Eye popping spending and overwhelmed about how to cut down to a reasonable lifestyle

[obsessed]

If you are somewhat handy with a spreadsheet program, I'd suggest that you download your credit card activity for the past 2-3 years and build a table with various look-ups to categorize your expenses into what makes sense for you. I haven't used Quicken in many years but I think you can customize your data a lot better doing it in the spreadsheet. At least it works for me.

Also, I don't think you need to get draconian on your expenses as you have a good income. Just find the healthy balance between living life now and building the nest egg for the future.

 

[Montecfo]

It's fine to look for money saving ideas like this, but a scattershot approach will have only limited success in really cutting spending.

What you and your spouse need to do, first, is understand precisely how much you spend and what you spend it on right now. All of it. There is no substitute for creating a spreadsheet with spending categories (mine has 53), then going back through the credit card statements and checkbook and allocating the spent dollars to a category. You could do it by the year or by the month (I do mine every month when I get the credit card bill and find that to be the most convenient). Just by doing that, you will find many, many places where money is trickling through your fingers without actually improving your life or moving you toward your goals.

Even in the days when our income was larger than yours, we still knew exactly where every dollar went. We did not "budget" or artificially limit our spending in any way. In fact, we lived pretty darned well. But tracking our spending naturally kept it in check and ensured that we were getting real value from every dollar spent. It would have been very easy to spend a lot more if we were not paying attention.

A secondary benefit of knowing our spending is that we could determine precisely how much we needed to retire and when we would reach that point. One of my goals for retirement was that our standard of living would not change (at least as far as money controls that), and it hasn't. We still do exactly the same things we did before we retired (except work) and spend almost exactly the same amount of money.

PS - for Amazon, we charge everything to our Amazon credit card, because we get 5% back. When the bill comes, I print out the sheet of charges, call up the Amazon order history and, for each charge, allocate to the proper spending category in my spreadsheet. ALL of our other spending is funneled through a single credit card and when that bill arrives, I print out and allocate every charge. Then, it is just a matter of accounting for the few checks I have written and the bank account charges for things like the electric company, which won't take a credit card. We spend very little cash.

Gumby, at least in this methodology, we are twins.

 

[ElizabethT]

OP- One final thought for you to consider - that once you build a body of wealth, you get to spend a portion of it via the thrown off interest or dividends, and you get to do it for the rest of your life. That, to me, was the game changer in understanding why we were making the tradeoffs we did during our working years in order to direct about 70% of our also close-to-half-a-million combined annual income into savings for purposes of FIRE.

It is freaking fun to spend 100% of our specified budget every year in FIRE, knowing it will magically replenish itself because we are not touching the principal, and in fact aren't even touching all the annual interest/growth.

 

[Montecfo]

Haha sorry I kept meaning to log in and update you all but didn't have time with a super hectic weekend. I'm on a short break at work now, thought I should post my very delayed update.



It didn't go super great, the Mrs was quite overwhelmed but she agreed it was an issue for our lifestyle and what we want for the future. We're going through all the credit card bils the next few weeks, starting 30 days back and then 6 months back. Our bgigest issues are 1) fancy travel and 2) eating out and 3) luxury one time expenses. The $2k VIP San Diego Zoo tour, the $10k ebike to haul the kids, the $800 fly fishing guide along with $800/nt 5 star hotel, it all adds up quick. ALso it turned out I miscategorized some stuff and our expenses were 310k, 160k of that was credit card. 50k mortgage. 50k nanny with taxes. She's looking at whether we can transition to much cheaper childcare for the little one. 25k for private school that goes away when the almost 6 year old goes to public kindergarden.



We both agreed that a spending pause for 30 days is a good idea to reset out expectations a bit, and I'm learning to cook and made a commitment not to eat out for 30 days for myself (We made pizza as a family this weekend, came out terrible, but oh man everyone had fun and the kdis made an awesome mess and had a blast). I placed a hold on some of the book recommendations above at the library, whereas normally I'd automatically go buy on Amazon We decided not to pause Amazon Prime, it's such a small expense relatively, but we agreed to every day look back at our spending and see if it was needed and added to our life or if we could have done without.



