Where Does My Money Go? Part 1

It’s time to talk expenses, people.

I know it’s sexy to talk about income and side hustles and dividends, but to be honest the best opportunity to have a positive impact on our financial lives is through managing our expenses.

Today, I wanted to write about my household’s fixed monthly expenses. Obviously, my ability to shop for savings with fixed expenses is somewhat constrained. Taking student loans as an example, there are relatively few viable options for refinancing and reorganizing payment plans when one is eight years past their graduation date and has already experienced periods of forebearance.

A future “where does my money go?” post will cover variable non-discretionary expenses, and then discretionary expenses, to give a complete portrait of what I’m spending. I’m using Mint.com to track my spending – I am still considering a switch to Personal Capital for their superlative account aggregation functions, as it’s helpful to see as many of one’s accounts in a single view as possible – Mint seems to have fallen behind in integrating with certain websites and vendors.

Tallying Them Up

Here’s what my fixed expenses look like right now, rounded up to the nearest $10:

Mortgage + Taxes + Home Insurance + Mortgage Insurance: $1,750

Wife’s student loan payment: $260

Cellular service for 2, with hardware payment: $200

Car payment: $190

Car Insurance, full coverage: $170

Cable + Internet: $140

Wife’s medication: $80

My student loan payment: $70

Gym membership for 2: $40

Wife’s monthly doctor’s appointment: $40

TOTAL: $2,940

Analysis

This is a lot more than I remember it being. Obviously, some of these expenses are debt related – approximately $500 of my mortgage payment is taxes and insurance, $260 from my wife’s student loan, $30 a month of my cell phone bill is paying down new hardware, $190 for car payment and $70 for my student loan. That’s $1,050 a month that I could get rid of by becoming debt free, bringing my total fixed expenses down to around $1,890.

How much other wiggle room can I find? I have full coverage because Cheryl and I share a car, and we’re still paying off our auto financing. I could potentially take that down to a lower level of coverage and create significant savings, but only after my car is paid off (future auto purchases will be made in cash, folks. Auto financing may be low interest rates at this time in history and with my excellent credit, but it’s still not worth it).

I could cancel the gym membership – but I have personal reasons for wanting it. I am more likely to exercise and live a healthy (and fiscally sound) lifestyle if I have access to a gym.

Taxes and home insurance – my home insurance is bundled with my auto. While it’s possible I could find a lower rate for my home insurance, I seriously doubt it. Taxes in New Jersey typically don’t go down – maybe if we legalize marijuana they’ll decide that they don’t need an arm, leg and first-born child from the state’s homeowners, but I doubt it. Politicians, especially in New Jersey, are experts at finding new ways to spend money.

The mortgage insurance associated with my home financing will sunset in the future – I don’t have the numbers in front of me, but as soon as I’ve paid off a certain amount of the value of my home (usually in the 25 percent range) they will drop that off of my house payment, saving me $30 or so a month.

We’re not likely to unplug from cable until after Game of Thrones is over next year. Yes, it’s an unnecessary luxury, and yes, I want to get rid of it. This is a compromise I’ve made with Mrs. Robbins. After no more Game of Thrones, we move towards streaming EVERYTHING.

Our medication costs were ¼ of the $80 we’re paying now on my wife’s old insurance. Some phone calls will have to be made to see if we can get some prescriptions re-worked and lower that expense – I believe it is worth the time and effort.

Thinking ahead

Moving into 2019, my primary target on this list is the car payment. Since I took stock of all my debts, I’ve reduced my total car debt to around $7,600. I’m paying an extra $70 a month on the car now, and I will try to continue to increase those payments in hopes of eliminating that debt in the next 12 to 18 months.

My personal student loan, with a relatively small $70 monthly payment, is also a likely 2019 target should I eliminate or at least make good progress on my auto loan. Though the interest rates are low, I have a relatively low balance on this loan – approximately $1,600 or $1,700 at this point, making it an easy target for elimination. The $70 per month could be put to good use in savings and investments. I still dispute anyone who tells the average reader that they should be in a huge rush to pay down their student loan debt, or any low-interest rate debt. That money is generally better placed in equity markets, and before I make any move to pay down my loan, I'll make sure I'm aware of any potential opportunities to invest that I might be missing.

A Thought on Frugality

There’s a very large subset of the financial independence crowd that has chosen frugality as a method of expense management. I love their ideas and draw a lot of inspiration from them, but I do not consider myself a “frugalist.” I’d rather find a way to balance maximizing my ability to retire/achieve financial independence soon with maximizing the lifestyle my wife and I are able to enjoy.

I was forced into a frugal lifestyle for several years and have only recently begun to emerge, and I do enjoy being able to spend some money cautiously here and there.

That means picking and choosing my “spots” when it comes to frugality. For example, I believe a guarantee of believe tasty, nutritious and fresh food is worth paying a higher price. Thus, I do not shop for green groceries or fresh food at Wal Mart despite the allure of lower prices. I’m also very careful about what I buy from markets like Aldi, as quality (and the quantity required to access their deals) may vary. My thoughts on frugality as my income increases are definitely worthy of their own post.

In my next post, I will target non-discretionary, non-fixed expenses like utility bills, fuel costs and food.