Every blog I’ve read on living inside a budget goes on about ‘frugal living’. There’s something distasteful about the word ‘frugal’ – it even sounds ugly. For me it conjures up visions of butter coupons, using teabags twice and asking guests not to flush the toilet if ‘it’s not a number two’. Ugh. I get these examples from my brother-in-law’s hilarious stories of a cheapskate friend. Ok so let’s be fair, frugal is not like that. It’s to live economically, within budget, without waste and to save wisely. I just need to readjust the picture in my head.
So we are beginning to live frugally. It’s been a topic and attitude I’ve had to introduce stealthily at home; Mr Kitty is all for not over-spending in theory, but when it comes to the crunch, he’d much prefer the fresh crunch of a new pair of Air Jordans over the extra quid in his account. So he’s not all signed up yet, and finds it a bit tiresome if I keep going on about it. He and I are definitely a bit under-deprived. (Though that’s not how either of us were raised.)
So, I’ve stopped. But this frugal lifestyle is costing me a lot more than money. It’s taking a lot of energy to find ways to live frugally, a lot of time trying to sugarcoat it to a partner that’s feeling kinda-enthusiastic (read:lukewarm) about it and a lot of energy trying to figure out how to stay at home for another 14 months. While other bloggers with $$$$ of disposable income mock at my lattes, we will mourn them.
This is where my path seems to diverge from all those wonderful ‘retire by the time your 40’ blogs where actually they’ve all started the blogs after they successfully retired early. Under the guise of being financially transparent, they get to gloat about how much cash they’ve got coming in, while being vague on the details of the original struggle which is usually wrapped up in a line like ‘I retired by the time I was 30, had my house paid off after living like a hermit for 10 years and saving 70% of my income’. How could you pay your house off AND save 70% AND live. So jealous.
For us it’s just the start of the journey, and at least if it all goes well, you’ll get to see where it all started, when my mortgage was only 3 years into a 25 year repayment with a laughable chance of being paid off super early.
What I do have though is a determination to not waste the opportunities I now see in front of me that I never saw before – the opportunity to invest and have my money not only beating the rate of inflation and the rate of interest at the bank, but over the long haul to deliver a return that we could potentially live from.
Where did this determination come from Mrs Kitty, I hear you asking. Well, it came from a few sources:
- my parents are not financially independent and still struggle on low income in their late 50s. I don’t want to end up this way.
- I see a different way is possible other than just working every day to 67 (that’s what retirement age will be when I get there). I don’t want that for Mr. Kitty and I don’t want it for me. Nor do I want my kids worrying, as I worry about my parents.
- I see that lots of people are building up a small fortune; all that’s needed is investment, time and patience.
There is one single aim to being frugal: to free up money that we can deploy elsewhere to free us up financially.
But freeing up all that money is not easy. We currently find it impossible to live within my husband’s net monthly salary. Here is where our money goes every month ( I won’t put actual figures in most cases but the ways in which we spend it, in order of highest cost):
- Food (approx €500 per month)
- Monthly bus ticket to work €200
- TV & Internet package
- Credit Card repayments
- House & Life insurance policy
- Car Tax contribution
- Car Insurance
- Phone contract
- Charity donation
- Property tax
- Toll fees
- Waste disposal
Then we have other bills at various times of the year (mostly annual things or accumulated things)
- Presents (Christmas, Eid, birthdays, friends’ babies etc.) typically around the €1500
- Flights to visit my husband’s parents (€800 per year)
- Wood for our stove during Winter (€330 per season)
- School costs €300 approx
- Car Repairs €300 approx
- TV licence fee €160
- House repairs €150
- NCT (Car roadworthiness test) €75 including inevitable retest after repair.
These contribute an average of €292 extra per month.
Still missing are things like Clothes, House stuff (maybe new pillows, new sheets etc). We have one boy and one girl, so we can’t share clothes between siblings, and sometimes we loan money to family which we don’t request back; we also make one larger charitable contribution per year on top of our small monthly one.
Going through this list is actually making me kind of depressed I won’t lie. All together we are several hundred over my husband’s monthly wage. We receive €260 in children’s allowance money from the government every month – this is standard in Ireland for any family with 2 kids. We have no other sources of income other than the occasional €100 or so a month selling our own stuff and baby stuff. I sell what I can from the kids clothes, toys and equipment that they grow out of as we don’t plan on having any more kids. So these lessen the shortfall every month, but there is still a significant shortfall of several hundred euro.
