Mrs FrugalWoods has posted some homework for us, and since I am diligent and always do my homework with plenty of time to spare (ahem), here's my start at working through the steps. If you're intending on reading all of this you might want to grab yourself a cuppa, I don't half waffle on...
Step 1: establish your goals
We want to move to a detached house with a lovely big garden. I want to have the option of working less. Right now, we are in a position where we could have one of those things, but not both. In ten years, I want the mortgage on our new house paid off, and to be in a position where I can choose to work (very) part time if I want to.
What I'd like to achieve from uber frugal January is:
- saving as much as we can towards moving expenses so we don't have to add them to the mortgage and pay interest on them
- dropping some spendy habits and cultivating some cheerful non-spendy ones
Step 2: review last month's spending
Hmm. (Un)fortunately for me, I can do this very accurately, as I use the YNAB budget software (which in itself is not free... although if you do decide to sign up after using that link you'll get a discount, and I'll get a referral fee ). This tells me that in total this year, I have spent £16772.81. Crikey.
(A quick word about our household finances. We own this house outright, after Peter spent 25 years working and paying off the mortgage, some of that while I was messing around doing a PhD. I am now the main earner - my wages are paid into our joint account, and I keep track of this and what we spend from it obsessively. We consider all money shared, but as Peter's income is mostly cash, and he is (by choice) in charge of food shopping, this mainly comes from his income, which I don't keep track of. Which is why I can be deadly accurate about most of our spending, but not food shopping, and not his personal spending, which he does very little of).
Anyway. That annual total breaks down as follows (I'm going to round up to the nearest £10 and use my existing, slightly odd, categorisation for ease). I've noted the monthly average as well as spending for November, as I think the average is slightly more revealing as not everything comes up each month.
True expenses - £5170 (average of £430 a month, £112 in November)
This is the category I use for things that I know will happen at some point in the future - birthdays, Christmas, car maintenance, dentist etc. It's also where all the DIY spending is being logged, which is why it's so huge.
Monthly direct debits - £3480 (£290 a month, £313 in November)
Council tax, water, gas and electric, internet, home and mobile phones etc
Everyday household expenses - £1880 (£167 a month, £50 in November)
Diesel for the car, odd bits of food (definitely a category that can be reduced!), household stuff
Quality of life goals - £1840 (£153 a month, £550 in November)
This includes holidays and weekends away.
Annual bills - £780 (£65 a month, £72 in November)
Car tax and insurance, house insurance, tv licence
Jenni fun spends - £2200 (£183, £250 in November)
Oh dear. This category holds my tea and cake spends, plus clothes, odd bits of fun travelling for me, and any other little bits of nonsense I care to waste my hard earned dosh on.
Well, that was interesting, but as Mrs FrugalWoods tells us 'do not berate yourself and do not get discouraged... you're participating in this challenge because you want to improve...'. So, I'll move swiftly on. I realise I've lumped a lot of things in together here but I'll expand on various bits as we go through January, this is just an overview.
Step 3: Categorise your expenses
Now we're going to categorise into fixed mandatory expenses and discretionary expenses, and rather than rely on last month's figures, I'll use the monthly average that YNAB gives me as this will be more accurate. This doesn't cover absolutely every single little category as we'd be here all day, it's just the main stuff (but I will be tackling the small things too!)
Another quick note, this time about what I've categorised as 'fixed mandatory' - these are things that either can't change (like council tax and the water bill), or that are annual bills already paid for this year, or that I've already spent considerable time trying to reduce over the years, and I'm happy with current level of spending, and therefore they're not being covered by this challenge this time round.
Fixed mandatory expenses
Council tax | water | internet | mobile phones (we both have cheap, monthly, sim-only deals) | my union | tv licence | Peter's national insurance contributions | web hosting | car tax | breakdown cover (paid annually in May) | car insurance (paid annually in March) |
Discretionary expenses (with average montly spending over the last year)
- My tea and cake - £45
- My clothes - £30
- My travel - £20
- My 'other' category - £100 (gosh)
- Diesel - £60 (outlandish considering neither of us use the car for commuting, but this will also include days out/weekends away)
- Food and household - £81 (again, outlandish since the main food shopping comes from a different budget!)
- Joint treats budget - £76 (takeaways, tea and cake together etc)
- Birthdays - £25
- Weekends away - £120 (gosh)
- Gym membership/races - £37
These are the things I'll be starting to tackle in January. The house insurance is also up for renewal, and our fixed energy deal is coming to an end so I'll shop around for a cheaper option for both of those too.
Step 4: What can I eliminate entirely?
Taxis, definitely. Clothes, for January at least - I have plenty, and most of mine are acquired through idle charity shop browsing which I reckon I can forego for a few weeks. Takeaways.
After that it gets a bit harder. We've had a discussion, and decided that if we invite friends out, we'll suggest our house, or a picnic, rather than a cafe. However, if we're invited to something that's already happening (a birthday in a restaurant, for example) then we'll go along. We'll see how it goes.
Step 5: Embrace the art of substitution
What can we substitute? Diesel perhaps? We do a LOT of just nipping to the shops in the car. I'm going to get walking again, and dig my bike out of the cellar. My gym membership is due for renewal in January, it's £180 (£15 a month) and I use it a bit, but not much. I'm going to hold off renewing until after January, and instead run outside, do yoga at home, and explore the world of youtube exercise videos.
Step 6: Reduce spending on discretionary expenses
I have a terrible habit of nipping into the shop for milk on the way home, and coming out with a bag full of food. This is why Peter is in charge of food shopping, but somehow we've drifted away from cooking and into buying pizzas and the like. Food is a big area we can make improvements in. I've already written about my work lunches, but there's more we can do too.
A big thing for me is roaming the charity shops at the weekend. We have a lot near us and it's something we really enjoy. We won't stop, as we're still looking for things for the house (nice excuse...) but I won't be buying clothes, books or anything unnecessary for January. It's only one month after all!
Step 7: Empower yourself to insource
I don't think this is a step I'll have a problem with - we've already decorated most of the house ourselves after all, and I have had precisely ONE haircut in the last year (which cost £7). We certainly don't use a cleaner, or a car cleaning service (you'd laugh at the thought if you saw either our house or our car). Easy peasy.
Step 8: Examine your habits
Buying food on the way home from work. Nipping out for breakfast at the weekend. Leaving the shower running for ten minutes before getting in it. Putting the heating on in the morning and just leaving it on for the rest of the day. I'm sure there are more...
Step 9: Plan ahead
This is definitely an area with room for improvement. I'm rubbish at planning ahead, and it definitely costs me money. For January I'll be taking lunch to work, bulk cooking at the weekend and freezing meals for after-work dinners, taking snacks with me when we go out, packing a flask of tea for a picnic.
Step 10: If you do buy stuff, get it used (or cheap)
Another one we won't have a problem with. Peter is fantastic at sourcing DIY-related things (doors, floorboards etc) on Freegle and Gumtree. We rarely buy anything new. I'll keep an eye on it to make sure, but I think we'll be fine here.
Step 11: Banish excuses
Oops. I can already see a few excuses that have crept in to this post...
So there are - off to a good start with thinking and preparing. I'll write about individual things as they come up, but at least we've got a benchmark to move from.