Most of my writing to date on this blog has centred around the many strategies, techniques and pitfalls I endure with regards to my savings and investments. However a less discussed but equally important part of the Money Tree is ensuring a tight lid is kept on costs.
There are a million and one ways to cuts back costs and reduce your monthly expenditure. Below I’ve shared some of the practical ways that I keep our monthly outgoings low that I think should be applicable to most people.
Get a Big Money Jar
I suspect the first time most of us heard about the concept of saving was when we were given our first piggy banks as small children. When I grew up I decided to make my piggy bank grow with me.
These days I rarely spend cash. If it’s in my wallet, I tend to spend it so I avoid visiting the cash machine where ever possible. By avoiding holding cash I naturally cut down my ‘casual spending’ on things like coffee, snacks etc. Where possible all expenditure is done on our British Airways Amex card and is paid off in full each month. However when I do break into a note, I ensure that any spare change in my pocket at the end of the day gets fed into the Money Tree Fund fund in order to avoid these small unnecessary expenses.
The jar (a 5 litre Demijohn) gets fed every UK coin apart from £2 coins1. It usually takes just over a year to fill up. Last year when it was emptied it contributed £1,127 to the Money Tree. As with all savings this pot never gets raided in an emergency.
Cheap Motoring
According to the RAC in the UK it costs an average of £6,689 per year for us Brits to own and run a car here in the UK. For someone earning the national average wage of £26,500 this represents a whopping 31.8% of their take home pay (£20,975).
It is for this very reason that we still drive around in the little car my wife bought2 when she passed her driving test about 15 years ago. We tend to avoid long journeys in it, preferring to take the train or cycle instead. Likewise any short journeys are done by bike where possible. To date it still has only done around 43,000 miles in 15 years.
The radio gave up the ghost a long time ago. The heater is stuck on hot. A mouse broke in and nibbled half of the gear knob away. In the depths of winter you have to de-ice the INSIDE of the windscreen but you know what…it gets us to where we want to go and it’s cheap to run.
Nobody would want to steal it, so it’s insured third part only (not even fire or theft) and it’s not full of unnecessary electronics that break down every few months3 so is reasonably easy/cheap to repair or replace components. I’ve even learnt to do a basic service myself to avoid garage costs (see below).
A good set of tools
Over the years I’ve managed to acquire what now amounts to a decent set of tools. I tend to avoid buying large tool kits (my exception here is a decent set of sockets and spanners) as they usually contain too many tools you’ll never use and are sometimes filled with some items that are not the best quality. Instead I only buy tools as and when I need them, preferring to buy better quality brands that should last a lifetime. Buying second hand hand is usually a great way to get better quality tools for less money.
I consider myself to be physically dyslexic when it comes to mechanics and DIY. However with decent tools, youtube and lots of patience you can save a lot of $ on maintenance costs. For example despite my lack of mechanical skill, I’ve recently managed to:
- Replace my bicycles wheel bearings (cost £4.99 versus a quote of £55)
- Replace our boiler/heating pump (cost £39 versus expected cost of £140)
- Oil & filter change in car (£45 versus expected £110)
- Fix water softener (£0 versus expected £85)
- Replace rusted manhole cover and re-bed in a replacement
That’s £301 saved right there.
Of course if you’re a DIY ninja like Mr.MM then you can just build yourself a brand new super insulated, energy efficient house that will never break down and save a fortune in the long run!
Vegetarianism
Mrs Money Tree is a vegetarian, and quite a militant one at that. Meat in our kitchen is a firm no no. The only time I really get to eat meat at home is when we barbecue for friends. In the early part of our relationship I did struggle with the lack of meat at home having grown up in a very carnivorous family.
I’ve found that with vegetarian food you need to put a lot more thought into your dishes to come up with healthy and tasty food. If you’re not careful you end up eating pasta every day. Luckily for me, the superb cooking skills of Mrs Money Tree have compensated for the lack of meat and our food never lacks flavour or satisfaction.
As a result of eating meat much less often I am now far more concious about the origin and quality of meat I consume when I do. I often find myself shunning much of the work canteens meaty offerings when I doubt the quality of ingredients they use and avoiding cheap mass produced sandwiches.
The result of this enforced vegetarianism is that our weekly shopping bill is much less that it would be if we were both carnivores. Meat is expensive when compared to even organic beans and vegetables. I suspect most of the population would benefit (financially as well as physically) from eating a little less [red] meat.