We need to work out what to do with the traveling, we love it and we don't want to stop that. I had a big shingdig planned for the whole family and grandparents, etc in Grand Cayman later in the Fall (huge house on the beach and paying for most people's flights) that I've put on ice for now. That would have been a 20+k expense for 7 days. The cars are already paid for, and that damage is done, so I'm going to just let it be and not trade out for the minivan right now.



Can't thank everyone enough for their advice. I owe it to re-read all the comments again after work today.



Have a great day all! And if there's more advice/tips, we'll be glad to take them!

I think you can get the info you need to get started cutting back by looking at just the past 90 days of credit card bills.

If you really want to go back 2 years then get quicken and import and categorize.

But don't wait till that is done. Start now.

Also, if you can get DW involved that will pay dividends. Let her work on the Amazon card analysis, for example.

And as Disneysteve suggested, start tracking going forward.

With all the low hanging fruit in credit cards, you could begin by focusing on their use, rather then jumping into tracking everything.

Baby steps, get some quick wind and stay motivated. And keep talking with your wife, keep this on the table and keep her involved.

 

[Koolau]

I'm encouraged that your first thought was to have a sit-down with your wife. If she's not on board, it won't happen. If she can see the advantages of saving more (spending less) then half the battle is done.

I think you have a big advantage over many in that you have a very good income. You can still indulge some passions and even a few frivolous expenditures without breaking the bank. I think it's important not to feel deprived. Simply setting priorities in spending may be all that is required to get you where you want to be.

Welcome to the forum and let us know how this is all going for you.

 

[dixonge]

I think one of the first times we became aware of our spending being out of balance was when someone suggested that the average person makes at least a million in their lifetime. We didn't consider ourselves that wealthy, but I'll be damned if it wasn't true! (per SS earnings statement). And that was just my wife's income. Then we looked around at what we had to show for it.

2 cars w/ payments
2 motorcycles w/ payments
1 house w/ payments
Furniture

Our retirement funds were quite minimal. Where had all the money gone? What amazing things had be bought or done with it?

It was sobering.

So yeah, first step is realizing there's a problem, second step is deciding what you would *prefer* to see in your life. Then make a plan and execute. All you are doing is delaying some of the fancy stuff until a bit later, but by then you can afford it without impacting your retirement years.

 

[socca]

... It is freaking fun to spend 100% of our specified budget every year in FIRE, knowing it will magically replenish itself because we are not touching the principal, and in fact aren't even touching all the annual interest/growth.

There are a couple of popular definitions of "financial independence":
(1) pensions & investment income cover most or all of living expenses;
(2) the "safe withdrawal rate" concept.

Like you, I'm fond of (1) but (2) seems more popular on FIRE websites.

 

[autonomousdog]

If you are somewhat handy with a spreadsheet program, I'd suggest that you download your credit card activity for the past 2-3 years and build a table with various look-ups to categorize your expenses into what makes sense for you. I haven't used Quicken in many years but I think you can customize your data a lot better doing it in the spreadsheet. At least it works for me.

Also, I don't think you need to get draconian on your expenses as you have a good income. Just find the healthy balance between living life now and building the nest egg for the future.

So many people have recommended Quicken I've just made my first purchase since last week haha to buy the annual subscription.



Your approach sounds very sane, and I was talking about this with my therapist today haha, I think my MO is to get really intense when I find a thing to go after. Some people are laser focused and gung ho about goals, that's me. We're going to have another meeting with my wife and I (I'm getting a colonoscopy this Friday so I'll do that in the morning and then we'll have a finances date again next friday afternoon! Just getting all of life's great challenges sorted out in a short time)

 

[autonomousdog]

I think one of the first times we became aware of our spending being out of balance was when someone suggested that the average person makes at least a million in their lifetime. We didn't consider ourselves that wealthy, but I'll be damned if it wasn't true! (per SS earnings statement). And that was just my wife's income. Then we looked around at what we had to show for it.

2 cars w/ payments
2 motorcycles w/ payments
1 house w/ payments
Furniture

Our retirement funds were quite minimal. Where had all the money gone? What amazing things had be bought or done with it?

It was sobering.

So yeah, first step is realizing there's a problem, second step is deciding what you would *prefer* to see in your life. Then make a plan and execute. All you are doing is delaying some of the fancy stuff until a bit later, but by then you can afford it without impacting your retirement years.

Oh interesting, thanks for sharing. I'm curious, how long did it take you to turn it all around?

