Since we are slated to retire in less than 3 years I am obsessed with figuring out what our "nut" or household/living expenses need to be compared to what we are spending now, pre-retirement.
I am trying to reduce our "nut" every year to try to get it as low as I can post retirement.
I figure if we commence retirement with our expenses lowered as much as possible and find we can in fact afford to spend more, it will be easier to expand our spending, rather than to head into retirement and find we are still spending more than our savings can handle.
Sounds like a plan, right? 8-)
Using my monthly spending/expense sheets from 2014, I have concluded that we spent $53,278.52 of our regular income that year. (This doesn't count the money I paid to buy my car in 2014 which came out of the Bonus money.)
That comes out to $4,439.87 spent per month on our "nut".
So far in 2015 we've spent $23,924.09 of our regular income to "live". (Again this doesn't count the money we paid to buy Hubs car in 2015 which also came out of the 2015 Bonus money.)
This averages out to $3,417.72 spent per month for the last 7 months.
If we stay on this track we will have approximately a $41,012.72 nut for 2015.
(Granted this isn't all the income we have spent as there was money taken out of the check before we got it for healthcare premiums, life insurance and long term care insurance. These items will still need to be funded in retirement and will need to be accounted for in our "nut" spending.)
So far in 2015 we have spent about $1000 a month less than we did in 2014.
July has been out lowest month of living costs so far in 2015. Our "nut" for July was $2200 out of our regular income. February's spending was $2500+ change.
$2,200 in July.
Gosh I wish our monthly "nut" was this low every month......
Looking at the spending for 2014 compared to 2015 so far, here are a few of the categories where we have reduced the spending......
* A lot less money spent on car repairs. Buying a new car in 2014 meant no car repairs on 1 of the 2-3 cars we owned. Buying another almost new car in 2015 meant even fewer car repairs compared to what we are use to spending on vehicles. We spent $2786.72 on car repairs in 2014. So far in 2015 car repairs have run a mere $441.61. (Sssh, don't say that too loudly lest we offend the car gods.....)
* Ditching cable tv. Since getting rid of cable we are saving $70.80 per month or $849.60 per year.
* Since putting in the mini-split heating/ac system Fall of 2013 we are shaving a bit off of the heating bill each month we use it. It's more efficient than the system the house came with. Yes, it cost a chunk of cash to install it/buy it but we are reaping the benefit of lower utility bills in winter and it will be an added asset when we go to sell this house. We should recoup some of the expense of having this system put in with a higher selling price.
It's difficult to quantify an exact figure for the savings in our heating bill since weather conditions vary from one year to the next plus the cost of electricity goes up every year here but we are trending toward lower heating bills.
* We are no longer paying for private music lessons for College Boy out of our regular income. He take lessons at college and that cost is included in the tuition/fees we pay for his education and that money comes from a college fund set aside years ago for that purpose. We are saving approximately $1600 a year on this item.
* We seem to be spending less on alcohol, clothing and "stuff" in 2015. There has been little spending on replacing clothing, shoes, household goods and "wants" so far this year. We just haven't felt the need to buy much "stuff" this year.
I'll have to wait until the year is over to run the numbers on adult beverage spending for 2015 but with how much we spent in 2014 on liquor I am SURE that number will be down. 8-)
* We have no pet related expenses in 2015 since our last doggy died near the end of 2014. We paid $450ish in vet bills and kennel fees for our dog in 2014. There were more costs such as meds and food but I don't have a figure for this portion of pet expenses. Let's just call that another $400 a year, so a savings in 2015 of $900+/-?
So with just these categories we are "saving" at least $6000 a year in 2015 over 2014's spending.(This is without taking into account any less spending on "stuff" and "wants" this year.) $6K a year comes out to a $500 per month reduction in spending in 2015 over 2014.
Looking over our spending categories now there really isn't much more we can cut out of our fixed bill costs. We have basic phone service(no fancy cell plans), basic internet/cable, have cut utility expenses, gas to get to work can't get cut, taxes are what they are, keeping medical co-pays low as possible by exercising/eating well/taking maintenance drugs/etc., and not performing "retail therapy".
Once College Boy is out on his own(hopefully in 3 years! Yes I am an optimist...lolz)there will be even less spending. No paying for his food/drink, water and electricity use, clothing, no more paying for his glasses and healthcare, incidental monies, no fetching in back and forth to/from school and no third car to maintain and insure.
Add in downsizing to a smaller house(less space to heat/cool and lower taxes)in a cheaper area once we move and there will be some more reductions in spending.
The only way to save more would be to cut out vacation trips and the costs associate with those. This year we have/had taken a 2 week trip to Southern Virginia to see my brother in January, a 2 week road trip to Louisiana in May, a 2 day apartment hunting trip in July, a 3 day trip to move Eldest in July, a 3 day family reunion trip in September and a 4-5 day trip to Ocean City Maryland in October.
For a year of traveling that seems financially reasonable to me. I would hate to have to cut out what little traveling we do per year. Traveling, sightseeing and visiting family and the associated costs are my one "wants" spending vice other than a nice meal out now and again and buying adult beverages. I don't spent much money on house "prettifying" or crafts or buying more fashionable clothes to cram into my closet or upgrading tvs, phones or doing entertainment or recreational things that cost lots of money.
Everybody needs to spend a little of their income on leisure and this is mine. ;-)
Even if you are trying to cut your living expenses what are the things you are reticent to give up?
What things do you spend on that are justified by helping you maintain your sanity?
To conclude this long ramble.......we seem to be bringing our expenses down slowly every year over the next. I hope to get the "nut" down a little more over the next 3 years before we launch into that unknown territory called "retired".