Househould spending analysis

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inmymind
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Househould spending analysis

Post by inmymind »

I'm going through and doing an analysis of my household spending with the goal of doing some belt tightening due to my current employment in the oil and gas industry. My household consists of two adults and a toddler. We live in what most would consider a lower cost of living area in TX. We use one credit card for virtually all expenses, so I just downloaded the data from 1/1/16 - 10/31/16 in excel to start analyzing. In doing so, I'm looking at all expenses except mortgage and health insurance.

My categories consisted of Auto (Gas, Maint., Tolls), Clothing, Entertainment, Food (Groceries, Dining out), Household (supplies, HOA, maint., gym, tools, sporting goods), Insurance (home and auto), Medical out of pocket, Utilities, and Vacation.

Total spend for the 10 months was approx. $25k. The top four categories (1. Food 2. Household 3. Insurance 4. Vacation) accounted for 80% of the spend.

The number 1 spend category was food, which I broke into groceries and dining out and made up roughly 30% of the total spend. I was not surprised by this and I know we can make some reductions in that area. We don't eat out that often, but do tend to buy higher end food items from the grocery store.

Household made up 28%, although a quarter of that is HOA. The rest was just normal maintenance, some one time tool purchases, and a couple of small repair items.

I was surprised to see that the number 3 spend category was insurance (home and car). I didn't even include our life policies or healthcare insurance and this still made up over 13% of our total expenditures. I'm still scratching my head at that one as we both drive 10+ year old cars and have a modest home with an insured value of $280k. That's going to be my first area to tackle for some reductions.

The vacation category was really just airfare as we haven't really done a true vacation in a while. This is the flight costs to visit family that lives out of state.

Out of those top categories, my best best is to look at potential reductions in food costs and insurance. Any recommendations on insurance providers for home and auto? I've used the big names in the past (Liberty Mutual, Nationwide, currently with Farmers) and typically shop around every few years, but they all seem to be in the same ballpark range.

I was also curious to hear some ways that people were able to effectively and efficiently reduce their household expenses. Any better methods out there than bucketing by category and cutting back in those areas?
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krannerd
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Re: Househould spending analysis

Post by krannerd »

For reducing insurance spend....you can raise deductibles. This assumes that you have enough cash on hand.

I've shopped around for a little bit, but have been with State Farm for 20+ years and it's difficult to get other insurers to be close to what I'm paying for home and auto now.

Are you interested in money saving projects? My biggest winner was insulating my house (cold winters in MN). This dropped my gas bill by $500 for the season and electric went down as well. Payback on the project was 4 years....but comfort is up too.

I noticed you didn't include a mortgage in your analysis...thought about a refi? I've seen 15 yr no-cost refi's at 2.875%.
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FiveK
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Re: Househould spending analysis

Post by FiveK »

Try a local independent insurance agency, and let them compare rates for you.
livesoft
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Re: Househould spending analysis

Post by livesoft »

A 2% cash-back credit card might reduce expenses by 2%.

We live in south Texas and our largest expenses are college expenses, charity, vacations, property taxes, and insurance, then food, then utilities.

I don't see a need for "gym" and I exercise about 2 hours a day.
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KlangFool
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Re: Househould spending analysis

Post by KlangFool »

inmymind wrote:

I was also curious to hear some ways that people were able to effectively and efficiently reduce their household expenses. Any better methods out there than bucketing by category and cutting back in those areas?
inmymind,

http://www.investopedia.com/terms/p/pay ... ffirst.asp

Don't budget. Do "Pay Yourself First" saving method. If you do not have the money, you will not spend.

KlangFool
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Kalo
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Re: Househould spending analysis

Post by Kalo »

I recommend Mr Money Mustache web site. Even though it's about early retirement, the principles are the same for cutting back expenditures. There are some great ideas there. Be ready for extreme examples, but you don't have to go to those levels. You will pick up tips and you can do as much as you care to. Also there are living frugal web sites besides his.

What I like about Mr Money Mustache is that he looks at things one would consider the normal, regular American way of life, and says, wait a minute. Why do that? Why not do something completely different, like this. So it kind of shocks your brain into opening up to new possibilities. Which is half the battle. I've never gone as extreme as he does, but I've learned a lot and stopped doing some things that in retrospect were just a pure waste of money, for me. For example, meals costing $30 plus per person. I just don't do that any more. I don't get enough pleasure from it compared to the cost. But for years I never gave it much thought.

Kalo
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Wellfleet
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Re: Househould spending analysis

Post by Wellfleet »

Cell phones can be an easy place to cut, same with cable and internet plans and you really don't "feel the pain". Can you shop in bulk for expensive things like nuts or meat? Nuts at Costco are about half the price of Whole Foods or Trader Joes. Eat less meat and supplement with grains, beans, veggies.

Diapers in bulk from Diapers.com, Amazon, Costco, etc.

Is a utility subsidized audit possible that could result in some cheap insulation/thermostat?

If you post some more details, we may be able to help better.

Good luck 8-)
AlohaJoe
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Re: Househould spending analysis

Post by AlohaJoe »

Spending $700 a month on an HOA+maintenance in a low cost of living area seems high on first blush. At $200 a month for the HOA, it means you're spending $500 a month just on "regular maintenance". When I owned a home I would have thought something was seriously wrong if I were spending that much every month on maintenance.
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FiveK
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Re: Househould spending analysis

Post by FiveK »

Kalo wrote:I recommend Mr Money Mustache web site.
...
Be ready for extreme examples....
+1
Especially because the OP has already done most (all?) of the data collection needed for a "Case Study" there.
NoGambleNoFuture
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Re: Househould spending analysis

Post by NoGambleNoFuture »

livesoft wrote:A 2% cash-back credit card might reduce expenses by 2%.

