If you're new here, this blog will give you the tools to become financially independent in 5 years. Here's how I did it and here's a few dozen online journals from other people who are currently doing it. This is not some stupid get rich quick scheme. The method is robust and replicable (no need to win the lottery, sell your business, or win at real estate), but not easy; much in the same way that a diet results in weight loss but is hard to follow persistently unless you set your mind to it.
The key is to save 75%+ of your net income and invest it in income producing assets (bonds and dividend stocks). This is done by running your personal finances much like a business, thinking about assets and inventory and focusing on efficiency and value for money. See this post on how to enjoy a middle class lifestyle on $7,000/year (Please read it, especially the part about the lentils!). There is a "21 day" step-by-step plan for how to get beyond 75% in the left side bar. Also, check out my answers to Frequently Asked Questions which also covers common misconceptions regarding my personal budget, blog income, retirement, marriage, children, health care, etc. I also suggest reading About ERE in the top menu bar.
Certain things I hear here and there leads me to believe that many have their heart in the right place and want to achieve their financial goals while at the same time having their brain in the wrong place spending more on certain categories than they really want to.
Now worries, I’m here to fix it, but first I need to know what the problem is.
Hence a new survey:
[You can tick several boxes] (Note for some reason the survey thingy asks for name and email. I don’t know how to switch that off, but you can just ignore that.)
I spend like a student without a car. Canceling my gym membership and iPhone internet plan were my last significant cost reduction, and all that’s left is ‘eating in’, which seems hard to do without looking even weirder.
In the UK the housing prices are extortionate. You would pay around 100 pounds a week for a rented room (bills included) or 100 pounds a week for a studio apartment (without bills) and this is outside major cities. On top of that, you must pay the council tax of approx. 1000 pounds a year depending on the region. I’m a student and don’t have a job yet, but standard net starting wage for graduates would be 12-16k pounds per annum which means that 40%-50% of net income goes to covering the most basic housing arrangement.
Kevin M said,
I picked housing and health care, but I like where I’m living just fine even if it is costly in terms of time/money. I’m torn sometimes though, looking back on those times when it was just my wife and I in our apartment and we were able to save a lot of money within a few year period. But we have kids now and need the space, so it’s a trade-off I’m willing to make….most of the time.
I guess you could call me a “waffler”…as much as I like the idea of being FIRE at age 35 I don’t think I have the guts to do it. I am trying to work it so I could decrease my working hours and be there for the kids when they get home from school in a few years.
one difficulty i have as an extrovert is interacting or leaving my socioeconomic class.
you’ve talked about the senseless acts of eating at restaurants / drinking at bars, which my peers adore. i’ve mitigated some of this through interactions with local groups that perform some purpose (sport and volunteer). however, there naturally seems to be an eventual drift to restaurants and bars. it’s just awkward, to me, going to those places not eating or drinking anything.
and on the flip side, so far i have a hard time mentally engaging with lower socioeconomic classes. i know there are very intelligent people in those crowds (like most of my friends from college who resisted a high paying career path); i’m having a hard time once again finding this nexus. as well these crowds eventually learn about my “noble” engineering field which “must pay a lot,” and creates (again, to me) weird financial expectations.
i think one solution is to move out of the crappiest apartment in a nice neighborhood to a somewhat safe apartment in a seedier neighborhood. my current tool of craigslist to find roommates then becomes much less useful.
Transportation costs for me. It’s really insane how much I spend for two cars, gas, insurance, and maintenance.
I’m working on moving closer to work (just have to get my house sold) and looking at switching to one car this year (family of 2), which will be possible as I have started working from home more often and expect that to go to full-time this year.
Hmm, the survey is missing the option: “I’m happy with my spending and I’m on track to retire when I want.”
Having said that, I think personal finance is simple, but humans tend to have a lot of trouble just doing the things we know we should. Maybe the root is that our decision making is emotional and not rational. There may also be more to it and I’m interested to read Jacob’s thoughts.
I still live with my parents, so I don’t have many expenses.
My biggest problem is knowing where to invest. I don’t know how things work around there, but here in Brazil one can only buy stocks after he’s 21 (I don’t know why, as the legal age for everything else is 18). I could ask my father to buy it for me, but he thinks it’s “too risky”.
There are some other difficulties here, too. I can’t buy bonds because it’s illegal to do so here. One must own a specific kind of company to be able to do so.
