Expense reduction side of FI

[DanteAlighieri]

Hey Everyone,

Long time since I've been here. I have a question for all of you regarding expenses. My situation: early 40's, two kids in elementary school, married, house paid for, DW a SAHM. By luck and tenacity Megacorp has done well and have kids college paid for (maybe.)

We live in a high expense area - Southern California. That said, we feel we are pretty frugal, but not misers.

I am looking at my monthly expenses and can't see how we could reduce them further without some pain:

Food - ~$800/month
Household stuff ~$500/month (includes home maintenance, repair, etc.)
Kids education ~$500 (school, classes, activities, etc.)
Medical ~$300 (stuff not covered by insurance, and we are pretty healthy)
Insurance (Life, Auto, etc.) ~$300
Utilities ~$300
Cash for incidentals ~$200
Gifts, charity ~$250

etc.

With everything else, it totals to around $4500-$5000 a month. Add in amortization of a couple cars (we drive beaters against SoCal rules, but even still) and you are looking at a minimum of ~$65-$70k per year after tax income just to pay expenses.

My question: Anyone else do significantly better than this without living like a hermit?

I know you are going to say cut back on the kids education, but seriously in SoCal there aren't many free alternatives. The days of the pick-up baseball game are long gone...

DA

 

[W2R]

You didn't even mention a mortgage or rent, either (or else I overlooked it?).

I think the problem is not you, but your location. It is pretty hard to live on a small budget in someplace like S. California, Manhattan, or similar areas that happen to have a higher cost of living. One really should expect a much higher salary in such a location, it seems to me. I agree about the schools there, generally speaking.

Is moving to a location where you can more easily afford to live, an option for you?

 

[Rustic23]

We live in East Texas. House payment for us is $7,200 per year and property taxes $7,000. That being said out total annual expenses are around $48,000. If you add an allocation to replace cars, roof, rugs, paint and all the rest of the stuff that wears out, add another $5,000 a year. We don't feel we scrimp on anything. We live as well, if not better, than before we retired.

 

[REWahoo]

We live in East Texas. House payment for us is $7,200 per year and property taxes $7,000. That being said out total annual expenses are around $48,000. If you add an allocation to replace cars, roof, rugs, paint and all the rest of the stuff that wears out, add another $5,000 a year.

You left out the $6-10k per year costs for chigger and fire ant control...

 

[Rustic23]

I also forgot the cost of snake and aligator guards! But Hey, it is east Texas!

 

[Notmuchlonger]

Pretty good for living in S Cal. Northern Ca isnt much cheaper. Mainly why we will move out when we retire. Cost of living sucks.

 

[aaronc879]

Hey Everyone,

Long time since I've been here. I have a question for all of you regarding expenses. My situation: early 40's, two kids in elementary school, married, house paid for, DW a SAHM. By luck and tenacity Megacorp has done well and have kids college paid for (maybe.)

We live in a high expense area - Southern California. That said, we feel we are pretty frugal, but not misers.

I am looking at my monthly expenses and can't see how we could reduce them further without some pain:

Food - ~$800/month
Household stuff ~$500/month (includes home maintenance, repair, etc.)
Kids education ~$500 (school, classes, activities, etc.)
Medical ~$300 (stuff not covered by insurance, and we are pretty healthy)
Insurance (Life, Auto, etc.) ~$300
Utilities ~$300
Cash for incidentals ~$200
Gifts, charity ~$250

etc.

With everything else, it totals to around $4500-$5000 a month. Add in amortization of a couple cars (we drive beaters against SoCal rules, but even still) and you are looking at a minimum of ~$65-$70k per year after tax income just to pay expenses.

My question: Anyone else do significantly better than this without living like a hermit?

I know you are going to say cut back on the kids education, but seriously in SoCal there aren't many free alternatives. The days of the pick-up baseball game are long gone...

DA

Considering my take home pay is about $1500 per month after taxes and 401K I can't really relate to anyone spending $4500/$5000 per month even in SoCal.

 

[Delawaredave5]

My question: Anyone else do significantly better than this without living like a hermit?

Personally, I don't see how folks with kids can reduce more than you have detailed. We have a similiar situation but wife works so we're "less efficient" on some shopping (but we still don't eat out more than 1-2x /month) - and we're $2k+ per month more than you.

