our new "Activities" budget category that includes a YMCA membership, select baseball (which in itself amounts to a monthly payment on a nice CTS-V Wagon), as well as other fun and usually healthy family activities.

I want to start off by stating that like everyone else's, our budget fluctuates due to unforseen circumstances as well as good 'ol fashioned wasteful spending.  Also, as I mentioned in the post linked above, we completely blew it in May (and again in July) and doubled what we planned to spend going out to eat (this would serve as appropriate soundtrack, right click, "Open in New Window" if you want tunes while you read).  In May, this was compounded by the fact that we couldn't keep our family healthy and ended up in the doctor's office just about every week (horay high deductible plan!).  Thankfully, despite all that we still ended up in the black due to budget cutting in other areas, something that definitely would not have been true in the past.   

Food: $500
This is where we've wrangled the most savings and my wife gets most of the credit here.  A little prep/planning and some research goes a long way, once she started planning out meals a week or two ahead of time we not only saved from not overbuying but were less tempted to grab a pizza due to being undecided on what to eat.  As I mentioned here, we also started comparing costs ($/oz, lb etc.) between our local grocery store and Sam's Club and found that quite a few things are actually cheaper at the store.  Coupons are also king for non store brand items and handy apps like Checkout51 and ibotta make it incredibly easy to get rebates (which we're storing up for Christmas expenses) on things you buy as well.

Our diet has also changed quite a bit in that time and now includes more fresh fruit, veggies, and healthy fats/proteins.  People say eating healthy is expensive but really look at the cost of your salty sugary snacks and you'll see that when bought/prepared right, good fats/oils and lean proteins probably aren't much more expensive.  Junk food also doesn't serve as a meal replacement so it's really just adding (delicious) cost to your grocery bill without adding dietary value.  This is a fact that we validated on our summer vacation when loosening the dietary reins not only upped our grocery spending but also the diameter of our waistlines. That said, I wouldn't have had it any other way!

Eating out was another area of big spending in the past that we've essentially cut by more than half, from lunches at work to indulging in happy hours and dinners out when we were feeling too lazy to cook.  Obviously kids and lack of opportunity for dates plays into this, but we also came to the realization that it was a lose-lose as we were forking over quite a bit of money to essentially make ourselves fat.  A social life and quality time doing fun things as a family is of course important and I'm still willing to pay 4x cost for a pint of beer for the atmosphere and chance to get away so our new budget still includes provisions for date night at our church (can't beat $16 for 3hrs of babysitting!) and an $8 weekly lunch with my buds along with occasional special celebration averaged in. We have also made a habit of packing lunches and snacks for baseball tournaments but an unpredictable schedule still leads to eating out sometimes more than we planned.

Bills: $300
This area is one where a minimal amount of effort and change has led to huge savings with little to no impact to quality of life, from $140/mo savings ($202 to $62) on our cell phone expenses to $50 related to cutbacks on satellite and internet including 10% savings that was had just by calling and asking.  We were also the "lucky" recipients of a new HVAC system last fall, something that when combined with a cheaper energy provider and setting our thermostat at 80 in the summer has led to an average savings of $60/month. Little things have added up to the other $50: paying our car and homeowners' insurance annually, water saving shower heads etc.

Gas: $260
Big one here, we live in the urban sprawl of the suburbs of Austin, TX and have to drive (large distances at times) quite a bit, something compounded by our traveling baseball schedule.  We took a small step by driving more efficient car (a $1200 Volvo mentioned here) and a big one after trading our gas guzzling Sequoia for a Prius. I also started Bike commuting (~4 days/week) which netted an additional savings of $60/mo with the added benefit of my commute becoming my daily workout.

Misc: $140
In the past misc (clothes, toys, other junk) was our wildcard category and would typically make or break the budget for a given month.  I covered this in decent detail in my Worth the Wait post, but planning misc budget spending months in advance has helped us to know and plan what's coming up as well as ponder whether those things are really needed at all in comparison to what those Benjamins could be doing for future us.  Although I still wear the same set of shirts and pair of shoes purchased 2 years ago to work on a daily basis (shoes purchased 9/5/12 according to Amazon order history), I realize that I'm married to a female (and would like to remain so) and like the occasional gadget myself so we also started budgeting a small bucket of fun money for each of us a few months back which seems to have been a big help in keeping this category in check as well.

Final Savings Tally
Food $500
Bills $300
Gas $260
 Misc $140 
Total $1200

All in all, a few big changes and multiple small ones gave our income a huge boost in a time where the economy could not and while we weren't able to make up for the full amount of my wife's social worker salary, we got close enough to make it work and now have a sustainable budget that will allow us to continue paying things off and save for the future.  In the end, we're all called to be good stewards of the abundance we're given and making the most of our income is one way to accomplish that.  Taking a hard line at maintaining (or reducing) expenses as our income (hopefully) goes up as we come out of the recession will also set us up for an even better savings rate, something we will desperately need as we look towards 3 sets of braces, college educations, and all the other things that come with a growing family.

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