Author Topic: What would you cut down on?  (Read 10717 times)

newton86

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What would you cut down on?
« on: June 04, 2013, 11:35:46 AM »
Hey all. I've just recently started going through these posts, and was hoping to get some feedback on what fat you would cut out of my monthly budget. For some context, my wife and I are 27, and living well within our means, but nowhere near the levels of some people on here. There are no short term goals other than building net worth and saving more for our future. We live in the Philadelphia area, both work full time ($140k total pretax), and have no debt other than the mortgage.

Everything below is on a monthly basis:

House
Interest & Tax & Insurance: 1,250
Electric & Gas: 250
Maintenance & Improvements: 250
Water: 50
Trash/Sewer: 50

Car
Gas: 300
Insurance: 100
Tolls: 50
Service: 30

Food
Groceries: 250
Restaurants: 200
Lunch: 50

Entertainment
Gym: 88
Hobbies: 150
TV/Internet/Cell Phones: 130
Beer/Wine: 50
Vacation: 250

Misc.
Gifts: 200
Clothing: 100
Pets: 50

On this budget, we are left with about $27,000 in savings each year, plus about 7-8k more from my wife's hobby business, and about 5k after tax in bonuses. Additionally, 15% goes into a traditional IRA.

Just typing out these numbers (averages from mint) I know there is plenty of fat to trim, but what strikes you as too much?

RedMaple

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Re: What would you cut down on?
« Reply #1 on: June 04, 2013, 11:39:56 AM »
Just curious, what hobbies require you to spend $150 p/m on?

newton86

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Re: What would you cut down on?
« Reply #2 on: June 04, 2013, 11:47:33 AM »
It's seasonal, but mostly golf, skiing, and racquetball.

mlipps

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Re: What would you cut down on?
« Reply #3 on: June 04, 2013, 12:20:18 PM »
The biggest thing that stands out to me, without knowing the size of your house of course, is your spending on electric & gas. That seems rather high to me.

newton86

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Re: What would you cut down on?
« Reply #4 on: June 04, 2013, 12:27:27 PM »
The house is a 2800 sq ft split level (no basement). Part of the problem is that the bones of the house are older - furnace/AC/water heater are all nearing a replacement age, but I can't bring myself to replace them before they die.

samustache

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Re: What would you cut down on?
« Reply #5 on: June 04, 2013, 12:37:08 PM »
meh. Nothing in your budget is going to drastically increase (percentage-wise) your savings. The biggest one, interest on your house, will come down naturally as you pay down principle. If it were me, I'd drop some money onto extra principle, drop to a 15 year at a lower rate, whatever I could do to speed up the reduction of interest portion of your budget. Piece of mind is worth more to me than beating my mortgage interest rate with investments, especially if there aren't a ton of deals out there.

netskyblue

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Re: What would you cut down on?
« Reply #6 on: June 04, 2013, 12:39:25 PM »
The house is a 2800 sq ft split level (no basement). Part of the problem is that the bones of the house are older - furnace/AC/water heater are all nearing a replacement age, but I can't bring myself to replace them before they die.

Agree.

Are there some energy-saving things you can do besides replacing appliances?  I've gotten on an energy saving kick lately, and so far have:

Had maintenance replace the vent hose on my dryer and clean out the ducts (maybe yours doesn't need replacing?)
Purchased a programmable thermostat  $39.99
Purchased a low-flow showerhead (I got a 1.5gpm handheld)  $18-something
Turned the temp down on my water heater from 130 to 120
Unplugged things that really don't need to be plugged in all the time (coffee maker, toaster, hair dryer, etc)
Turn off my computer when I'm not using it.  (Supposedly, this can really save on energy usage.  We'll see.)
I've just started to try to limit my shower times to 7 minutes.  Today was day 1.  I expected it to be tough, but I did it in 6 minutes.

Can you do any weather-proofing?  Heavy light-eliminating drapes to keep summer sun out?  A fan to bring cooler night air in?

I would also trim the restaurant budget, to maybe one meal out every other month.  That's not too much of a hardship.  I'd probably also cut the hobby budget to $50/mo.  What are your hobbies?

