This is an extremely detailed series of posts that applies not only to First Home Buyers, but also to existing home-owners. The point is to cover the most major expenses and how to make sure that your mutilation powers are at their highest with all of them. You want details? Read these!
This is a highly varying expense from what I’ve experienced. Here in Australia we are extremely lucky in that we have incredible food of all different varieties available on almost every corner. You can get a fantastic Thai meal, pop down the road and enjoy fish and chips, Chinese, Indian or pizza. On a recent visit to Paris, I was eager to sample their “amazing pastries” that everyone had told me about. I was a little disappointed though to find out that they essentially tasted just as good as what you’d find here in a professional patisserie shop. Not that that was a bad thing as they were still amazing, it just further drove home that we have extremely good food here, and most people make excellent use of it too. Problems can arise though when this appreciation turns into a rampant quest to “try everything” and buy whatever you feel like at the stores. A chunk of brie cheese here… that delicious pack of chocolate biscuits there… those awesome cakes or snot blocks. It all adds up very quickly and food is also particularly susceptible to “lifestyle inflation”. When you start eating more luxurious food, it becomes more difficult to STOP eating those more luxurious foods later on. This is also what seems to lead to such vast differences in peoples food budget as well as their often harsh reactions that they “could never eat like that!”.
As a result, you have some people who are perfectly happy eating potatoes, rice, beans, veggies and so on all their life costing very little. You then also have the highly pushed “Western” diets of meat in every meal (and a major part of it too), dairy in almost every meal too and very high contents of fat and sugar. Unfortunately if you’re already inflated up to this standard, you will likely have a difficult time coming back down but it is possible over time. I like to think of it as weaning yourself off a crack habit that’s been unknowingly forced upon you by society. There are three main categories to attack though: Home Foods, Take-Away Foods and Work Foods.
This is everything you buy from Coles, Woolworth’s, butchers, fruiterers and so on. This should be your main expense for food. Mr Money Mustache has an excellent article here outlining some very good tips however I must confess, we haven’t been able to get down to that level of spending ($80/week) just yet. From what I’ve read the cost of living here is around 1.4 times theirs so that $80 is probably more like $112/week. Hopefully with some more tweaking and cooking experimentation we’ll one day get it though. Now here is where I would suggest or demand that you adhere to $xxx/week of home food budget… but people don’t like that much as mentioned earlier. They see “$80/week” and scream out that it’s IMPOSSIBRU! However they are simply sitting at a higher level of lifestyle than the other person who is quite happy eating their way. Your food bill could be $200/week, it is irrelevant. What I would like you to realise is that what you currently eat is under your control and that getting angry and saying it’s impossible to be happy spending any less doesn’t help in any way. Realise that there could be someone who spends $300/week and thinks that it’s ALSO impossible to “only” spend $200/week. Your resistance to living off less is ONLY in your head and as soon as you realise that, you can control it and massive savings are possible.
To further drive home this very important point consider this quote from ERE:
The Wheaton Eco-scale explains this in a brilliant way. Consider people living at different budgets, e.g. $100k, $80k, $60k, $50k, $40k, $30k $20k, $15k, $10k, $7.5k, $5k, $2.5, $1k, and $0k. Now, what Wheaton observes is that people who spend one or two levels below you are inspiring to you in terms of budget reductions. People who spend three levels below you are slightly nutty and people who spend four or more levels below your level are crazy or downright extreme. This holds no matter where you are. If you spend 60k, then 50k and 40k is inspiring, 30k is nutty and 20k is crazy. If you spend 30k, then 20k and 15k is inspiring, 10k is nutty, and 7.5k is crazy. Conversely, people who spend a couple of levels above you are considered prodigal and wasteful.
No matter how much you spend on food per week, $300, $250, $200, $150, $100, $50, $0… someone else saying they spend less will ALWAYS sound inspiring, nutty or crazy depending on how much lower than you they are. So if you’d like to get around this mental road block simply assume that “crazy” lower amount can be done. It clearly can be as this other person is doing it already!
From monitoring our Home Food spending over the past year+ we spend around $115/week. That’s for two people (one gluten free) eating basically whatever we want, whenever we want and just generally not trying to eat on a budget so I know we can do better. I’m aiming to get that down to $95-100/week without us noticing much which I think is very possible. Doing things like buying meat only from the butcher as opposed to at Coles, buying far less meat and dairy products and so on. After that, we might try for $80/week who knows! The point is that you can be happy eating food at almost any cost, so why not make it as cheap as possible. According to the AIFS, a couple under 35 spends 10.2% of their income on food. At an average income of 2 people earning $70,000 each the Total Income After Taxes is $110,900. 10.2% of that is $11,311.80 or $217.53/week. If that number is close to yours I’m sure you’re very happy eating at that cost… but we’re ALSO very happy eating at $115/week… and I know we can be happy eating at $95-100/week. The trick is to be aware that you CAN be happy spending less money. The other one is being careful not to steadily get more fancier with your food choices. As a result your body will likely thank you for it too. Science tells us that when we eat meat it should be used basically as a garnish not half our plate, we only need roughly 230 grams of meat PER WEEK (that link is to a fantastic TED talk BTW). The Australian government seems to pretty much agree with that as well. The healthier you eat, the cheaper it should be.
