If you're new here, this blog will give you the tools to become financially independent in 5 years on a median salary. The wiki page gives a good summary of the principles of the strategy. The key to success is to run your personal finances much like a business, thinking about assets and inventory and focusing on efficiency and value for money. Not just any business but a business that's flexible, agile, and adaptable. Conversely most consumers run their personal finances like an inflexible money-losing anti-business always in danger of losing their jobs.
Here's almost a thousand online journals from people, who are following the ERE strategy tailored to their particular situation (age, children, location, education, goals, ...). Increasing their savings from the usual 5-15% of their income to tens of thousands of dollars each year or typically 40-80% of their income, many accumulate six-figure net-worths within a few years.
Since everybody's situation is different (age, education, location, children, goals, ...) I suggest only spending a brief moment on this blog, which can be thought of as my personal journal, before looking for the crowd's wisdom for your particular situation in the forum journals.
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.)
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! 😉
Weston said,
My wife and children. I know it sounds a little snide and I don’t want to give the impression that my wife is a spendthrift or that my children are overly spoiled. But the fact is that my wife and I have very different ideas about early retirement and financial independence.
I don’t have a problem with decreasing any of the budget categories. However that becomes irrelevant when the person you love and whom you believe should be an equal partner has no problem with the joint expenses as they currently are.
Kent said,
Without a doubt it will be getting 3 children through school. The expenses are already starting to mount as the first child reaches High School and we haven’t even gotten to college yet.
Leigh said,
None of the above. Insufficient income and job opportunities.
Denise said,
I indicated ‘Housing Cost’ in what would (I’m setting up my lifestyle now) be holding me back from achieving my ERE goals. I’m happy to say that after 1.5 months of camping out on Craigslist, I found a 2/2 place with a cool roommate, 8 blocks south of my office in a downtown metropolitan area. The rent is half of what I originally budgeted after seeing 1/1 apts around the area. It looks like my goals are going to be achieved even sooner than I planned! Craigslist is awesome!
Now I have extra money to join a maker lab (w/ 3D printing and all the cool stuff) at a mere $50/month. I’m stoked. My quality of life is going to vastly improve: 55 minute drive to work will be down to a 5 minute walk to work and lab space to create stuff!
George the Original One said,
> Insufficient income and job opportunities.
@Leigh – so what are you doing about it? Are you seeking more education/training? Are you relocating? Are you becoming entreprenuarial? Are you trimming costs?
Or are you just waiting for a turnaround or change to appear?
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