As Claudia and I continue on our adventure to financial independence/early retirement, we’ve realized that continually monitoring our expenses was critical to success.
At the beginning of our journey, this was mainly to find out where our money was going, get spending under control, and to direct as much money as possible toward paying off debt.
As we begin to approach debt freedom, our mindset has shifted to monitoring our expenses to get a better estimate of our cost of living. This is important since it will define our passive income target.
Using Mint, we have established budgets for each expense of our lives, which we review weekly. Since unforeseen expenses occur, we also generate reports quarterly. This allows us to see any trends in those expenses we didn’t anticipate, as well as areas where we are overspending; this could mean we are not being mindful of our spending (or that our budget needs adjusted).
Related Post: A Look at July 2014 vs. July 2015 Expenses
Let’s look at summaries of our main expenses. This chart does not include our small house mortgage since all of the money left over each month goes straight to the mortgage.
Food and Dining Expenses
This has been an area in which we have struggled with for years. We had a tendency to go out to eat way too often (and we also wasted food at home).
We now strive to not let anything go to waste and limit eating out. We have also signed up for a local CSA, which has been amazing; we have a fridge full of vegetables every Thursday. No need to go to the grocery store and be tempted to buy things when we have a full fridge.
Health & Fitness Expenses
Our health & fitness numbers have also been a challenge. Originally, I thought that this was a result of misfortune and the cost of aging but with a little self-reflection, I came to the conclusion that the main driver in this number was that we were not listening to our bodies.
Prior to the small house, most of our waking hours went as follows.
- W-2 jobs to pay for the big house and all the items in it
- Maintenance on the big house
- Home improvements and what seemed to be weekly trips to the home improvement stores for stuff
- Figuring out what to eat as we still had time left in the day
During this whole process, we were in a zombie-like state trying to get through the list of things to be done. We rarely listened to what our body was telling us. We didn’t always provide our bodies with the nutrients needed to be healthy.
Once we moved into the small house and sold the big house, stress went down, the list of things to do was reduced, and our health improved. We’ve stepped up the time we spend at the gym, too.
Auto & Transport Expenses
In 2014, we had four cars. We are down to three cars today. In January, we will be down to one car when we turn in our leased smart cars.
We are keeping our 2007 Volvo S40, which has 125,000 miles today. We expect to have roughly $5,000 in expenses this year, which includes service, insurance, fuel, oil, etc. Most of this is covered by the mileage reimbursement from my W-2 employer.
Reducing our “shopping” category was fairly easy. We haven’t had any urges to go out and spend, and when we do shop, we look for used.
Recently, I needed a suit for an upcoming event since I have lost a good bit of weight. We were able to find what appeared to be a new suit at Salvation Army for $5; I invested $20 to have the pants adjusted. Curious to see how much the suit originally went for, I located the brand on Nordstrom.com where it sells for $1,400 new.
Overall, we don’t really shop anymore.
Our utilities from August 2015 through July 2016 were still influenced by having the big house for a portion of that time. Based on this and the fact that we are turning in our two electric car leases, we are confident that all our utilities will be under $2,000 annually. Once the electric cars are gone, I will monitor utility expenses more closely to get a more accurate account of our energy usage.
Student Loan Repayment
This represents a regular payment of $475 monthly. We’re hustling to eliminate all student loans by the end of the year, once the mortgage is paid off. This will be the last of our debt!
We definitely didn’t want to compromise on this category, so we try to get the most travel per dollar. Using our frugal ways, we’ve found that we can travel for a lot less than we had originally expected.
Our teardrop camper has also reduced lodging costs and food expenses since we have a micro-kitchen.
Our first attempt to travel hack landed us in Chicago for a long weekend for less than $1,000 total. Not bad.