By and large, we are a typical Midwestern family. I work an 8 to 5 job, my wife is a stay-at-home mom, and we have one child. It took us seven years to have our first kid, but we plan to have as many kids as God will give us (I hope He doesn’t give us more than four). I only work 40 hours/week because I want to be able to spend time with my family, and actually get to enjoy some of my youth. We spend a good amount of time at church so moonlighting is off the table. Also, we give money to church and other charities. So how does a family with (hopefully) multiple children, limited time, retire early on a single income all while also donating to charity?
The most basic advice you can be given is to make a budget, and then spend less than you make. This is pretty solid advice. We have a budget, but it’s mostly for tracking our spending rather than strictly budgeting it. We find that having a number without holding ourselves to it rigidly works well for us. The main expenses in our budget are groceries, entertainment, gas, bills, and pop-up expenses. Here’s a rough breakdown of what those expenses look like for us, and how we work to spend a reasonable amount in each category.
Groceries
This category is pretty self-explanatory. We cook for ourselves most of the time and we buy groceries at Walmart. It comes to a few hundred dollars a month.
When you shop at Walmart, it’s pretty easy to keep the grocery budget low. We make sure to buy non-perishable items in bulk. In our opinion, most generic brands taste just the same as name brands, so we tend to buy almost exclusively off-brand groceries.
For breakfast we usually eat cereal. Cereal is already pretty cheap but we make each dollar stretch by buying the giant bags to off-brand cereal. This doesn’t mean we get the cheapest stuff possible, but we often get Malt-o-Meal brand and save name brands for the cereal for when there is no off-brand available. Breakfast usually comes to $0.50/meal.
I bring a lunch to work which usually consists of a sandwich, a bag of chips, a drink, and maybe a dessert. Courtney makes bread which is super cheap since it’s mostly flour, but homemade bread is far better than even expensive quality bread from a store. Instead of individual bags of chips, we get a family-sized bag and portion it into little Ziploc baggies (which are then reused so we aren’t filling landfills with plastic).
I may get ridiculed for this but I still like Capri Suns so we get a big pack of those and put one in my lunch. And for dessert Courtney makes cookies or cake or something that tastes way better than junk food from Walmart and is much cheaper. If I am working from home, as I have been for the last year, we tend to eat leftovers, or just the same thing I usually eat in lunches. My lunch probably costs $2/day.
Dinner is where things get a little more “expensive”. We love Italian, Chinese, Indian, Mexican, pretty much everything, but what do these all have in common? They cost quite a bit at a restaurant, but can be made for cents on the dollar at home. You don’t even really need to know how to cook. I make a mean stir fry if I do say so myself, and it’s basically just meat, frozen veggies, rice, and whatever seasonings and sauces sound good that evening. And it always makes leftovers. We can make dinner for like $3/meal.
Entertainment
This category consists of eating out, hobbies, going to movies etc. We eat out once a week, on average, each have a couple of hobbies, and will go out for the occasional movie (When movies are actually in theater, unlike this year). Entertainment comes to about a couple hundred dollars a month.
Basically we save money on entertainment mostly by cooking our own meals, but when we do go out for food, we have a few simple rules that help us save hundreds/year.
1. We don’t order drinks. Sure pop tastes good (so I’m told), but at anywhere from $2-$6 for a drink, it can add up quickly. Also pop is terrible for you, even sugar-free pop is still carbonic acid which degrades your teeth. Water is free and good for you!
2. We never order alcohol. It helps that we don’t like the taste, but the tax on alcohol makes it fiscally untenable. See also all the health reasons laid out in rule 1 above.
3. We don’t order dessert. By now you’re probably starting to think I’m just a kill-joy. But the reason we don’t order dessert is that we almost never finish our plates when we eat out. Don’t stuff yourself just to eat some piece of cake that’s been sitting out in their kitchen for 12 hours. Make your own cake at home. It’s much tastier and cheaper.
4. Take home leftovers. Don’t force yourself to finish the food that’s on your plate because you think it’s wasteful not to, and don’t throw it out. Get a to-go box! Those leftovers can become a meal tomorrow, thus saving you money on your grocery budget. I have heard that there are actually people who think it’s cheap to take home leftovers.
5. We like to see movies in the theater, but we never buy snacks from the theater. We always bring our own snacks to the movies. In this day and age, most movie theater employees don’t bother checking your bag unless you’re carrying in a duffel bag. We make it a game to see how much we can sneak into the theater. Our goal is to one day sneak a whole pizza in!
