Reader Case Study - suggestions requested for reducing spending (~gulp~)

[ysette9]

Arg - struggling with the web interface! I apologize for the inadvertent premature posting.
***
Hello everyone!

I have been really enjoying the good advice from these forums but quite hesitant to expose myself so brutally. Then again, this is how you learn and improve. So, if you can try your best to be gentle, I will do my best to keep an open mind to your wisdom. :)

Brief background: the two of us, DINKs (though if the Fates are kind to us, that may change soon), combined salary ~$255k. Have a mortgage on a townhouse that is currently rented out while we rent another place that is closer to both of our jobs.

One other note since it will draw fire: we did not plan on buying a new car. We did the comparison matrix, made a choice, then went out into the market to discover that there plain weren't any of that car available used. Well, that isn't completely true. There was one car, older, and with higher mileage than the car we were replacing. The car is almost paid off and we plan on keeping it for a long time (it's diesel so "long time" means something).


Category          Amount                        Notes
Rent                   2300                 Under market, product of a move to be closer to work
Car Payment     478.67                 Will be paid off in 2014; plan on keeping for a long time
Insurance           426.12                 Homeowner’s, renter’s, car, life, valuable personal property, umbrella
Mortgage           1573.86                 On property now rented out; anticipate selling within next year
HOA                    261                         On property now rented out; anticipate selling within next year
House Cleaning   180                 “happy marriage insurance”
Property Tax     534                          On property now rented out; anticipate selling within next year
Internet              66.95   
Fixed Subtotal            5820.6   

Groceries            600                          Actively working on reducing this; artificially high as it includes cash withdrawals, but cash often spent on food anyway. Partially driven by special dietary needs.
Car extra            50                         maintenance, registration fees
Restaurants     300                         Actively working on reducing this
Travel              400                         Monthly average; artificially inflated b/c some business travel expenses show up here and are later reimbursed (~$2K, perhaps)
Clothing            200                         Actively working on reducing this, though at the moment I am pregnant and therefore have had to buy some new things
Personal Care   150                          Haircuts, other beauty treatments, monthly massage membership (plan on canceling after pregnancy)
Gifts                   100                           CSA membership for family member + other
Electronics      175                            Monthly average from a new laptop and other items last year; plan on replacing another 5+ year old laptop this year
Utilities             125                            Gas, electricity, garbage, sewer, recycle; includes water and trash for rental property
General Merchandise   150   
Gas/Diesel     120   
Cell Phone     130                            Two cell phones, after employer discount
Home Improvement   60   
Healthcare      100   
Other Random      100                            Hobbies (pool, yoga), entertainment, professional societies, etc.
Variable Subtotal               2760   
Grand Total       8580.6   

Since this is a specific question about spending, I haven't put much in about income or assets. If that is helpful to you, I can revise this post to add in the info. I will say that just in the few months of reading this blog and paying closer attention to our spending, I have seen some of these categories come down. I have implemented a spending plan in my bank's app and plan on continuing to monitor and make more conscious choices at the cash register.

Happy target practice.

[chasesfish]

How much are you getting in rent a month?  What is the delay in selling this?

I count 900/mo in food and restaurants, how many people is this for?
Personal care?  How many people is this for?
Does your work require expensive clothing? 

There's a lot here you can work on

[Thegoblinchief]

What kind of car?

My rule of thumb for grocery and necessities/personal care is $200/person on the high end. Anything higher and you are wasting money or can't shop properly. I can get more specific if needed, but threads all around about shopping seasonally, etc.

Give yourself a hard and fast limit on restaurant. $100 a month.

I don't understand paying to clean my own house. At the very least, reduce your intervals.

Make every random/misc purchase pass a "48 hour" test. Don't make impulse purchases.

I note you're expecting? Congratulations! Avoid buying baby stuff!

A simple bassinet/laundry basket sized sleeping arrangement is much better than an expensive crib. Avoid buying new baby clothes at all possible. There's TONS of good quality kids clothes at rummage and thrift stores. Avoid the kids-specific ones, though, as they are generally overpriced compared to Goodwill.

$130 a month AFTER discount for cell phones?

[ysette9]

"How much are you getting in rent a month?  What is the delay in selling this?"