Debbie M said,
This is a weird question to me–I’m not totally sure what the question is. I think what you are trying to get at is which categories seem to have plenty of room for improvement, but we feel we are spending too much and haven’t been able to reduce our spending much even with some effort or at least with some thought. And so I picked transportation–by getting rid of my car, especially if I got better at bicycling, I could greatly increase my savings without much reducing my happiness, but I don’t want to get rid of my car.
As far as what’s holding me back from retiring tomorrow, I’d say that I want a certain standard of living both now and after I retire. I’m not currently willing to do the things I know about that can lower my expenses (or raise my income) beyond those that I am already doing, so I have to settle for a later retirement. So another possible answer is that what’s holding me back is ignorance about all the things I would be willing to do–either I’ve never even thought of them or, because I’ve never tried them, I don’t realize that I’d be willing to do them.
Finally, the last time I was wondering where all my money went and so I kept track of every penny for a while, the problem turned out to be that my roommate was often late in paying rent. He doesn’t mind paying on time, but I have to actually remind him every time. While he still has money and while he is in a position to write me a check.
Kym said,
Housing, definitely. As a single woman I’m very apprehensive about getting a roommate, for personal safety reasons, besides the fact that I’m weird enough to put off strangers and don’t have any single friends. However, I do live 3 miles from my job, and I don’t need much in the way of healthcare, no kids, etc. Food is also a problem as I find it seriously difficult and expensive to feed one person eating in, unless I subsist on beans, rice, and ramen. Everything else comes in portions so large the food spoils before I can eat it all (oh, the hazards of being single in the suburbs).
I’d love to get rid of my car as I don’t really need it, but I have close relatives that live way out in the country (4 hours away) who I’d have no way to visit without a car.
Angulo said,
Housing is 70% of my total expenses(though
only 21% of my gross income).I sold my house in 2006 and moved to a 2 bedroom b 1000 Sq, ft. Apt. 3 miles from work,where I pay $1200/month…which I find bothersome but is typical for Miami unless
you are living in “Da Hood”.
Still..It does bother me to pay that much…
Most of the space in my Apt. is for my 10,000+
record collection..and being extremely introverted(I’ve been called anti-social on many occasions),even the thought of having
someone living with makes me anxious,though my lease allows it.
Food is another issue..I find myself spending
$500/month on just for myself…and I never eat out,order in,have stuff delivered or buy
processed food.
Other than these issues,I keep my other living expenses very low,with an occasional indulgence
in Casino gambling,which is my only actual reason for getting out of the apartment except for work and errands.
Compared to my few acquantances,I’m doing OK
financially..very little debt and saving almost 35% of my income …But at age 53 I wish I’d had started much sooner to be able
to retire early.
vga said,
I’m voting for my two highest costs because even a small reduction in these would probably help me out substantially. I’m also going to describe my problems in greater depth so as to avoid any kind of generic (and thus useless) advice.
1) Housing – My apartment must be nice enough to invite people, especially single women, over and actually be taken seriously. I’m not really comfortable with roommates because I don’t like the idea of sharing my house with a stranger. Finally, living out in the boondocks with an over 20 minute commute is out of the question – I hate commuting with a passion.
2) Eating in – While I love meat, I’m not going to say that adding vegetarian dishes is entirely off the table. But if I can’t get enough protein to sustain my workouts and build muscle then I can’t sub out the meat. How much? I’ve found that 180-200 g/day leads to nice strength gains.
et said,
Costs are fine but rural underemployment is my problem. I know the answer is to cut costs to match income and we’re working on that. Some costs are hard to cut: insurance, heating, vehicle.
Macs said,
I hate to admit it, but my three vices are holding me back financially and health-wise: alcohol, caffeine, and nicotine
On everything else I am disciplined, but these three let me down. Of course, if I could stop work (or even change job …) the last two would be easily remedied
McTrex said,
Traveling for me, but that exactly what I would do if I were to retire early.
Time is not usually on my side and I end up eating out or paying for the convenience. I am relatively happy with my other decisions at this point. The fact that my wife asks when we can go on a trip or get this or that is a sign that I tighten the belt. Can I go further? Possibly but that would require a life style adjustment. Possibly major adjustments because I have dealt with many little things already.
