Spending Discipline >

Everyone’s Strategic Retire Early Plan is unique and custom to the person. But they all have two crucial basics if they are to be successful in reaching their retirement dream. Spending Discipline and Saving and Investing. This page is about Spending Discipline.

Frugal Living is key. Everyone needs to know where they are spending their money and set a budget. Whether they have a spending weakness to manage or not. We all have waste in our lifestyle that could be cut so that we can increase our savings rate. When you do retire this is a habit you will carry forward.

The idea is to first see where your money is going. Look for ways to cut out the waste. Then embrace your new smart frugal lifestyle. Both now and after you retire. Your plan must be something you can live with without feeling deprived. Your spending plan must be one that is sustainable over the long haul.

Everyone’s frugal living threshold is different. But if you really want to retire early you will have to make cuts that challenge your frugality threshold. That’s because it will take more than average or slightly higher than average savings rates to get there.

Tracking Spending

If you are not already on a budget. Where you know where all your money goes then now is the time to do it. This isn’t a one-time shot thing. You will need to check your lifestyle costs at least yearly. Yearly of more reassessment is necessary because our lives are fluid. Things change. You could get a raise, a bonus, paid off some debt, reduced cost somewhere because a contract ended, etc.

The point is to always check to see if you are wasting money on things that doesn’t add happiness-value to your life. See if you are spending on things that are not that important in the overall scheme of your life.

Do you have stuff that you really don’t use but it costs money to keep? Having a lot of stuff leads to in some cases maintenance, licensing, taxes, and other costs.

If you make early retirement saving a high priority there is a likelihood that you will discover a way to find more money in your lifestyle-budget to put toward your early retirement goal. I have another page where I share some of my and some donated Smart Frugal Balanced Living Tips that is just the tip of the iceberg for ways to find savings.

Frugal Living- A Growing and Sharing Community

Besides this site, there are other sites dedicated to frugal living that you can do research and see what others are doing.

Something to adopt into your spending thinking is to ask yourself if you need it or want it before buying it. If you need it then find the best deal you can whether it is online or on-sale. If you just want it then never buy it without thinking long and hard about whether it adds any happiness to your life or what its importance is to you. The expression “you better sleep on it” is an important tool to use before purchasing a “want” when you are pursuing early retirement.

Spending Discipline – Making and Setting a Budget

You can use a spreadsheet or just do it on paper but writing down your budget somewhere allows you to see how you are doing. When you add your tracking of spending against your budget you see where you are and where you can make improvements. You need to set the budget for the basic categories:

Fixed Cost (essential)

This will be your Housing, Utilities (split them out), Health and Car insurance, costs to commute to work gasoline, Bus or Train, and I also include Groceries here. Even though we call them fixed they do fluctuate monthly due to the hot or cold of the seasons or whether we change job locations, add a family member, etc.

If you can go back and see what you spent over the year you can try to see where you can make cuts or improvements. Can you drive less and instead walk or ride a bike during good weather? Can you make your home more energy-efficient, the yard more water efficient, can you find less expensive insurance by shopping around?

There are a number of things that you might be able to do. Once you get that down you know what the bare minimum cost it takes for you to live.

Non-Fixed Variable Costs (non-essential)

This is where all the other things you spend your money on goes. Cable/Satellite TV, other entertainment, eating out, lattes, vacations, gifts, donations, etc. and this is where you can find lots of waste. The little things we do add up. Some of these things may be what someone thinks is essential and sacred to their budget.

Always think if it really makes you that happy and is more important than your early retirement goal. If your donations are all over the map, decide where you feel in your heart it is best served and concentrate on that charity. If you feel you need to buy a latte everyday consider getting something different and less costly. I traded my Saturday flavored latte treat for an Americano with my favorite flavored syrup and some skim milk for half the cost of my skim milk lattes that I was buying and I still enjoy them just as much.

By setting a yearly vacation budget based on your tracking and ideas of how you could cut costs will happily force you search for better deals. It’s too easy to just make the reservations without trying to see if there is something better and less costly. Everything in this part of your tracked spending should be looked at for cost cuts.

Miscellaneous Non-Fixed Costs

These are the unplanned for and are unknown going into the year but will always be there. They are the repair, fees, and/or replacement of essential items and non-essential items that you own including yourself, meaning unexpected medical costs.

Every year different things happen that eat into your budget. I have tracked my expenses for 8 years and the funny thing is this category for me seems to be about the same every year. My budgeted amount based on the past is $2,820 or $235 a month. Some years were less and some more depending on the catastrophe. It is never the $235 a month as these come in smaller and much larger monthly costs but it adds up to about the same yearly.

Examples of these costs are the 100,000 mile auto servicing with new breaks, alignment, tune-up, transmission fluid change, and new seal to stop an oil leak $900. The double garage door spring replacement $324. One year my central air compressor $1800 (that was a deal by asking for any scratch or dent units they had).

I think you get the point. No part of this is a car replacement. It will happen one day and I have set aside $15,000 in an account just for that purpose. It seems to be what I usually max out on when buying our new used car for us.

Spending Discipline – Credit Cards and other Debt.

Credit Cards are a wonderful thing but only if you can pay off the balance you use each month. You first need to pay off all Credit Card debt as part of your Strategic Retire Early Plan. Do not forgo saving in your 401K for this but definitely add any money you are able to save from your budget or money you gain elsewhere to getting rid of Credit Card debt. If you can’t manage to only charge what you can pay off each month then manage this weakness by cutting them up and walk away from using them and go to using cash or debit card.

The great thing if you can have the discipline to only buy what you can pay off monthly is the Credit Card Company pays you. Always choose a card that offers either the pay back cash awards or if you prefer travel awards.

I have not paid a penny in Credit Card interest for over 15 years and they pay me 1% to 3% depending on the card and what I bought for all my yearly charges. We make more in Credit Card pay back awards than my Credit Union savings account pays me in interest. I don’t even have to claim the Credit Card cash award on my taxes. Having a Credit Card weakness is a big killer of early retirement dreams. Manage it and they pay you.

Our Early Credit Card Story and Payoff

We had used Credit Cards early in our family life to make ends meet when my wife quit work to be home with the kids. This was a duel decision due to the cost of child care which made her working non-justifiable. The idea was to use the Credit Cards as we went and planned on paying them off with tax refunds and with any money I got working a second job.

Over time these balances grew to where I owed $16,000 spread over five Credit Cards. When my children started school my wife started working part-time. We concentrated on the higher interest Card first and worked our way down. When a lower interest card offered low fee debt transfer we paid off higher interest cards and moved it to the lower interest card.

Some say it’s best to concentrate on the smaller balance owed card so you can quickly see progress. I think there is merit to either method because what is necessary is your strategic plan that is perfect for you and sustainable by you to accomplish the goal, which is staying with it until the debt is gone so you can retire early.

Once the debt is gone you get to add all of what you were paying to the Credit Card Company to your early retirement savings and investment portfolio.

It is up to you.

You have a choice to make to take control of your future and engage in Spending Discipline and frugal living so you can cut waste from your lifestyle cost and increase savings. The pursuit of early retirement is worth any sacrifice in spending that it takes.


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