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

[Romer]

I went through 6 years of Quicken and Credit Card data to define my normal spend to evaluate what I would need to plan on spending to maintain the same lifestyle in retirement.

I also used the data to better manage expenses building margin rather than just cutting

Are there things you can do to get the same functionality at a lower cost?
1) I switched my phone plan to another company using the same network for the same service and saved $1200 a year
2) I figured out I was spending a lot on cable boxes for all my TVs in my house. I got rid of all but 1 and replaced them with Firesticks which has an app for my cable company (xfinity) so I get all the same service and channels on all the TVs. That saved $450 a year. I also bought my own Modem which saved another $168 a year

I know small potatoes so far, just examples of managing vs cutting

Reviewing the Credit card data also key'd me to things we spent a lot of money on. Awareness helped me reduce cost there by looking for substitutions or just decide if that was something to focus on not needing. An example would be if you spend several thousand a year on Starbucks, is the less expensive coffee shop or coffee from home acceptable.

On travel, I found I could save thousands for the same cabin on the same ship for a cruise by shopping around. On a recent Cruise (Jan 2023) I found a Concierge Balcony Cabin for $1200 on the companies own web site no one could match. Their all inclusive would have added $1200 a person where as my paying out of pocket for gratuities and drinks cost $500 a person. I saved Thousands by deciding first what I wanted to do and then shopping vs using a travel agent.

These are just examples of what you can do with the data to manage expenses vs just cutting

It is a place to start and it enables you to better manage and understand where your money is going

 

[autonomousdog]

Well add a 5th day of work since your work is so lucrative...

Haha yes, that's what I've been doing intermittently. 2 fridays a month, I feel bad taking time away from the kids but it does help with the financial picture. If I work 5 days a week, my wife will make us move back to the East coast from Colorado.

 

[ivinsfan]

Haha yes, that's what I've been doing intermittently. 2 fridays a month, I feel bad taking time away from the kids but it does help with the financial picture. If I work 5 days a week, my wife will make us move back to the East coast from Colorado.

You just need to figure out your goals and get comfortable with a spending level...if you spouse doesn't work outside the home the Nanny is adding a lot to your monthly nut.

 

[ncbill]

Haha yes, that's what I've been doing intermittently. 2 fridays a month, I feel bad taking time away from the kids but it does help with the financial picture. If I work 5 days a week, my wife will make us move back to the East coast from Colorado.

As others have noted your credit card(s) should have generated a summary statement at the end of the year which you can download off their website(s)

In addition, I use mint.com (by Intuit) to track my spending since i try to put all expenses possible on my credit cards.

Once you add your accounts Mint is pretty good at automatically categorizing spending by category at least for credit cards so that might also help you discover where the credit card money is going.

 

[badatmath]

I too wonder if this could possibly be real.

+1

 

[pb4uski]

When I was in the business world, a lot of the couples with both parents working had a nanny. In a high cost of living area, the cost of day care for a two year old, and a 6 year old (after school) could easily exceed the cost of a nanny. The cost of childcare was a frequent topic of discussion. Due to his family income, OP would most likely not qualify for subsidized day care.

It was unclear whether or not the OPs DW works and that is why they have the nanny or if the nanny just gives the OP's DW "me time".

 

[kgtest]

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)

I thought the same thing when I looked at how much we spent last year. Not quite as much as you. The cost of everything has risen. I would say we don't live beyond our means, but we do splurge on some things (like vacations).

I look at our big category expenses and the biggest for us is taxes, followed by our mortgage $27k, daycare costs, travel and food. I spend a lot on our kids, their activities and sports to keep them busy. We could just sit at home watching the clock, playing cards and coloring...but where is the fun in that?

Subscription costs are always a good place to start. Sure we could start saying no to the kids more often. There are certain things that just can't be cutout like taxes, health insurance and mortgage.

I would look at how often you eat-out and your food budget, all your netflix and tv subscriptions, money you spend on fun activities etc.

We go to movies. We go to museums, plays, activities in town. We travel a few times a year and spend a decent amount on accommodations. A lot of people travel when they feel they are getting a deal. We just go where we want when we want. We could definitely save money on travel if we planned better and were more flexible. We could cut out some food spending if we shopped smarter and at discount Aldi instead of our more expensive local store. We could stop eating out at fast food, but with kids sometimes its the only option as we are flying around getting them to sports and activities. I am the head coach for baseball, scout leader and it does cost me some money out of my pocket to handle those responsibilities... but it also gives what I consider a better quality of life as I am more engaged with my kids.