As for hobbies, both of us have reasonably cheap hobbies. My wife loves to collect books, and I like to rock climb. When done right, neither of those hobbies are horribly expensive. My wife almost never pays full price for a book, opting to either buy them online or just finding books at thrift stores. And even though we have to go to a climbing gym to climb (not many big rocks in Kansas), I get a punch pass that goes on sale twice a year.
Gas
Once again, this category is also self-explanatory. While we try not to drive a whole lot, about once every month or two we travel to Nebraska to see family so that’s about $50 in and of itself. Since I’ve been able to work from home for the past year, we’ve been able to keep gas under $100/month.
We have two cars, both of which get about 30 miles to the gallon. We live about 15 miles from my work place, and while we could live closer to save on gas we like our neighborhood. I save on gas by coasting up to red lights and not accelerating quickly. The majority of gas is wasted when starting from a stop so if you time your lights well you can save a lot on gas. I’m not kidding. Seriously, if you only take one thing from this whole article, I want you to start coasting up to red lights. My wife, who edits these articles, doesn’t want me to leave this in but I’m dead serious. Also I never turn the AC onto full-blast. It takes a lot of energy to run a condenser.
Bills
This category includes our mortgage, utilities, and other recurring bills. The mortgage is obviously the biggest part of this section, but we refinanced last year and locked in a rate of 2.625%! We usually keep our bills under $2000/month.
The best way to save on bills is to refinance your mortgage. As a general rule of thumb if you can get a 1% reduction in mortgage rate, it’s worth refinancing. We refinanced from a 4.325% to a 2.625% dropping our payments by about $200/month. Utilities are another area where there is room to save. In the winter time we keep he heat at 68°F during the day and 64°F at night. In the summer we keep the AC at 78°F during the day and 72°F at night. These are totally reasonable temperatures for the Midwest. We are also in the process of replacing all the lights with LED’s. We are waiting until they burn out because it’s dumb to replace something before it’s broken.
Popup expenses
This category is our biggest variable in the budget. This includes annual insurance payments, car maintenance, big trips, and other expenses that are not monthly. We budget $1000/month for this, but it can be anywhere from a couple hundred to a couple thousand. Last year we averaged about $1000/month.
This is hard to keep control over, but in general we save on transportation by driving old cars. Since our cars aren’t worth much we only pay for liability insurance. In my opinion, full coverage is a scam. I also do much of the routine car maintenance myself. My dad and I change our own oil, brakes, and rotors. A high-mileage synthetic oil change will cost you $80 at an oil place (and even more at the dealership), but doing it yourself will only set you back about an hour plus the cost of the oil (about $20 at Walmart). Changing oil on two cars twice a year saves us $240/year. And for the record I’m not a car guy, I just looked up how to do this on YouTube.
As for vacations or big trips, we work to keep costs low by Pricelining hotels, packing meals for car trips, and finding deals when possible. But I’ll be honest, this is the area we are most likely to splurge. We like to try new experiences, so often vacations are full to the brim with different activities.
How Much do we Spend?
So doing a back of the napkin calculation, our essential expenses are roughly $3600/month or $43,200/year. This allows us to use a large portion of my salary for other things.
One of the things we do with this is we tithe 10% to our local church. This isn’t a compulsory giving, but 10% is an easy amount for us and we’re happy to help the church out however we can. We donate to an International Student organization that works with our Alma Maters, and this year we donated to the Prevent Cancer Foundation.
All this isn’t to say look at us we’re so frugal. But I hope it does give an example of how a middle-class family can easily stay under budget. And as I mentioned earlier in this post, we’re not strict in keeping to this budget. While we try to be frugal, we’re not being cheap. We don’t just eat Ramen noodles or rice and beans to save money. Courtney makes real meals that taste great, and we still go out to eat regularly. We don’t turn off the heat in the winter time and when something is seriously wrong with our cars we take them to a mechanic.
There’s a difference between frugal and being cheap, and while that line is different for different people, I don’t think we’re cheap. We don’t pinch pennies or clip coupons, but we like to live frugally so that we can spend money on things that are important to us. Like I’ve already said many times on this blog: financial independence isn’t a race, it’s a slow burn. So based on our spending how early can we retire? Find out in Part 2 of this post next time.
What do you think? What’s a major expense for you? Or what have you sacrificed to reach financial independence? Let us know in the comments below!