We get $2400/month minus $191/month in property management fees for renting our place out. It almost but doesn't quite come out even. Our renters are in their second 1-year lease and the thought is to sell once the lease expires. Another big factor is that the property values have (finally) been rebounding so we have seen real gains in our place in the last 2 years.

[AJ]

It sounds like you already know some areas to cut back on. The things that jump out to me are:

• Personal care - can you cut this back now rather than wait until after the baby comes? What is holding you back?
• Clothes - the need to buy maternity wear could provide a good opportunity to flex your frugal muscles. While you will need to buy some items, could you make a list of the absolute bare minimum you need, then ask around or find the items used? All the thrift stores in my area have maternity sections, and I've had good luck on Craigslist.
• Housekeeping - can you cut the frequency way down from now until the baby arrives? Make yourself a deal that you can put it back when the baby gets here if you really need to, but see if you can acclimate to a lower standard. Perhaps just a once-a-month deep clean would suffice?
• Cell phones - have you looked into cheaper plans?

Other than that, it's just the food thing, which you've noted is already being worked on.

[chasesfish]

Okay, so your net spending is around $6300 as DINKs, including a high rent payment to be next to work.  People may be brutal, but you're doing well relative to income.  That's $3900 after housing.  (My personal target is 3k/mo after house payment for two people)

How's your savings and how long have you been DINks at this level?

If you go down to one income, does the  personal care, home cleaning, and clothing expense drop way down?  You probably have another $500 in fat that can come out after that in food, restaurants, and technology.

Good luck

[MKinVA]

Don't forget to review your insurance rates. There is no benefit in being loyal to car or homeowners insurance. Take advantage of teaser rates. It's ridiculous the difference in auto rates. You can save hundreds of dollars per year just by moving around.

[ysette9]

Give yourself a hard and fast limit on restaurant. $100 a month.
We are definitely working on this area. Last year we were spending on average $300/month here; for now we are trying to meet $150/month. I'll see how that goes and take it from there!

I don't understand paying to clean my own house. At the very least, reduce your intervals.
There is a lot of history there. There is a reason I refer to it as "happy marriage insurance". Long story short, paying someone else to clean the house avoids a significant amount of marital tension, fights, and resentment. Well worth it in my mind.

Make every random/misc purchase pass a "48 hour" test. Don't make impulse purchases.
Very good advice.

I note you're expecting? Congratulations! Avoid buying baby stuff!
Thank you. One upside to it having taken us this long to (hopefully) have a baby is that most of our friends got there first and they can't wait to unload their crap on us! I was making a list the other day and it looks like we will be able to borrow just about everything from friends. I am big on not having *stuff* around the house, so the prospect of being able to give it all back once we don't need it anymore makes me dance with delight.

[ysette9]

How's your savings and how long have you been DINks at this level?
Let's see: we're maxing out 401(k) though starting to run into the HEC limits at our work. That ends up being in the $35-40K/year with matching for retirement. On top of that we're doing $48K/year in non-retirement accounts. Depending on how you run your numbers, that is about 31% savings of gross or 51% of net.

Income grows yearly as we have been blessed with good jobs in a great area. We have always saved though not always in these amounts. Basically, when a pay raise comes, it goes into bumping up the auto savings. Looking back at an old spreadsheet, in 2009 we were saving 31% of gross income.


If you go down to one income, does the  personal care, home cleaning, and clothing expense drop way down?  You probably have another $500 in fat that can come out after that in food, restaurants, and technology.
Good question and not one I know, though I think it is largely academic since neither of us plan on quitting once a baby arrives. That does bring up childcare though, which is an as-yet unknown expense that will have to be factored in.

[ASquared]

Congratulations on your baby!  Best thing ever. 

DON'T START BUYING THINGS!!  You can have a baby for WAY cheap! Seriously!  Things to consider:
Birth Center/Midwife - better care for you and baby and usually much less expensive to top it off!
Cloth diaper - initial investment of 200-300 however you can use these for your babies entire diaper time!  And for future babies:)
Craigslist and garage sales and buying used from friends - for things you HAVE to have.  (buy new carseats)
Breastfeed!  Not free I will give you that - but much less expensive AND much better for you and baby:) Despite what modern America will tell you, most women can exclusively breastfeed successfully, even if returning to work, etc.