I feel your pain though. We didn't earn quite as much as you and also didnt spend quite as much. I have like 15k due in taxes this weekend, and a 6k credit card bill to payoff. We spend about 6 to 7k a month on our credit card just living.

 

[rodi]

Drilling down on the credit card spending might find some redundancies.
When my sister and BIL were both working full time, and his work had a LOT of travel they'd found they'd doubled up on
- Amazon Prime membership
- Digital newspaper subscription (3 different papers - local, WAPO, and NYT)
And some other stuff... Once they realized it - they cancelled the extra Prime and newspaper subscriptions and saved some money.

It sounds like nickel and diming, but I've found when I wanted to trim the budget the easiest place to look was recurring expenses (subscriptions, utilites, etc.) Changed our POTS landline to magic jack. Changed cell phone carriers. Anything that had a monthly bill was examined and price compared. Saving $20/month here, and $50/month there adds up to real money.

The things I couldn't improve were daycare expenses (which was our largest expense when the kids were sub-5. ) Fortunately, they grew out of the expensive stage and after-school programs were much cheaper. For activities, we did rec-center sports leagues (little league, basketball) vs travel teams.. and in high school the school teams. I have friends who spent thousands/year on fancy private swim teams - and their kids ended up on the same high school swim team as my boys, who just did the rec-center swim team. (Laps are laps. and rec centers often have decent coaches who can improve the stroke technique).

 

[socca]

All good advice so far. The only thing a bit different I would add is that when you sit down with your wife remember that you are engaging in a relationship management session* as much as you are a financial management session. ...

Good advice. I've never been married so I accidentally posted as if the OP is single.

 

[autonomousdog]

Drilling down on the credit card spending might find some redundancies.
When my sister and BIL were both working full time, and his work had a LOT of travel they'd found they'd doubled up on
- Amazon Prime membership
- Digital newspaper subscription (3 different papers - local, WAPO, and NYT)
And some other stuff... Once they realized it - they cancelled the extra Prime and newspaper subscriptions and saved some money.

It sounds like nickel and diming, but I've found when I wanted to trim the budget the easiest place to look was recurring expenses (subscriptions, utilites, etc.) Changed our POTS landline to magic jack. Changed cell phone carriers. Anything that had a monthly bill was examined and price compared. Saving $20/month here, and $50/month there adds up to real money.

The things I couldn't improve were daycare expenses (which was our largest expense when the kids were sub-5. ) Fortunately, they grew out of the expensive stage and after-school programs were much cheaper. For activities, we did rec-center sports leagues (little league, basketball) vs travel teams.. and in high school the school teams. I have friends who spent thousands/year on fancy private swim teams - and their kids ended up on the same high school swim team as my boys, who just did the rec-center swim team. (Laps are laps. and rec centers often have decent coaches who can improve the stroke technique).

That's a really good point, I bet we do have some redundant spending. And the bigger issue I see from these comments is that right now we have no structure around money and our spending which has to change.

 

[autonomousdog]

+1

I'm not sure why anyone would waste their time or yours making up stuff like this, but I guess there are people in the world that do

 

[autonomousdog]

Yes a 100% if it's not spent on eating out or the like STUFF is coming into your home a lot of stuff. I'm not saying it's not stuff you dont need but saying you don't know where it goes makes zero sense...

I am indeed saying I don't know, it sounds so dumb and spoiled when I say it out loud, the credit cards are on autopay and I honestly didn't use to (now I will) look at my accounts regularly. Turns out Chase has a alert that pops up anytime anything gets charged on the card, so I have that turned on now

 

[PlayinwithFIRE]

Most of it looks inline for a family of 4. (speaking from experience here).
The CC is the one that sucks the air out of the room.

I hope, you have a CC like a Fidelity 2% card which at your spending level would be putting $6000 per year into investment accounts like an IRA.

One or both of you has to be willing to breakdown $ spent into some budget categories, my wife goes thru our CC/bank statements every month and splits things into general categories (food, car insurance, home insurance, kids college, etc etc) .

We track that and look for large deviations from our "averages". For instance, if a typical Food cost for the month is $1200, why the heck did we spend $2200 last month?

Just the act of doing this, make you both more conscious of spending when you have the CC in your hand.

