Driving Down the Budget

When I first looked at our financial situation in earnest back in July 2017, it did not make for pretty reading. I was working full time, and my wife three days a week. From a remuneration perspective, the jobs were okay - above the median average but not spectacularly so.

The cost of living in our town was the highest in the country, and even with a very modest lifestyle we were spending more than we earned each month. But that was a long way from where we needed to be.

The Origin Story covers the background in more detail. In this post, I wanted to get into the detail of exactly what actions we took in order go from having negative cash flow to saving $10k in our first year.

The Savings

The plan was not really very formalised to begin with; we just knew we needed to spend less. As we got started, it became easier.

Roughly in chronological order, here's what we did.

Stopped or Reduced all Subscriptions

It broke my heart, but my Audible and Spotify subscriptions were the first things to go. I loved listening to audio books while walking the dog, and Spotify was fantastic while I was working. Giving up these was tough, but it was important to demonstrate that I was serious.

I also have a Digital Ocean account for hosting personal projects that had slowly grown over time. I removed anything that wasn't actively being used.

It probably saved us about $50 a month (all figures in New Zealand dollars), but it really got us into the right mindset.

Stop Buying Take-Out Coffee

While running chores at the weekend, I'd often grab a coffee. When catching up with friends, we'd do it over coffee.

Coffee is $4.50 a cup. It can easily run to $25 a month, or more, for something I can make at home for a fraction of the cost. I skipped those on-the-run coffees. When meeting my friends, instead of heading to a cafe we took advantage of the breathtaking views and went for a walk.

Sold Our House

This is the biggie. Our mortgage was over $2000 a month, representing about a third of our after tax income. By the time you inluded the high Rates (local tax) and ongoing maintenance the house needed, it consumed about 45% of our take-home pay.

The answer seemed painfully obvious. We could sell in Queenstown and move… well pretty much anywhere else that wasn't Auckland would be cheaper. I work remotely, so have amazing flexibility when it comes to location.

Queenstown is a stunning, happy and safe tourist town on New Zealand's South Island. It makes a fair claim at being "The Adventure Capital of the World". The schools are consistently in the top 10% in the country.

We loved it there.

And I got to go for runs along the lake, which had a tendency to look like this: Queenstown

It's fair to say, we did not want to leave, but the numbers were incontrovertible. Our house price had gone up 50% in value over three years, outpacing the rest of the country. It was unlikely to go up much more. If we sold now and bought somewhere in another good location, we could potentially halve our mortgage. This meant, with aggressive payments, we could pay off the next house in five years.

We haven't yet decided where we'll live; we're currently renting a place near my head office, which due to some negotiations with my work is proving fairly cheap. Right now we've got a chunk of cash in a term deposit and in the new year we'll look for something else.

Stopped Eating Out

Eating out is truly guilty pleasure for me. Having the space to step outside of the daily grind and spend some distraction-free time in my wife's company is a glorious treat.

A couple of kids had already made this much more challenging, but as part of our drive towards frugality, we removed this almost completely. I think we've eaten out twice in twelve months, both times on special "eat early for half price" deals - thanks FirstTable.

We've tried to flip this into a positive by cooking better meals at home, which we plan in advance. The truth on this one however, is that I do miss eating out. But honestly, the kids have already introduced a sufficient overhead, that it doesn't feel like frugality is entirely to blame. Yes I wish we ate out more, but I don't think it's because we're being tight.

Buy Our Groceries Online

We have now chosen to buy our groceries at one of the most expensive supermarkets in New Zealand. On the face of it, this is crazy - why would we do it? It's because with Countdown we can place the order online and collect it in store the following day at no exra cost. Ordering online allows us to price optimise, and most importantly know exactly what we're spending. If we rack up more than $200 then we can just remove things from the basket until it meets our target.

We don't always get it right. Some weeks that are heavy on cleaning products and other occassional items can go firmly over that price. But it's always a deliberate choice - we don't get to the counter and feel shock at what we've just put in the basket. Every item is carefully chosen based on the recipes we know we want to cook that week.

Planning is the science behind the art of frugality.

In New Zealand fruit and veg is very seasonal. Imported produce is expensive, so we now live as the seasons provide. It can mean winter is a bit less varied than summer and autumn, but it also means our meals vary over the year rather than getting stuck in a rut.

