Poopsie and I consider ourselves to be reasonably savvy when it comes to money. After all, we read all about personal finance and are on the path to financial independence! We know all the theory.
However, recently, it has come to our attention that we may not be as good as we thought about putting it all into practice.
Just before we made the big move, we sat down to discuss our spending. We were both feeling like it was getting a little bit out of control, but that we didn’t really have much to show for it.
If we had been eating out a couple of times a week, going to shows, going to the movies and doing all the “normal” stuff people do, then we may have understood why our savings rate was on the low side each month. We weren’t doing any of those things- so it seemed our money was slipping through our fingers.
We track our spending and I record our expenses on here each month, so I could certainly see what we were spending our money on, but it still seemed very reasonable and necessary. So why couldn’t we save as much as our fellow ER bloggers? We both earn very good salaries, even with the cost of living being a bit higher in Australia, we still should have been able to save more.
I remember a few years ago, I suggested to my sister that she and her husband should start living on just his salary in preparation for having a baby. If they were used to living on his salary, it wouldn’t be a shock to the system when she stopped working and, as a bonus, they’d have a lot of money in the bank. I’m not sure if they ever did it, but it never occurred to me to do the same thing, as Poopsie and I have no plans to have children.
However, Poopsie suggested that we should try and live on the lower wage (his) and that way, we would automatically be saving more than 50% of our income.
I can’t believe we hadn’t thought to do this before! It seemed so simple!
So we set it up so that my wage immediately went into savings and only his wage remained in our regular bank account. We pay for everything on the credit card to take advantage of frequent flyer points. Usually, I would pay this off the night before we were paid.
I was a bit worried we would struggle to live on Poopsie’s wage. We now had his kids living with us for part of the time, so it’s likely our expenses would increase at least a little bit. And anyway, if we could live on his wage, why hadn’t we been?
I still don’t know the answer to that, but not only did we live on his wage (including a couple of luxury expenses, like taking his kids out to dinner and taking my mum out to lunch for Mother’s Day), but we even managed to save some of it. We saved about $400 from his wage for the fortnight. I couldn’t believe it!
We clearly did not know as much about personal finance as we thought we did. From now on, we will be pretending my wage doesn’t exist and hopefully the result will be a much higher savings rate and being even closer to retiring early.
What lightbulb moments have you had with your finances?
Oh my goodness, this is EXACTLY what I have been feeling, and what I’d love to do. Unfortunately Mr ETT isn’t quite on-board, so any attempt to reduce spending is… well, that’s a blog post in itself. Like you, though, the majority of our spending seems necessary, so identifying areas to cut has been tricky. We earn average wage, but have no debt. Almost everyone we know has a mortgage, some are off having babies, but their quality of life hasn’t reduced, so I know it can be done. I wanted to pretend we had a mortgage and put that money aside, but I’m still working on selling the idea… Congratulations to the both of you, putting it into practice.
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Funny that I stumbled upon this post at the perfect time! I’m going through the same realilzation as well. Like the posted above though, it’s going to be hard to get my partner on board, but I’ve spent the last week trying to convince him that we should live off just one income (his, because he’s a small business owner so needs his accounts functional and accessible for spending for tax reasons) and use mine to pay off our debts and then create savings. We’re going to start with a budget challenge in August (post family vacation) to live minimally until the end of the year so we can get used to reduced spending as well as a tandem budget, and hopefully he’ll be on board for single income living in 2017.
Good luck with your endeavour, I know you’ll be successful! It’s amazing how everything can come together in fulfillment of a goal once we really define it and commit to live up to it (the way that you are Poopsie are doing now!)
Good luck getting your partner. It can be hard, but it’s worth it. MMM gives some good advice on how to get a partner on board, I definitely recommend checking his site out. Good luck and thanks for dropping by. Keep me updated on how it goes!