The other way, some CCs will do this for you thru their online site, or you could use something like Mint or Yodlee to help with it.

 

[autonomousdog]

Is your spouse employed is that the nanny expense?


What your goal here? RE , less hassle at work, a bigger nest egg? Fleshing that out might get you some clarity.

That is the million dollar question, thanks so much for asking it. It's part of what I'll talk to my wife about today, what are our goals. Part of why this is coming up now is I've been reading [mod edit], and really questioning what I'm doing. My kids are so little but growing up so fast and I'm missing out a fair amount of it and I'd like to cut down work hours to be at home more, so trying to buffer the financial house to be able to do that. If I can reduce spending, I can save faster but also be able to actually retire taking out only 3-4% of my saved up funds. Right now I'd need around 10 million to continue my current lifestyle which means I'll have to work til I'm 70.


There have been days this week I've pondered selling the Tesla and SUV and just buying a used minivan and using a ebike to commute the 4 miles to work and going full [mod edit]. But that's too drastic for my stage of beginner frugality.

 

[autonomousdog]

Most of it looks inline for a family of 4. (speaking from experience here).
The CC is the one that sucks the air out of the room.

I hope, you have a CC like a Fidelity 2% card which at your spending level would be putting $6000 per year into investment accounts like an IRA.

One or both of you has to be willing to breakdown $ spent into some budget categories, my wife goes thru our CC/bank statements every month and splits things into general categories (food, car insurance, home insurance, kids college, etc etc) .

We track that and look for large deviations from our "averages". For instance, if a typical Food cost for the month is $1200, why the heck did we spend $2200 last month?

Just the act of doing this, make you both more conscious of spending when you have the CC in your hand.

The other way, some CCs will do this for you thru their online site, or you could use something like Mint or Yodlee to help with it.

Seems like everyone agrees the CC spending is the problem. Yes, we plan to sit at a coffee shop, decaf latte splurge in hand, and go through the last 24 months of CC statements and categorize. Fun date! Mint has a nice thing where they break it down by category, but the painful act of going through line by line may be helpful for us (maybe motly me, I'm an impulse purchaser).



I've had my credit card for so long and my credit score is something in the 820's I don't want to do something drastic like close my CC accounts, but in my hands I need something drastic. Credit card spenders anonymous, maybe.

 

[autonomousdog]

When you are analyzing spend, beware of the Amazon/Target effect, where things are spent, but you have no idea what it was spend on, besides "household".

This, so much this. We're going to need to go through our Amazon order history too.


One idea I'll float (very carefully) with the wife is that we cancel Amazon prime and see how it goes for 60 days. We do get diapers and wipes from Amazon but we can bulk order that and save the impulse purchases. I'd also like to stop contributing to the destruction of the planet by my mindless purchases. And if we desperately need prime after that trial we can always re-start.

 

[autonomousdog]

He hasn't mentioned any income for his wife. I agree with you, though- for two-income couples a nanny can be more cost-effective and a life-saver when you have multiple kids with different school and activity schedules.

Good question, thanks for asking. She enjoys her job and keeps her sane to be doing her profession, so she works 1-2 days a week. I think she brings in maybe 20k a year plus adds to her retirement accounts (I have no idea what those contain, we may need to dive into that on our next date). The nanny is indeed helpful for breaking her free for chores, catching up on sleep, and things like pilates. We're considering a much cheaper nanny share rather than having our own nanny (though the kids dearly, dearly love her) once she moves out West with her husband. The older child will be going to public school next year, so the private preschool costs will go away too.

 

[autonomousdog]

As others have mentioned, the only way to know where/what to cut down on, is to know where every cent is going.
Take a weekend and track every single penny. Checking accounts, credit card bills, etc for the past year or two.
Is the 12-15K cc paid in full every month?
Your brief list does not mention taxes, utilities, medical expenses, any lessons/sports for kids (dance/music/t-ball for the 6 yr old?), college savings, house/yard expenses, gas and car maintenance, house maintenance, clothing/hair/personal expenses, vacations, etc.

You can't begin to cut down if you don't know where or what the actual cost/spend is.

$2 million sounds like a good retirement savings, but you lumped home equity in there. So, unless you plan to sell you home, many folks do not include that in their money for retirement spending.

I do not live in your income realm. Perhaps 300k spend is normal for 500k income.
But if that income is variable, you definitely might benefit from a good spending plan/budget that both you and your partner agree with.