For example, I commute by car and I get 1 hour back of my life. I have time to work out now. Otherwise, commuting by bus takes 2 hours out of my day where now it takes me 50 minutes to commute to work. I push back on some items but the caveman lifestyle has some limits.
deegee said,
I am retired but my biggest expense in 2010 is now my health insurance+dental expenses, mostly the former. This year they overtook my housing costs (all co-op maintenance expenses less property tax rebates) as my #1 expense by $16 a month. The HI premiums went up 20% in 2010 while the maintenance was just about unchanged (and rarely rises or drops much from year to year) so the HI will likely go up and up and up at a pace much higher than the maintenance.
sarasuperid said,
I think you have stated a few times that your system is for folks with a median income. I am not a person with a median income. I still like to follow your blog, because my husband and I are working our way up to being median income with additional schooling and climbing the ladder. I will be a person with median income eventually, and your tips will be more meaningful to me then. At this point, the tips help me cut back enough to keep out of debt.
Debbie M said,
@Kym, the freezer is your friend. You can make a family-sized portion of something you like and split the leftovers into single-sized portions. Keep one in the fridge for quick re-heating and put the rest in the freezer. I do this all the time. And depending how often you visit your relatives, you may save money by renting a car for those trips and getting rid of your car. I did this for four years, renting to visit my relatives who were 200 miles away 2-3 times a year. (When I was traveling every other weekend to visit a boyfriend, it was cheaper to own my own car.)
@vga, on the one hand, you can interview people, lunch with them, and visit them at their place before offering to let them live with you, so they aren’t a complete stranger (and of course you continue getting to know them after they move in, so they don’t remain strangers). On the other hand, even people you know well may turn out to have many traits that you discover only after they move in. On meat, I like to mix my hamburger 50/50 with hydrolyzed vegetable protein—I tried just using half as much hamburger, but I missed it. Also, even vegetarians don’t have trouble getting enough protein—beans or nuts and grain make a complete protein (peanut butter sandwiches, peanut butter toast, peanut butter oatmeal, banana nut bread, beans and rice, and bean burritos are my favorites) and most dairy products also have loads of protein (milk, cheese, yogurt).
We have managed to pay off our house, cars, credit cards, and student loans. Not bragging – just describing situation. Even with all of that payed off – no debt at all – I feel that the biggest obstacle to self-employment is health insurance availability/affordability. I am hopeful that the new legislation may help, eventually, but not counting on it. Even with our expensess at less than $1000 a month, I feel that we need too health insurance, which keeps up tied to our jobs.
MakingTheGoodLife said,
Books and coffee! I luv both and without them I would save more but my life would be dreary and depressing:) I don’t mind buying used books and going to the library and I’ve recently joined a book swap so I’m getting better at managing this addiction. I only buy coffee at mid-range coffee shops (not Starbucks). I sometimes brew my own coffee at home but I take pleasure in reading a book with a cuppa joe at the bookstores around town. I don’t have debt and my retirement savings are quite good so I allow myself a few luxuries to make life joyful.
[...] been reading the blog Early Retirement Extreme lately, and this post got me thinking about our monthly expenses and our ability to reduce them. One area we seem to have little control over is the cost of healthcare. Sure you can ask for a [...]
chris said,
My wife and I look at this info once a month. Yesterday was the day.
Our budget breakers are in two areas. First Health care continues to go up. With premiums ,copays and prescriptions we spend over $700 per month for a family of 5.
For us that’s more then housing, more then food, more then taxes, more then trasportation, and utilities. Its crazy.
ANother area is spending on kids activities such as a camp each summer, tae kwon do, soccer, school picts, trumpet lessons, camping trips …each kid deserves something fun to do we think.
Mom and dad have the same deal. We call it mad money. We each get $100 ea per month to spend however we want….well not completely free (use your imagination of what the wife won’t go for). Mine goes for kiteboarding equip.
ANyway those two are our two areas we chose to spend on. Take away the marriage, kids and family health care we could retire many years earlier. They are also what brings us lots of happiness to our life. So it will just take a little longer.
I’m living on the lowest possible budget: Not buying anything other than stuff I need. That can be nothing but raw food in one month, ice cream & eating out in another (for well-being), and a new Macbook in the next (when mine gets broken). Quite happy with that, and not much to reduce, I think…
Oh, and thanks a lot for the link!
Mo said,
My weakness might be cable TV. I usually watch about 45-60 mins worth on weekdays, and on weekends usually a movie and/or a sporting event. For what I pay for it, I think it offers me good value in terms of cost and entertainment.