 

[Texas Proud]

It might be just me but $75K for nanny and school sounds like a big waste of money... by the time they get into college nothing they are learning now they will remember...


I would talk to DW big time about getting rid of the nanny... and find cheaper child care if needed... heck, she can quit her job and make more money doing that job which IMO is her job anyhow or yours if she makes the big bucks...

 

[Accidental Retiree]

So many people have recommended Quicken I've just made my first purchase since last week haha to buy the annual subscription.



Your approach sounds very sane, and I was talking about this with my therapist today haha, I think my MO is to get really intense when I find a thing to go after. Some people are laser focused and gung ho about goals, that's me. We're going to have another meeting with my wife and I (I'm getting a colonoscopy this Friday so I'll do that in the morning and then we'll have a finances date again next friday afternoon! Just getting all of life's great challenges sorted out in a short time)

If you really want something fun to play around with, I found the app “Every Dollar” helped me capture everything I was spending.

 

[USGrant1962]

So many people have recommended Quicken I've just made my first purchase since last week haha to buy the annual subscription.



Your approach sounds very sane, and I was talking about this with my therapist today haha, I think my MO is to get really intense when I find a thing to go after. Some people are laser focused and gung ho about goals, that's me. We're going to have another meeting with my wife and I (I'm getting a colonoscopy this Friday so I'll do that in the morning and then we'll have a finances date again next friday afternoon! Just getting all of life's great challenges sorted out in a short time)

Wow, what a pain in the ass!

But seriously, you might also want to look into an account aggregator like Personal Capital (just changed to their name to Empower but the website is still PC). If you enter your brokerage, bank, and credit card accounts it will track your cash flow and portfolio. Quicken might be just as easy, but Personal Capital or Quicken will certainly be less work than maintaining your own spreadsheet.

 

[SecondAttempt]

DW's - ahem, personal maintenance may be more than yours. If you try to send her to a new hairdresser, your life may be in danger.

OTOH, OP may have to start golfing at a city course. I realize you are a girl but it's not always the girl who is high maintenance!

 

[Ronstar]

Lots of great advice here, that I won't repeat. But I will reiterate:

1. Track spending in detail. Categorize everything. No - Misc is not a category. This is going to take some time.

2. Analyze need expenses vs want expenses w/ DW. Develop a list of things to cut. This can be done immediately, and should be revisited frequently as you gather more historic expense data.

3. Start cutting expenses, and continue to cut expenses based on future analyses. Make a habit out of things like your family pizza night where the kids messed up the house.

4. Develop a budget for future expenditures and stick to it.

 

[ElizabethT]

There are a couple of popular definitions of "financial independence":
(1) pensions & investment income cover most or all of living expenses;
(2) the "safe withdrawal rate" concept.

Like you, I'm fond of (1) but (2) seems more popular on FIRE websites.

Ha, I get that! But, we FIRE'd at 48 and 55, so that left a long road to go to reach SS and Medicare. But now that we're approaching both, who knows? Maybe we'll kick up our heels and open that spigot a bit more!

 

[athena53]

It might be just me but $75K for nanny and school sounds like a big waste of money... by the time they get into college nothing they are learning now they will remember...

I beg to differ on the school. It depends on the public school alternatives. I lived in a HCOL area (NNJ) in a highly-regarded school district. DS was falling through the cracks. I spent $48,000 (in 1999-2003) to send him to a nearby military boarding school for 4 years. He and I are convinced that the turnaround saved him. They had structure, discipline and the small classes he really needed. The OP may have totally different reasons but the right (or wrong) school can make a huge difference, even for young children. I was a single mother and I don't regret a dime of that $48,000.

The nanny- I wish I'd had one! With one high-power FT career and a second PT career, no one needs to be dropping the kids off and picking them up somewhere.

OP, as usual, I'm projecting my own priorities on your situation but it comes down to what you really value. Spend money on those things, cut back in places where it doesn't matter.

 

[Taco]

autonomousdog, you might enjoy this song since it sounds like you are Waking Up (from the American dream)...

Some of the lyrics...

The world was like an Amoco and I said "Fill er up!"
With a house, a car, a VCR, a lawn and all that stuff
But I got a nagging notion that enough did not exist
And at the end of every day I'd wonder "is this all there is?"

