What are you personal expenses? Do you spend more than your income?

Ok, so i have been listening to "Millionaire Next Door" and it has really opened my ears about the importance of controlling expenses.

I realized that whilst I earn a good salary, I wasn't really sure whether we spent more than we earn.

That prompted me to download all ~2000 transactions spread across my Credit Card and Saving account and categorize each expense to figure out what is happening with our personal finances.

I was shocked to learn that we spent pretty much exactly what we earnt - granted we paid down about 12k of principal of our PPOR, i was disapointed as i feel that this should have been much more.

I'm interested if anyone has gone through this journey of self- realization and what you did to correct it.

My wife and I were considering depositing her salary into a ETF as a form of forced saving but am interested in what other PCers have done on this.

PS - i have also attached a break-down of our spend and would be interested in some honest opinions if this is about right - our combined after-tax salary & rental income is $190k

 

Whooaaaa QS....that is a lot money! Are you living the high life? Might be something to talk about at our meeting on the 7th of Aug...

A couple of things you maybe able to get savings on:

1. Are you leasing cars?
2. Are you spending more than $45/mth on mobiles?
3. Are you spending more than $50-70/mth on internet/home phone?
4. Have you reviewed you insurance costs (car, house, contents, land lords)
5. The rate you are paying on your IP and home loans
6. Utilities plans...

The top 6 can save you anything from a couple of grand to over 20k....

 

Thanks Sash. I think I need to be clobbered around the head a little and willing and open to it

I did a quick google search of recommended budget %s and our numbers seem in the right thresholds but that may be for lower incomes.

Just trying to figure out how to reduce spend.
What is a surprise is that I consider ourselves comparatively frugal. Ie. Shop at aldi, Costco, outright own cars kia & 2nd hand golf, no foxtel.

Mmmmm

 

In short, stop buying things you don't really need with money you don't have to impress people you don't really care about. In defining need, beware of how much marketers have inflated our perception of need over the last century and simply don't play their game.

 

Some ideas on areas that I might consider more discretionary, and maybe you can cut back on:

Health & Beauty - $180+ p.w. ($9,500 p.a.)
House & garden - $180+ p.w. ($9,500 p.a.)
Entertainment - $145+p.w. ($7,600 p.a.)
Clothes - $250+ p.w. ($17,100 pa)

 

I do the same, manually enter every transaction to see where it's all going! I think you need to take money out as soon as your pay goes in so is out of sight out of mind!

Put a few hundred into a separate account so you can't get to it easily

Another I just started is worked out insurances, water rates, electricity, phone,internet, car rego. Then worked out the average each week (or your pay cycle) and it goes into a separate savings account (visa debit) and is all paid for automatically. You'll need to work out a small float to get it started. Those increase yearly and aren't going away! Add a few extra bucks to ensure it's covered, say phone bill has a heavy month.

The thing that will probably be hurting you is the toys and dining out.

The more you earn the more you spend! It's all proportional.

 

wowsers - you are doing pretty well on the spending side of things.

I think you need to look at your categories closer. You have "food and drink", Entertainment, 'other' (cash) as separate items.
I dare say that the majority of these could be combined into one category?
$1,000/month on transport? Seems a lot. Buy a bike.

Slash and burn!

Also... sell the kids - they are expensive

Blacky

 

Also - look up 'pocket book'. Free app and website to do what you just did automatically.

 

Some of my categories in my excel document have food, take away, alcohol & entertainment. This narrows it down much more, which I like.

 

When I opened it up, I didn't get actual figures, just a graph, but if that is the actual figures, all I can say is OMG!!!
How do you spend $250 per week on clothing? That is seriously HUGE
Health & Beauty? Does your wife get a manicure & a facial every week? Again, this is a HUGE spend.
My mind boggles on what you could be buying for the house & garden each week too, unless you've got an older place that you're slowly doing up.

 

I agree Skater. That clothing figure is 17x (yes 17x!) what my wife and I spent on that category over the last 12 months.

 

Hehe, I have no idea what we spend, but it's probably even less than yours. As I work from home, there's no need of expensive clothes for work, & Hubby LOVES the Costco Business Shirts, so I bought him heaps, about 20 of them, ages ago & he's still got some brand new ones sitting in the cupboard. As he's only got another 5 days of work to go, I'm guessing we won't need to buy anymore.

 

I've spent less then $150 on new clothes this year. That includes 2 pairs of jeans(one levis) and underwear

Do people wear their clothes out that much or do they just horde?

 

One way to curb excessive spending is pay everything in cash...more you pay cash, more you realize how much money you are actually spending.

Simple habit change will save you

Buy thing you need

Shop around (overseas clothing and beauty stores are way cheaper )

Ask for discount (you wil be amazed by result)

Pack left over for lunch

Choose busy local restaurant instead of high end fine dining.

Put away 10% of take home pay in to savings (etf as you mentioned)

Above won't change your life style as per se, but will save you decent money.

 

Spend some time reading Mr Money Mustache - www.mrmoneymustache.com

Essentially, every time you spend a dollar (or enter a new contract or buy a subscription) you need to consider whether the expense is worth the value you will get out of it. People get into habits of spending money on things without stopping to consider if it's really worth it to them.

The first step is exactly what you've done - list out every expense so you understand where your money is going. The next step is to go through each category and decide if those costs are necessary or add value to your life. If it doesn't, consider cutting it back.

 

Convert your weekly spending to half yearly, and some to even yearly and that gives you an idea of my budget for certain expenses. Some expenses will be easy to quickly reduce however others I would recommend to change slowly over time so it isn't such a system shock. Like anything in life once you get into a routine you become accustom to it.

 

I think its a combination of hording and keeping up with fashion, the latter being a prime example of how marketers try to manipulate us to feel guilty if we are not wearing the latest trends. As previously mention, you simply don't play this game if you want to bring expenses under control, and that applies with other expense categories.

 

+++++1.
Buy more IPs so you can't afford all those extravagances.
I'm pretty shocked at your spending, the clothing and beauty seems way off the chart.
Simply if you get paid monthly I would directly pay a monthly amount onto every utility so those are out of the way, then pay mortgage, then pay a set amount into a savings account and give each parent an allowance to use as they wish but when it's gone it's gone - I'd suggest $100pw and then see if you can get it lower.

 

Kids can certainly play their role in making clothing budgets high. Not only do they keep growing so need a new set of clothes every year but if they have a school uniform you can spend easily another $500 a year on that.