$100/mo on clothing seems very excessive.  What do you need to replace monthly that's so expensive?  I can see replacing worn out socks & undies yearly, and other garments as they wear out or become damaged, plus maybe a couple new pieces each year.  You aren't growing any more, you shouldn't need to pay for new wardrobes yearly.



Take Restaurant down to 40/mo (so one $80 meal every 2 months) = $1440 saved/year
Take Hobby down to $50/mo = $1200 saved/year
Take Clothing down to $300/year (so, $25/mo) = $900 saved/year

That alone is $3,540 saved/year.
« Last Edit: June 04, 2013, 12:45:22 PM by netskyblue »

newton86

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Re: What would you cut down on?
« Reply #7 on: June 04, 2013, 12:49:33 PM »
I could trim that clothing budget down to about $10/month.... unfortunately thats one area that I probably can't get my wife to move on.

Good suggestions for lowering utilities. I do have the programmable thermostat and we keep the AC at pretty minimal levels. I doubt I can lower the water bill too much, as the majority of it is fixed fees for just having the service.

I should probably lower the water heater and unplug electronics when not in use. I can see them staying plugged in again after their next use though... tough habit to break.

In response to the interest on the house - Ive considered this, but we just bought the house this year (30 years, 3.675%), and I am the person who would rather try to earn more in the market than lower the federally subsidized interest on my house. In our area taxes are about 6-10k on a house my size, and luckily I live in a township that generates a lot of revenue from businesses, so mine is ONLY 5k, but there is not much I can do to lower that. If anything it should probably be higher.

netskyblue

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Re: What would you cut down on?
« Reply #8 on: June 04, 2013, 12:54:38 PM »
Oh, and fix any leaky faucets and use the COLD side of the tap when you don't need hot water.  No need to heat up more water to 120 degrees that doesn't need it.  I caught myself at it this morning, I reached for the left (hot) side of the tap when I just needed to rinse the coffee pot.  Cold water would do.  ETA: the coffee pot was already cold, not hot.

Theadyn

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Re: What would you cut down on?
« Reply #9 on: June 04, 2013, 12:59:24 PM »
$200 a month on gifts??   Ouch.

newton86

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Re: What would you cut down on?
« Reply #10 on: June 04, 2013, 01:01:27 PM »
The gifts are unfortunately high, but when you and your wife are in several weddings, attending several more, and have large families, its hard to mitigate. Plus those people were very generous to us when we got married, so pay it forward.

samustache

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Re: What would you cut down on?
« Reply #11 on: June 04, 2013, 01:17:31 PM »
re: interest

I understand beating the market with leverage, I wouldn't pay off the mortgage early if interest rates were up or if the stock market was on sale (if you know of an asset that's not inflated right now I'd like to know!). But bonds are low yielding with huge interest rate / inflation risk, and the stock market is at par to over-valued.  Lending club will pay anything from -x% to 22%, but it's a roll of the dice unless you can diversify across thousands of loans (and increased default risk if rates rise even with diversification). Paying off the mortgage is an instant, risk free return of over 3 percent. Now that the stock market is back in style, keep this quote in mind:

“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful” - Warren Buffett
« Last Edit: June 04, 2013, 01:23:02 PM by samustache »

newton86

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Re: What would you cut down on?
« Reply #12 on: June 04, 2013, 01:31:50 PM »
I understand your angle, but I still have a contrarian view. Markets may be at all time highs, but throughout history they are consistently at all time highs. There is not a ceiling in place. I am not so naive to believe that there will not be ups and downs, but I do believe that over time I can have a higher return in a diversified fund with almost zero fees, while taking advantage of long term tax treatment (assuming laws dont drastically change, which obviously is anyone's guess), than I can by locking up that money in a constant 2.61% (tax effected) mortgage.

samustache

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Re: What would you cut down on?
« Reply #13 on: June 04, 2013, 02:23:08 PM »
It's not strictly one or the other in any case. Every month I have X amount over and above tax advantaged savings I do no matter what. Some of X goes to paying off the house early, some of it goes into the market. In 2009, 100% was going into the market, now it's more like 50/50. My view may skewed in that I'm getting closer to "retirement" and my time horizon outside of retirement accounts is pretty short.

hybrid

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Re: What would you cut down on?
« Reply #14 on: June 04, 2013, 02:28:32 PM »
$300 a month for gas seems like a lot, but I have no idea where it goes to.  Can you combine errands - carpool - bicycle - find someway to fill in that $3600 sinkhole if possible?  That's more than 2.5 gallons of gas a day, every day.  Ouch.

