Wednesday, October 5, 2011
Budgeting Matters #2
I just did an analysis of our six month spend rate and compared it to our twelve month retirement budget to see where we stand. The goal at six months was to have spent less than 50% of our annual budget, and it looks like we are achieved that in every one of our categories. Hooray!
I wasn't completely confident that would be the case back in April when we implemented our new retirement budget. In fact, when I sat down to enter the first week's worth of receipts into my spreadsheet, the new budget suddenly seemed a bit austere. Some of my pre-retirement spending habits were highly impulsive (like shopping for new clothes on a whim) or really expensive (like regularly enjoying front row seats at our regional performing arts theatre) and I wasn't entire confident how I would feel about doing things differently. What I did know though, is that having a robust travel budget was a top priority for both my husband and myself, and we were more than willing to change a few things if it meant we could add even more funds into that bucket.
The first thing I did was to begin to track every expense diligently. We have access to a banking website that consolidates all of the spend from our various accounts and credit cards into one screen, allowing me to easily track every financial inflow and outflow. By doing this daily I began to identify where every dollar was going, and whether it had been properly allocated for in our budget. The next step was to determine the value that each item delivered in order to assess whether it would remain, would remain with changes, or would be removed from our budget (and our lives) altogether.
The results have been both fascinating and telling. Here are a few of the items we analyzed and revised over the last six months:
- Gym Fees. We had forgotten that our monthly gym fee included an additional $10 monthly fee for an adult child no longer living at home. It took about 15 minutes to make the phone call and get the additional membership fee removed. Annual savings - $120.
- Satellite Radio, We blanched after seeing a three year renewal charge of $480 hit our credit card account. After some discussion, we agreed that this service no longer delivered appropriate value and cancelled it. (A note that cancelling this service took me almost 45 minutes by phone, and it was not fun, but I was successful in getting the charge removed. As a result, see IMPORTANT LEARNING LESSON below.) Annual savings - $180.
- Life Insurance. We cancelled a small term life insurance policy that automatically debited monthly. (Also see IMPORTANT LEARNING LESSON below) With our kids grown and our retirement fully funded we no longer had need for a life insurance policy. I now had the time to make the necessary call to cancel it, and did so. Annual savings - $360.
- IMPORTANT LEARNING LESSON - I will never, ever again give any service provider permission to automatically charge or debit us for anything! Almost without exception these services make it very difficult and time consuming to discontinue service once it's been initiated. I repeat, never again!
- Auto and Homeowners Insurance Policies. We increased the deductibles on our auto and homeowners insurance policies. Since we view both of these as catastrophic policies that we hope to never use, moving up to a higher deductible made financial sense, and resulted in close to $200 in combined annual savings.
- Magazine Subscriptions. We put ourselves on a diet of just one magazine subscription each. When we took the time to sit down and review everything we were subscribed to, including online subscriptions, we both agreed it had gotten out of control. If we found ourselves having withdrawal pains, we could always drop by our local library to stock up on back copies at no cost. Annual savings - approx. $250.
- Technology. Consolidated our phone, cable and internet service with one provider. Annual savings - $620. (We will likely drop our land line next year for an additional annual savings of $399. We will also leverage a competing carrier's offer for bundled internet and cable service to ensure we do not get hit with a rate increase from our current carrier in the near future.)
- Haircuts. Moved our respective hair appointments from every five to every six weeks. Annual savings - $300.
- House Cleaning. Changed our house cleaning service from every two to every three weeks. Annual savings - $720.
- Books. Stopped purchasing them and began using the public library. Estimated annual savings - $500.
- Movies. Stopped ordering movies online (now a hefty $4.99 each from our local cable provider) and began getting them via Red Box instead for $1.00 each. Annual savings - Approx. $48. (As you can probably tell, we rarely watch movies. I'd rather read the book.)
- Theatre Tickets. We began purchasing tickets to attend performances at our smaller local community theatre rather than our larger-but-pricier regional performing arts center. The parking is free (compared to $10 at the arts center), the sight lines are excellent and the distance (and stress!) to get there is much, much shorter. Savings of approximately $100 per event.
- Groceries. I began reviewing grocery store ads each week in order to plan out meals that utilized the featured sale items. I now visit three to four different grocery stores each week, all within a three mile radius of my home, and aside from being economical, it's incredibly satisfying and fun. Not only have I managed to spend about $20 less per week, I'm also getting a lot more food for the money I am spending. Annual savings - $1,040.
- Restaurant Dining. Exploiting the heck out of online discount services like GroupOn and TravelZoo so that on those rare occasions when we do dine out, we do so at a 50% discount.
So, at this point, with six months still to go before determining if our retirement budget is sustainable and satisfying over the long haul, I give us mid-year marks of "A" for both effort and results. And with the savings achieved in our first six months now happily moved over to our travel funds line, we've just added a couple of two week cruises to our 2012 travel plans. Well worth giving up a magazine subsciption or two to achieve!