Take a deep breath. You can do this research if you really are invested in a lower spending plan.
Nerd Wallet, Dave Ramsey are two places to read/learn about budgeting for spending and savings.
So may knowledgeable folks here on the forum could also give advice, if you wish. Ask away, be prepared for some tough love though!

There are SO MANY AMAZING PEOPLE ON HERE. I'm so glad I posted my question here, and I can't thank you all enough for your time, thoughtful responses, and feedback. What an awesome community!



As for your other comment, 300k spend on a 4-500k pretax earning may be normal, but oh my gosh we'd be in a much better place if we continue to earn that hwile spending 60-80k instead. That's my (fantasy) goal.

 

[autonomousdog]

OP reads like something that is being trolled for article research.

I make >500K, I don't budget or track monthly, and we spent ~300K last year.

Answer: What is Measured is Managed.

It's the long game of building up my blog to compete with [mod edit]. Going from 300k spend a year to 7k - HOW YOU CAN DO IT TOO!



No, I'm just a clueless soul bouncing around looking for solutions, no malicious intent here

 

[MichaelB]

Seems like everyone agrees the CC spending is the problem.

I don’t think the CC spending is the problem. IMO it’s more like a symptom. The problem is you have no target for saving or wealth accumulation. You have no way to make trade-offs between spending and saving, so you just spend. That’s not unusual and you’re not alone.

My guess is you can’t / won’t make headway into spending until you have an alternative that is equally compelling for you. College fund and retirement fund are two that come to mind.

When I had a variable income I learned to live off of the minimum and bank most of the upside variable.

 

[autonomousdog]

Personal finance writer Michelle Singletary advises a 21-day financial "fast" to get a handle on spending...you might want to start with a week, though! Change can be difficult and scary, but seeing how different your life is without those purchases can show you what's really important to you and what isn't missed at all. https://www.washingtonpost.com/busi...83e5b2-ad94-11e5-b820-eea4d64be2a1_story.html

OH THIS IS GETTING BOOKMARKED. Thank you so much for the recommendation.

 

[autonomousdog]

First - relax. It’s never good to make decisions under stress.
Second - As has been said, spend time to get to know all your spending. Set up a spreadsheet or use a program like Quicken and get some data to work with.
Third - Set some goals. Do you have a savings goal? A goal to pay off your house? A goal on when you’d like to retire? A goal of how you want to live your life (time with family).

Take six months, get the data and have conversations with your spouse so you know you’re both on the same page. Agree and create a plan and implement the plan.

Being shocked by your spending and just trying to cut spending without some thoughtfulness is not a road to success. It’s easy to cut spending, but it’s more important to plan out your life. Do that and the spending will be easier to handle.

Really good point, thank you. This seems like a good wake up call and jumping point for us to have family discussions about what we actually WANT to design our future to be like and to use the money accordingly.


I'm definitely approaching this from a state of stress right now. I'm going to look at this as day 1, we're lucky to be in a position where I don't have to make snap decisions I suppose.



Thanks much.

 

[autonomousdog]

OP can probably cut down his expenses by $100K just by following the great advice given so far.

Post # 14 by intent is spot on.

Now I owe an update on what we did with all the good advice in 6 months, without a doubt!

 

[ivinsfan]

There are SO MANY AMAZING PEOPLE ON HERE. I'm so glad I posted my question here, and I can't thank you all enough for your time, thoughtful responses, and feedback. What an awesome community!



As for your other comment, 300k spend on a 4-500k pretax earning may be normal, but oh my gosh we'd be in a much better place if we continue to earn that hwile spending 60-80k instead. That's my (fantasy) goal.

OK well good luck with this fantasy you have going on....

 

[autonomousdog]

I think most posters here are frugal and dissect spending month by month. I know we do. And we do forward-thinking for the budget as well. I realize there are unknowns for future spending so a cushion is always necessary. OP's post seems desperate. Not much thought for that huge CC spending. And for a first post, seems like a last resort for help.

OP, maybe your response or comment is needed. We're spilling our guts here.

I bet it seems totally desperate, I'm panic posting at midnight not being able to sleep . But I think between all the advice I've gotten on here, I have a more level head of how to approach this. I can't thank you all enough.



Yeah, you're absolutely right, too. This was quite a splashy one for a first post, my apologies for that.