I'd halve the $200 you are spending eating out.  Then I would look hard at the gym.  If you are using it regularly, keep.  If not, drop.  $150 for hobbies is $1800 a year, seems a bit on the high side given you also budget $3000 a year for vacation.   And $3000 a year for vacation is one I would look long and hard at as well.  I'm all for vacation, perhaps you can do it on a different budget.  That's almost 5K you have tied up in entertainment aside from cable and the gym and eating out.  Add those in and your various leisure activities check in at over 8K a year in the entertainment budget.

Find less expensive options that make you both happy.

Lastly, from one newbie to another, ease into any changes given that you are not single.  Easier to get the missus on board if you don't make a whole lot of changes at once.

innkeeper77

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Re: What would you cut down on?
« Reply #15 on: June 04, 2013, 02:35:27 PM »
You look pretty good overall! However, your cell phone bill is a little ridiculous MMM's latest post on Republic Wireless http://www.mrmoneymustache.com/2013/05/30/republic-wireless-19-for-an-unlimited-everything-smartphone-plan/ is something you should look at- if you could drop your bill to $40 you would break very quickly. Perhaps you could switch to republic, or wait until they have some nicer phones, or switch to a different cheaper carrier?

newton86

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Re: What would you cut down on?
« Reply #16 on: June 04, 2013, 02:42:30 PM »
Gas is pretty much entirely commute. We each work about 30 miles away, in opposite directions from our house. As is tolls. That said, I more or less built that into the salary I demanded when I took my current position.

Eating out we should definitely cut down on, and now that it is summer it should be easier, as we are more likely to have people over to enjoy our deck than go out to restaurants as an escape from the house.

The gym membership isnt going anywhere. We are both there 4-5 days a week, and at $44/month per person and unlimited racquetball, I'm not going to find anything better in this area.

I am in the process for searching for better cell plans, but right now we only pay $55/month in total. The amount in my original post includes tv/internet, and as much as I would love to shed the cost of TV, I don't think I'm there just yet.


Kira

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Re: What would you cut down on?
« Reply #17 on: June 04, 2013, 05:48:43 PM »
Not to be a grumpy Gus, but is your food bill actually going to go down when you are hosting friends for dinner multiple nights per week?

What kind of cars do you drive? That's a lot of gas and insurance. Older, cheaper, more efficient cars would drop both of those.

Overall you are doing good for Americans but not quite to Mustachian levels yet. The previous commenters seem to be following the same thread, that there is nothing terrible in each category but that real increases in savings will come when you trim 20%+ out of all of those categories.

newton86

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Re: What would you cut down on?
« Reply #18 on: June 04, 2013, 06:47:26 PM »
Well right now that $200 a month on restaurants is more or less eating out every Friday. So if we replace that with grilling with a few friends once per weekend, then yes- costs should go down. Especially since we are of an age where when we "host," the other people generally bring half of the meal.

In the Philly area, those are the rates for 2 cars and no accident history. Can't do much about that without moving. We have an early 2000 Honda element that we use to commute as well as for my wife's business and a late 2000 Honda accord which I use for the commute. I think our insurance right now is a $500 deductible with comprehensive and collision on both. We own them outright and they have required very little maintenance.

EmJay7

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Re: What would you cut down on?
« Reply #19 on: June 04, 2013, 08:04:30 PM »
Gosh, I don't want to punch anybody in the face, but I do see a pattern that you have 'excuses' for every suggestion that is made. I don't mean to say this judgmentally - my husband and I are similar ages and have very similar expenses. I'm in the same place and trying to figure out how to start to make these small changes that end up adding up to big changes.