Personally, I wish I didn't buy a crib (still don't use!) at 14 months.  I wish I didn't buy 2 strollers (regular and jogger, pre-MMM days!).  I bought WAY too many clothes, and sheets, and and and.  Baby needs you and daddy and not much else for quite awhile.

People will buy you SO much.  What you don't like/want/need you can take back and get something you like/want/need. All the major stores do this no problem. 

If family/etc is agreeable - set up education account for the little one and have family contribute to this instead of constant "stuff" for baby

[Thegoblinchief]

If family/etc is agreeable - set up education account for the little one and have family contribute to this instead of constant "stuff" for baby

We're just now reaching the "don't buy us crap" stage and trying to encourage money for their investment account. Wish we'd done it years ago.

[Villanelle]

Maternity clothes are something that can be picked up used for cheap.  If you need anything else, thrift or consign, don't buy new.  Clothes that will only be worn for a few months (seasonal and size changes) aren't something you should spend much on at all.

Your insurance costs seem high to me, though this caries based on location.  I'd definitely shop around and also consider increasing deductibles.

Is there a reason that you need to replace a 5yo laptop?  If you *must* do so, why not buy used?  If you are looking to cut back to SAH, continuing to use an older laptop, especially when you already have one new one, seems like a minor sacrifice.

[Thegoblinchief]

Is there a reason that you need to replace a 5yo laptop?  If you *must* do so, why not buy used?  If you are looking to cut back to SAH, continuing to use an older laptop, especially when you already have one new one, seems like a minor sacrifice.

Not all 5 year old computers are made equal, but currently my newest PC is 5 years old. My other computer is an 11 year old PowerMac.

[ysette9]

The laptop wasn't a *need* but a need/want: it was slow, didn't have enough storage and my external drives were full. It wouldn't run some applications because it didn't have the power. Mostly I really wanted the new/beautiful/light laptop and we have friends who work at Apple who were kind enough to share their employee discount with us. :) Additionally I was able to wipe the old one clean, reinstall the OS, and give it to a friend in need, which made me feel better about the whole thing.

My mother was asking yesterday about opening a college savings account and I think that is a great suggestion for funneling outside desires to give us *stuff*. I think I was successfully able to buy all of the clothes I'll need (with the exception of nursing bras) for about $200 total. For some emotional reasons I have been VERY reluctant to buy anything maternity/baby and this has been a good exercise for me in figuring out the absolute bare minimum essentials I need to look presentable at work. Hopefully I can translate those lessons back to my real wardrobe when that happens.

[Thegoblinchief]

I didn't go the 529 route, since I will probably encourage my kids to explore alternatives to college. I don't want the money locked away for a dedicated use. Plus, last I looked at 529 plans for my state, they're not terribly great.

[rocksinmyhead]

Nice work already starting to make changes!

The most obvious thing to me if you really want to cut back is to let go of the beauty treatments/massages. Why wait to cut back? Don't get me wrong, I love a massage and a shellac manicure as much as the next girl (probably more than the average Mustachian, haha) but mine are usually limited to once per year as a birthday present or something.

WRT grocery spending, if you want some accountability, a whole bunch of us are tracking our spending here:
https://forum.mrmoneymustache.com/throw-down-the-gauntlet/track-and-categorize-grocery-spending-all-march!/

I have already learned a lot from tracking our grocery spending in March. If it makes you feel any better, our combined income is about $100k lower than yours and we still spent >$500 for two adults last month! But I have been getting some good tips (not sure if any of them will help you but the link is here).

Good to know you are already working on cutting back the restaurants. We started trying to do this a few months ago and found it surprisingly easy, so hopefully you have the same experience!

[nedwin]

It seems you know spending areas that you need to work on.  These areas stood out to me, though, and are areas for improvement:

Insurance - Higher deductibles, different companies, different coverages may significantly reduce this expense.  I blindly bought insurance from one company for several years before shopping around.  I was able to lower my insurance costs by 50%
Groceries and Restaurants
Travel
Personal Care
Electronics
Cell Phones
Clothing
New Baby - Not listed in your budget, but as several people stated already babies are not necessarily expensive additions to your family.  Shop for used items and beg/borrow/steal from friends.

