I started my new job this week, but between gigs, I was unemployed for about two weeks. It was truly a glorious time. I got to spend all day with the wife and baby. I love going on walks with the baby, both in the stroller and carrying her. I like explaining trees, sidewalks, grass, birds, clouds, and a million other things that you won’t see indoors. The mental stimuli is good for her brain. She likes to reach and grab for leaves, and she laughs when gusts of wind hit her face. Just being outdoors tends to wear her out and within an hour and she will drop her head onto my shoulder. It’s good for me, too, as I like the exercise and fresh air.
It felt amazing. Walking around on weekdays with the family. It felt like stolen time. Who agreed that the standard 8-5 work day has to coincide with the best hours in the day? By the time folks started filtering into their driveways around 6 pm, the best weather was behind us. These slaves show up just as the sun starts drifting behind the rooftops and warm breezes gave way to cool stillness. How could all these people totally miss out on these beautiful days? I felt bad for them. But, only until I realized that that is exactly the life I’d be going back in not too distant future.
The Last Man On Earth?
Over the two weeks, I probably walked the baby around a half-dozen times—the weather cooperated. We would walk during the afternoons and early evenings, when the spring days were at their warmest. I like looking at other people’s homes, patios, decks and landscaping to get ideas on what we could do for our own home. I noticed a lot of people in our neighborhood have really nice decks. We live in a nice suburban planned community and I must have seen two hundred nice decks and patios. Complete with high-end grills, beautiful furniture, custom masonry, and never-wear TREX decking—definitely very nice stuff ($30k here, $30k there). However, one thing was noticeably absent from each and every one of these decks….people.
Of course, Eric, there’s nobody actually around to enjoy the fruits of their labor, to relax on their deck with a beer, some music, a hot grill, and kids in the yard—those tranquil moments are reserved for Memorial Day, July 4th, and the occasional Saturday evening. Even when we would venture out in the weekday evenings, though, I still never saw anyone on their deck. I’m guessing “relax on deck” just isn’t a high-numbered priority for the few waking hours available after a hard day’s work. That is really unfortunate.
Two Men and Their Grills
All the credit card offers and whatnot that built up at our abandoned Virginia mailbox had been accumulating to the point absurdity. Being out of the workplace, I didn’t have a handy document shredder available to me. I had originally put all of this stuff in a plastic bag in our entry way, intending on bringing it to the office when I started my new job. I realized, though, that I didn’t want to ask on my first day:
“Hey there. I’m Eric. I’m looking forward to working with you.”
“Nice to meet you, Eric. What’s that you’ve got there?”
“Oh, this plastic grocery bag I’ve been carrying around all morning?….Yeah, about that. Any chance you have a document shredder nearby so I can unload this massive amount of personal mail?”
So, like any resourceful person, I instead burned each piece one-by-one in our charcoal grill. It was therapeutic. I saw one of my neighbors not too far away, and walked over to his lawn. He was grilling food, rather than mail, and we got to talking about where I’ve been for the past year, lawn care, kids, cable & internet, money, and I’m pretty sure at some point we got on a tangent about the unrest in the middle east.
Anyhow, he was gracious enough to invite me over for some of what he was cooking up. I took him up on it and brought the baby over for some good conversation. We got into the topic of money and careers, and I mentioned my intent on some very early retirement. That (barring some terrible economic collapse) I’ll be retiring in 2019 at the age of 34. They were pretty stunned by this, given that we have one kid and are hopefully going on to four (God willing). And, that we would accomplish this on just my income. They asked me how I was going to do this, and I gave them a brief overview on the virtues of dividend growth investing, tax avoidance, side hustling, and optimizing expenses (basically the tenets of my big plan). I told them, though, that the most important thing is expenses. That nothing has as dramatic of an effect on financial independence than reducing expenses. The man’s wife then said, “I feel like we already don’t spend anything.” I didn’t say anything at the time—this was their house after all—but I saw a big issue with this statement.
In my short conversation and observations both outside and inside with this family, I tallied up the following:
“Lawn Guy” – $100/mo (conservative estimate)
1GB Internet and Premium Cable – $220/mo
Home Security – $30/mo
Second Gym Membership – $50/mo (We have a gym in our community center that we pay for already)
So, here’s $400/mo that is structured into their lives that seems unnecessary. Over 10 years at 8% interest this adds up to about $75,000. And, obviously, this doesn’t include the many things I cannot see. But, I would guess (given the precedence) they are overpaying or overbuying on cell phone plans, home/car insurance, energy efficiency, and transportation. Finally, I saw a product that might be the peak of consumerism, a “Brushed Nickle Electronic Salt & Pepper Grinder with LED Lights.” Really?
This is not meant to be a mandate on their lifestyle, they can obviously afford to live this way (we could not), so more power to them. But, I thought it was startling that they believed they thought, by their own admission, that they “don’t’ spend anything.”
I can understand why they feel they don’t spend anything. Most of their expenses are of the “structured” variety. They aren’t going to the store every month and buying their HBO subscription or gym membership. You sign up once and it kills your soul every month into perpetuity. Newton’s law of inertia tells you that you’ll just keep on spending along this path because it is difficult to change (how long does it take to cancel Comcast, three hours on hold?).
Our family isn’t immune to this. We are slowly but fervently trying to claw our way out of a lot of structured expenses. Our luxury cars (and associated property taxes and insurance) kill us every month. We ended our cable, have subletted our Manhattan apartment, are energy-efficientizing our home, and switched to RingPlus phone plans. These changes took time, money and effort, but they’ll be worth it. Over the next few months, our expenses will drop from ~$9k/mo to ~$5.5k/mo. After our cars are downsized and we continue to improve in other areas, that will fall by another $500-$1,000.
Expense reduction and optimization isn’t about avoiding the daily Starbucks or always flying out on a Tuesday. Those things help, for sure, but you need to look at expenses the same way you look at saving (a penny saved is a penny earned, right?). Most financial gurus, and me, advise people to “making saving automatic” and to create streams of passive income. Expenses are no different. “Remove/reduce automatic expenses,” meaning, cut out those expenses that hit you like a punch in a dark room. Take the action today to create streams of “passive expense optimization.” I shop around for car and home insurance every time I renew (six months or annually). I recently paid a $320 early termination fee for DirecTV, but that will save me over $2,000 over the rest of our contract. I bought a dozen LED lights today for our kitchen and hallways—a $120 expense that will save $120/yr for a decade or more.
You don’t need to do it all today, but every month take a look at your expenses and identify those that, like I said, hit you automatically, where there is no point-of-sale. That’s where you can cut some serious fat and create great wealth over time.