It’s not really all that expensive, and as a percentage of my income it’s about 1%, so I can rationalize it and say it isn’t going to make much of a difference. On the other hand, there are times when I say to myself “If you’re really serious about this, you’d get rid of the stupid cable bill…” I know there are clever ways to substitute for having cable– like getting DVDs at the library.
I would like to see the results of that survey.
My major costs are child care when I have to travel, food (I only eat organic x2) and my cable,internet bill because my family moved in with me, (mom, 4 brothers) and of course, the Big One: Medical and dental for myself and my 18 months old child.
Wish I could find ways to cut down the medical side,but my child has asthma and seasonal allergies, so medical is the one thng I will not change or do without.
Well, it’s like this with me. I don’t owe anyone anything but taxes and utilities, and that has been my thing for several years. Taxes and utilities are recurring bills that you must pay unless you go to wood and coal oil, and evade the tax collector somehow.
So what you do is this. As early as possible, you get everything you need paid for. You get a home (unless your lifestyle is mobile) and you pay for it so you own every nail in it. (For highly mobile people renting could be a better alternative). You do the car trick so you always pay cash for those. You never finance anything that depreciates, or consumes itself in use. Repeat: Never.
You therefore obtain cash flow by keeping what you earn/have earned. So you increase your income by reducing your need for cash, because your cash stays yours, and earns more cash for you. Want more money? Easy, reduce your need for it to outflow from you to someone else. Balance your spending-to- income ratio. Soon your writing a check for everything you buy, but it is your money, and you find you would rather saw off your leg than let it go for something you really don’t need. Then you find you have happiness and a serene life. Your looking for a roof, warmth/cool, a place to cook some food, security/personal safety, health, future.
In the end of this drill, you are set, you find what you need to be contented and it really isn’t that hard if your dedicated to doing it. It is really just common sense.
Rove said,
Highest cost is monthly debt repayment (student loans) but I’ve reduced costs in other areas to help pay it down.
I’ve been carless for 2 months and am happy to be a bike commuter again (did this for 3 years before someone gave me a car!). I help my landlady by splitting wood/gardening to keep rent low (and this way I can live on my own as a single female).
I think social outings/impulse trips are the other areas I could work on.
Josh said,
I know what my biggest costs are: Housing and transportation.
And both are completely my fault.
My problem is that I know what I need to do financially, but it is way to easy to just stay in my own routine.
I only live 1 mile from work so I could easily sell my car and be done with it. Yet I keep making excuses for why I need it, the main reason being my parents/siblings/relatives live about an hour away, so I feel I need a way to get to them if need be.
Also, my 1BR apartment is extremely convenient to work/grocery/safe area/everything else so I am reluctant to move farther away from my job to save a bit on rent. However, I should look into getting a roommate. My problem is I feel I am too old to live with strangers (just turned 30).
I think I just need to suck up my pride for a few years as I could definitely retire in my 30′s if I was willing to do so.
Jacob your path is so clear yet so hard for me to follow. I honestly don’t know what my problem is. It is definitely a psychological problem not an intellectual one.
tracysimplylivinginspain said,
So far on our path towards financial independence we’ve eliminated (or almost the following):
1. Housing: by selling our old home and downsizing to a place in Barcelona that was really well-priced because a) the owners were desperate to sell and b) it is in a slightly seedy area of the city that is gentrifying. It is in the Barrio Gotico (we have a view of a Roman wall) and walking distance to the beach, however.
2. Transportation: got rid of two cars and are now carless with three kids. We go everywhere by public transportation and the very occasional taxi. That saved us 170 euros a month just on one parking space rental. There’s also carsharing and bikesharing here.
3. Medical: health insurance for our entire family is 87 euro/mo. and would be free if we were employed in the Spanish system. We lived in Italy before and healthcare is free.
Our weaknesses, however, are:
1. Schooling: the public system here is in Catalan, not Spanish, so for expats that may not stay here forever, Catalan is not such a useful language. Plus, it would have been very stressful for our older children to switch. Many expats with smaller children do it, however. Our 12yr old DS is attending an American school which is insanely expensive, but he loves. Our 9yr DD is going to Italian school but wants to homeschool, which we will be starting this fall — yeah! The goal is for the older one to do that as well. Our youngest is going to a wonderful special education school that we would not consider eliminating, at least not in the next few years until he could be mainstreamed to the public system.
