Well folks, new year, new goals. Are you looking to increase your savings rate this year?
Are you really interested in saving? “No” is a completely acceptable answer, by the way. If you prefer to answer no, you can largely disregard what’s written below and carry on with a plan more suitable for you. We fully recognize that a frugal existence is not for everyone. We cool? Cool.
However, if you’re really interested in saving tens of thousands of dollars, it’s going to require not only change, but a complete re-framing of your lifestyle.
These sort of changes will require a degree of discomfort — whether it’s physical, social, or otherwise — until you become accustomed to a new normal. That’s the beauty of the human condition; we’re adaptable. Take it from us that perceived discomfort can, with time, result in a new-found appreciation for a more simple existence. And the benefits are not purely financial. Building a new life of simplicity brings the benefits of a difficult-to-describe feeling of place in the world. A place you’ve earned, not bought. If you trust us in that, let’s read on.
Hard choices, easy life. Easy choices, hard life.
Jerzy Gregory
1. Cars
Allow me to clarify: We do have a car, but we don’t have cars. We’ve never been car people.
We don’t even need a car most days. We can get to work and around our neighborhood by walking, riding a bike, or taking the bus. So, this summer we decided to try our hand at being a one car household.
Will this work for you? I don’t know, maybe you need one car per person. But before you head over to the Porsche dealership, you might consider the true cost of car ownership.
I had a kick-ass 2001 Toyota Tacoma for 17 years until I sold it this past summer. Mrs. CC had a 1995 Honda Accord with a mysterious murder-like stain in the backseat for many years, before cashing it out for a few hundred bucks in 2011 at 223,000 miles.
We bought a really crappy used Jetta that died within a year. That led us to believe that a new car was the only way to go. Put a hand in the air if you’ve experienced the pit of despair that is a crappy used car. Yes.
We purchased a brand new 2012 Subaru Outback (So Colorado) late in the model year. Was that a wise financial decision? We certainly took a major depreciation hit the second we drove off the lot. Who knows, but judging from our history, we plan to run this puppy into the ground. We’ll ideally get 15-20 (or more) years out of her. That’a girl.
But back to being a one-car household…
Basically, we were bleeding money for two cars when we were barely using one. I’m embarrassed to admit how long it took me to finally bring myself to sell my truck. I kept coming up with “what-if” scenarios, but I knew the costs (insurance, registration, maintenance) no longer justified keeping the truck. But damn, it was cool-ass truck.
So yeah, we sold my beloved truck, scored some income, and drastically lowered a key fixed yearly expense. So far so good!
Is being a one-car household in the cards for you? Are you in the market for a new car? The best car might be the one you already have. Either way, make sure to crunch the numbers and consider all the obvious expenses and forgone opportunity costs.
Estimated Yearly Savings: $3000
2. Cable Television
I haven’t had cable TV since I left my parent’s house for college in 2003. I’ve missed it zero. Those that know me are likely aware of my disdain for cable TV, and frankly, many in our generation have already cut the cord.
You know that feeling of contentment and refreshment after watching TV for 5 straight hours? Yeah, me neither. Sitting in front of a TV for hours is really bad for you, but you already knew that. Writing for this website probably isn’t much better for my health, so I guess we’re sort of even.
At least we can all agree that cable TV is expensive.
We do enjoy a bit of Netflix here and there to unwind. Hypocritical? Well, Netflix isn’t getting me up my latest projects, that’s for sure. But at least it’s a fraction of the cost and we can pick what we want to watch and when we want to watch it. And no Swiffer commercials!
Do you think you could go a month without cable? Check out a subscription service like Netflix or Hulu instead. Those subscription services won’t help pull you away from the couch, but at least they will be healthier for your wallet. Seriously, give it a go.
Estimated Yearly Savings: $1,020
3. Eating Out
This is likely to be our most controversial spending cut (unless you really like TV). In our prior life, we went out to dinner twice on most weekends. We really enjoyed it and thought we were getting good value out of the money spent. In late 2015 we made a concerted effort to save money here, and if I’m being honest, this did feel a little like deprivation…at first.
We haven’t cut spending here entirely; we’ve left up to $100/month in the budget. But as of the time of writing, we’ve spent $5.63 in “dining out” spending in the last three months (and that was because Mrs. CC forgot her lunch — SHAME!).
Your kitchen, your savings….
Our desire to eat out naturally dwindled over the last three or so years. But let’s not get it twisted — we’ll gladly go out on occasion for something that catches our eye. When we do, it actually feels like a special occasion…because it is! What once was a weekend habit has become a memorable and valuable experience. When we go out for a nice dinner, we actually remember it.