But I'm waking up, but I'm waking up
I'm waking up from the American Dream

It seemed that the beginning of the dream was so benign, I mean
All I ever wanted was a smidgen of the pie
And some comfort and security and good things for my kids
And, OK, to please the neighbors and my ego while I did
Anyway, it's great to be awake and feeling satisfied
With seeking out the simple and the deeper things in life

 

[Koolau]

I think one of the first times we became aware of our spending being out of balance was when someone suggested that the average person makes at least a million in their lifetime. We didn't consider ourselves that wealthy, but I'll be damned if it wasn't true! (per SS earnings statement). And that was just my wife's income. Then we looked around at what we had to show for it.

2 cars w/ payments
2 motorcycles w/ payments
1 house w/ payments
Furniture

Our retirement funds were quite minimal. Where had all the money gone? What amazing things had be bought or done with it?

It was sobering.

So yeah, first step is realizing there's a problem, second step is deciding what you would *prefer* to see in your life. Then make a plan and execute. All you are doing is delaying some of the fancy stuff until a bit later, but by then you can afford it without impacting your retirement years.

Over the past 50 years, I can't count the number of times I've had this exact discussion with my BFF who is 79 and is half a million in debt. Only his list often also included 2 boats, 2 wave runners, 4 cars, 2 houses, 2 4-wheelers, etc., etc.

My council was to save money for what he wanted and then buy it. He agreed that was wise but never once did it. If he could get a loan or had a new CC, he would buy what he wanted as soon as he possibly could. Eventually, he sold most of the stuff at a tremendous loss and was then off to the next latest-greatest toy. Heh, heh, his wife bought clothes, nick-nacks, stuffed animals, "decorating" items, etc., etc. They were the perfect couple - for the CC and loan companies. I would not want to be the survivor of the couple. I think it will all come crashing down.

With this in mind, I'd say autonomousdog is actually in pretty good shape and has an excellent chance of winning the FIRE game. Relatively small changes now will make a huge difference in 20 years.

 

[eyenitnoy]

I have a high paying job and we live in a HCOL city. We have 2 kids age 2 and 6. We generally don't worry too much about money and spend what we think we need without a budget, and recently I looked back and saw we spent 300k last year, I haven't yet calculated what it was the year before. My eyeballs about popped out of my head, and I've been overwhelmed the last few days. I really don't even feel like we have a luxurious life, and I'd like to really cut that number down to <100k a year so we can boost our savings rate to >50% of my earnings. I don't even know where to begin to cut down and it's a bit overwhelming. My wife and I are sitting down to go through the expenses and see where we can make changes. We have a >3000 sft house, a fully paid off Tesla and a Toyota SUV. I have . I don't even know if I have a specific question, just looking for advice or tips on how we can start cutting down without us fighting about it and precipitating a meltdown. Should we work with a professional with our level of spendiness, if so who does that kind of thing? Is it too extreme to say we should cut essentially down to zero our CC spending and all discretionary spending for a few months? I have ~150k cash reserves, just under 2m retirement accounts and equity in the home. My income ranges from 350k in a bad year to 450k in a good year, it's pretty variable. This year I'm on track for >500k pretax income, and could earn more by working more, but I don't want to cover up this spending problem by earning more and spinning my wheels harder.
Mortgage 3800 (3% interest rate)
Nanny 2500
School 2000
Insurance (life, disability, umberella, car) - 1000
Credit card 12-15k between both of us per month
(Eating out 500/mo)
(Groceries 1200/mo)

Cut up the credit card, stop eating out, and fire the nanny.
Savings: over 200K a year.

 

[almost there]

Its not what you make.,. Its what you keep that counts.

 

[imnontrad]

Boy, groceries are waaay too high for that size of family! Abd that CC spending is also way too much!
Make saving/investing your first priority (401K, IRSa, HSA if eligible, 529 plans) and live on what is left.
Although it seems weird, spend 1-2 months (or more) by putting away the CCs and paying cash for everything. You will be amazed at the difference in your spending. Also, consider investing in a taxable brokerage account. If something happens (loss of job before 59, disability, or death), your family may be able to continue on just fine.

 

[Texas Proud]

I beg to differ on the school. It depends on the public school alternatives. I lived in a HCOL area (NNJ) in a highly-regarded school district. DS was falling through the cracks. I spent $48,000 (in 1999-2003) to send him to a nearby military boarding school for 4 years. He and I are convinced that the turnaround saved him. They had structure, discipline and the small classes he really needed. The OP may have totally different reasons but the right (or wrong) school can make a huge difference, even for young children. I was a single mother and I don't regret a dime of that $48,000.

