Smart401k Blog

I spent almost $2,500 on cable and movies in 2008!  Finally, something motivated me to evaluate how I spend money.  It’s been something I’d wanted to do since purchasing my first home a couple years ago.  Unfortunately, I let things like taking down wallpaper, repainting rooms, tearing out a couple walls, landscaping get in the way. 

This all changed when I took the time to look through a recent bank report that summarized how I spent money last year.  What jumped out at me was how quickly monthly bills can add up to a substantial amount of money.  After a full review, I decided to reduce how much I spend on non-essential items such as cable, entertainment, and eating out.   As a result, I believe I am in a better position to not only ride out the economic downturn we are facing today, but also position myself for a comfortable retirement.  If you haven’t done a review of your spending habits yet, I don’t recommend pushing it off any longer.  Below is a quick review of the process I went through to eliminate almost $10,000 dollars of expenses.

Step 1: I spent how much???  On what???

Each year my bank sends an annual statement outlining how I spend my money items such as entertainment, eating out, travel, and other discretionary items.  What I found was that day-to-day living expenses paled in comparison to what I was spending on entertainment and other non-essential activities.  For example, I spent almost $2,500 on cable and movies in 2008.  Since most of my bills are automatically withdrawn each month, I typically don’t pay much attention to them.    Well $2500 was definitely enough to wake me up!  I went on to review other expenses and felt the same shock when I saw how much I spent eating out.  After that, I was determined to keep a closer eye on how I spend my money and cut costs where I could. 

Step 2: Operation Cut Expenses

Here are a few of the changes I made that I expect will enable me to save a considerable amount through 2009 and beyond:

1. Cancelled my Netflix subscription and premium cable package. Instead of seeing the same movies over and over on cable or waiting for movies from Netflix, I now use Redbox which only costs a dollar. Projected Savings = Almost $1,500 for the year

2. I now bring my lunch to work at least 4 times a week and limit how much I spend when I do go out to lunch with the other advisors. We were going out at least 3 times a week so the estimated savings is substantial. Projected Savings = Roughly $1,000

3. I have now made it a rule to cook dinner during the work week and only eat out on special occasions or the weekends.  Not only am I saving money, but I am eating healthier.  It’s hard to estimate how much this will save me but I know it’s a considerable amount.  Projected Savings = Probably at least $1,000

4. My girlfriend currently lives in St. Louis, which I would fly to at least once or twice a month. Instead, I now drive out there (My girlfriend doesn’t like it to much since we don’t spend as much time together, but she says she understands). Projected Savings = around $1,200

5. I decided against buying a new car, which I thought I needed to have. I drive my old car around, but it’s still reliable and gets me where I need to be. Projected Savings $4,500 a year until I buy a replacement.

There were a number of other expenses I cut that alone are small, but when combined will have a significant effect on my financial picture.   All in all, I hope to save $9,000-$10,000 this year.  Now that’s a lot of money!!

Step 3:  Cause & Effect

The best part… I’ve seen positive effects already.   My checking account balance is larger than it was this time last year, which has prompted me to put more towards my savings account (the snowball is getting bigger already!).  I’ve already noticed that I don’t need as much to live off as I once thought I did.  Best of all, I have been able to increase my contributions to my 401(K).  It’s only a 1% change for the time being,  but I intend to increase it by another percentage point later this year (I’ve run the numbers and 1% can make a substantial difference on my retirement account – click here to see what it would mean for you).   With the few small changes and sacrifices I’ve made, I know I am in a better financial position. 

Times are tough, and there is no better time than now to evaluate how you spend your money.  I am very glad I got the wakeup call when I did.  It has given me the tools to realize how much I was wasting and motivated me to get my priorities straight.  If you haven’t reviewed how you spend your money, consider this your wakeup call.

As always, if you have any questions or would like to share your savings tips, please feel free to reach me at, jstudebaker@smart401k.com

Jeff Studebaker, Investment Advisor

This entry was posted on Wednesday, May 20th, 2009 at 6:24 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.