We’ve also gained immense satisfaction and health improvements out of cooking our own food. I’m kind of rehashing what I’ve already written in an earlier post, but eating out makes managing your health infinitely more difficult. OMG that damn Chipotle goes straight to my hips.
Is eating out your social outlet? That’s cool, do it a bit, but what about dinner at your place? You can be as ridiculous as you want. There’s no manager to crank the A/C on you when you’ve been sitting too long. And Noah won’t spit in your coconut shrimp. (It happens folks, I’ve seen it. Loogie in the shrimp batter. Real talk.)
**How we define “dining out” includes all restaurant meals and anything not prepared from scratch at home: coffee shop pastries, grab-and-go grocery store deli, you get the idea.
Estimated Yearly Savings: $5000!
4. Expensive Housing
Your choice on where and how to live can make or break your chances of financial security.
It’s incredibly important to to buy or rent within your means. Housing expenses are simply going to (likely) be the biggest line item expense for most, and paying for a house/condo/apartment you can barely afford will have you teetering on the cliff of insolvency. (I’d put an Alex Honnold photo here, but he’s famous now and I’ll probably get a cease and desist letter. Google him.)
How much should I spend?
Dave Ramsey, the worshipped debt-erasing guru, recommends a mortgage payment of no more than 25% of your monthly take-home pay. This sounds like good advice, but even that was too high for us. Too many people get hosed by an underwater mortgage, and we wanted to keep our heads afloat before jumping in on the housing game. For full disclosure, we ended up taking on a mortgage that constitutes about 17% of our take-home pay. And to be clear, I’m including all taxes and insurance (escrow) under the mortgage umbrella. That’s still a lot of money in our frugal world.
Whether you live in a big house or a small house, you’ll get used to it. Ask the Odette’s.
Estimated Yearly Savings: $9,600 (An estimated difference on a mortgage we theoretically could have afforded and the one we have. This does not include additional interest payments, additional furnishings, increased utility bills, or other hidden costs of owning a bigger/nicer house)
5. High Utility Bills
As mentioned above, it should be obvious that living in a bigger space requires more energy to keep it comfortable. Aside from space, I’ve always struggled to understand the desire to say, I don’t know, wear a T-shirt inside in December. It’s freaking December! It’s supposed to be cold!
I’ve always been a stickler — much to the disdain of former roommates — about the bare necessity use of heating and air conditioning.
Winter: 55-60 degrees. Even for the less frugal in the FIRE community, we’re not the only ones.
Summer: 80 degrees. We honestly don’t use AC much at all.
To get on a brief soapbox, I’ll remind my readers that the CC’s work in the oil and gas industry.
So shouldn’t we be cranking the heat and A/C in support of our industry? Drill Baby Drill!!
If you don’t care about the cost savings, at least let this be a public service announcement to remind you where your electricity comes from. (In our case, it’s actually dominantly supplied from coal-burning power plants).
Don’t like coal? Think oil companies are the devil? Not in your backyard? Remember, the economy functions as a supply and demand system, and if you desire to wear a T-shirt inside in December or a hoodie in July…well, you get the idea.
Anyway…
Mr. Money Mustache wrote an interesting article on the adaptation potential of your body to the ambient environment. As someone who spends as much time as possible outside, I don’t want to get all soft by sitting in a house warmed to 80 degrees all winter. No wonder no one wants to climb in the winter!
I can already tell that this needs it’s own post. More to come!
Estimated Yearly Savings: I don’t really know. Based on some trends in our area that I (lightly) researched, let’s go with $2000.
Summary…for now
This post is already getting too long, so I’ll have to schedule some sort of follow-up. There are more big-ticket items.
My suggestion for now:
- Take a look at your three biggest expenditures. The big three are probably housing, food, and transportation.
2. Do they make sense? Can you save money there? Does the value meet the cost? It’s perfectly ok if you are getting value out of the money spent. You do you.
3. If you desire to save money anywhere, take action. Today. The hardest part of any lifestyle change is getting started. It’s easier from there.
What’s amazing is that by making these life decisions mentioned above (and there are others), you can cut an estimated $20,620 in expenses per year.
Want to know how freaking powerful that is? If you can realize those kinds of savings year after year after year, you’ll make yourself rich without even trying. If you invest those savings into something generating (on average) a 7% yearly return, in 30 years you will have over $2,100,000 waiting for you. I got ants in my pants and I need to dance!
This is not some sort of Ponzi scheme. This is easy stuff, and these lifestyle modifications can radically change your future and your family’s future.
It’s 2019, so why not make some changes? If you want to, anyway.
Talk to you next week guys.