Author Topic: Areas for Budget Improvement (or how to become a Mustachian)  (Read 3805 times)

Mega

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Areas for Budget Improvement (or how to become a Mustachian)
« on: August 14, 2013, 01:18:19 PM »
Hi all,

Relatively new member here, and I am looking to make my life much more Mustachian. However, I am not sure where to start, and much more importantly, how to convince my wife to embrace the Mustachian lifestyle.

When calculating our savings rate, should I include mortgage principle payments?

Here is our budget below, all values based on weekly after tax values (Canadian taxes estimated at 30%). Assets & Liabilities are below the budget.
Edit: I am 30


Income:
1st income                 $1,050.00
2nd income              $680.00
Vehicle Stipend      $110.00 (From spouse 1)
Office Stipend         $32.00   (From spouse 2)

Gross Income                $1730

Expenses:
Mortgage interest      -$137.00
VW Auto Budget      -$100.00
Ford Auto Budget      -$110.00 (From Stipend)
Cellphone            -$10.00
Property taxes         -$66.00
Home insurance      -$24.00
Groceries            -$140.00
Amusement         -$20.00
House Maintenance      -$130.00
Gifts               -$45.00
Vacation            -$40.00
Clothing            -$25.00
Dates            -$15.00
Netflix            -$3.00
Child care            -$200.00
Hydro            -$39.00
Hot water heater Rental   -$4.00
Gas (Heating)         -$14.00
Life insurance         -$25.00
Hair (Wife)         -$5.00
Internet            -$13.00
Home Phone         -$6.00
Cats /Vet            -$10.00
Teaching Supplies      -$10.00

Gross Expenses:       -$1,191.00

Savings:
Mortgage Principle      -$269.00
1st RRSP            -$220.00
2nd RRSP            -$100.00

Assets:
Estimated House Equity      $170,000 - 290,000 (What we paid vs asks for comps)
2012 Jetta Sportwagon(Wife)   $25,000 (est)
2002 Ford Taurus         $1000
RRSP (401K)            $50,000
Net cash on hand         $13,000

Liabilites:
Mortgage               $184,000
Car is being paid off next week.
« Last Edit: August 14, 2013, 01:41:43 PM by Mega »

Spudd

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Re: Areas for Budget Improvement (or how to become a Mustachian)
« Reply #1 on: August 14, 2013, 02:10:19 PM »
I would say it's up to you whether you count the mortgage principle payments towards your savings rate. Personally, I tend to count any extra (above the minimum) payments, but I don't count the regular base payments.

Weekly expenses are kinda hard for me to wrap my mind around.

$25/week for life insurance seems high. We pay $30/month for term insurance for both of us, $200k for one spouse and $300k for the other.

Groceries might be an area of opportunity. $140/wk = >$500/mo. We spend $350/mo for 2 adults. Try shopping at the budget store (No Frills, Food Basics, Freshco) instead of Loblaws/Metro. Know what the good prices for things are, and stock up when they come along (e.g. frozen concentrated OJ is normally $1.75/can but you can get it on sale for $1.50/can, so when that happens we buy 10 cans).

$45/week on gifts seems very high. What is all this gift spending about?

Other than that, I think most of it seems pretty reasonable already. Congrats!

Eric

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Mega

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Re: Areas for Budget Improvement (or how to become a Mustachian)
« Reply #3 on: August 14, 2013, 05:39:43 PM »
Weekly expenses are kinda hard for me to wrap my mind around.

Will post monthly expenses.

$25/week for life insurance seems high. We pay $30/month for term insurance for both of us, $200k for one spouse and $300k for the other.

The policy is for $ 1 million. Should we decrease coverage? We have a 17 month old and another one on the way. I am a professional engineer working in Pharma, wife is a teacher.

Groceries might be an area of opportunity. $140/wk = >$500/mo. We spend $350/mo for 2 adults. Try shopping at the budget store (No Frills, Food Basics, Freshco) instead of Loblaws/Metro. Know what the good prices for things are, and stock up when they come along (e.g. frozen concentrated OJ is normally $1.75/can but you can get it on sale for $1.50/can, so when that happens we buy 10 cans).

We typically shop at Costco and Walmart. I think we end up wasting alot of the produce from Costco, but wife was brought up "you have to eat fruit with each meal". We buy the fruit (out of season - Yuk) and then don't eat it. There is a local, but more expensive grocery store (walking distance). Does it make sense to pay more per unit for the closer groceries?

$45/week on gifts seems very high. What is all this gift spending about?

Well, my wife grew up in a family that was very gift oriented. Like if you don't give a gift and card for mother's day you are in deep KAKA. In fact, the family makes certain that the dollar value of the gifts match almost perfectly. SO: 11 family members (including wife & I) * $50 an event * 2 events a year min = $1100. But let's not forget friends, weddings (5 last year), anniversaries, wedding showers, Valentine's day, Easter, Mother's Day, Father's Day etc. I am not a fan of it...

and much more importantly, how to convince my wife to embrace the Mustachian lifestyle.

Have you read these?

http://www.mrmoneymustache.com/2012/03/22/selling-the-dream-how-to-make-your-spouse-love-frugality/

http://www.mrmoneymustache.com/2012/03/27/selling-the-dream-of-financial-independence-part-2/


I am still in step #1 / 2. Amusingly, my mother suggested to my wife she talk to a doctor about my desire to save money...

But honestly, my wife doesn't even understand the concept of FI. I was talking to her about how if we are FI, I could take summers off with her and the kids. She said no employer would let me take the summer off. It doesn't help that she LOVES her job, and wouldn't retire early if she could.