2. Vacations: we always rent a house someplace and that tends to be expensive. We spent most of last summer on ‘staycation’ in Barcelona but the heat was hard to handle. Our big goal for next year is to do home exchanges and we’ve upgraded our house so that it will be exchange-able (it had one bathroom — outside — when we bought it!).
3. Eating Out. We’re kind of suckers for ethnic restaurants, of which there are many here. We’ve remedied this to some extent by eating out at lunchtime (no babysitter to pay and they have lots of lunch menus around 10euro/person – 1st, 2nd course, drinks, dessert and coffee – really too much food, to be honest). We’ve also improved the last minute, too-tired-to-cook, buy takeout syndrome by planning better and eating at home much more.
Haven’t been able to give up the once-a-week cleaning lady and an afterschool activity (dance at 47euro/mo. for our DD)…
As for the rest, our home expenses including utilities, condominium fee, telephone, taxes and insurance are around 250/mo., which is pretty good.
I found the early comment by Pete really interesting. Living in our very ethnically mixed neighborhood would probably be considered a step down on the socioeconomic scale for us. Most of the upper middle class live in a completely different area (we lived there for a while and we nearly died of boredom!) and wouldn’t be caught dead here. We, however, love the mix of young, creative people of all nationalities (our building is English, Italian, Spanish and American), and the Catalan, Pakistan, Asian and Spanish shopkeepers in the area. I’ve found our neighbors to be a really great aspect of living here. There’s a much greater sense of community here, but being a big city, you can still retain some anonymity if you want to.
DOT said,
I am going to have to go with healthcare. My husband and I are still on track to retire early, however he was diagnosed with cancer last year. Even when he is cured I don’t think we would be able to afford healthcare ( or even be able to get it) if we retire early. Until something in healthcare changes I may just have to work employer benefits. ( usually not offered with part time work)
[...] What’s holding you back from your financial dreams at Early Retirement Extreme [...]
Sim said,
@tracysimplylivinginspain – I’ve found education expenses to be a significant hurdle towards ER. Of course private schooling is optional depending and where you live and what your priorities are, but if does end up to be deemed necessary (as in your case) it can be outrageously expensive. And then, of course, there are college fees to follow…
My income is my biggest problem. I managed to only spend a little over $12k last year but since I only made about $15k I didn’t make much progress towards FIRE.
JMK said,
We’ve saved enough to fund our retirement from 65 onward and now we’re working on building the funds and reducing costs so we can retire many years before that.
Housing is the big one for me and a direct result of not being single and in total control of where I live. My DH and I built a lovely home on a few acres 15min out of town. In our early 20s we were on the same page and intended to live here forever and designed the layout with accesibility in mind for our senior years. Twenty years and two kids later, I’ve had a change of heart and would rather sell it, downsize and get the $300k equity out of it. If we did that we could easily retire in about 3yrs at 49 and 52. He would rather have a root canal daily than move into town and live in close proximity to other people and use public transit or walk. He grew up in a very small town and thinks the suburbs are ridiculous and don’t even talk about living downtown. He can’t understand why anyone would live “like that” by choice.
I’ve already floated the idea that I plan to retire in 3yrs and if he’s unwilling to downsize then he’ll have to keep working to fund the higher costs of living where we do. Yes, I guess I’m being difficult but now that I’ve realized I don’t need a nice big home in the country and would rather live modestly and roam the globe, I just can’t see myself being held hostage to my job because my DH refuses to consider other options.
Cat said,
Definitely food. A lot of the problem is a big lack of time and ease of access to take out or more expensive food. Friends suggest meeting in places that are too expensive- got caught the other day with that one bigtime but could have gone for cheaper options!!!!. However, am still justttttttttttttttttt making savings goals
alex said,
@glippy: I’m attending an Ivy League school, trust me, I know exactly how expensive education is. Also, my child will be attending a private school when she turns two in some months, that alone will cost me about 40k a yr. It will be worth it though and her money is coming out of a separate account to which she is the sole beneficiary. As for grad school, calculate how much it costs to attend Harvard and you have an estimate on how much i spend on my education and thankfully, the GI Bill also helps
tracysimplylivinginspain said,
Yes, then your kids go to college…My single Mother struggled to put me through a very expensive private high school (now costs in the area of 30K per year — insane!) but luckily I was smart enough to want to attend UCBerkeley, which at the time cost something like $600/semester in fees (not anymore, I know). Lived at home the first year until I could support living on my own with part-time jobs. Am hoping my kids do something similar… But to tell you the truth, I am seeing less and less usefulness in a college education…
Sim said,
“But to tell you the truth, I am seeing less and less usefulness in a college education…”
Me too, but I’m reluctant to advise my children not to further their education. It’s tempting to save the $200,000 per kid and give them money for housing or investment. But then what?
