Aspiring towards early retirement , for me, meant adjusting to a different life style- and a different spending regime- but- and this is the important point I am emphasizing- the change needed to be permanent- not “only until I reach early retirement- and then- the sky’s the limit “.
And why is that, pray tell?
Because if there is one important thing I’ve learned , although by not being a financial wizard of any kind- is that the power of saving money, is sometimes even greater than any stock-real estate- bank investment.
Give me 5 seconds I’ll convince you:
#1: Learning to save , and implementing it on your everyday household spendings- is entirely up to you. as opposed to investments of any kind- where you many times need to trust the impossible combination between other people (owning the business or establishment you are investing in) and luck (which , for me; has been a very discomforting thing to trust)
2: The state agents– such as taxes of any kind or shape- that are usually a “good friend” when you try to invest your money and make a few $, cannot interfere with your intentions to cut back on your expenses, actually- learning to cut back on your expenses has many tax deterrent benefits- for one thing- no VAT …
#3: learning to save is a skill that can improve your whole conduct– not only your bank account. think about polishing your decision -making process, your self confidence (as a direct result of gaining control over such an important aspect of our lives- the monetary aspect), and as a side effect- improving your math skills- and brushing the dust off some of your brain cells!
#4: well naturally- it’s cheaper – all investments cost money. you pay the investment company- the bank-the lawyer who writes the cotract etc’. besides the money invested-you almmost never avoid paying for the chance to make more money from your investment. and yes, a lot can be done to minimise these charges- compare and double check before making any investments- you worked hard to earn this money!
learning to save money, on the other hand- is free as a bird.
#5: and this is the most important aspect , I believe- is that rare are the people that their financial situation improves once retiring early. I am aware that some people pursue other careers, go viral on youtube or get a bazillion subscribers on their blog- but many of us ordinary people will need to adjust to 60% -70% of our previous income, and without making major life style changes, you might end up not managing at all.
I automatically think of another major lifestyle change- that needs to be permanent : change of eating habits towards healthier eating.
Many people get blood test results and listen to their doctor advising “cut back on fats/sweets/processed food etc- for a while“.
Many other gain weight and decide immediately to lose 5 pounds pronto by restricting something from their diet for a while.
Same goes to “12 week exercise routine” ‘ and other short term ways to deal with life changing situations.
What happens afterwards?
If you understand that your whole life is going to change- whether it is your income- your health or your diet, then please please take a moment to contemplate the moment after.
Why bother ahead? because understanding the change is about to become permanent and not “until I reach a certain point”- be it early retirement or a certain weight or a particular race- is a huge factor in preparing towards that change cognitively- and emotionally.
Ok- now that I laid my humble opinion on lifelong major changes, it is time to revisit my household 2018 expenses -so as to learn a thing or two- or three- about my spending habits, for better or for worse.
*I went through my other expenses (Amazon and EBAY) in my previous post- Reflecting on my 2018 expenses-read here.
*Last thing- the advantages of reflecting back on the past year of household expenses are obvious in terms of learning about your decision making, but also- we all tend to calculate certain obvious expenses into our monthly expenses sheet: food, gas, electricity, water, phone, cable, internet etc. when looking back at the whole year -you get to revisit other yearly expected expenses we tend to forget about: such as school fees, car shop , presents for the kids -etc. these are considerable expenses that need to be taken into consideration even on our monthly finance sheet- divided into 12, ofcourse.
*One last thing- my partner and I divide the household expenses equally- we don’t have a joint account because he doesn’t mind spending money (YOLO and all that s***) -read here how this works for us: Why I believe in seperate accounts.
So what you see here is not a basic household full expense sheet: I pay the electricity +internet bill and he pays an equal amount for water and property taxes. we split the food expenses equally. I pay for my pool entrance by myself (it’s my thing) and he pays for his cable tv ( I don’t watch any television- read here why I believe this is a great decision I made :How to get up early).
We each pay for our apparel, books, etc- and split our youngest’s education fees and aikido classes expenses between us.
You will notice a difference throughout the year- my second kid was home for a few months before going off abroad- and he is an avid carnivore so..also add to this my annual birthday +holiday presents for the kids- 1500$ total.
January 2018: 830$:
health insurance- 75$
pool entrance card (10 entrance )- 120$
(at this point the electricity bill was once every two months this changes soon)
electricity : 200$ (for 2 months)
gas- 30$+20$ toll road (this stopped throughout the year)
surgical procedure – 1000$
health- 75$(in a few months I will learn that I had to stop paying so much and began taking off some of the insurances)
phone- 20$(soon this bill will shrink considerably- wait and see)
March 2018: 963$
martial arts- for my youngest- 200$
April 2018: 4935$
pool entrance- 125$(I will be reimbursed 125$ at the end of the year so )
vaccinations for guatemala- 15$
*car for my oldest child- my share- 4000$
May 2018: 767$
the machanic alarmed: I had to change the tire- 350$
car shop- 200$
pool entrance- 125$
restaurant- my mothers birthday- I treated- 100$
IRobot parts- 60$ (will be good for another 2 years!)
*health- managed to let go finally of some of the insurances- 15$
coffee shop- my middle son insisted on eating something- he is not a frugal person to say the least of it! 15$
new baking oven- the previous one lasted for 6 years and collapsed- 300$- my half
sealing the roof before winter- 500$- my half
Guatemala – 2200$(flights +ninos de guatemala)
school books- 30$
school payments- 300$
internet-35$ (told you- managed to haggle with the company and lowered the price)
vipassana donation- 350$
martial arts for the youngest- 205$
health insurance for guatemala- 90$
train ticket to the airport- 6$ (instead of paying a bundle for long term parking and waiting for 45 minutes for the shuttle to the parking lot!)
new entrance door- the previous one almost fell apart…- 400$ -my half
Ok- now for some conclusions:
#1: the expenses are definitely not consistent: some months ended with a total of 557 $ and then there was that month with nearly 5000$. We (OK-I ) tend to forget unexpected expenses happen all the time– this year I pitched in financing a part of my oldest kid’s car, we had to buy a new baking oven, seal the roof and buy a new door. I also payed for a surgical procedure and had to pay for a new car tire. when you calculate your monthly spendings- remember those unexpected always come at a bad time and put some money aside ahead. reflecting on my expenses helped me realise that throwing a number based on usual everyday expenses is accountable only for half the actual expenses…(to be real with myself I summed the total amount (11,507$) and divided it by 12 (months)- 959$. this is my bench mark for next year. not my expected 600$ -this is the number I had in mind when going over my everyday expenses in my head.
#2: haggle -haggle-haggle! I haggled with both health supplier and internet supplier and lowered my bills.
#3: money is there to serve us- not the other way round.this year I gave 4000$ so as to buy my daughter’s car. sure- she could go on riding 4 buses (from home to work to university and back home)- but I managed to help make her hectic life a bit easier-and I am very glad I could do that.
#4: buying grocery online saves money!
#5: Driving On early hours allows you to save money on fuel! (read here how- How I reduced 25% of my electricity and gas bills ( 5 tips and another V for enVironmentalism)
Hope I encouraged you to make your own lists and reflect on 2018- in order to make 2019 even better.
Enjoy- the cooliflower.