People sometimes ask me how we are able to save over 50% of our take home pay. Well below is the answer to this. This post is long!
One of the biggest expenses we all have is our housing cost. Not many people are lucky enough to live mortgage or rent-free. There are a couple of considerations which everyone should take into account when deciding where to live.
First and very often an important factor for all is the size of the property. Very often people find themselves living in large houses far from work which they hardly use due to working all the time. We found ourselves the happiest when living in a tiny apartment a few years ago. It was very warm, the neighbours were fairly decent most of the time and the bills were minimal.
We are always considering the following:
"Happy wife = happy life! "
The above four are satisfied because Mrs Frugal can walk to work, this cuts down the cost of having an additional car. It also saves time which is handy since we have a dog called Obi-Wan Kenobi. Mrs Frugal can see him during her lunch break which is great. It makes her and the dog happy. Happy wife = happy life! Oh and yes I am a Star Wars nerd.
Rent has to be lower than the local rate, this is usually because the property is not of an amazing standard with a cheap finish and or is outdated. These things don’t bother us too much as long as it can be kept warm, can be cleaned and maintained, and there is no mould.
Since we delayed getting onto the housing ladder due to Brexit we had the flexibility of where to live. We are currently considering buying a property, which is a completely new topic all on its own. Let's just say that we are not looking at the top of our budget and that I will need to learn a lot of DYI.
2. Saving vs investing, savings rate and automation
Sooooo everyone’s favourite topic of saving money. This is a very broad topic, but the key things to consider here are:
“Poor people pay interest.
Rich people earn interest”
Now, this topic might be confrontational to some. Especially those with expensive German cars on finance or on lease.
4. Housing essentials
We are talking about things such as gas and electricity supplier, insurance and broadband which I see as housing essentials. Shop around and find the best deal for you. There are many comparison websites out there. I used comparethemarket.com, confused.com and others. Click on the link below to see what you could save and support my blog at the same time! I do this every year!
5. Housing extras – mobile phones, cable and other
Now we are getting into territory where people get very defensive. For some reason, people are very protective about their ridiculous mobile phone contract deals, Sky TV or other cable TV packages. They always try to justify that it is fine to pay in the region of £100 for their brand new iPhone 27 and an incredible TV package.
I’m not here to judge, but let me tell you what we have.
Mrs Frugal has a sim only contract for £12 with three and I do too. We use old iPhones 6 and we are usually around 5 years behind on mobile phone technology. My phone does all I need it to do and I am not paying a ridiculous amount of money for that. We also have a Netflix subscription for those rare times when we actually watch TV. Total cost of £30 per month.
6. Gym membership
This one is simple. If you attend gym regularly and you get real value out of that then so be it, but if not cancel the bloody thing, get some weights and used elliptical machine.
Congratulations on getting so far!
"Set a goal!"
7. Side hustles
There are multiple ways you can make additional income. Most of us can gain some additional income by working on the side. Amazon Flex, other courier jobs, teaching instruments, creating online content, such as blogs or YouTube channel. Comment below if you start a blog, I will happily take a look.
8. Have a long term goal - 4% rule
Those of you who are unfamiliar with 4% rule. It is a rule of thumb which states that to be able to say that you are financially independent you should have wealth which consists of 25 times your annual expenses. This means that you can allocate this in low-risk index funds and draw down 4% of your money each year in perpetuity. So, what would that amount be for you? How long would it take you to get there?
27/11/2019 09:44:49 pm
save, invest, (and do not forget) Enjoy!!!
28/11/2019 08:19:29 pm
Thank you Michal, yes that's exactly correct. Never forgetting about enjoying. We actually have £100 in our monthly budget destined to go towards enjoyment. Whether that's going out to eat, a device we don't really need or just many takeaways. It is better to take into account that we are not perfect rather than trying to deprive ourselves. We are still very intentional about our spending, but making sure we don't go over a certain amount.
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My name is Witold, but I call myself a frugal alien on this blog. Why? Because I feel like one when talking to people about personal finance. I write about financial independence and ideas surrounding it whilst embarking on that journey with my wife.
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