There's a very wide range of "living budgets" on this board. Some of the low numbers I cannot possibly understand. I guess the factors include:

• Kids or no kids
• House or no house payment
• High cost living area or low
• Expensive hobbies or not (boating versus public library)

 

[dex]

Is this your total budget?
What about cell phones, cable tv, clothes, gifts etc?
A detailed budget and expense following helps to make informed decisions.

 

[ziggy29]

You and your wife need to sit down and make every dollar have a "job." At first, you might just want to record every purchase and categorize it, and then look it after a month or two to see where you see the most room to cut back.

A lot of time, you'll be amazed at how a lot of the $5, $10 and $20 purchase here and there (that aren't really necessary) can get into thousands of dollars a year.

I moved from San Jose to Texas in 2003, so I can totally relate to the cost of living thing. In an area where a "good" job earns $25-30K if you can find one, the price of goods tends to be a little lower (reduced overhead due to labor costs) and the price of services is much lower in many cases.

 

[LOL!]

We have 2 kids ages 16 and 12. We seem to be running about $75K - $80K a year including the $12K going to the mortgage. You seem high to me on home maintenance. Maybe you pay for lawn service and maid service? You are lite on charities and gifts. Maybe something disappears into that category? If your utilities include phones, cells, internet, cable, electricity, gas, water, then you are higher than us.

Don't you give everyone (spouse, yourself, kids) allowances to spend on anything they want?

 

[DanteAlighieri]

I think others pointed this out, but I am supporting a wife and 2 kids, so $1500 a month isn't possible without a 3'rd world lifestyle...

Considering my take home pay is about $1500 per month after taxes and 401K I can't really relate to anyone spending $4500/$5000 per month even in SoCal.

 

[DanteAlighieri]

Hmm, the spouse has free reign (I trust her) and the kids get minimal allowances.

Since the major expenses come from food, education, etc. I am not sure allowances would help. We probably will do that when they get a little older though as they need to start getting the feel for handling money.

We have 2 kids ages 16 and 12. We seem to be running about $75K - $80K a year including the $12K going to the mortgage. You seem high to me on home maintenance. Maybe you pay for lawn service and maid service? You are lite on charities and gifts. Maybe something disappears into that category? If your utilities include phones, cells, internet, cable, electricity, gas, water, then you are higher than us.

Don't you give everyone (spouse, yourself, kids) allowances to spend on anything they want?

 

[DanteAlighieri]

Is this your total budget?
What about cell phones, cable tv, clothes, gifts etc?
A detailed budget and expense following helps to make informed decisions.

No, it isnt everything. Actually, though, "Utilities" includes cell phone and cable (we get only the lowest cost cable - keeps us from watching too much TV!)

The other things seem to fluctuate more yoy, but the total is pretty constant with our lifestyle.

Clothing is about ~$100 (we are not too proud for hand-me-downs for the kids). We also had an expensive vacation this year, but I don't consider that a "Mandatory" expense (i.e., we are content to hang around too.)

 

[dex]

You and your wife need to sit down and make every dollar have a "job." At first, you might just want to record every purchase and categorize it, and then look it after a month or two to see where you see the most room to cut back.

The answer you are looking for are in this exercise.

 

[ER_Hopeful]

We're in somewhat similar situation. we live in SoCal but we're in our 30's, kids 7 and 4. Wife is a SAHM. My monthly expense is around 4k - 4.5k but that includes $1400 on the house($110 PMTI + $300 extra pay-in) and $550 preshcool tution for the 4 yo. By Sept. 08, that $550 will be dropped when she goes to public kindergarden. If my house was paid for, my monthly expense could be around 2.5k to 3k(according to my back of envelop calculation)

Food = $500 to $600. we don't clip coupons but we don't shop at brand-name chain stores either. We shop mostly regional Asian markets(we're Asians btw.) like 99 ranch market and some Korean, Vietnamese markets. These are clean, well maintain stores, not like the ones featured in Hollywood films(mom & pop ghettoish). Food For Less is good, too. We eat out maybe once a month.