Buy Local
We are very lucky in that we live in a rural area which has a large number of fruit and vegetable producers. Within about 2 miles of our house we have about 10 ‘farm shops’ that sell locally grown fruit and vegetables. When I say ‘farm shop’ I’m not talking about the type of places that charge £5 for an ‘artisan loaf’ but mainly roadside stalls, allotment stalls and semi commercial ventures that sell out of converted garden sheds.
These places sell locally grown vegetables & fruit at (usually) much cheaper prices than the big supermarkets (even after you factor in the the never ending 2for1 offers). Not only are they cheaper but you get to feel smug about supporting these local producers as well as eating seasonal produce.
As an example, this morning I picked up our vegetables for the week:
- 1/2 dozen eggs4
- 2 punnets of strawberries
- 2 bags of broad beans
- 1 bag of new potatoes
- 1 punnet of tomatoes
- 2 bunches of asparagus
This little lot was acquired for the princely sum of £8. Supplemented with some spinach and lettuce from the garden and some store cupboard items and we have pretty much a weeks worth dinners with a few lunches too. It wouldn’t be hard to double or treble this bill by adding a few choice cuts of meat or fish. There’s no doubt about it…..going Veggie is cheaper!
Throughout the spring/summer we also benefit from the abundance of fruit and vegetables that grow wild in hedgerows and woodlands nearby. Again within a short walk or cycle of our place we’ve discovered places to pick wild apples (cookers and eaters), wild plums, Victoria plums, horse radish 5, wild garlic, elderflower, walnuts, gooseberries, red currants and blackberries. It’s amazing how much free food is about when you start looking for it.
Don’t buy Local
I’m afraid we don’t live The Good Life entirely. For dry/tinned store cupboard goods and other household consumables we usually buy in bulk either from a local Asian supermarket or during our roughly bi annual trip to Costco. In both of these places you can make significant savings compared to supermarkets. However you do need to be careful because while some goods are much cheaper, it’s not the case for everything. Buyer beware.
Any vegetarians amongst you will know that in order to avoid eating nothing but pasta you need to befriend beans, pulses, grains, dals and spices. All of these items tend to be ludicrously expensive in supermarkets so it definitely pays to bulk buy from cheaper retailers.
Notes:
1the neck it too narrow for £2 coins
2foolishly purchased on credit before she joined me under the money tree
3not wanting to tempt fate
4yes I know eggs aren’t vegetables!
5alas never used for a nice piece of beef 🙁
Great list of ways to cut costs. I do most of them except for the car one. Our car is 7 years old at the moment but since hubby drives a lot for work, it already has nearly 150,000 miles on the clock. I hoping it will last a couple more years yet but don’t think we would be able to get it to 15 years.
We have a camper van money jar that our change goes into and it’s surprising how quickly it adds up!
150,000 – crikey, that would take us about 40 years to clock up at the current rate!
Glad I stumbled upon your site. I’m going to spend a bit of time trawling your articles, I like what’s happening here – rss’d 🙂 Our car is 15 years old with 150k miles, can I join the club 😉 Vegetarianism isn’t quite for me, but I want to start cooking one vegetarian meal at least once a week. Not just to save money, but to learn more recipes and ingredient combos. I’m pretty good with DIY, but I’d be a bit cautious of boiler work. I guess with a good manual it can’t be too tricky?
Hi Leo,
Thanks for the comments. Give the meatless cooking a try, it really gets you thinking about combinations and challenges you to become a better cook. I’d recommend starting off by looking at Italian and Indian cuisines as they have so many great veggie dishes.
Regarding the boiler it was just an external pump that feeds our gravity fed heating system. As with most things if you take your time to read up and understand how things work you soon realize it’s not all that complicated. That said electrics is my exception – I don’t trust myself with that yet!
Great to see you focusing on this aspect of financial freedom. Escaping the tyranny of unnecessary expenses really is the key if you ask me. Some of the blog posts you read about safe withdrawal rates and investment charge percentages…… people would get a much bigger return if they spent a bit of time working out how to have an excellent quality of life without wasting so much money. It’s a real journey moving from standard consumer sucker to frugal early retirement wannabee and I’m still not sure how far we are along that path. Then someone comes along and claims you ‘need’ some ridiculous figure to live on and you just find yourself wondering why they don’t seem to ‘get it’. Anyway, the less you spend the smaller your target retirement pot needs to be, and the more you are able to save along the way too.