@alex
$40,000/year for preschool – really?! How are you so certain it will be worth it? I am not being antagonistic, but sincerely would like to know since I question the $50.000/year it costs for my kids to attend college.
Can’t help you with your first issue (nice housing is expensive). However with the second, I think you can seriously consider reducing your meat consumption. For myself, I haven’t gone completely vegetarian but I only eat meat occasionally and certainly not at every meal.
There are many well documented vegetarian athletes so it can be done without affecting performance (I’m not just talking about long distance runners, but athletes who need significant all-around muscle mass). I suspect though that you’d need to be much more careful about planning your meals though.
Lady Copper said,
I am very frugal in general, have never had a cell phone, hardly ever eat out, don’t drive much at all. The biggest expense for me is upkeep on my two horses… They certainly are a money drain but right now it’s worth it for me. I am changing some things to raise my income, though.
Alex said,
@slim
I can justify spending that 40k a year for preschool because it’s a guarantee that she’ll have a “safe” ride into the other schools. I know it’s a lot, but aside from education, it’s access to connections to other parents that are in positions of power, and her classmates will also be growing up within an enriching environment. Success breeds success. She’s young enough to be molded a bit. I want her to have access to a world I couldn’t have as a child because in the long run, I can see her being self sufficient. She’s pretty smart already, and very curious. I’m trying to get her the best education I can while she’s still wanting to learn a out everything. She’s also gifted in dance. She’s 18 months and can keep beats n has rhythm. I’ve yet to meet another child that can do that. So, I’m doing all I can to keep her “entertained” her way n learning.
50k for college? Hmmm…my parents never paid for my schooling. I believe college is something every child should pay for. It increases the chances of them not wasting their time since they to earn their keep. I’m attending an Ivy League school n to me, it’s more about networking than it is the education.
My biggest problem is actually internet connection issues. We’ve been disconnected from a couple of our major brands here. Would cost and arm and a leg to get plugged back on. So we’re doomed to wireless. D:
Geek said,
Transportation – at least I paid cash, and I’m trying to convince DH to dump car #2, which will save us $2k/year.
Living – we’re in a long lease. Lease cancel fees plus paying pet fees for a new lease would easily cancel out saving $200 in rent for a year, so we’re living it up for now in a place that’s too big.
DH is starting his own business – there are expenses associated with that. If one has to work, one at least can work for oneself. I’m still at 25% or so of after-tax income. Together (if he worked for The Man again) we’d be at 60-70%.
Internet: in my job right now time transfers easily to money – I need my income as high as possible to save more. Luckily I save my raises instead of adding them to spending.
Eating in and out: I’m eating lunch brought from home 3-4 days a week now. However rice is 11c/oz, and beans (organic black beans) are 18.2c/oz. Chickpeas a bit less maybe. ~100 cals/oz would leave us at 2.40/day per person. That leaves us at about 75 bucks a month each. If we ate only rice and beans. Ha. It’s a battle every day, and we definitely add wheat gluten for protein.
Dogs: they aren’t cheap. I don’t care, as they’re part of the lifestyle I want.
Health insurance is paid for 100% by my company… for now.
SunTzuWarmaster said,
Mostly everything is where I want here. Housing repair costs are the most common thing to nudge the budget up a bit. I would also like the cost of travel to be cheaper, and it will be in the future (staying with relatives, for longer, working off the cost by cooking/chores).
Terry said,
In four years I could have four kids in college. I may be past the ERE but I’m looking for ER and college costs are the biggest deterrent.
1Vikinggirl said,
I am debt free and counting down to (E)RE.
For me it is Housing!
Cheap in comparison to what I get but when rent and heating is 2/3 of total spending a month, it is way too much money.
I have a six month notice period which makes quick changes difficult, I am however finally about to cancel the lease as next year will be filled with adventure instead!!!
(Note that there is an huge difference between expensive and too much money!!)
I’d be interested in some advice as to how to get a significant other to come on board, or at least how you and your wife have managed to compromise. My SO already owns a house, two cars, etc… and it would be a significant shift for him. Thanks.
