Case Study: A Hard Look in the Mirror

The instruments of my destruction, the tools of my success.

The instruments of my destruction, the tools of my success.

Let me introduce you to someone who spends more than he earns, much of it to hold off the crushing wall of debt he’s accumulated.  He vacations wastefully, owns two vehicles, and thinks he’s entitled to luxuries like a new computer every year, and the newest model of smartphone on the day of release.  Not only does he not save for retirement, but the very thought of saving sounds impossible.

I’m talking, of course, about myself.  Or rather, myself from about five years ago, as I began this journey.  I felt like it was important to own up to where I began to show that even someone with habits as bad as I used to have can be redeemed, catch up, and make serious progress towards early retirement.  So, I’m going to write a case study of my spending of the last six (extremely luxurious!) months compared with my spending during the last six months of 2010.

You may have noticed that the first step I usually recommend in my blog posts is to track your spending.  Back then, this was the first step I took on the long road to financial independence.  The me of five years ago may not have been very responsible, but he was at least diligent in logging his purchases.

I should also mention that my spending of the last six months is much higher than usual.  I’ve spent 32 out of the last 180 days out of the country, staying in hotels, traveling through airports, and dining out. Still, the comparison is startling.

CategorySpending 6-12/2010Spending 2-8/2015
Gas$1,005.07$715.98
Motorcycle Payment$1,145.44$0
Fees, Overdrafts, Advance Repayment$871.02$101.00
Cash Withdrawals$1,508.66$1,053.21
Clothing$626.73$519.05
Credit Card Interest Payments$1,673.62$0
Dining Out$1,579.68$1,924.18
Entertainment and Gifts$3,972.91$494.60
Groceries$1,539.91$1,282.43
Health and Fitness$183.97$31.72
Household$624.13$751.90
Loan Payments$3,924.27$2,175.97
Mortgage$17,635.87$15,278.47
Pets$683.41$627.18
Unknown$8,890.09$0
Utilities$3,380.30$1,229.83
Vacation$4,404.25$3,156.02
TOTALS$53,649.33$29,341.54

Let’s look at each category.

Gas: I commute less than I used to, and carpool at least three days a week.  This gas spending is still a little high, but I hope to continue to bring it down.

Motorcycle Payment: When I really began to cut away the unnecessary expenses, the motorcycle was the first to go.  I occasionally wish I could go for a ride, but I really don’t miss it too much.

Fees, Overdrafts, Advance Repayment: This is really shameful. I used to overdraw my account regularly, and use the bank’s “cash advance” feature to draw out some of my next paycheck before it arrived.  I’m not proud of it, but it happened and I overcame it.  These days, the only bank fees I pay are a monthly fee, and in the case of the last six months, foreign withdrawal fees.

Cash: I hate using cash now, because it’s nearly impossible to account for where it has gone.  Aside from $160.00, everything else from the last six months was withdrawn abroad in a foreign currency (particularly in Bosnia and Croatia, where few businesses took cards).

Clothing: This looks about flat to five years ago, but in reality this is usually nearly nothing.  I bought clothes to travel with this year.

Credit Card Interest: I haven’t paid credit card interest in years.  I’m ashamed to see how much I used to pay someone to send me a bill every month asking for more money.

Dining Out: Wow, here’s one place where I need to cut back!  We spent nearly $300 per month on average this year dining out.  This is also pulled upwards by the amount of dining we did abroad, but there’s really no excuse- I need to cut back on fast food and eating out.

Entertainment: I don’t know what I was doing five years ago, but I hope I was thoroughly entertained! Most of the money spent five years ago was on electronics and video game purchases.  Today, it’s mostly museum entries and attractions while traveling.

Groceries: This has improved, but could still be so much better.  We’re running about $200 a month to feed two people when we eat at home.  I’d rather see this number go up slightly and the dining out go way down.

Health and Fitness: I used to maintain a gym membership.  Since I run and bike now, my only health and fitness costs are the occasional race nutrition bar or drink.

Household: The slightly higher household cost this year includes a $657 brand new, self-installed water heater last month.  Otherwise I would have come out way ahead.

Loan Payments: My loan payments five years ago included student loans and car payments.  I have since paid off the car and one of the student loans.  The rest are all low interest, so I am in no rush to pay them off.

Mortgage: My Mortgage and HOA remain almost half of my monthly budget.  It’s about par for the course where we live, but I’d still really like to find a way to cut it down.  When we can get out of the property with a little profit in the next couple years, we’ll likely move to renting in a slightly less expensive city in the area. I have to mention that my costs of five years ago were several thousand dollars higher due to late fees, unpaid portions of prior months, and late HOA payments.

Pets: We still spend about $100 a month on treats, toys, and pet food for two medium sized dogs.  Owning a pet is an undeniable luxury, but one that is worth finding savings elsewhere to finance.

Unknown: This is the truly embarrassing one.  I have almost $9,000 in completely unaccounted-for spending in 2010.  The purchases are logged, but I didn’t bother to put down a payee– I must have been afraid my future self would write a blog post about whatever it was.

Utilities: Our utilities have dropped, largely on account of making changes to save on our power bill (CFL and LED bulbs, making a conscious effort to turn out lights, etc.) and switching from an expensive AT&T cell phone plan to a very inexpensive Airvoice one (from $100 a month to $30 a month).

Vacation: Five years ago, I went to Las Vegas for two long weekends and spent $4,404.25.  This year, I went to Egypt, France, Mexico, France again, Croatia, Bosnia, Austria, and the Czech Republic for a total of 32 days and spent $3,156.02.  Not too shabby, if I do say so myself.

Totals and Thoughts For the Future

For the last six months of 2010, I spent $53,650.  For the six months leading up to today, including over a month of travel, I spent $29,341.  This is still terribly high.  Some of it is due to the travel, but much of it is simply wasteful.  I think I have a pretty good chance of keeping my total spending for the year at $50,000 or less.

The point is that I have room to improve too.  Though I saved far more than $30,000 in the last six months (making for a savings rate of over 50%), I don’t need to dine out so much and I could find ways to save more on gas.  I’m glad I’m writing this article, as it gives me a chance to look at my own habits and work to continually refine my spending.  As a good friend likes to say to me, it’s about progress, not perfection.

If this post was interesting to you, please consider setting up a free Personal Capital account. It’ll help you track your own spending, and referrals help to support this site, and help me to bring you more and interesting content.

One thought on “Case Study: A Hard Look in the Mirror

  1. Pingback: My Biggest Financial Mistakes - The Frugal Vagabond

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