Part 2: Reigning in Spending
This post is the second part in a series about steps that someone new to pursuing FI might take during the first year. Here is where you can find Part I: Assess Your Situation. Reigning in your spending is definitely the next step that I would advise someone who is new to FI to take. Maybe you’re already spending the bare minimum, if so, good for you and feel free to skip this part. If you have not optimized your spending or you don’t know what that means, then here are some ideas for you.
There are tons of articles, listicles, infographics and blog posts about how to reduce spending, so I won’t try to come up with an all-encompassing list. I’ll just tell you the main things we did during the initial rush to cut our expenses. I’ll include a few things we didn’t do as well. Feel free to leave more ideas in the comments.
Things we did to cut spending:
TV and Phone
- Cancelled our DirecTV subscription (which was replaced by an HD antennae, Tablo, and Sling) which is saving us $900/year
- Cut our landline, which nobody ever called anyway, saving us about $700/year
- Switched from Verizon to Google’s Project FI. We bought new phones in the process, so it will be a while before we break even on the switch. However, from a pure service perspective, this is much cheaper for us (about $600/year less) because we don’t use that much data. We were always paying for more than we used at Verizon.
- Switched our Auto insurance from State Farm to GEICO and realized in the process that we had over insured our 15 year old car (a fact which our SF agent failed to mention to us). I didn’t make a note of our savings for this one…oops.
- Switched our homeowners insurance from State Farm to Liberty Mutual. We increased our coverage and deductible and saved about $300/year.
- Cancelled our Universal Life insurance policies with State Farm. Not only did this save us $2,400/year in premiums, it also allowed us to put the cash we got back toward debt repayment. Win-win! (Full disclosure: this was a difficult decision for me; our agent put us through a very long fear mongering talk about clients husband’s who had died unexpectedly…blah, blah, blah. It took some difficulty sleeping and a few spreadsheets for me to feel like I would be okay if anything happened to Hubby and we finally ripped off that Band-Aid. Lesson learned: don’t let someone scare you into spending money – do your homework and figure out what you need, then go get it.)
- Started going out for dinner every other Friday versus every Friday night. This actually makes going out more of a treat than a routine. Probably saves us about $600/year.
- Started shopping at the cheapest grocery store in town, which right now is Smart & Final. We have to carefully check the dates on everything, but we are saving. I hear Aldi is coming, so that will be something new to try.
- Started looking for alternatives to going to Target. Even at our best, we could still get sucked into a few impulse items at Target. Shopping online (including Target.com) is a good alterative (same stuff, but less impulse buying for me). Another is just grabbing that thing we need from Walgreens or whatever – we might pay more for the item, but it saves us money in the long run.
- This is after the first year, but we are currently in the process of switching from ADT to Simplisafe for our home security. This will save us over $550/year in monitoring fees. I got the hardware on Black Friday for around $400.
Things we chose not to cut:
- Membership to the most expensive gym in town. We have tried a few gyms and had the best success with consistency at this gym. They also allow you to put your membership on hold for a fee of $10/month. We do this when the weather is nice and we can walk outside and lift weights in our garage. It’s a compromise that is working for us.
- Amazon Prime. I get a lot of value from it and it helps with the fact that we don’t have cable, satellite, or Netflix.
- Landscaping and housecleaning. I know, I know, we’re supposed to do these things ourselves. Well we don’t want to and it can be done more efficiently by someone else, so we continue to pay for those services.
- Kindle Unlimited. I don’t know about this one, you’ll have to ask Hubby.
- Professional Hair Care. I have too much grey hair for my age, so I choose to dye it for career reasons. I don’t want to screw it up by doing it myself, so I keep paying.
In general the most important thing we’ve changed is our attitude toward spending. We now evaluate all purchases against our goal of Financial Independence. We think about why we are working toward FI in the first place. If the item isn’t necessary, doesn’t bring additional value to our lives, and doesn’t help us get to FI, then we question if we should buy it.