Eating out is my main challenge to the efforts to reduce my expenses. Also, I think if I learned even more skills, I could reduce expenses a little bit more. After many years of constantly tracking money in and money out, my other expenses are quite low. I have been debt-free for a long time. For the last year or so, I have been temporarily living with a family member in order to keep housing costs very low and save extra. I paid cash for my efficient car 12+ years ago; it is extremely reliable and costs me a pittance per year in exchange for the massive sanity savings and personal freedom it provides, as I have a very nomadic spirit and it is my only way to escape from this small, conservative town for short jaunts on a regular basis. I am a wanderer by nature, and around here you can’t wander without a vehicle. The car is also necessary to visit nearby family members (1.5 hours away) for frequent birthday and holiday celebrations. I expect I can easily get another 10 years out of it, at least. I did without a car for several years while in college and for a year or two thereafter, using only a bicycle, my feet, and public transit. Unless you are suicidal, it is not possible to do that in this town, and there is no mass transit here.
I have been debt-free for a long time and regularly save half or more of my after-tax take-home pay. I have no kids and believe in health maintenance rather than health insurance. I plan to relocate sometime next year, so housing expenses may change. The logistical necessity of having broadband internet service for my at-home job and the psychological/emotional necessity of living in a warm climate will somewhat determine how my housing expenses will change then.
As I work at home, I have no commuting or wardrobe expense for work. Because I work at home, though, I nearly go stark raving mad staring at the same four walls day in and day out. Hence the eating out–I eat out for almost half my meals (a maximum of one out of my two meals per day). I don’t eat at expensive places, and my restaurant expense might run anywhere from $4 to $9 for that one meal a day I am tempted to eat out. Even so, because my other expenses are so low, a couple of months ago, eating out accounted for over half my total expenditures for the month. Obviously there would be a dramatic increase in my savings percentage if I could stop eating out so much, but psychologically and socially I have not found a way to make it tenable yet. Lately the weather has been too harsh here to make packing “picnic” food at home and getting out of the house to eat it a possibility. I am very health-conscious and do choose fairly healthy foods when I do eat out. At home, most of my intake is raw. Because of the living situation (which is saving me a lot in the meantime), I cannot socialize at home and must do that elsewhere. I guess since I am normally spending less than $800 per month on all expenses, it’s not too bad–but this is a big area I need to get creative in. During milder weather, picnicking out would be a good option.
Annemarie said,
Medical, no question. In a good year, it’s 25% of our monthly income. In a year of hospitalizations, it’s closer to 45%.
We cut costs where we can — my husband and daughter both have HDHPs and they’re both in good health. Mine runs $650/month, with no cap on out of pocket expenses plus a very scary $1 million lifetime limit. Yep, lousy deal in some ways, but it was the only one I could get. Looking forward to 2014.
Other areas are OK, thankfully.
Shandi76 said,
I second what rowzee said about housing costs in the UK. Petrol prices are also much higher due to taxes (currently £1.35/litre) and we also have the most expensive rail fares (and overcrowded trains) in Europe, so commuting from a lower cost of living area doesn’t necessarily save that much money.
I have an 840sqft house which is small by US standards but close to average for the UK. I’d be happy to downsize but the only cheaper places are in really dodgy areas, and my boyfriend insists we need at least 2 bedrooms so that he has a library for his massive book collection.
Jen said,
I am very frugal in every other way and have already cut back on this tremendously, but I still find I spend way too much on liquid calories. A few times a week I find my car in line at McD’s or Starbucks to get a soda or coffee drink. I drink it and then am like “why did I do that, it wasn’t even satisfying?” Then I vow never to do it again. Then, like a true addict, I am back in the line to get my fattening coffee drink once again. I estimate I spend $50 a month this way.
I also started realizing the two cheap bottles of wine I allow myself a week are still $10! That’s $40 a month on wine too.
$90 a month on empty calories that are doing nothing for me. Must…stop…doing…this!
msrich said,
I have alot of Entrepreneur/Business Start-Up costs. Please make a box for that!
Jacob said,
@msrich – Aren’t those supposed to be investments and eventually return the money back? This list is only for the consumption side. I mean, I wouldn’t say “I spend too much money on stocks”
Andrew said,
I lack the desire to be “retired”. I prefer to work at my consulting business about 25 hours per week, so I can afford a nice house, clothes for the wife and baby, and some travel. Plus, staying home with the little one (like my wife does) is harder than going to a coffee shop and working!
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