My husband, Darnay, and I will be turning 64 at the end of 2020. He is an elementary school teacher; I am a freelance writer. It occurred to me that we should be doing some serious financial planning before we reach 65.
We manage our future pensions and our retirement savings quite well. But we haven’t had a clue about our current and future daily expenses, healthcare expenses (including Medicare), and how we would prepare our three-story, 80-year-old Michigan home to age instead. . So, we are embarking on a four-step plan to pool our financial stocks. In this article, I’ll tell you how we’re taking Step 1: cutting our expenses. Based on our conversations with a financial advisor and some pretty simple strategies, I think we could cut our expenses by roughly $ 12,800 this year. My husband and I knew we weren’t ready to retire at 65. But we thought we might want to downsize, to make it easier for us once we stop working full time. Also read: Whether you’re 55 or 25, do this to secure your future Social Security benefits In January, we gave ourselves three months to dig into all of our “smooth” spending and see what we could cut down for the long term. Once we started investigating, it became clear that this was going to be more difficult than we thought. That’s when I called in a financial and budget coach to guide us and act as a referee, if we needed him. She told us to “post all of her financial statements” for the last 18 months, so we could see where our money was going. That meant carefully studying our checking accounts, credit and debit card statements, and cash applications like PayPal. PYPL, + 1.94% Darnay and I decided that we would set a goal of reducing at least $ 1,000 from our combined monthly expenses, or $ 12,000 per year. Our advisor challenged us to dig deeper. “It can always be reduced,” he said. Our Cars We begin by looking at our auto expenses, as cars are often a high-spending item. We are essentially a two-car family (we recently sold a third car that was in the garage and was not driven). One of our cars is my husband’s BMW; drives him to work when he’s teaching in person and to the golf course. We’ve had it for 15 years and it’s probably in its last stages, but this car is fully paid for. I drive a 2018 Mercedes-Benz C300 and have only a few payments left. Once paid, that will add $ 500 to the money that won’t come out each month. We both need our own wheels, so getting rid of a car and associated costs was not an option for us. AAA estimates that maintaining a car that drives 15,000 miles or less costs about $ 8,500 a year, including gasoline and routine maintenance, tires, and insurance. During the lockdown, we have been driving much less than that. We went from spending $ 100 a week on both cars to $ 100 every two to three weeks, as we both work more from home. That means we are saving $ 200 a month or more, which would add up to $ 2,400 over 12 months. I realize these savings could be reduced a bit when things get back to normal, probably in the fall. At some point in the next 12 months, we will probably buy a used car to replace the old one. But when we do, we’ll pay cash out of our savings to avoid car loan payments. To save on our auto insurance, we lowered our deductibles (the money we pay out of pocket before coverage begins). And we took the insurance off the parked car when we sold it. In total, we went from spending $ 350 a month on auto insurance to $ 150 a month. That adds up to a savings of $ 2,400 a year. See: How to get the best deal on car insurance Food Like many families, we spend a lot on food. We always have. And the pandemic didn’t help. Although we saved some money by not eating out at restaurants, much of that ended up paying for take-out we buy for three or four meals a week. Also, during the confinement, going to the grocery store was my only guilty pleasure. But along with that came big bills. In 2019, we averaged about $ 500 a month in groceries, not including the cost of laundry and cleaning supplies. However, around April 2020, our monthly grocery bill had gone up to $ 800 +. Part of that was our spending a ton on sugary sodas each week. Fortunately, in the first quarter of 2021, we spent between $ 100 and $ 150 a month less. The reason: Last year, we had apparently been buying more wine than we could drink (don’t judge me for a pandemic), but since we entered 2021 with so many reservations, I have not bought a single bottle this year. Related: How Are Older Americans Spending Their Stimulus Checks? Darnay and I have agreed to set a goal to go back to $ 500 a month in groceries and see how it goes. If we can do it, we will save $ 400 a month or about $ 4,800 for a year. You’d think things like paying for broadband and cable and streaming services would be some of the easiest places to trim the fat. Over the years, our monthly cable bill has grown steadily and has really skyrocketed with streaming services like Netflix, Amazon Prime, Disney +, and Hulu. Internet, cable, and streaming AND during the pandemic, when my husband and I we were working from home and our eight year old grandson was doing his virtual education here, we increased our bandwidth to the max. All in all, we have spent $ 350 a month on internet and cable. Since we couldn’t agree on how to lower this cost, our money expert suggested that we review our cable bill in a few months. But he also suggested that we call our cable and internet provider to see if there were any promotional offers. We plan to do it in May, when it is time to renegotiate our package. Our goal: save $ 100 a month or $ 1200 a year. Cell phone bills To be honest, our cell phone bills have been out of control. Much of my business as a journalist revolves around my ability to be connected and always active. So between unlimited data for two phones, a mobile hotspot fee, iPad charges, and the purchase of two top-of-the-line memory-enhanced smartphones, we’ve been paying, gulp, $ 350 a month. We printed all of our monthly cell phone bills and I sent a copy to our financial expert to review with me. We go through everything line by line. To my surprise, we discovered that Darnay and I were paying for things that we no longer used or needed. So, I disconnected my tablet from my cell phone plan and instead connected it to the internet at no additional charge. I also canceled my mobile hotspot at $ 20 a month, as well as the additional SIM card that stored my data, but it cost me $ 20 a month. We also decided that we really didn’t need to replace our phones every 12 months, as we have been doing, and then include the cost in our cell phone bills. All of these changes add up to a savings of $ 150 per month, or $ 1,800 over the next 12 months. Memberships and Subscriptions Finally, our advisor said, we needed to compile a list of all of our subscriptions, memberships, and monthly fees for the applications. . This was a difficult one for me. I have many subscriptions to magazines, newspapers and satellite radio. Most of them are tied to my work. So we decided to postpone these cuts until 2022. But when we tackle this tricky area next year, we will probably cut several hundred dollars a month. “You have to consider each of those fees and subscriptions as part of the whole,” our budget advisor advised. “Those $ 5 and $ 10 shots to your money add up fast.” Related: Watch Your Wallet – There Are Many Ways You Can Part Of Your Money She’s Right. I stopped adding potential savings when I hit $ 400 a month. Our financial advisor also suggested that we try an app called TrueBill, to manage subscriptions and renewal dates. I immediately signed up. The Bottom Line The Bottom Line: If we stick to our plans, these cuts and adjustments could save us approximately $ 12,800, which is $ 800 more than the original goal we had set with our financial advisor. Darnay and I are very excited. Frankly, I thought it would be more difficult to get rid of the things that we thought we were sure we needed. And we were both surprised that we could come to an agreement on what would stay and what would go. “You two did a great job and this is probably something you want to review every six months for the next year or two,” our advisor told us. We will do it. And I look forward to the next three months, when we will tackle financial decisions on everything related to our home – mortgage settlement, repairs, replacements and remodeling. We will also be examining our maintenance costs, both inside and out. . I can’t wait to get that financial house in order. Andrea King Collier is a journalist and author living in Lansing, Michigan. This article is reprinted with permission from NextAvenue.org, © 2021 Twin Cities Public Television, Inc. All rights reserved. More from Next Avenue: