Taking A Hard Look At Expenses In Order To Boost Savings
In my recent post, Planning for Various Expenses [Nov 19, 2009], I talked about the different kinds of expenses, the best ways to manage them and prepare for them and how it relates to overall savings targets. I’d like to continue the discussion here, looking into the specific expenses in my life.
First, my savings goals are at least $15,000 a year. Most of this will come from additional income, i.e. sales commissions, but the more I can have left over from my base income from my regular expenses, that obviously helps. Currently, I spend between 90% and 95% of my monthly base after-tax income on monthly expenses (includes tithing). This leaves between 5%-10% in savings. The goal is to boost this. As such, I must decrease expenses since the base income part is fixed.
I’m going to break out my expenses into the following categories:
- Residence – Includes mortgage/rent, property insurance, property taxes, HOA dues, home maintenance, utilities (power, water, TV, internet, phone, etc.), lawn care, etc.
- Food & Essentials – Includes groceries, eating out, toiletries, baby food, diapers, etc.
- Personal Care – Includes dry cleaning, hair cuts, gym membership, grooming, etc.
- Lifestyle – Includes entertainment, alcohol, buying clothes, buying electronics, cell phone, buying furniture, etc. (the nice-to-have non-essentials)
- Pet – Dog food, vet bills, etc.
- Auto – Car payment, auto insurance, gas, maintenance, etc.
- Financial/Insurance – Life insurance, etc.
My goal over the coming months is to figure out how to shave a few dollars off each area in order to get my expenses down to about 85% of my after-tax monthly income which would result in saving about 15% of my monthly income.
Here are a ideas for each category:
- Residence – Consider getting rid of cable, consider buying a lawn mower instead of paying for lawn service (cash outlay required for lawn equipment of approximately $300; monthly savings of $180)
- Food & Essentials – Stop eating out for lunch; be much more smarter about planning meals (Estimated savings of $150-$200 per month)
- Personal Care – Get rid of gym membership – running and pushups will suffice (monthly savings of $70)
- Lifestyle – My lifestyle is pretty barebones right now other than eating out which I addressed in point #2.
- Pet – Unfortunately, unless we get rid of our dog (which I have considered), we’re stuck with some expenses here which drive me nuts.
- Auto – No car payments, but we could be possibly more efficient with combining errands (Estimated savings of $20 per month)
In those main categories, I’ve identified approximately $420 to $470 in monthly savings. This would easily get me into the 15% range of savings each month which I mentioned is my goal.
Am I willing to adjust my expenses to accomplish this? It would require me to mow my own lawn each week (about 30-45 minutes per week). This is very do-able. The hardest thing will be to alter my spending on food. I will have to enact serious discipline on this one. Giving up the gym is a no-brainer, I run most of the time anyways.
The other thing that I hate spending money on is dry cleaning. I wear my shirts several times before getting them dry cleaned, but I still hate forking over $50-$60 each time I go in (probably once a month or every 3 weeks or so). But, I guess I’m stuck with this until I work for a company that doesn’t care about dress code or become self-employed. Got any tips for minimizing dry cleaning expenditures?
Please read my previous post, Pursuing Complete Independence [Nov 23, 2009] for more details on my overall financial plan and where the $15,000 in monthly savings fits into my overall goals.