We live in south Texas and our largest expenses are college expenses, charity, vacations, property taxes, and insurance, then food, then utilities.

I don't see a need for "gym" and I exercise about 2 hours a day.
I'm from the valley originally and the thought of a boglehead, much less the one and only livesoft, being from south Texas makes me happy.
Dottie57
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Re: Househould spending analysis

Post by Dottie57 »

I spend an awful lot on convenience foods from the grocery store. I hate to say it, but cooking from scratch will save money.
But maybe you are doing that...
yellowgirl
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Re: Househould spending analysis

Post by yellowgirl »

We are also in Texas and family of 4. I shop around for home and car insurance every other year. We shop mostly at Aldi, Costco, and some Amazon for groceries and household supplies. We have solar panels for AC and heat. We spend 27% on daycare and school activities so I hope it will be lower next year. Here is what we spend.

Property tax and insurance (no mortgage) $550 a month
Daycare, swimming lessons, after school activities $1,000 a month
Electricity $30
Gas : $0 no gas service
Water and trash $50
Internet, cable and Netflix $70
Cell phones $26
Car ins $125



Groceries and supplies $400
Fuel $60
Copays and med $50 ( estimated, usually $0)
Home maintenance and repairs $400
Car replacement $100
Travel $500
Birthday and Christmas gifts $50
Eating out $100
Entertainment $50
Cars maintenance $25
Clothing and other stuff $200

Total $3636
basspond
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Re: Househould spending analysis

Post by basspond »

I would rearrange some of your categories. Gym and sporting goods should be entertainment. When purchasing food always keep an eye out for sales on staple items and buy several when they are on sale. When buying things always think if the item is a need or a want.

The heart tends to follow the money. Save and give first. A lot of things in my life cleared up when I followed that strategy. Good luck.
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JDCarpenter
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Re: Househould spending analysis

Post by JDCarpenter »

The bureau of Labor statistics' Consumer expenditure survey http://www.bls.gov/cex/ provides a nice touchstone to compare oneself against nd ascertain where cuts might be available. Usually I see it in reference to planning for retirement spending, but it has all ages of households.
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Jack FFR1846
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Re: Househould spending analysis

Post by Jack FFR1846 »

I would also recommend an independent insurance agent. Mine has saved my butt more than once and has even called me when my insurance company was bought and they saw all new quotes significantly higher. We were ready at renewal and seamlessly switched to another company. You certainly won't get that with a captive company. They also changed us at one point where our circumstances made sense to switch. College student son, but no "good student" discount or "driver exclusion" discounts. We switched to another company and got a AAA discount, good student discount, which at the end of this semester will upgrade to a Dean's List discount, and I exclude my son on our most expensive vehicle. We also get low mileage discounts on the car my mom drives (I own it).

I agree with Livesoft on the gym membership. My son is a weight lifter and had joined a gym when home for the summer. He did the analysis and figured out the payback for buying the equipment and clearing out an area in our basement (something you don't have in Texas......think of it as a square cave under your house that doesn't usually fill with water). I walk, bike and cut a lot of firewood (which also saves a ton of money on oil in the winter). Also, I do all of our car maintenance. I see estimates people post here for car maintenance and just about throw up thinking anyone pays that kind of money for such easy to do work.
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homerj15
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Re: Househould spending analysis

Post by homerj15 »

I would definitely look at insurance costs. I too am a family of four living in Texas and also have 10+ year old cars. Analyze whether you have/need full coverage. Also take a close look at your deductible limits. This of course all depends on whether or not you have cash reserves to back you up.
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inmymind
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Re: Househould spending analysis

Post by inmymind »

KlangFool wrote:
inmymind wrote:

I was also curious to hear some ways that people were able to effectively and efficiently reduce their household expenses. Any better methods out there than bucketing by category and cutting back in those areas?
inmymind,

http://www.investopedia.com/terms/p/pay ... ffirst.asp

Don't budget. Do "Pay Yourself First" saving method. If you do not have the money, you will not spend.

KlangFool
I initially went with the pay yourself first approach, but have found that unless I go to paying for cash for all expenses, it wasn't a hard stop on the spending. I have setup automatic investment plan with Vanguard based on my AA and savings goals for the year. It's the credit cards that end up making the pay yourself first easier said than done. I also found that it does not give much visibility on where you are actually spending and where cuts could be made, although I do understand that is not the main goal with that approach.
Esse quam videri
KlangFool
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Re: Househould spending analysis

Post by KlangFool »

inmymind wrote:
KlangFool wrote:
inmymind wrote:

I was also curious to hear some ways that people were able to effectively and efficiently reduce their household expenses. Any better methods out there than bucketing by category and cutting back in those areas?
inmymind,

http://www.investopedia.com/terms/p/pay ... ffirst.asp

Don't budget. Do "Pay Yourself First" saving method. If you do not have the money, you will not spend.

KlangFool
I initially went with the pay yourself first approach, but have found that unless I go to paying for cash for all expenses, it wasn't a hard stop on the spending. I have setup automatic investment plan with Vanguard based on my AA and savings goals for the year. It's the credit cards that end up making the pay yourself first easier said than done. I also found that it does not give much visibility on where you are actually spending and where cuts could be made, although I do understand that is not the main goal with that approach.
inmymind,

I use my credit card to pay almost all my expenses. I do not have this problem. I kept about 3 months of expense (a fixed number ) on my checking account. I pay my credit card through my checking account. When my checking account balance drops below the 3 months number, I put a stop on all discretionary expenses.

I am a cautious spender. I think long and hard on any expense more than $100.

KlangFool
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