This time last year, I’d recorded our first yearly spending, and the shock of the number drove me to set a goal of reducing our spending by 10% in 2017. I was fired up and ready to commit, to both financial and personal goals. After achieving our 2017 spending goals, I find myself at a bit of a loss. There isn’t this big, horrible thing driving me, although we know we still spend a good $20,000–$30,000 more than most other Financial Independence bloggers. I’ve been collecting possible ideas in my brain, reading what others are doing, and letting it all swish around. I’m finally ready to put something together.
First, the numbers. We own our house, so no mortgage payments or rent are included. We spent $70,300 in 2017. Not including a holiday, we spent $64,000 on everyday living. What do others spend without housing?
But you know, these awesome people are all on FIRE. They represent the pinnacle of what we should be striving for—the Big Hairy Audacious Goal, if you will. What about comparing ourselves to the average Joe?
Since my comparison of our 2016 spending, the ABS released results of a new, up-to-date HILDA survey. Let’s look at how we compare to the rest of Sydney, and the highest earners in Australia.
Back in 2016, we spent more than the Sydney average in all categories, and more than the top quintile average in half of the categories. This year, food is the big winner. We’ve also reduced our bills, and our expenses would be comparable if I removed our charitable giving. The efforts we’ve made are clearly visible, but in almost all other categories we still spend more than the average Joe. This makes me angry. If the average person who saves $5,000/year and is on track to retire on little more than their Superannuation and a pension can spend less than us, what are we doing?
I’ve realised the graph above only includes categories where I could do a fairly close match to the way I categorise our budget. It doesn’t include every single dollar. We invested $33,000 last year, so we must be doing better than the average Joe. Time to go to the totals before we decide to give it all up and buy a Learjet (are they even a thing anymore?)
Now this—this is much better, but I don’t want to get too cocky. We still need to make an improvement. We spent higher than all quintiles* when I remove rent/mortgage. Clearly we still have a way to go if we really want to keep improving our chances of retiring early.
*I don’t know why all quintiles and all Australia aren’t equivalent, and I’ll admit to not having enough time™ to investigate further before this post is due. Sorry!
How Do We Keep Improving?
I’ve always had in the back of my head that we were capable of living on one wage. It made me feel comfortable to know that if anything went really wrong, we’d be okay. I realised in 2017 that the numbers don’t bear that out. Right now, if we lost one wage, there would definitely be an impact on our lifestyle. I don’t want to court disaster, but maybe this is the type of thing we need to have happen to shock us into doing what we need to. I digress.
Ideally, we repeat the goal of last year—that is, to reduce our spending by another 10%. I just don’t feel like we could do it, and I don’t want to set a goal I’m not comfortable having a reasonable shot at meeting. That would be too discouraging and frustrating for me.
Instead, inspired by J at Hey, It’s Just Money, I’ve decided my goal for 2018 is to be able to live off one wage (not including our holiday to the U.K.) For us, this means reducing our expenditure by another $4,000, down to $60,000. This is a 6.25% reduction. Our Daily Spending Rate in 2017 was $192 ($175 excluding the holiday). That means we need to meet a new Daily Spending Rate of $164, or to spend $77 less every week. Putting it that way sounds achievable to me.
Great—But How Will We Meet Our Spending Goals?
Where are we going to find the savings from? Remember, this isn’t about earning more—it is purely about spending less.
Food definitely. We are going to stick to the budget this year. That will gain us $1,229; we’ll be a quarter of the way there.
I want to halve the amount we spent on clothes—that will save us another $350.
Transport—we won’t have to pay for the NRMA, which should mean $1,100 less.
I’ll be cancelling gym membership in March, but Mr. ETT will then pay as he goes, so I’m unsure of whether we’ll see any gains there. If he decided not to go at all, it would be worth $718.
Now, if I simply dropped all charity giving, then we have made it! But that’s not in the spirit of the #FIREd individual I want to be.
Bills are pretty much static. I will investigate other energy providers and see if we can shave something off there. Ditto with insurance. We shopped around last year, so I can’t see too much potential for improvement in reduced premiums, unless we want to reduce our level of cover.
Expenses – we could get the lawn mowed less, but I really value this service. Also, I’m supporting a local business, and I like to have a tidy yard so I can enjoy it. I gain pleasure from our mowed yard.
If we reduce gifts, that will also reduce charity so it’s a double gain, but I’m already a bit of a miser—I don’t want to encourage that in myself!
Pets—food and healthcare. We don’t want to move to non-premium food, so there won’t be any cuts here. Fingers crossed for a healthy, non-expensive 2018 for Frank and Jelly!
Quality of life. I don’t want to reduce activities—they are what life is about, after all! I may be able to look for or encourage free activities this year. We don’t have any paid education planned.
Just for fun—Lotto will remain the same for the family syndicate. I’ve already broached dropping our spending money; Mr. ETT would rather not. (Let’s be honest. Last year, our spending money totalled $8,800. We only need to drop $4,000 to be able to live off one wage. If we halved our spending money, we’re done!)
So, the potential savings I can identify here is $2,679. That means we still have to find another $1,321 in reduced spending. If we each dropped our spending money by $50/month, that would complete our goal…
- Food $1229
- Clothing $350
- Transport $1,100
- ??? $1,321
The Fly In The Ointment
This is going to be the YEAR OF SPENDING (in my head, this phrase booms out over a canyon, then echoes back as it fades away: SPENDING SPEnding spending spending). Like NZ Muse’s recent post, we have been lazy all our lives, and it costs us. We have a bunch of planned spending that we’ve never gotten around to, and our goal to live off one wage aside, it’s time.
For example, this is how I’ve been cooking with our oven for years. Literally years. The light doesn’t work. The fan doesn’t work. The door won’t stay shut. It won’t light on first go. Or second. Sometimes we have to come back in 10 minutes and try again. The stove has a faulty starter. The gas has begun making scary “whomp” sounds. Unfortunately, in the time since our house was built, standard sizes have reduced. This means we can’t just buy an oven and stove and have them installed. We have to get creative to fill up the spaces that will be left. And it’s that I didn’t want to deal with. I’m lazy; this seems like too much work and I can’t be bothered. It’s the “whomp” that has driven me to finally take action.
There’s a whole bunch more things that we’ve got lined up. I planned on doing one thing a month, but I’ve decided one thing every two months will be enough. I’ll detail what we want to do in a future post.
After initially feeling lost, writing all this helped me to figure out what we want to achieve in 2018. It would be fabulous to be able to say “we can live off one wage”, if it ever comes to that. It will be even more fabulous if we manage to embed this as a habit for our future.
Can you see any glaring inconsistencies? Is there anything I’m missing? (Aside from the spends, I know it’s ridiculous)