Car insurance = $70(liability only). 90's Toyota Celica (my graduation car) and 02 Honda CRV. Both bought used and paid cash.

life ins. = $35(term with return of premium). I'm thinking about switching to straight life after reading some posts here.

clothing = mostly Thrifty/GoodWill.

Appliances/furniture = Craigslist.

Entertainment = Free to $100 or $200. Disneyland annual pass = $550 (for 4 of us), Long Beach Aquairum of the Pacific annual pass = approx. $100(for 4), Discovery Science Center annual pass = $70(for 4). During the Spring/summer time, we love going to the Farmers market in Alamitos Bay (we go almost every Sun.), wife and I would watch the sail boats passing thru the channel, the kids ride their bikes, etc, Price = pop corn plus fruits from the market. We also like going to the beautiful Donald Trumph golf Course in Palos Verdes for picnics, and that's free. It's huge, huge grass area on the big cliff over looking the blue pacific ocean. Kids can run bikes along the path or play soccer on the grass. My other free or almost free activities include kayaking and scuba diving.

There was a thread on Trac phone earlier, if I go with that, I could probably shave off another $25 - $30 per month.

I mow my own lawn mostly. I did my own copper pipe in the house(my dad, a handyman, came to help. I worked for him during my college years), so that saved me a grand or so. I did my own roof(again with my dad's paid help and a couple day labors), but I don't think I would do it on my own next time around, which should be in my 50's.

kids take swimming lessons in the summer, no music/art/other lessons yet, might look into that later on.

Like you, I'm always mentally scanning for where I can trim the "fats".

 

[Khan]

Wife is a SAHM. ... and $550 preshcool tution for the 4 yo.

Why would you need preschool when there is a SAHM?

 

[FIREd]

I am looking at my monthly expenses and can't see how we could reduce them further without some pain:

Food - ~$800/month
Household stuff ~$500/month (includes home maintenance, repair, etc.)
Kids education ~$500 (school, classes, activities, etc.)
Medical ~$300 (stuff not covered by insurance, and we are pretty healthy)
Insurance (Life, Auto, etc.) ~$300
Utilities ~$300
Cash for incidentals ~$200
Gifts, charity ~$250

etc.

With everything else, it totals to around $4500-$5000 a month. Add in amortization of a couple cars (we drive beaters against SoCal rules, but even still) and you are looking at a minimum of ~$65-$70k per year after tax income just to pay expenses.

The expenses you listed look reasonable to me. My wife and I live in a low COL area and our expenses in these various categories look fairly similar to yours (except we have no kid's education expenses). But there is about $1350 to $1850 in unlisted monthly expenses here. What do you spend that money on if both your house and cars are paid for? Could it be where you could cut corners?

 

[kombat]

Kids education ~$500 (school, classes, activities, etc.)

This seems high to me. It shouldn't cost $6,000/year to keep 2 kids entertained, particularly when one parent stays at home full-time. Surely band camp, karate classes, and girl scout cookies can't add up to $500/month, can they?

On the other hand, I don't have kids. Maybe that really is what they cost?

Gifts, charity ~$250

Personally, I'd cut the charity part. Charity begins at home. My family comes first.

 

[W2R]

This seems high to me. It shouldn't cost $6,000/year to keep 2 kids entertained, particularly when one parent stays at home full-time. Surely band camp, karate classes, and girl scout cookies can't add up to $500/month, can they?

On the other hand, I don't have kids. Maybe that really is what they cost?



Personally, I'd cut the charity part. Charity begins at home. My family comes first.

I agree about the charity. As for $500/mo for school, classes, and activities, I have a little insight. There are some areas in southern California (as in many metropolitan areas) where I would feel compelled to send my child to private school because the public schools are just too rough. And even if he doesn't send his kids to private school, he has to pay for after school care and such, I would think. It all adds up and $6K/year would be quite reasonable.

Personally, when we lived in San Diego we sent our daughter to private kindergarten which cost $5.5K/year. That was back in 1983, when my ex was earning I think maybe $50K-$60K, so this was not trivial! But I did not want her exposed to the gang culture in our local public schools. We moved to Texas the next year and sent her to a public school that was far better, and free (as well as gang-free).

 

[maddythebeagle]

I think it would be more appropriate for OP to back out how much he is saving and if it is enough for his plans...spending varies on this board based on values and doubt you will get consensus...

