For me to be able to afford to not work fulltime, having low monthly expenses was critical.
For me to have peace of mind, it was critical.
For me to save more, it was critical
To improve my marriage, it was critical.
To reduce stress, it was critical.
I think you get the picture.
So how did I reduce my nut so I could get from living paycheck to paycheck just ten years ago, to semi-retired at 50 today?
1. Eliminated car payments by driving old cars. We paid off our 2nd car in 2009. The first was paid off a few years earlier. My “new” car is 14 years old. Our “old” car is 19 years old. Monthly savings – $700 ($350 per car)
2. Eliminated the home phone line. My wife still likes to use a regular phone handset. By combining her low cost cell phone, google voice and an Obi device, she gets home phone-like service at no monthly cost. All it took was some research and setup on my part. Monthly savings – $50
3. Dropped mobile phone costs by using a prepaid MVNO, Airvoice wireless. I was fed up paying AT&T at least $75 per month per phone. My bill was always padded with unexplained charges, taxes, recovery fees etc. Airvoice Wireless costs a flat $30 per month. I get unlimited voice & text plus 2 gb of data on AT&Ts network. Because I use wifi for most browsing I do on my phone, I never run out of data. Monthly savings – $100.
4. Bought a smaller house. No doubt this is the big one. By not moving up to a house we could “afford”, my mortgage payment was only $1000. Then I decided to pay this off and reduced it to zero. Monthly savings – $2000.
5. Negotiated cable service. Good old AT&T again. I could probably live without TV altogether, but my wife still loves it. So we’re stuck paying for some kind of cable service. AT&T sneakily adds charges over time so I am forced to call and negotiate with AT&T at least twice a year. Monthly savings – $50.
6. Car insurance – After going with my insurance broker’s recommendations forever, I dug into this a few years ago. I was paying for comprehensive coverage on both cars which each had a blue book value of less than $3K. If my car was damaged, insurance might only pay me the scrap value of it. So I dropped collision and kept liability only. This means, if something happens to my car I pay for the repair but we are insured if something happens to another person’s car (or body). Monthly savings – $100.
7. Lawn Service – I dropped this years ago and bought a lawn mower. Monthly savings – $120
8. Pool Service – I’d like to fill my pool in with dirt, but that would cost me over $10k so instead I maintain it myself. Monthly savings – $120
9. Dining out – Back when we really couldn’t afford it, we ate out several times a week and ran up credit card debt. Now we cook a lot more and get takeout a few times from the local (and cheap) pizza shop or bar. Monthly savings – $500+
10. Dry Cleaning – Gone. I can wash and iron my own shirts. I refuse to buy any clothing that I cannot wash myself. It helps that the world has gone to business casual and that I work from home. Monthly savings – $100
Adding this all up, I total nearly $3900 in monthly savings.
To generate this amount in after-tax income, I’d need to earn around $5500/month or nearly $70K annually.
Instead, we’ve made life changes over the years that have eliminated these costs from my monthly nut.
As you can see, nothing we’ve done is ridiculously frugal or requires us to make extreme sacrifices.
On the contrary, it’s given us less to worry about from a management perspective and from a cost perspective.
It also freed up money over the past few year to do things like payoff the house and credit cards.
I’d encourage everyone to look at your monthly nut and prune it down too.