One thing that my husband and I are trying (although I'd love suggestions for how to do this better) is to go through 1-2 budget categories per month and talk about how we could start to cut back. Then, the next month, we talk about how that went and tackle another category or two. For example, last month we looked at our spending on gear/equipment and on vacations. This caused us to actually budget out our summer vacation in advance -- something we never did before-- and we realize that making a jaunt into Chicago just to catch a baseball game and take in the city for a day was going to add $600 (!!!!) to the trip after we accounted for gas, tickets, hotel, parking, eating at restaurants, and kenneling our dog, so we decided to cut off that segment of the trip and spend more time with family that lives in a place with lots of (cheap/free) things to do and will house us.

Going through each category is slowly helping us to start trimming at the small stuff that isn't as easy to find as the big stuff. See also: http://www.mrmoneymustache.com/2013/05/15/the-principle-of-constant-optimization/


anastrophe

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Re: What would you cut down on?
« Reply #20 on: June 07, 2013, 09:10:18 AM »
Gosh, I don't want to punch anybody in the face, but I do see a pattern that you have 'excuses' for every suggestion that is made.

The facepunch is a long-respected feature of the MMM forums. And I agree, every category mentioned (except for eating out?) seems to be an exception for you.

You can't change without changing. There must be something that you're willing to experiment with. Tell yourself it isn't permanent, you can always go back to it. Try a month without TV, you can always pick up your subscription again later. Try less spendy gifts, see how people react, you can always spend more later. Cut out one thing entirely, or shave back on several, but you'll have to actually push yourself outside your comfort zone.

Rebecca Stapler

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Re: What would you cut down on?
« Reply #21 on: June 07, 2013, 09:52:02 AM »
You are in a good financial position and drive inexpensive cars, so I don't see a reason for the collision and comprehensive, or the low deductible. Drop those coverages and you will save money right away. If you have an accident, you have the funds to make the repairs or buy a new-to-you car.

Also, for your wife's business / hobby, I hope you are writing off those expenses at tax time. That will save you some $$. 

Emg03063

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Re: What would you cut down on?
« Reply #22 on: June 08, 2013, 05:57:04 AM »
On the mortgage, look at a refi to a 5/1 arm, keep your payments the same (i.e. apply the savings on interest to principal), and see what will happen to your payment in 5 years if the loan resets to the max rate.  I'd look to cut utility payments (energy efficiency is usually a great roi).  Also, try carpooling.

CU Tiger

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Re: What would you cut down on?
« Reply #23 on: June 08, 2013, 07:47:59 AM »


Car
Gas: 300   I would work on getting my gas costs down. Group errands, etc. Lots of good advice on this here on the forums.
Insurance: 100   Have you shopped around to make sure you are getting the best deal available?
Tolls: 50
Service: 30

Food
Groceries: 250
Restaurants: 200
Lunch: 50

Entertainment
Gym: 88   My husband is doing something called You Are Your Own Gym. Buy a dvd once, the only thing you need other than that is a place to exercise and a computer or dvd player. It is a good workout.
Hobbies: 150 
TV/Internet/Cell Phones: 130  I may be in the minority in the general public, but here on the MMM site I think you will find that most of us agree that you can get along just fine without cable or fancy cell phones. Look at it this way - cut cable and keep your athletic hobbies and you'll have more time to enjoy them.
Beer/Wine: 50
Vacation: 250

Misc.
Gifts: 200
Clothing: 100
Pets: 50

On this budget, we are left with about $27,000 in savings each year, plus about 7-8k more from my wife's hobby business, and about 5k after tax in bonuses. Additionally, 15% goes into a traditional IRA.

Just typing out these numbers (averages from mint) I know there is plenty of fat to trim, but what strikes you as too much?

My notes are above. I think you are doing pretty good, but there is room for improvement

MustSam

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Re: What would you cut down on?
« Reply #24 on: August 03, 2013, 08:47:09 AM »
I may be new here, but I think you are doing fantastically well for your age and situation and saving an impressive amount of money.  Maybe not retire-by-30 level of savings but it doesn't seem like thatis your goal. May I ask what time of work you guys do and what hobby business your wife runs?

