Earlier this week, I lamented the fact that my net worth plunged by more than 15% in 2018. Although much of this was due to accounting quirks (buying back this website and remodeling the house, neither of which get tracked by my personal net worth) and larger economic forces (the stock market declined by 6.2% last year), some of the problem is that I've allowed myself to succumb to lifestyle inflation. I've been spending more than I used to.
As a result, I've resolved to make some changes.
I've already trimmed nearly $500 of recurring monthly costs. (This number will increase to nearly $750 once a couple of contracts end.) But that's just the beginning. Over the past month, Kim and I have discussed other steps I can take to cut costs. It's time for me to get back to basics.
Back to Budgeting
Because I track every penny I spend, I have a pretty clear idea of where my financial weaknesses are. When Quicken shows that I spent $4675.56 dining out last year, that's clearly an issue. (And that doesn't even count what Kim spent!) When it shows that I spent $2820.39 on iTunes downloads, that's clearly an issue too.
Analyzing my spending summary for 2018 allowed me to find several ways to curb my spending.
- I'm going to cut back on groceries. To start, I'll give HelloFresh a trial run. Kim and I enjoyed a free two-week taste of this meal-delivery service last spring. We liked it. It seemed a little expensive but not outrageous. (Here's my HelloFresh review.) Because my grocery spending continues to be higher than I'd like — primarily due to impulse spending in the grocery store (beer! juice! fancy cheese!) — we're going to use HelloFresh for three months to see whether this actually cuts costs. If not, fine. We'll try something else.
- I'm going to build barriers between me and “frictionless spending”. Big companies like Apple and Amazon make it easy to achieve instant gratification with one-click shopping. I'm a sucker for this kind of stuff. I spend far, far too much on the iTunes store, for instance. Back when I was trying to get out of debt, I deliberately avoided bookstores and comic book shops because I knew they'd tempt me to spend. Similarly, I'm now going to deliberately avoid browsing online stores. If I have a need and want to order from Amazon, great. If Kim and I decide we want to rent the latest Marvel movie from Apple, great. But I'm not going to kill time by browsing.
- I'm going to move from tracking my finances casually to tracking them seriously. For the past two years, I've used two tools to manage my money. I use Personal Capital to keep tabs on my accounts, to get a sort of overview of my financial situation. And I use an antiquated desktop program (Quicken 2007 for Mac) to manually enter my earning and spending. These habits won't change. What will change is how carefully I use the tools. I'll monitor Personal Capital daily. I'll be much more accurate about how I enter expenses in Quicken.
These are the big changes I've already begun to implement. There are plenty of smaller things I hope to do, as well.
For instance, Kim and I want to spend less on dining out. Last year, I spent about $400 per month eating in restaurants. My gut feeling is that I spend about $50 every time we go out, which means I've been buying eight restaurant meals per month. (Kim probably pays for another four restaurant meals per month.) I want to aim for $200 per month in restaurants instead. Dining out once per week is a perfect treat.
I've also gotten out of the habit of using the public library. Back before my divorce, I enjoyed walking to the library and carrying home a backpack of books a couple of times per month. It's been a l-o-n-g time since I regularly made use of this resource, though, and that needs to change. My local library isn't in walking distance, but it's certainly on my way home from various errands. Or from the box factory.
Which brings up another big change, one that I've hinted at for a couple of months.
Back to Boxes
My cousin Duane is dying of throat cancer. I recently took three weeks to travel Europe with him, yes, but I'm also exploring the idea of taking over his job.
Long-time readers know that my family owns a small business here in Portland. In 1985, my father founded a company that manufacturers small runs of custom boxes. For many years, I was the company's salesman. I hated it. Also, I sucked at it. I quit my job in 2008 (much to the relief of my brother and cousin) to work on Get Rich Slowly full-time.
Duane manages the office at Custom Box Service. He answers phones, pays bills, and processes payroll. He takes care of anything related to the financial operation of the business. (My brother Jeff is in charge of the rest of the company's operations. He quotes prices, enters orders, and schedules production.)
With Duane's time on this Earth dwindling, the company needs to find a replacement. We could hire somebody new, it's true. Or maybe another family member could take on the job. But for a variety of reasons, it seems to make the most sense if I assume the position. I know the company. I'm emotionally invested in its success. I'm good with computers. I like managing money. Plus, Kim has been urging me for years to find some sort of job so that I get out of the house.
So, we're exploring this idea.
On Tuesday, I spent three hours learning how to process payroll. Today, as soon as I finish this article, I'm driving down to the box factory to learn how to do year-end bookkeeping. Next week, I'll spend several days learning other aspects of Duane's job.
My return to the box factory isn't a for-sure thing yet, but it seems extremely likely.
Obviously, it's far too early to know how this will effect my financial life. Will this be part-time work? Full-time work? Will I get a retirement plan? Health insurance? How much will I earn? When will I find time to do my work at Get Rich Slowly? And how will I adjust to having a work schedule after a decade of doing whatever I want, whenever I want to?
Back to Basics
As I contemplated these changes during the past few weeks, I realized I've grown lazy. Complacent. Inattentive. No serious damage has been done, but I don't want to continue down this path.
Because I have a sizable nest egg, it's easy to let my guard down. I have a big safety net! What does it matter if I spend $400 per month on restaurants? What does it matter if I buy every movie I want from iTunes? Well, it matters.
I'm a vocal advocate of conscious spending, especially for people who are in the process of building wealth. If you want to reach your financial goals quickly, it's vital that you make deliberate decisions that are aligned with your purpose and direction. When you don't do this, you're essentially wasting money.
The same principle applies even to those who have built a nest egg, those who have retired early or achieved financial independence. Just because you're reached an arbitrary financial milestone, that doesn't mean you can relax your vigilance. If you want to keep your nest egg, you have to actively maintain it. You have to continue making smart financial decisions that help you pursue your purpose.
That's what 2019 is all about for me. It's an opportunity for me to revisit the lessons I learned while digging out of debt a decade ago. It's a chance to practice skills I once honed but have since allowed to atrophy. The bottom line? This year, I'm getting back to basics. I'm going to be a money boss once more!
Author: J.D. Roth
In 2006, J.D. founded Get Rich Slowly to document his quest to get out of debt. Over time, he learned how to save and how to invest. Today, he's managed to reach early retirement! He wants to help you master your money — and your life. No scams. No gimmicks. Just smart money advice to help you reach your goals.