I was browsing through my “Personal Finance†folder on my computer a couple of days ago and stumbled upon an old copy of my master budget/net worth spreadsheet from about 4 years ago. I’ve always enjoyed looking back at old copies of our finances because it reminds me of how far we’ve come.
As I looked over the numbers on the spreadsheet, one number really stood out. It was the “total monthly expenses†number. The number was actually higher than our expenses are today. I won’t lie. It put a smile on my face, mostly because it made me feel like we’re succeeding at keeping lifestyle inflation away. What’s even more remarkable about this is that we really haven’t sacrificed in order to do it. In the last four years we’ve purchased a new car (it’s paid for), built a second home (it’s paid for), taken a couple vacations, re-roofed our home and had multiple other expenses pop up. We were able to do these things because we have managed to keep our monthly committed expenses at about the same level as they’ve been for years which has freed up additional monthly income to keep our emergency fund full and cover all those unplanned expenses that come up.
How have we managed to keep our expenses level for this many years? One bill at a time. I have always considered recurring monthly expenses to be evil. They will suck the life right out of your budget if you don’t keep a close eye on them. By paying close attention to all of our monthly bills, I am able to keep them as low as possible, evaluate which ones we are truly getting our money’s worth out of and ditch the ones that just don’t make sense. Here are a couple examples:
Car payments:
We used to always have at least one car payment. We just accepted the fact that people always have a car payment. A few years ago, I decided to quit the car payment rollercoaster. That has freed up over $300 per month in our budget. By saving up and THEN buying the car, it proves to us that 1) we really wanted the car and 2) we can afford it. This has probably had the single biggest impact to keeping our monthly bills at a minimum level.
Cable and Telephone:
A long time ago in a galaxy far away, we used to have a home phone line with all the bells and whistles. Caller ID? You bet. Voicemail? Yep. Call waiting? Uh huh. Now we don’t. We maintain a home phone line for $21 per month, solely so that I can use it for work. If not for work, we wouldn’t even have it.
Cable has also been a drag on our budget over the years. I’ve been pretty religious about calling to negotiate a lower price, but recently we went a step further and scaled back cable to only our local channels. We haven’t missed cable even ONE bit. Between the local channels, our old Tivo box and the cheap $8.99 a month Netflix plan, we have more TV than any human should ever watch. We also save hundreds of dollars a year compared to the old days.
Electricity and Gas:
Growing up in a house where we didn’t have a lot of money, I was always told to turn off the lights when you leave a room. It’s a hard habit to break. Between my wife, daughter and I, we do a pretty good job of turning off lights and only using electricity in the room that we’re in. We also keep the heat at a lower level than most (somewhere around 67-68 in the winter) and keep the A/C off unless we REALLY need it. We also heavily use CFC bulbs in the house to minimize the amount of electricity we use for lights. All these techniques save us hundreds of dollars a year compared to the equivalent houses in our neighborhood. How do I know this? I get a letter once a month showing our energy consumption compared to our neighbors. We consistently beat even the “most efficient†neighbors.
No Revolving Debt:
By not having any credit card or consumer debt, we save a ton of money on interest compared to those people that do carry revolving debt. It also frees up monthly cash flow. It’s nice not having a line item on our budget that has the minimum monthly credit card payment on it.
Shopping for Insurance:
I used to just send my checks in to the insurance company, resigned to the fact that insurance just costs lots of money. This year, I’ve taken a more aggressive stance on insurance. By shopping this year, I’ve been able to reduce our insurance costs by over 15%. It all adds up. I’m done being loyal to one insurance company. I make all the other companies out there earn my business. Why not make insurance do the same thing?
Home Mortgage:
Since having a mortgage seems to be a given where I live, at my age, I might as well make sure I’m getting the best rate possible. By having good credit scores, my wife and I have been able to lower our interest rate by nearly a point. That change shaved nearly $200 a month off of our house payment. Yes, we had to extend the loan back out to 30 years but I’m mitigating that by paying bi-weekly (works out to an extra payment each year) and throwing a bit more at the mortgage every so often. Just these steps should get the house paid off faster than before the refinance, with a lot less interest paid.
None of this stuff is rocket science. I get that. I guess the main reason we’ve been able to keep our expenses level over a number of years is that we’ve refused to allow lifestyle inflation to increase them. We’ve been on a “pay as you go†plan for a number of years so that we still enjoy the things we really want without committing to additional fixed monthly expenses.