“A whole month of extreme frugality!?”
(I can hear my girlfriend laughing at me from the other room.)
“C’mon, it won’t be so bad! We’ll just – ”
She cuts me off, “I mean, I’ll do it. I just don’t understand why you want to cut even more money out. It’s not like we’re big spenders.”
“Well, the point isn’t really to stop spending money entirely, just to get a feel for where we are. You, know, just kind of measure things.”
That’s how it began. I little resistance, sure, but she came around! And now, the results are in. So, just how did we do with our extreme frugality challenge?
For the whole month of January, we spent…a lot of money.
Not what you were expecting, huh? All in, we spent $4,406.56. That’s everything. Rent, gas, car insurance, groceries, you get the idea. In order to get a clear shot at what we’re measuring here, we’ll have to take some of those expenses off the table.
You’ll remember when we set out on this challenge, I laid out a few ground rules. Up front, I explained there were certain costs we weren’t going to count in our frugal month challenge: auto insurance is the big one, as well as 3 “get out of jail” transactions. Auto insurance rang up at $1,063.49. So after that, the number for the month comes down to $3,343.07. Starting to look better! There isn’t much to explain away here, I pay my auto insurance in one annual lump sum payment, and I shop for the best price every other year, I’m happy with that plan so far.
Go to jail. Do not pass go.
Now those three pesky freebies…
Oh right, I got rid of them!
Listen, I decided that if I was working excuses into the very planning stages of a challenge, I wasn’t really challenging myself. I mean, think about, if you want to eat healthy, but you work in a bunch of cheat days, are you really eating healthy? I don’t really think so. I wanted an real challenge. That meant staring my expenses right in the face. Even the ugly ones.
But I know what those get out of jail free cards would have been. All three would have been eating out. One time out to lunch, another out to dinner, and once at the bar. I like to pretend I never eat out to save money, but truth is, we do. And sometimes *gasp* I even enjoy it!
Since we’re not taking anything out of the expenses here, we’re still at $3,281.08.
The next round of exclusions is simply for tracking purposes. These are all fixed (or near-fixed) costs. Rent, money transferred to savings accounts, money invested in my business (reselling and arbitrage), and travel costs for future trips. Rent is excluded simply for analysis. At $1,600 for the month, rent represents almost 50% of the remaining monthly expenses. Let’s take that one out – and we’re at $1,743.07 for January.
The next one is pretty simple. I can’t include saving money as an expense…that would just be ridiculous. If I’m transferring money into my IRA or my savings account, it isn’t being spent – that’s the whole point of saving money! I chose to defer $233 to savings last month, so we’re down to $1,510.07. Remember, this is just after tax money I put into my savings accounts, and doesn’t include the automatic deductions from my paycheck for my 401k.
I also invest a small amount of money into me reselling business from time to time. Mostly, this is to cover cash flow issues, as I seem to have a lot of those at the moment. In January, I contributed $313 to my business from my personal income. $1,510.07 – $313 = $1,197.07.
Last but not least, some travel expenses for upcoming trips. These totaled $395.07. I debated whether or not to keep these in my final January number, but decided to take them out. Two reasons: One, I usually calculate my trip costs on a “per trip” basis, not on along any kind of time restriction. I’ll be going to Costa Rica in April. It doesn’t matter if I booked the flights in January, it’s a “Costa Rica” expense, not a “January” expense. Two, I didn’t want the timing of these purchases to be affected by this frugality challenge. If I had waited until February to purchase those tickets, it would have been much more. Likewise, if I had waited to book the AirBnB, I’m worried it may have been unavailable. (We actually did miss out on our first choice in the La Fortuna area, because we waited too long to book it!) So after taking out the future travel expenses, I’m down to $802.
After quite a few deductions, we’re at exactly $802 in “real” spending for the month of January. Check out the distribution of our cold, hard, $802 in the pie chart at the top of this post.
Who spent money?
Ok, the last thing I need to do is pit my girlfriend against me on money. We make it work, and we have similar values, end of story. I was curious to see when we spent money by ourselves, together, with family, with friends, etc. And I think this actually provides some useful insight into our spending habits.
I’ve divided this into 5 categories: Me, Us, Her, Family, and Friends. Me and Her should be easy enough. I spent some money, and my partner did too. “Us” refers to spending money on things we use or we did as a couple or as a family. Family and Friends are just what they sound. Whenever we spent money on something with friends or (the rest of the) family, it was marked accordingly. You know, dinner with the family, drinks with friends, that sort of thing.
Me $122.35, Her $10.99, Us $496.66, Family $83, Friends $88. Our largest item is “Us” which makes sense. This includes anything from family activities, to the gas and electricity bills. We spent roughly the same on family and friends, all of which was going out to eat and hanging out for drinks. I’ll be the first to admit that my number is high (before she reads this and says “I told you so!”). I had a few small shopping items that I just couldn’t be patient enough for.
What did we spend on?
Mint did this one for me. I have categories set up in Mint to organize my spending. That way, I know how much I spend in every area every month. For this challenge, all I had to do was pull the data from Mint!