There significant spending savings to be found in these areas, but I think you already knew that based on your posts.

I primarily replied to address your new baby.  Congratulations!  You stated that both you and your partner will continue working after the baby, so you will need day care.  It is never too early to begin looking for a day care provider.  Often times desirable day cares will have a wait list that is several months or even years long.  We were on a wait list for a day care at my wife's former employer for 10 months before an opening came up.  Also, I would not be surprised if day care expenses for one child, five days per week would be at least $1,000 (or much more) per month where you live.  We pay more than that in Colorado for between three and four days per week for two kids.  Begin planning for this expense now.

Also, I'm skeptical of cloth diapers.  I don't generally disagree that they are less expensive than disposable, but I believe that for two working parents you will find it very time consuming and tiring to keep up with washing them.  In our family we chose to use disposable primarily because of the time commitment.  We also buy diapers at SAMS/Costco, one large pack usually lasts at least 1 month.  Many people here will disagree with me, but we all value different things.

[La Bibliotecaria Feroz]

I'm actually going to agree that two working parents might not want to cloth diaper--and I have had TWO in cloth diapers at once. I used to send my son to a babysitter with cloth diapers and the bag of used ones at the end of the day... (*shudders*) But I have found Walmart/Target diapers to be totally acceptable and cheaper than Costco. Costco does, however, have the best prices on formula, should you need that. If you tend to stick close to home on the weekends, you could get a set of cheap prefolds and covers and just use cloth on the weekend.

People have suggested good ideas for cutting the budget--your food bill definitely jumped out at me. Hang around here on the forums and maybe read some frugal living/parenting blogs--the exposure to what other people are doing is really helpful to me. And congrats on the upcoming baby, by the way!

[kkbmustang]

First of all, a big CONGRATS on the baby. So exciting!

+1 on checking out child care options NOW. Wait lists are bananas in my area.

With respect to the massages, I totally get that, especially if you have back issues. Carrying a baby puts pressure on your lower spine and can cause pretty significant sciatica pain. That being said, check to see if this is something your health insurance provider might cover and/or reimburse you for.

TMI Alert on this tip: Also, I'm in the camp of women that likes to have some grooming done (i.e., bikini waxes). I found a place that only does waxing and offers 50% off if you agree to be a "model" for the trainees to practice on. I'm not particularly modest after two kids and five million surgeries, so this doesn't bother me a bit. I go longer in between visits and can get a bikini wax for $17 instead of $35. See if that is an option for whatever personal care services you are buying.

[La Bibliotecaria Feroz]

Re: Waxing; I do this myself, especially my eyebrows, using sugar wax. (Blog post about it with link to About.com recipe: http://frugalparagon.com/2014/01/28/if-i-can-you-can-home-eyebrow-waxing/)

You probably already have the ingredients and it's easier than you might think. Although obviously you aren't going to attempt a self-bikini wax in your condition!

[kkbmustang]

Re: Waxing; I do this myself, especially my eyebrows, using sugar wax. (Blog post about it with link to About.com recipe: http://frugalparagon.com/2014/01/28/if-i-can-you-can-home-eyebrow-waxing/)

You probably already have the ingredients and it's easier than you might think. Although obviously you aren't going to attempt a self-bikini wax in your condition!

Ha - Nope! I get my brows professionally done once a year (to shape them) and I pluck in between. My upper lip - I'm not committed to wax over tweezers, but the reality is I usually wax at home. But, I will try out the sugar wax recipe.

[ASquared]

I didn't go the 529 route, since I will probably encourage my kids to explore alternatives to college. I don't want the money locked away for a dedicated use. Plus, last I looked at 529 plans for my state, they're not terribly great.

Remember that 529's are specific to a state, but do NOT have to be your state, or where your child will go to school/etc.  You can pick any state's program.  Some states give certain tax advantages for using their own program (your income is likely above the limits) and some give reciprocity and many have no benefits.  We went with Nevada to get a Vanguard account (free no account fees etc, lowest expense ratios).

Your income is too high to fund an ESA I believe

[Villanelle]

If the massages are something you won't bring yourself to give up, check to see if there is a massage therapists' school in your area.  They generally offer very, very cheap massages, performed by students who are training and need to get hours toward licensure.