Up to now we’ve been supplementing the shortfall with my redundancy and our savings, but I want to figure this out so that I can see how we can get to breakeven point first as there is NO savings figure in these numbers as you can see. I would like to stop hemorrhaging money from our savings ASAP.
Ok so there are clear winners when it comes to cherrypicking items to cut in our attempts to be frugal:
- Reduce our monthly grocery bill – note this figure €500 includes eating out and coffees etc.
- Get rid of the Cleaner (*cries a little*)
- Stop using the motorway near our house and get rid of the toll fees.
- Reduce usage of the car (which is fairly minimum anyway) – the other thing is to fill up midweek and not on weekends or Mondays which see hiked prices in stations in Ireland.
- Reduce our life insurance policy payout to reduce the premium.
- I would love to cut our family Itunes plan but Mr Kitty has already said NO.
- Buy cheaper wood which is harder to burn or light the stove less often in Winter. Note that our stove heats our large kitchen/diner which is like a freezer without it.
- Pay higher repayments on the credit cards in the short term will reduce the bill over the long term in reduced interest payments. We despise interest.
- Flights -we need to shop around more for cheaper costs. This figure covers one family trip (2 adults, 2 kids) and two Mr.Kitty only trips per year.
- We could size down the car to a 1.o litre smaller car with a smaller car tax bill. I don’t know if the petrol/diesel price differential would kill the saving though. (about €0.10 per litre or €0.30 per gallon at the moment). It may reduce the car insurance too, though our car is currently 12 years old and insurance in Ireland is so high it’s a matter of public inquiry.
Without the car change I estimate that to be a saving of about €500 plus per month over the year, though in reality that saving may not materialize every month as we are into spring now and no longer buying wood for the stove for example. Still it brings us under the limit of Mr. Kitty’s wage if we spread the cost of these items which is great news!
Things we feel we cannot reduce:
- We will not remove our monthly charitable donation as we believe it’s as important as the mortgage.
- The iTunes (sigh).
- We shopped around for a reduced TV and Internet package. As internet is so important to us but there is only one fibre provider in our area, and they have an 18 month contract where we paid 50% for 12 months and 100% for 6 months. The 50% was equivalent to the price of broadband on its own without TV. Still, maybe we will cut the TV altogether on our next contract.
- The Phone Contract is already a discount plan that we got through having a family member in a phone company. Hard to beat it, but if Mr Kitty was willing to go hardcore frugal and could stay within lower minutes/text/data allowance we could reduce it a third (save maybe €10 a month but risk breaking the allowances and I fear that’s exactly what would happen).
- The monthly bus ticket is on the cheapest line already, and is far cheaper than taking the car to Dublin inner city for work and paying parking etc.
I have three aims to the point of all this frugality:
1. Live within our means with leftover cash every month.
2. Pay more off of our mortgage. I love this mortgage calculator which shows you tantalizing amounts of time you can shave off your repayment period if you pay off extra every month or in a lump sum. This is the stuff of dreams.
3. Invest spare money into a dividend paying stock or ETF to accumulate wealth for doing nothing other than take a risk. I love this investment calculator which you can use to roughly forecast your return. I always enter 8% as the rate of return as it’s approx the market average. Because I’m in Ireland I remove all the taxes (but not forgetting the Irish Capital Gains Tax of 33% is applicable once you sell, though this is irrelevant when just looking for investment value forecast), and for conservative purposes I pick Compound Annually. This calculator requires you to enter a monthly contribution too, so if you only plan on entering one lump sum, enter $1 for the monthly contribution. It will make only a small difference.
Most financial blogs go on about FIRE (Financial Independence, Retire Early).
I’m not sure if it will ever come to retire early for us, but certainly I am going to try for it. Financial independence would be a balm over my soul. Maybe it’s because we have two young kids and are constantly feeling stressed and exhausted. Maybe it’s because I worked since I was 15 years old, doing part time jobs all through my education which was self-funded and paid my own loans back, taking barely a week off for my degree finals then went straight into full time work for 12 years. Maybe it’s because money feels more like a stick than a carrot, and I’d rather have neither. I know that I need this, and my family needs it, it’s just a matter of setting your mind, making your budget and not caring if you look stingy because you don’t buy the neighbour’s new baby two presents and not just one. My babies need it more.