Economic Shutdown: A Household Financial Cleanse With Eddie & Rebecca Goepp – Take One, May 2015

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So how did this Economic Shutdown start? Somewhat on a whim to be completely honest. Something that grew from a conversation to a challenge. My wife, Rebecca, and I are good stewards of our money. We save, we tithe to our church and support a number of charities, and we are free of consumer debt. We do carry a mortgage, but our interest rate is below 4%. We are comfortable and we are grateful.

All the same, there is a collective groan in the Goepp household when the credit card bill comes due each month. Yes, we have enough money to pay the bill and never carry a balance, but there is still a general sense of, “Where did our money go?” or “How does it add up so quickly?” I’m sure that conversation is not unique to our house.

SO what is to be done? How do we reset our spending habits? First, we needed to understand our spending. Where does our money go each month? Let’s look at “typical” month in the Goepp household. This does not include savings towards our retirement plans as this is a net take-home pay exercise (after all taxes, deductions, 401(k) contributions, etc.)

eddie-budget

What are my takeaways from this pie chart? We eat. A LOT. Like as much as our home! Obviously that’s an area where we can cut down on and see huge saving results. But there are definitely a number of areas where we can “tighten our belts.”

Let’s take a step back for a second and discuss the concept of this “economic shutdown”. Very simply put, if we don’t need it to live, we don’t buy it (within reason). The goal is to see how much we spend that goes somewhere unaccounted for, and the savings as a result at the end of the month if we were taking care to account for every dollar.

So we looked at areas where we MUST spend money. Obviously, we must pay our mortgage, our bills, we gotta eat, and put gas in our car, etc.

What We MUST Spend Money On (“The Bare Necessities of Life”- courtesy of Baloo & Mowgli):

  • Mortgage
  • Utilities
  • Cell phones
  • Food (grocery store, not dining out)
  • Gym membership (local gym, it’s reasonable and investing in health is important)
  • Medical expenses
  • Medicine
  • Car payment for Leaf  (my wife drives a Nissan Leaf on a two-year lease, and yes the tax credit is real)
  • Gas for my truck
  • Cable / Internet (justifying this as my wife and I both are expected to be available from home for our jobs)
  • Dog Food (but my wife has promised to skip the treats while on Economic Shutdown…this in and of itself will save us an unsightly amount of money, sorry honey!)

What We Will NOT Spend Money On (The Pleasantries of Life):

  • Gifts (sorry friends and family, especially our moms as Mother’s Day falls in May – get ready for some crafty homemade gifts courtesy of Rebecca)
  • Starbucks (painful for some in our house)
  • Clothes (should be an easy category)
  • Eating out (outside of a gift card of course!)
  • Movies (including renting movies and on-demand / iTunes, etc.)
  • Decorative house stuff (we have plenty, thanks)
  • Grooming (again more of a “sacrifice” for my wife than me, but no pedicures, haircuts, etc.)
  • Housekeeper (which means lots of vacuuming as our golden retriever is quite a “shedder”)
  • Alcohol (don’t laugh, but this one will be tough. We can drink what we already have, and no, I didn’t go stock up last week!)
  • Landscaper (I will be cutting my own lawn which I should be doing anyhow)
  • Dog Daycare (I call this private school for our pup) and Dog Treats (sorry EB, you’ll get plenty of carrots)

So, we’re going to take it one day at a time and keep track of every expense, avoiding unnecessary purchases along the way. We are going to be diligent in journaling our experience, feelings, and financial results. Each week, on Monday, we’ll post a new blog about what the last week entailed, in addition to any comparative changes from the week before. I think you get the picture…so from our house to yours…cheers to an economic shutdown!

Week 1 – (May 1st – May 8th)

As week one comes to a close, the first thought that comes to mind is “that wasn’t so bad”. The feeling is somewhat empowering. Knowing that you do have control over where you spend your money. Clearly, there are plenty of unexpected events and we were fortunate to avoid those this week. But, the point is, when you are cognizant of where each dollar goes and are actively trying to spend less, then the unexpected one-off events aren’t as difficult to navigate. (Side note/financial planning plug: This highlights the importance of keeping an emergency reserve fund liquid). When you’re not spending every last penny, then the things that aren’t planned for don’t derail your month. So, as I mentioned earlier, week one wasn’t so bad. Rebecca sent me a few thoughts on week one:

A few days in to our “Economic Shutdown” I thought to take a moment to reflect on my experience thus far… mainly to throw in a few acknowledgements. What Eddie and I cleverly called our “Bare Necessities of Life” is really so far from that. As I just bought medicine for my dog, I felt the need to call myself out. Our “bare necessities” include things like a health club, a pet and cable. These are luxuries, and we KNOW that.

This exercise that we are enjoying doing for a month, is still beyond the means of many people. We are incredibly blessed to be able to consider things like the health of our pet or our gym membership a non-negotiable expense, and I just felt the need to acknowledge that today.

This exercise is not about our family making a huge sacrifice because we really AREN’T making any such thing. Instead, it’s about learning how we can spend our money more wisely, and how we can alter our habits responsibly in order to save more. This month isn’t about saving a few thousand dollars only to blow it the next month… it’s more about finding where we can push our comfort level, and using that knowledge (and savings) to build upon in the future as we consider our spending habits.

For instance, if we could save $2000 this month, and then continue that trend even to a lesser degree in the following months, we could save $10,000 by the end of the year and have enough to invest that money within a Wela managed account. When I think about that, I more fully appreciate how cutting the “fluff” from our spending can have a tremendous cumulative effect. And that’s what we are working towards…

That’s all for today. Back to coupon cutting I go.

I really appreciated her perspective of this exercise we’re embarking on. It’s not about being a hermit or being miserly. It’s about cutting the fat to see the impact. And for this month, avoiding any splurging that we are so often tempted to enjoy. We’ve cooked at home each night and brought lunch to work each day. We avoided the usual $8-$10 daily lunch ticket that so frequently gets punched. We found ourselves taking the dog to four different parks this week to enjoy being outside and doing something different. A point of clarification, taking our dog to the park isn’t unique, but typically we go to the same park. Variety is the spice of life I guess you could say. The little league baseball team that I coach is in full swing so I was at the ballpark five of the last seven days. Yes, you read that correctly. Volunteering is a great way to productively occupy your time and not spend any money!

This past weekend, we attended a wedding in Athens, GA and did have to rent a hotel room. We split the room with another couple and that was the only expense we incurred. Thus far, it’s safe to say we’re off to a great start. Week one wasn’t so bad, so we’re beginning week two with a positive outlook!

Economic Shutdown Part 2: Tackling The Meal Plan