The semi-vegetarianism is something that we’ve fallen into as well. Getting over the young male bravado about eating meat is half the battle! We find dried lentils and beans with rice an incredibly cheap way of eating, but like you I’m lucky to have an other half who has a love of cooking and skills to match. But I do still like a bit of pig fat when I’m working outside in the cold!
I’m sure if Jacob from ERE was reading this he’d point out that housing is the number one cost, and you haven’t mentioned that at all in your article. Motoring is definitely number two for many people, though. I’ve found I save money on this by keeping annual depreciation under £500 and using a local independent mechanic who works out of one of those sheds where you buy your vegetables. It takes a while to find these off-the-radar people but they exist for every trade or service you may need, and they tend to charge around a quarter to a third of the high street and advertised equivalents.
I hope you’ve got a few more of those demi johns so you can turn all those wild plums, blackberries and so on into nearly-free wine!
You’re right about the million and one ways to save – it’s really a mindset that you develop and then you simply apply that to your expenses time and time again until you’ve got a really efficient set up. I pay particular attention to anything that costs at least £10 and recurs every month as that represents 1% of what I consider a sensible target household spend of £1,000 per month (ex-mortgage/rent). The challenge is that new £10 expenses keep coming along so you have to maintain that focus if you’re to avoid personal inflation, which of course also increases the target size of that retirement pot you’re building.
And at the same time we have to keep ourselves happy, and sometimes that does involve spending money!
@BeatTheSeasons
I fully agree with you regarding expenses. I like your suggestion about looking at expenses as a return. I kind of alluded to this in my article on NISA income where I look at how much capital you need to ‘earn’ the income to pay for some typical recurring expenses. It really makes you think about expenses differently.
Regarding housing, I’m fully aware that is represents a significant slice of monthly expenditure. We have benefted from having extremely low interest rates these last few years and have taken advantage by overpaying the mortgage. We also took the step to move out of London (but still commute in) to benefit from the vastly cheaper housing. Maybe I’ll do a follow up article on housing costs 😉
Finally rest assured, I do have some spare demi johns and I have grand plans to make a batch of Elderflower Champagne. I’ll report back if successful!
It’s partly an age thing. I can remember when I serviced our car, cycled everywhere, when we made our own wines from hedgerow harvests, butchered and cooked roadkill pheasant and venison.
Then you suffer illness, aches and pains, bad sight, and strict instructions from the medic never to get out of breath. I suppose the lesson is to do all these frugal-but-good-fun activities while you can; seize the day.
@dearieme – I’m not sure my veggie wife would allow butchered road kill in the house!
The penny jar is spectacular, but I’m not sure that I understand how it works (well, I fear it may not work at all for many people). The only way to cut expenditure is to cut back on spending, to spend less. Recycling change back into a non-interest-bearing savings account inside a glass jar won’t necessarily cut spending — unless the urge to spend is reduced when faced with having to break into a new note (which is what you seem to experience, so it works for you).
For other people, they’re just going to break into new notes more often — because the root cause of expenses (spending) isn’t directly addressed.
To be fair, I’m finding the same, ineffectiveness problem with the “pay yourself first” technique, of standing orders into my savings, investment and pension accounts at the start of each month. Since it doesn’t directly tackle spending, I’m building up impressive balances elsewhere, then having to transfer some “saving” back to my expense account to cover the subsequent overdraft.
Stephen Pollan (“Die Broke!”) pointed out that using physical cash rather than a credit card to enforce a planned budget is the best way to cut wasteful expenditure. Putting the change from notes into a glass jar rather defeats that — it becomes impossible to know where one’s money is, and whether one has spent 10p or £4.10 of that last fiver last week.
Jonathan,
For me the penny jar works. I try to avoid carrying cash at all times where possible. If i do take money out and break into a note it is all diverted into the jar before it gets frittered away on food/drinks I don’t need. For me the penny jar is like a savings bonus. I save regularly via standing orders after payday….I view anything in the penny jar is an ‘annual savings bonus’.
Because I tend to spend entirely on cards when I track my expenses I have a category for ‘cash’ which I know gets pretty much exclusively on lunchtime food and drinks.
If you’re struggling with the ‘pay yourself first’ then maybe you’re being too ambitious with your saving targets each month? Have you analysed your spending and drawn up a proper budget which includes amounts for saving/investments? If you have then I presume you missed some one off expenses that you may need to apportion out monthly in your budget.