Champagne, what's the celebration? Well, for the first time in the 8 months since I retired early, our costs are less than our budget. That's got to be a good thing, right? Or perhaps I'm being a positive thinker here, because you could say that for 7 out of 8 months, we've overspent! Hmm, perhaps we aren't quite ready for the champagne just yet.
But back to the good news, our costs for August were £2,655 ($3,277) which is much less than out budget of £3,700 ($4,567). Although I'm not exactly sure how that happened. We were on vacation for the first half of August, which is why costs such as groceries, going out and coffee shop/casual dining are lower than normal, but you'll see that we spent £1,023 ($1,262) while on holiday. Vacations are normally when you spend more, so it's interesting that we kept the vacation spend under control in this period - it was the second two weeks of our four week vacation, and we stayed in quite a lot rather than eating at restaurants, so that helped.
With that two weeks of vacation, the August costs are not a reflection of a "normal" month. As I've said before, while it is interesting to see the month's costs, it is the totals and monthly average that are generally the more relevant figures, and we probably need to see out the whole 12 months to get the full picture. Anyway, here are the August costs, plus the totals since the beginning of the year and the monthly averages as normal:
I like sitting down at the end of each month to see what we spent. What I'm finding in particular is the benefit of setting a budget and then monitoring the costs each month. It makes you think about your spending and whether or not you are happy with it. When I was working, I definitely cared about our costs and how much we could save to get to our financial freedom goal, but since deciding to retire early, I am finding that I'm becoming much more interested in getting value for the money that I spend. I plan to write a post soon about how my attitude to value has changed since I retired early.
Going back to the question of whether I am happy with our spend - to me, it comes down to two things
- Most importantly, can I afford it? and
- Secondly, that point about whether I'm happy with the value that I am getting from the amount I am spending?
Briefly on the value point, I just looked up the definition for value and it talks about the importance, worth, or usefulness of something. That sounds right, and matches my current thinking of buying things that meet those criteria. Before I retired early, too much of what I purchased didn't match this, which in hindsight was a bit wasteful.
Back to the first point of can I afford it - it is pretty obvious that if your costs are more than you can afford, then that's a problem, and a way to reduce the costs will have to be found (unless you can get additional income to cover the shortfall). Although our costs are more than we budgeted, we can probably afford it and, for us, this first year of early retirement is more about discovering how much it costs us to live the life we want rather than cutting things out just to get down to a budget figure. Of course, we do have to balance this against the risk of running out of money later in retirement. After I have completed this first year of early retirement, I plan to assess where I am, decide if it's affordable, and then figure out whether we need to make changes.
In fact, simply by keeping a monthly record of our costs, I'm already making some of these assessments as I go along. The good news for us is that there are some obvious places where we will save some money in the future because we will move to a new location for our forever home. If you aren't familiar with our story, we are still living in Dubai as my wife, Sally, is working there until June next year (2018), but we will likely make our forever home in Europe, or possibly North America for a while, after that. A few of the things that I'm certain we'll save on once we relocate are:
Groceries
Two things here. Firstly we have been a family of three until now, but my son has now moved out to go to university, so our grocery bill should decrease as we will be shopping for two instead of three. I've also price matched our grocery bill against what we would pay elsewhere. As a ballpark figure, we would pay only 70% (perhaps less at low cost stores) of the price for the same shopping list. I think that with these two things we should get a saving of at least a third off our current grocery cost. By the way, under groceries, I include food, personal hygiene products, household cleaning, laundry products, pet food etc.
Going Out/Dining Out
We don't actually go out that much, but our monthly spend averages £427 ($528) which I think is a lot for what we do. What hurts here is that the cheapest bottle of wine at a restaurant typically costs between £33 and £50 ($41 and $63) which is far too much in my view. I think that in most places you'd pay no more than half this amount (mostly of the lower figure) for a bottle of wine that is quite drinkable. I would normally choose perhaps the second cheapest wine from the list (because I don't want to appear too cheap), but I just read this may not be the smartest move - see this article about why buying the cheapest wine on the menu may be better than the second or third cheapest.
Cable TV/Internet
We've just downgraded our cable TV and internet package and it still costs us £74 ($91) per month. I just price compared this and if we were in Europe or North America then we would pay 50% of this (possibly less with a deal because we really do have a very basic TV package).
Holiday/Vacation
I've really enjoyed my vacations, but I think we have spent a lot of money on them. Having said that, I'm not sure that we are that extravagant in what we spend when on vacation. Perhaps the main issue is that we have had five weeks vacation this year. We had a week skiing in France in February and then four weeks in July/August where we went to France and Switzerland for a week with the other three weeks in the UK.
These are the costs for our two vacations totaling five weeks. We probably paid a bit extra on flights and accommodation because we went during the school holidays which is more expensive. Skiing was also expensive because we had to rent the equipment and have ski school as we are just beginners, so after a few years we shouldn't need the ski school and we'll get our own equipment which will save money over time. And if my daughter takes her cat, then we won't have the cattery cost either. The other thing that I think we'll do differently is spend less time in hotels and more time in self catered apartments - not so much for money saving reasons, but because you sometimes don't want to eat out and would rather stay in and cook, and an apartment gives you this flexibility. I just think that if we have a similar amount of time on vacation in the future we can arrange it so that it costs less and we still have just as much fun.
So that's the costs for August. I'm happy to come in under budget, and I guess the question is whether we will do the same in September. We shall see soon enough.