Mega

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Re: Areas for Budget Improvement (or how to become a Mustachian)
« Reply #4 on: August 14, 2013, 05:56:53 PM »
Monthly values:

Income:
1st person 4550
2nd person   2947
Vehicle Stipend   477
Office Stipend   139

Expenses
Mortgage interest   -594
VW Auto Budget   -433
Ford Auto Budget   -477
Cellphone   -43
Property taxes   -286
Home insurance   -104
Groceries   -607
Amusement   -87
House Maintenance budget   -563
Gifts   -195
Vacation   -173
Clothing   -108
Dates   -65
Netflix   -13
Child care   -867
Hydro   -169
Hot water heater   -17
Gas   -61
Life insurance   -108
Hair   -22
Internet   -56
Phone   -26
Teaching Supplies   -43


Target savings (not always achieved)
Mortgage Principle   -1166
1st RRSP   -953
2nd RRSP   -433

I think this works out to a 34% savings rate. I guess this means I can retire around 55.

Have you found it is worthwhile to do extra work to increase the savings rate? (e.g. tutoring for $40/hour, tax free)

A couple of things I am thinking about doing after looking at this are:
1 - replace the rental hot water heater with a purchased used one (~$250) or new ~$500. Payback period is 2.5 years on a new one. ($17/month)
2 - Lower life insurance coverage (not sure about this one...)
3 - get rid of Unblock Us for Netflix ($5/month)
4 - Decrease home maintenance budget by $60/week (saves $260/month). I will do the work myself.
5 - Hydro bills - How much more efficient are new fridges? The current one is from like the 70s/80s. (Risk is wife wants to keep old one for food overflow...)


Any other ideas for where we can cut?

KMMK

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Re: Areas for Budget Improvement (or how to become a Mustachian)
« Reply #5 on: August 14, 2013, 06:50:24 PM »
Well, it's hard when the other spouse isn't on board. We're both interested in FI, but there are still compromises that result in me spending more money. But I'd rather have a good relationship than be FI a little sooner.
What jumps out at me: mortgage interest - are you making extra payments? - get that paid off.
Cars - do you need two cars? - oh, does that number include gas and insurance as well? That makes more sense. Hard to avoid vehicle expenses entirely, I know.
Home Maintenance - yikes -  that's why I don't own a house
Gifts - wow. I guess it's hard to change this one, from what you explained. But that's a lot of money to other people.
Clothing - do either of you like to shop? I hate shopping, so this one is easier for me. Do you shop thrift stores and only buy what you will wear?
Hydro - seems high if you have gas heat, but for a house maybe that's reasonable.

Nothing is really extreme. And you are already saving a good amount.  I think the issue is more one of differing opinions on life goals and FI. Have you discussed retiring earlier than she does? That's what we're planning. My husband works more now and will be FI and retire sooner. I prefer to work part time and will retire a little later, most likely. I'll probably do half time for a while once he's fully retired.

How do you manage your money? If you both contribute the same percentage of income to agreed upon joint expenses, then you can save the rest of yours however you want, and she can buy more luxuries if she wants to do so.  Separate money works for us. Even if we had kids (we don't/won't) we'd still keep some money under our own control.



Mega

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Re: Areas for Budget Improvement (or how to become a Mustachian)
« Reply #6 on: August 14, 2013, 07:18:35 PM »
My wife doesnt quite understand FI, but she is from an Eastern European background and understands saving money (Which is why we are a pretty good match).

We have made a total of ~$76,000 advance payments on the mortgage. Everytime I have received a raise, I immediately increased the regular mortgage payment. We used to have ~30K emergency fund in TFSA (not sure about the American equivalent - essentially you pay no tax on profits from that money.), but I thought it was better spent on the mortgage.

The car budgets ideally cover gas, maintenance, licencing, depreciation, insurance, etc. I work for a consulting firm, and it basically covers my car costs. My wife is a new teacher, and cant really pick where she works right now.

Home maintenance - This is a budget item. We put this much aside every month to cover home maintenance costs... however after reading MMM, I am now thinking about how I can do the improvements.

Clothing - We live in Burlington, Ontario, which is a very nice area. The Value Village usually has quite a selection of brand name dress shirts in like new condition for $10. Dress pants, coats, shoes are much harder to come by used.

Hydro - My wife loves a cool house. Great in the winter, terrible in the summer (which she has off being a teacher).

The way we have been managing our money is living off my income and saving most of hers. I dont think it is working that great, but we have made some changes and we will see.

Thank you!

dorkus619

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Re: Areas for Budget Improvement (or how to become a Mustachian)
« Reply #7 on: August 16, 2013, 12:58:53 PM »
When you add together amusement + vacation + dates, it comes to 325/month. Might change your perspective to put those 3 together as they are all fun/extras. Also maybe doing date night in would save on child care also?

A few things that seem high IMO are
Home maintenance (I own and spend wayyy less - however I have been pretty neglectful and pessimistic since I'm $70k upside down on it)
Hair (I get a $20 cut every 6 months from a hairdresser friend in her kitchen. I guess I don't track my spending on shampoo/conditioner...so i don't know what I spend, but not much)
Groceries (I recently started using coupons more, only buying on sale items, and AVOIDING the center aisles! Stick to fresh produce, meat, dairy, frozen veggies. I'm learning to cook which means I don't have to buy prepared/packaged/GMO/processed/killer foods! YAY for my health and wallet)

Not sure this helps you much. I think if you can get her on board, you could save more