MoneyLifeandMore

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Re: What would you cut down on?
« Reply #25 on: August 03, 2013, 09:09:43 AM »
I'd probably cut the gifts down but that's just me. I guess it depends on what you're gifting $2,400 a year for, but if it is for things like Christmas gifts I probably would say you could cut back a get and get more meaningful gifts for less.

Tad

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Re: What would you cut down on?
« Reply #26 on: August 06, 2013, 12:43:58 AM »
I think you might want to spend a few minutes considering what the goals really are.  If, as you say, it's just generally building your net worth, then it may be hard to justify going the extra mile on particular line items that aren't going to move the needle drastically.  If there is a particular target in mind, you may feel less like you are just "giving up" and more "trading for" that objective.  Of course, you can also view cutting consumption to be its own reward (as does MMM), but that is a fairly advanced step.

newton86

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Re: What would you cut down on?
« Reply #27 on: August 06, 2013, 08:34:20 AM »
Thanks for the replies. I work as a CPA in tax, and my wife is in insurance. The side hustle is a floral arrangement business - mostly weddings and holidays (think weekends).

I'd love to cut down on the gifts, and we have started to. It is mostly weddings and family birthdays. Many of the weddings we are going to are for people who came to our wedding a few years ago and gave generously, so it is difficult to give less than they gave us in the past. And we're at the age where we are invited to a lot of weddings (although the floral business brings in income for a lot of them too).

Since my original post, we have cut groceries down to about $175 a month, restaurants to about 100, and hobbies to about 75. I agree we are not at a retire-at-30 level, but that is not the goal. The goal now is to start having kids in the next year or so, balance the increased costs associated with them with reductions to other categories to the extent possible, and hopefully be able to approach FI by about 40. I say approach, because I would like to go into business for myself in 5-10 years, and that would provide less income (at least initially) on significantly less time spent working (think tax season).


olivia

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Re: What would you cut down on?
« Reply #28 on: August 06, 2013, 09:15:17 AM »
Can you use public transport and drive less?  Any way either/both of you could use regional rail to get to work?  Seems like transportation is one category with a lot of possible savings. 

calskin

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Re: What would you cut down on?
« Reply #29 on: August 06, 2013, 10:30:11 AM »
Turned the temp down on my water heater from 130 to 120

I highly recommend you turn your water heater back up.  At 120 degrees, its the perfect breeding ground for Legionnaires Disease (Legionella pneumophila) which leads to pneumonia.  At 140 degrees Ligionellae die within 32 minutes.

[url]http://www.hydroquebec.com/advice_hot_water/[/url

I know the water heater thing is tempting, but you're really not saving much if anything.  You just end up using more hot water.

onehappypanda

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Re: What would you cut down on?
« Reply #30 on: August 06, 2013, 02:24:02 PM »
There are a ton of places to cut spending in that budget: the gym, cable, restaurants, gifts, vacations - all unnecessary and rather large monthly expenses. $500-1,000 could easily be trimmed from your monthly budget by adopting more Mustachian habits.

The question is: do you really WANT to cut expenses, and if so, why?

You seem to have an excuse for why you'd rather not cut down in each area. That's fine, it just suggests that you're happy with your current level of spending and saving, you feel that you're meeting your goals, and you don't mind working extra to make up for the spending.

On the other hand, if you feel that you need to make spending cuts, it helps to sit down and figure out why. Cutting spending is a lot easier when you're working toward goals, both short-term and big-picture goals. Do you want to retire early? Purchase a home? Save for future children? Start a business? Other big goals?

Instead of looking at each budget line and trying to trim, I would start by listing out your goals, the timeline for them, and how much money you need to save and generate to get there. Quantify it as much as possible, even if it's ballpark figures. Then look at your current spending/saving and see how far off you are from it. That'll give you the fuel you need to make the cuts, and it'll tell you  how deep those cuts need to be.

Mr.Macinstache

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Re: What would you cut down on?
« Reply #31 on: August 06, 2013, 04:20:54 PM »
Restaurants and lunch. Stop eating out so much, you'll save a good amount.