 

[ER_Hopeful]

Why would you need preschool when there is a SAHM?

Well, I sort of have to look at it as the price/penalty I pay for Americanizing(for the good parts, certainly not the consumerism) my kids. We're both first-generation immigrants, I speak fluent English/Chinese but my wife only speaks ok English(and lacks American cultural background), so naturally we speak Chinese at home. I don't want my kids to start school playing catch-up or to go through what I had to go through when I first came the States in my teen years(feeling alienated and different.)

I realized it's a hefty price tag and I don't really have to do it if I don't want to but my instinct just tells me that I should.

Kid #1 is fluently bilingual now (preshooling in English gave her a big boost) and is one of the top students in her class.

 

[Bestwifeever]

"My situation: early 40's, two kids in elementary school, married, house paid for, DW a SAHM. By luck and tenacity Megacorp has done well and have kids college paid for (maybe.)

We live in a high expense area - Southern California. That said, we feel we are pretty frugal, but not misers.

I am looking at my monthly expenses and can't see how we could reduce them further without some pain:

Food - ~$800/month
Household stuff ~$500/month (includes home maintenance, repair, etc.)
Kids education ~$500 (school, classes, activities, etc.)
Medical ~$300 (stuff not covered by insurance, and we are pretty healthy)
Insurance (Life, Auto, etc.) ~$300
Utilities ~$300
Cash for incidentals ~$200
Gifts, charity ~$250"

Looks good to me--congrats on having a paid-off house. And although "charity begins at home" it is also important imho to help others and have your children learn this (and you don't seem to be hurting so you probably don't miss the $250/mo too much)--this is about what we give to our church/UnitedWay/fundraisers.

This year I have been looking at our expenses as an annual percentage of gross income. It made it real easy to cut some things out when we looked at them that way especially for things that we didn't use that often.

 

[freebird5825]

i see a few areas for possible trimming...at your discretion...
you mentioned driving "beaters". if you have collision on them, is the ins rate per year too high? i just reduced my auto ins on my "beater" by eliminating collision. saved $110 per year. it's a 92 accord with 127K miles and rust. not an issue in SCal, but go to kelley blue book and see what your beaters are worth. then get some other ins co quotes and decide from there. also maybe combine all ins policies at one company and get the discount for 1 stop shopping.

food bill...no clue what you COL is. food costs are always lower for non-processed items. since i FIREd, i have taken a long hard look at my shopping list and eliminated all pre-made food items. also changed stores for certain items. found a little mom-n-pop butcher shop that beats any of the chain stores on meats/vegs. only shop when i'm downtown anyway vs special trip. and i bring a short list. the longer we are in the store, the more we tend to buy.

 

[DanteAlighieri]

No, I think the insurance is pretty reasonable - some of the cost is due to an umbrella policy since we have a relatively high NW.

Others have pointed out that my list didn't tally up to $4500 - the "hidden" ~$1500 is in things that seem random but always add up to about this much every year (like major appliances dying, major home repairs, a particularly expensive vacation, finally replacing some crappy furniture, etc.)

I suppose many of these were in fact discretionary, but it is still a question of lifestyle. Even Thoreau didn't spend more than two years in the woods...

I think the best thing for us would ultimately to go to a lower COL area. DW is certainly amenable (neither of us are CA natives and would like to get the hell out of here in the next couple years.)

Thanks for the comments everyone

i see a few areas for possible trimming...at your discretion...
you mentioned driving "beaters". if you have collision on them, is the ins rate per year too high? i just reduced my auto ins on my "beater" by eliminating collision. saved $110 per year. it's a 92 accord with 127K miles and rust. not an issue in SCal, but go to kelley blue book and see what your beaters are worth. then get some other ins co quotes and decide from there. also maybe combine all ins policies at one company and get the discount for 1 stop shopping.

food bill...no clue what you COL is. food costs are always lower for non-processed items. since i FIREd, i have taken a long hard look at my shopping list and eliminated all pre-made food items. also changed stores for certain items. found a little mom-n-pop butcher shop that beats any of the chain stores on meats/vegs. only shop when i'm downtown anyway vs special trip. and i bring a short list. the longer we are in the store, the more we tend to buy.