The highest amount (at $147.53) was for utilities. Winter in New England? Seems about right. Next up, we have gas (for the car) at $105.44. Oof, that’s high. It isn’t out of the ordinary though, as we have some family obligations that require a decent amount of driving. I’ve already cut that one down as much as possible, riding public transit and my bike wherever possible.
In third place we have Restaurants at $96.91. You’ll notice too, that all of that $96.91 fell into the “Family” or “Friends” categories above. What’s that mean? We spend money eating out with family and friends, but not so much on ourselves. This is important. I’m not giving up friendships or spending time with family to save money. That being said, I’m going to try and convince the important people in my life that there are other things to do than go out to dinner.
Rounding out the top four categories, we have Alcohol & Bars at $65.98 (those damn friends again!). Tied for 5th at $60 are Kids Activities and Auto & Transport (not including gas). $60 went to a hockey game my son’s school organized. As far as the car goes, $60 got me a couple odds and ends I needed, and my 2017 inspection sticker on the new ride.
Where did we spend?
I created a few categories for “where” too. “Restaurant/Bar” and “Online” should be self-explanatory. “Store” is anything we purchased in person at an establishment that didn’t happen to be a purveyor of fine edible substances. “Other” catches the miscellaneous items, like money given to a friend for a gift and a check made out to my son’s school.
In person purchases made up the majority of our spending: $345.93 in stores, and $136.02 in restaurants and bars. $481.95 total (61% of the month’s discretionary spending). Online purchases accounted for $232.05 in spending, almost 29%, and “Other” came in at $88 (11%).
I think one result of this challenge was taking away some of the impulse buys. In this day of online advertising and single click ordering, it’s easy to get sucked into internet consumerism without even realizing it. As a result of the frugal month challenge, I was able to slow down my purchases, and really consider whether or not I needed whatever I just added to my cart. More often than not, I decided I could do without the latest addition. I think the second look at my cart before I check out online is a good habit, and I’m going to continue doing it.
When did we spend?
There isn’t much we can learn from this chart, I just thought it would be interesting to see when I spent the money in January.The biggest day was January 6th. Only one expense on the 6th – my gas bill from December. We also went 4 days without spending anything, from January 24th to January 27th.
Why did we spend?
I think this chart is important too. I can see exactly why I spent money during January. I’ve grouped this into 4 categories. Activities covers the basic ‘stuff’ that we did all month. Necessities are those costs that are more or less required to maintain our standard of living, or required as a result of the lives we lead currently. Utilities, the aforementioned gas for the car, that kind of thing. Shopping refers to those items we definitely didn’t need, but purchased anyway. The those expensive friends I have too…”Friends/Family” includes any and all purchases that were made with, or because of, family and friends.
So, what did I learn?
Before we get to me though, I want to call out the Frugalwoods again! I check out that blog regularly, and they run this frugal month every year. In fact, you can do sign up at Day 1 whenever you want! If you’re interested, or I’ve inspired you to give it a shot, check out their blog and sign up here!
This challenge was great! It pinpointed a few areas where I could improve:
- You don’t have to go out to dinner just to see your friends. I mean, I’m still going to sometimes, but I need to find some other things we can do too. I’ll chalk part of this up to the cold weather, and adults’ aversion to playing outside in the snow. For some reason, the same friends that say yes to hanging out at the beach inevitably say no to going hiking in the snow (which I affectionately refer to as “arctic exploring!”).
- I need to drop the “holier than thou” attitude about going out to eat. That’s my most common point when talking about saving money. Someone asks me how to save money. I respond with, “Stop eating out.” While effective, and I think, necessary to save money, it’s not the whole picture. Going out to eat or grabbing a few drinks is fun, you just need to realize that’s it’s not always a good trade for your hard earned money. I think we can agree to just go out every once in a while, not every day for lunch at work.
- Keeping track of your spending is a great habit to get into. Seriously. And you don’t have to do it down to the penny like me if you don’t want to. You don’t have to use Mint if you don’t want to (there are other great programs). The truth is, if you want to know where your money is going every day, you have to sit down and track it. Otherwise, you’ll look over that W2 at the end of the year, and think, “Now where the hell did all that go?”
- Really evaluate your big decisions. One that comes up frequently in this category is rent. Yes, you can save money on rent by moving somewhere else. But is it worth it? Do you have family you need to stay close to? Could you find a decent job in the new locale? Cars too. Don’t buy a cool car simply because it’s cool. Buy what you need. My current car is considerably smaller than my last, but 99% of the time, it’s big enough for my needs. Plus, it was a great deal, and I’m saving money on gas.
- Don’t be too hard on yourself. Could I save money on groceries if I ate only oatmeal for breakfast, lunch, and dinner? Maybe I could mix some rice in too. Of course I’d save money! I wouldn’t be very happy though…or very healthy.
- But don’t make excuses either. I got rid of those freebies for a reason. If I hadn’t, I’d be writing off even more of my expenses, and therefore, I wouldn’t be able to really analyze them. The only way you’re going to learn from yourself is by looking at yourself honestly.
Hope you enjoyed the sneak peak into my life for the month of January! I might do this again next year, as I think it would be really interesting to compare things year over year in my own financial life.
Good luck on any goals you may have set for this year, and I hope 2017 brings you fatter wallets and fuller passports!