In our last post, we showed how we found an extra $1000 per month hiding in our budget. While that was a great start for us, most of these savings were in bills, utilities, automotive, and other miscellaneous areas. This doesn’t give a complete picture of our spending.
To better understand this, let’s look at a comparison of our expenses before and after our Financial 180:
What you are looking at is our household’s annual spending in 2012 vs. 2015. The numbers are rounded to the nearest thousand for simplicity. Notice how we’ve been able to reduce our annual expenses by almost $75K per year. That's an extra $6K per month freed up for investing and paying down debt (I'll have more posts on these topics soon)!
Some of you may be looking at these numbers and thinking “It sure must be nice to be able to blow $75K on frivolous spending every year… my entire household income is less than that.” That's fine- that just guarantees that you aren't wasting as much money as we were!
The truth is that waste works proportionately, and the techniques I'll be discussing in these posts work at any income level. Plus, at lower levels, avoiding waste is even more important, because you need as much free cash flow for saving as possible. We'll walk through it together.
Over the next series of posts, we'll take each of the spend categories above and discuss our changes in depth. We'll break down the situation, before and after, and give you the tools to challenge your current spending habits and find money you didn't know was hiding. Today, let's start with shopping, one of our larger problem areas in the expense chart above.
In our podcast interview, there’s a story I tell about my obsession with electronic gadgets. Years ago, when I came home with a $500 gaming system that I purchased on a whim, my wife got angry with me. I tried to reason with her:
“It’s OK babe- you can spend $500 on something you want too! Win win!”
She started at me blankly. “You are an idiot”.
I was! I didn’t even really play video games. I just wanted the hot new gadget. It didn’t matter what it was, if it had WiFi, I probably owned it. It wasn’t just hardware either. At one point, I was spending more on iTunes purchases per month than on any of my other monthly bills. In 2012, nearly $4K went to electronics and software.
My wife wasn’t completely innocent, however. She spent nearly as much that year on Amazon purchases, which consisted of everything from makeup and clothing to candles and chocolate. Looking at our expense history in Personal Capital, it looks like we were ordering about 3 amazon packages per week! We had prime, of course, so if we could think of something we wanted, we had it a day later. Super convenient. Super expensive. Super bad for the environment with a FedEx truck driving to our house every other day.
One shopping expense we were both guilty of was the financial black hole called Target. You go, you spend $200, then a week or two later you go again. At the end of the month, when we’d see our statements, I would always ask “What did we buy at Target?”. We could never remember. It wasn’t groceries. It wasn’t clothing. It wasn’t electronics (I would get those from Best Buy). To this day, I do not know where that money went! Hence the black hole. Personal Capital shows we spent $3K on these so called ‘discount’ stores in 2012.
When the time came for our financial 180, we knew we needed to cut back on the shopping. But it wasn't that simple… we actually had to change our behavior. At the time, shopping was a source of enjoyment for us, and we were finding real (albeit short lived) happiness in material possessions. But this was all superficial- our house was actually crowded enough, and we couldn't fit any more crap.
We set a strict budget in Personal Capital, and for the most part, we followed it. We implemented the plan of writing things down that we wanted, and waiting at least 72 hours (thanks Frugalwoods!) before purchasing. We canceled Amazon prime to deter us from impulse shopping. I made an iTunes budget by purchasing gift cards and applying them to my account. When the credit was done, I was done. I set a zero tolerance policy for myself at Best Buy.
And for those damned ‘discount’ stores, we made a rule that we were not allowed to go inside without a list. And even with a list, the most we could carry was two hand baskets, one each. No carts. If we couldn’t fit it, we had to come back another day. I know it sounds silly, but these changes actually work! They break up your default routine, and break you out of your normal cycle. They trick your brain into triggering a completely different behavior.
Within a few months, the pain of the changes subsided and we were saving another $1000 a month in reduced shopping expenses! No, it wasn’t easy, especially at first, but seeing the cash, seeing the savings, seeing our numbers change in our spreadsheets, it made it all worth it.
Putting It All Together
We saved over $1000 per month by changing our shopping behaviors. Let's summarize the techniques that worked for us here:
- Stop shopping for enjoyment or boredom
- Set a monthly shopping budget
- Create a ‘wait 72 hours before buying' list
- Cancel Amazon Prime
- Set limits on media purchases
- Stop shopping at electronics stores altogether
- Don't go into Target without a list
- Use a hand basket instead of a cart
That's it. No magic tricks. Just a bunch of small behavioral changes and another grand added to the pile. Let's add this to the $1000 per month we found last post by optimizing our recurring bills, and we now have a solid $2000 a month in our savings snowball so far. What did we do with all the free time we had now that we weren't shopping? We learned to cook, of course… on the next Financial 180.
Interested in starting your own Financial 180? You've come to the right place. The math is easy: create a gap between what you earn, and what you spend. If you can save half your income, your working career will only be around a decade long! Want to shorten it even more? Read on to see exactly what expenses the wife and I cut from month to month. Track your progress against the milestones of FI, and gradually build up your own savings snowball. Check out the books and links in our resources section and jump-start your journey to FI. The you ten years from now will be glad you did! Ready? Start here.
5 thoughts on “Monthly Savings: Shopping”
This is really eye-opening! We are in Orlando too so I’m comparing your numbers with our 2016… (rounded to thousands)
Home: 10,000 (do you have low property taxes & insurance?)
Food: 14,000 (yowza, our one kid doesn’t add THAT much)
Travel: 7,000 (including 4 trips to the west coast)
Automotive: 12,000 (bought a new Volt to soon be a one-car family)
Gifts: 4,000 (includes charity and lots of babysitting gift cards for Grandma)
Other/Misc: 12,000 (includes preschool, YMCA, Disney annual passes)
Excited to follow along with your journey and hope to learn a little! You two are so inspiring 🙂
Thanks Kim. I love to compare numbers. Our current property taxes are about $1800, and our homeowners insurance is about $700. I have a post coming up about how we keep these expenses so low.
Your food, travel and automotive expenses look like they have lots of room for optimization! Glad we could give you some inspiration. A little bit of optimizing each month goes a long way!
Ah, yes. Target. My dirty secret. These discount stores really can be the black hole of money. When Joel says we couldn’t remember what we got there, it’s because we got a little bit of everything there. Every. Week.
What did we get? Groceries? Yes, but not all of our groceries because it’s not a Super Target. Health and beauty items? Yes, but it’s okay, it has the orange clearance sticker on it. Oh, that cute cardigan I have, but in another pattern/trend/color? Yes, I gotta look presentable for work!
Joel was nice enough to leave out the part where I went from holding hand baskets to no baskets, and I looked ridiculous walking around with stuff in my hands and hangers of apparel on my arms walking to the register. The struggle was real…and unnecessary.
However, I don’t actually go into Target/Marshalls/etc much anymore because there isn’t much I *need* or *want* there anymore. Having life goals really helped me put my wants in check.
‘The wife’ has finally made an appearance on the blog! You should write a guest post on the psychology of shopping and what had to happen to curb the spending. I bet it would be a popular topic!
Damn. This is the first I’d heard of the Target black hole. Since I started tracking my spending I’ve averaged $500/year at Target. It’s usually my go to place for random unexciting things I need. It’s always been only three blocks away from my lab, and now it’s also three blocks away from where I live, so it’s super convenient.
Then again, I sunk $4k into this black hole called Newegg in 2013 (okay, I know what I spent my money on…but it sure sucked in a lot of money). This was before I saw the light of Mustachianism.