Home Made Birthday and Christmas Presents

Okay, not so much for the kids - that'd be a little harsh. For my wife and I, and for the wider family, we've made a lot of our presents. My wife especially has a real talent for crafts, and the presents are personal, clever and beautiful.

This is not for everyone. It's a serious investment of time, and I personally find it very difficult. For me, my goal is to place a large amount of effort into deciding what people actually want, and to find a way of delivering that as cheaply as I can. In the past, I'd been guilty of leaving it to the last minute and just throwing money at the problem by buying lots of expensive gifts.

No New Clothes for a Year

I've not purchased any new clothes since about July 2017. It's August 2018 now, and I've made a commitment to go the rest of the year. Over the course of my life I've collected heaps of t-shirts, jumpers and trousers.

Clothes do wear out - at the very least I'll need to buy some shoes at some point in the new year. Styles change, but not radically enough to affect my somewhat staid wardrobe.

Working from home also deals another trump card at this point. When you spend your professional life only being seen from the shoulders up, the requirement for a sharp wardrobe is vastly diminshed.

It's worth nothing this commitment is mine alone, not my wife's. It's not like she's going overboard, but lady's clothes seem to have a shorter shelf life.

The Library

Oh my, but the library. How I love thee.

As a kid I was forever at the library. As I earned my own money however, I was seduced by the idea of building my own personal collection. At some point I probably even started thinking of the library as "for poor people". A worthy cause, but not for me.

I was an idiot, and I regret the occassions that thought wafted across my clueless mind.

The library is simply amazing. What clinched it for me was finding I could now borrow e-books and audiobooks. All of a sudden, releasing my Audible subscription didn't hurt at all.

I'm now reading more books than ever and am much more happy to take a punt on a book I've only vaguely heard about. If knowledge is power, then the library is a nuclear reactor.

Still To Do

We're not quite there yet, there are a few more items on the list that we've still to get around to.

Sell the Car

We had, actually still have, two cars. That's at least one more than we need. Embarrassingly one has now sat idle for about four months, when it could have been sold. Excuses abound as we explain ourselves with children, moving house, illness, etc. All are true, but kind of weak over that time period. It'll happen before Christmas!

No More GitHub

I store a lot of personal software projects on private repositories on GitHub. It costs, depending on the exchange rate, about $11 a month.

The plan here is to move everything over to GitLab, which has a different pricing structure, meaning I can host private repositories for free. I'm midway through this process, though there are a few client-specific repos that are proving a little more troublesome.

Grow Our Own Fruit and Vegetables

Once we buy the new house, we'll be diving into growing serious amounts of fruit and veg. In the short term, this is actually more expensive if you need to buy seeds, pots, specific soil, maybe a greenhouse or another protective environment. In particular, fruit trees are pricey.

Ater the first year however, the cost settles down, and you'll see a benefit to your weekly grocery bill week after week. There are also Facebook groups and websites that advertise local events where you can swap and share your crops with other local people. Your glut of courgettes (it's always a glut of courgettes) can be transformed into a wider variety of fruit and veg.

Reduce Our Take-Out Spend

We've always been a bit guilty of "treating ourselves" on a Friday night to take-out. It's normally been a long week, we're tired, and we just want to get the kids in bed and enjoy a bit of Netflix (Note: Netflix is the one thing I doubt we'll ever give up). It's as much about spending time together as it is about the food.

We still do this, but not every week now. It's more likely we'll cook something on Thursday and have it again on Friday. Or just have a simple meal of beans-on-toast - which is tough to beat anyway.

When we do purchase, we'll lean more towards a couple of pizzas from Pizza Hut for $10 rather than a couple of curries or some Burger Fuel. Pizza Hat and Dominoes are a quarter of the price.

In Summary

As I was writing this list I was quite surprised by everything we've done. I've certainly never been frugal by nature, so even making a budget has felt pretty strange to me, but we've really made progress!

Selling the house was clearly a massive decision, and an option I imagine very few people will have. Without that step, and reducing the mortgage duration, the 15 Year Plan would have been a much more difficult proposition.

The truth is, I expect we all have different levers we can pull to make savings. Cut down on drinking, eat less meat, cycle to work, use the library - all are potentially small gains, but they compound together.

As life happens to us we accumulate expenses, each being one a small increment, one on top of the other. With a hard reset we can liberate a lot of money from our monthly expenditure. Even if Financial Independence is not your end goal, which of us couldn't benefit from a few extra dollars being saved each month?