The nanny- I wish I'd had one! With one high-power FT career and a second PT career, no one needs to be dropping the kids off and picking them up somewhere.

OP, as usual, I'm projecting my own priorities on your situation but it comes down to what you really value. Spend money on those things, cut back in places where it doesn't matter.

I have a few educators in my family and school for the ages listed do not add much if anything at all... studies have shown this to be true... will it help for a young teen... or an older teen... probably.. if the public school is not a good school.. I just happen to live in a district that has some good school, but districts next to mine are not as good..


Nope.. a PT job paying $20K is not something that requires paying $50K for a nanny so you do not have to carpool... To me that seem like a big entitlement... now, if OP was not concerned with the money going out then that is an OK expense... but he is concerned or he would not have posted...

 

[Texas Proud]

Over the past 50 years, I can't count the number of times I've had this exact discussion with my BFF who is 79 and is half a million in debt. Only his list often also included 2 boats, 2 wave runners, 4 cars, 2 houses, 2 4-wheelers, etc., etc.

My council was to save money for what he wanted and then buy it. He agreed that was wise but never once did it. If he could get a loan or had a new CC, he would buy what he wanted as soon as he possibly could. Eventually, he sold most of the stuff at a tremendous loss and was then off to the next latest-greatest toy. Heh, heh, his wife bought clothes, nick-nacks, stuffed animals, "decorating" items, etc., etc. They were the perfect couple - for the CC and loan companies. I would not want to be the survivor of the couple. I think it will all come crashing down.

With this in mind, I'd say autonomousdog is actually in pretty good shape and has an excellent chance of winning the FIRE game. Relatively small changes now will make a huge difference in 20 years.

Some people can juggle those balls and live large... I had a BIL that seemed to do that... but when he passed we found out that my sister was not in as good a place as she thought... BIL was just fine with his lifestyle and died before the bill came to roost...

 

[Music Lover]

Over the past 50 years, I can't count the number of times I've had this exact discussion with my BFF who is 79 and is half a million in debt. Only his list often also included 2 boats, 2 wave runners, 4 cars, 2 houses, 2 4-wheelers, etc., etc.

My council was to save money for what he wanted and then buy it. He agreed that was wise but never once did it. If he could get a loan or had a new CC, he would buy what he wanted as soon as he possibly could. Eventually, he sold most of the stuff at a tremendous loss and was then off to the next latest-greatest toy. Heh, heh, his wife bought clothes, nick-nacks, stuffed animals, "decorating" items, etc., etc. They were the perfect couple - for the CC and loan companies. I would not want to be the survivor of the couple. I think it will all come crashing down.

Maybe, but he's now 79 and has lived higher than his means for most of his life without it crashing down.

I couldn't live like that, I wouldn't be able to sleep with that debt. But he obviously doesn't care and still gets to enjoy his toys. There's no reason for him to change, is there?

 

[dobig]

I think one of the first times we became aware of our spending being out of balance was when someone suggested that the average person makes at least a million in their lifetime. We didn't consider ourselves that wealthy, but I'll be damned if it wasn't true! (per SS earnings statement). And that was just my wife's income. Then we looked around at what we had to show for it.

2 cars w/ payments
2 motorcycles w/ payments
1 house w/ payments
Furniture

Our retirement funds were quite minimal. Where had all the money gone? What amazing things had be bought or done with it?

It was sobering.

So yeah, first step is realizing there's a problem, second step is deciding what you would *prefer* to see in your life. Then make a plan and execute. All you are doing is delaying some of the fancy stuff until a bit later, but by then you can afford it without impacting your retirement years.

Man, did I cringe when I read your post because that was us back in 2017 but in much worse shape. Multiple properties, car, toys and credit cards. We were in the hole somewhere around $1.5 million and not much in savings or retirement. Still remember the day my wife sat me down and whipped out a green hardcover notebook to categorize our situation. You either have a come to God moment, which I did, or you ignore it until the bottom falls out.

Even with multiple mistakes these past 7 years including $400k in capital losses and not investing more han 50% of our money we currently sit at $1,009 in debt and a little more than $1.7 million between retirement accounts and cash according to our Fidelity wealth tracker.