Expenses: Its the Little Things

You have to wonder why I would put a picture of Oktoberfest on a cost reduction blog. A picture like this implies a lot of things, like an overseas plane trip, lodging in Munich during a peak season, and of course the cost of the beer! Its to prove the point that spending less and living more frugally allows us to do those “Money is Time” items from your list. Its about focusing your spend and making intentional choices of where and how to spend your money. Of course you have to research and optimize those things you want to do, but building a strong methodology with a simple way of checking progress of all spend allows you greater freedom to keep moving.

The problem for those of us who are not naturally frugal, or who have allowed extended family to have some control over spend, is that at some point the spigot of income ends. When money no longer represents a renewable resource, you have to control the outflow, and optimize where it goes. I have read on the internet (so it has to be true!!??) that people struggle to learn to spend less, and I have heard the same from a financial advisor. Remember, F.A. are a group of people not retired that produce single digit returns, so that should be a huge red flag right there. If you are working, start this process today. Now. I know that can be difficult if you are working your fanny off, raising kids, and going about the business of life. Doing this s will put you light years ahead. I think sometimes the things we knew when we were in our 20’s, struggling, are easily forgotten when that regular pay check rolls in.

The first and most obvious thing is to eliminate debt. Servicing debt is tantamount to a deal breaker for those looking to travel and experience the world. Credit card debt is well known to be evil, but car payments, personal loans, and yes, even mortgage loans are un-necessary money sucks. There is a host of arguments about mortgage loans, but the bottom line is even with a tax break on the interest, its your money you are giving to someone else. So your next priority, right after stashing every penny you can pre-tax, is to eliminate debt. As a matter of fact, you should be consolidating as many expenses as possible on to a rewards credit card which you pay off every month. There are a number of great cards you can find that give you something back. I would usually recomend straight cash over shopping cards where you are locked into specific price structures, or airline miles, which rarely provide full dollar value, but thats a personal call. I have been able to move 82% of all spend on to my card, and after paying $100 per year fee, I receive very nice 4 digit returns, along with purchase protection, travel protection, rental car damage waivers, etc. You would be surprised how many repetitive payments can be done with a credit card. An yes, I am that guy using my card on $1.50 purchases at the store. It all matters.

Now that you have basically all your expenses mostly in a single place, its quite easy to roll up your spend by category, find you biggest items, set goals and get a plan to reduce. Most cards provide a previous year rollup sometime in January for you to use. Spend time going through it. Sometimes your monthly statements don’t make it obvious. Spending $100 a month on coffee shops amounts to a discount plane ticket to Oktoberfest! I recomend the usual monthly check, but step back at 6 months and see if you are on track or need to adjust.

As you work through those expenses, look for the little things that add up. Those on-line subscriptions you thought were cool can add up to a nice night out at a restaurant you always wanted to try. Those mobile phone contracts and TV contracts all need to come under review. Internet streaming is coming fast as a TV replacement, but be careful. Remember you have to understand the companies financial model: hook you on what seems to be a few dollars, raise it slowly, an hope you forget about the monthly deductions and yearly renewals.

Shopping in general has to come off the list, or at least be focused. If you are the kind of person who pines for a spring sale, black Friday or the like, this is going to be a problem. Buying things off season, in colors that may not be your first choice, may not provide the endorphin rush of a good sale, but this blog is about ways to get that rush from climbing a mountain or seeing an amazing sunset. That new fangled pan may have a great add, but you certainly don’t need another. I hand out that criticism pretty freely, but trust me, I struggle here. Should I rent that finish nail gun or buy one? The payback on a finish nailer for me is multiple years, and thats after looking at all the deals on line. So no matter what is your kryptonite, its got to be on the table.

I hate reward cards. I hate data harvesting, AI, sale of personal data, and in general taking my info and using it for someone else’s profit. The largest brick and mortar store in the world rolls up its spend analytics on a daily basis, and knows more about the economy and your spend than any entity in the government. The largest online retailer makes this effort look pedestrian, knowing what you want before you even want it, based on not just things you buy, but things you looked at. If you want to scare yourself, have your young niece do on line searches using the mega search engine and mega retailer for something that is age specific for her. Those adds will pop up for you for months randomly across the internet So with that huge disclaimer, I believe reward cards have their place, in the case where it saves you money up front on a purchase. Also be wary of any reward program that requires monthly minimums. Anything you have to manipulate on line or send in should be avoided. If you can tag that reward card with a senior discount and get double digit savings on purchases, you have to do it. In general its not worth doing a folio of cards, but cards for the the 3-4 fuel stations and stores you are recommended.

Eat in and stop the spend on alcohol. These are simple economic recommendations not a rant on eating healthy. In order, the cost optimized choices are eat in by cooking from scratch, eat in by heating prepared food, eat out but don’t consume alcohol, and last choice, eat out with full meal and beverages. As with on line streaming, on line food and meal delivery is coming on quickly. You can order meals that aren’t cooked but have all the ingredients if you like to cook, and if you need you can order fully prepped entrees that only require microwaving. I have had personal experience with the fully cooked meals, ordering them for my elderly father, and the quality and portion is absolutely great, so for about $9, he gets a dinner meal that has enough left over to be next days lunch. These meals provide good value and are of top quality. Why do I call out alcohol and really any specialty drink as a red flag item? The margins! To deliver a restaurant meal requires ordering, stocking, inventory management, prepping, cooking, serving and clean up and rarely generates more than single digit returns. Pouring a drink requires ordering, serving, and cleaning, and can provide margins up to 40% or greater. Scan the cheap bottles on the wine list. That $9 bottle is $25, and can generate over $30 when served by the glass! The game here is keeping the money in your wallet and not transfer it to someone else.

Insourcing may be on your list of things where you can reduce spend. These are items you have paid someone to do that you now have time to do yourself. House cleaning, dog walking, mowing, car maintenance are prime examples. The list varies with your skill set, but keep in mind you can find a video or blog on line thats explains the procedure for almost everything these days. If you find yourself on a lawn mower for 3 hours and you don’t like that, maybe you better work on reducing the size of that lawn!

There are host of other things to watch out for that will bubble from you regular reviews. Eliminate those memberships, have a yard sale and get rid of that storage unit, pedal your bike to the store instead of drive, get a higher fuel mileage car, buy assets that are already depreciated, and when you go to a store, for goodness sakes work off a list, to name a few. As an RV person, I use a phone based app that does fuel price searches for me by location. I have yet to find anything that rivals the Mega Warehouse Store for fuel prices, if you are willing to fight the crowds. Your case may be altogether different, but the mindset is the same. Reduce spend to enable your ‘Money is Time’ activities. Don’t skimp on that skydiving trip, or arrange a budget guide up Everest!

You have worked hard. Some of you have made incalculable sacrifices with your time throughout your career, and now its time for the next phase. Whatever your situation, its simply about staying moving and focusing your spend on things you really like to do!

reducing spend, retirement expense reduction