To begin with, be mindful of what you buy and keep a record of how much it costs. I find this extremely easy as virtually all food we buy is done on EFTPOS and thus is automatically recorded for us. Once you have one month under your belt you should have an idea of what your per week amount is. You might even be able to look back over your bank statements and come up with it right now. Whichever one you do, put this figure in your spreadsheet and then cut $20/week off it. After you figure out how to hit that amount and are used to it, cut another $20/week off it. It’s not impossible, thousands of people live happy lives without 12 different types of cheese, block after block of chocolate and frozen meals. If you find you simply can’t get the number down any more, start learning how to cook luxury meals with simple staples like rice, beans, potatoes and pasta. I’ll get back to you when I’ve mastered that task… More options to save include having your own vegetable or herb garden, cutting right back on packaged or processed foods, cutting back your dairy and meat intakes and more. Ask your parents or friends what their favourite cheap meals are and incorporate them into your recipe list. Ask your parents how they save money shopping, I’m sure they’ll have something.
A final note is that many people when faced with trying to curb the food budget go straight to trying to buy specials or assume the only way to do it is to become a coupon cutting nut job. The truth is though that it simply takes a higher level of cooking skill and planning. Just as you can get different mileage in the same car by driving it differently, so to can you get better meals from cheaper ingredients by knowing what to buy and how to cook. A very simple example is baking a cake. If you don’t have the knowledge or skill to bake a cake, you’ll have to buy one which will cost you more money than if you were to cook it yourself. Buying something on special is a great idea, however having the skill to turn a cheap old potato into a delicious meal is far more powerful (and will likely taste better too).
Next up we have the take away category. This includes things like KFC, dinners out with friends, chicken and chips on the beach and so on. First off, this stuff is just simply shit for your body. There’s been scientific studies done, there’s been UN-scientific studies done, there’s also just plain common sense. I’m mostly referring to the McDonalds, the KFC’s, the Hungry Jacks with this accusation. Aside from the high fat levels, I’d imagine fish and chips should be not too bad for you assuming it’s a decent bit of fish that is. But back to the point, eliminating the fast food restaurants completely is a killer thing to do. Your food budget will go down which means your mortgage killing powers will go up and as a second reward you’ll be much healthier too. If you scoff at this idea to eliminate ALL fast food from your diet do a search on your bank account transaction history for words like “KFC”, “McDonald”, “Rooster” or “Jacks” and add up how much you’ve spent this year. I did it just then and it came out to $0 (as a side note I do remember buying a 30 cent cone from McDonald’s to be completely thorough). How much are you wasting on seriously crap, disturbing food that’s also making you live a shorter life? Just stop and divert all that money into your mortgage, find something else to take its place. Personally, I use real food.
Another big money sucker (often far higher than fast food) is the “dinners out”. As I’ve mentioned, Australia has GREAT restaurants and GREAT food. I have trouble picking between Indian, Pizza, Thai, Charcoal Chicken, Chinese or Japanese. We are very spoilt. Regardless the same principal mentioned in Home Food can be applied here, no matter what you spend there will always be someone who spends less and who is still very happy. We’re certainly very happy and do indulge ourselves every now and then on going out but it’s become a very special occasion now. Over the last 3 months the Take-Away Food expenses have been $0.00, $70.39 and $0.00 (that $70.39 month had a fantastic party in it where we all had different take away foods!). Going out to dinner or ordering take out around once a month is probably our average I’d say but I’m sure we’d be just as fine doing it once every two months. Figure out how much you’re spending and start cutting it down. Eating out is a great past time but it should be savoured and done in moderation, not 2-3 times per week as otherwise you’ll lose your appreciation for it and pay through the nose as well.
One very important thing to ensure you aren’t constantly tempted into buying take away food is to try and prioritize having a good amount of energy left when you get home from work each day. When it’s been a crap day and all you want to do is veg on the couch, cooking a meal seems a lot less appetising than ordering out. If you can’t manage to make sure you’ve got enough energy after you get home, think ahead and prepare a few frozen home cooked meals on the weekend. Some people do this with a full sized freezer and cook meals for up to a month! You can also again use a higher skill level by developing your “quick meal” powers. You might be stuffed after work, but if you can make an OK meal in under 10 minutes and with very little effort it should go a long way to helping you not order out instead (I love baked potatoes myself for this).
In the end though it’s simply a matter of weaning yourself off of the habit. Does that 2-3 nights per week of eating take out sound familiar to you? Try limiting yourself to 2 times a week for a month. Then 1 times a week the month after. Then once a fortnight and so on. You might think that you “love food too much to give it up” but this slow process should hopefully alleviate any feelings that you’re “giving it up”. Even if you don’t hit your goals each month keep at it as after 6 or 12 months you’ll look back at what your take out budget looked like and be mortified at how much money you were just throwing away.
This one is often very touchy for people too. It can also be the second biggest food expenses if you’re not doing it right. Each time when I travel into work I see countless people picking up their daily morning coffee from the coffee shop. Now I know people LOVE their coffee and I’m all for cutting expenses where you feel them the least, but after a while these types of careless expenses have to go. There are other ways to get your coffee fix for FAR less if you can’t manage to kick the habit. Many work places offer tea and coffee for free, you can buy a second hand coffee machine and bring it into work if you want or you can just BYO from home. Either way people who buy daily coffees are just leaking money all day, every day. I’d say I love soft drink just as much as others love coffee… but I’ve never bought one EVERY day! Even at a cheapish $2.50 each that’s still $2.50 * 5 * 48 = $600 / year! Add in the muffin or whatever people seem to buy (at say another $3) and that’s $1,320 / year.
Next up is the work lunch. This one’s again a bit touchy but I’m putting my foot down just like I did with the 70% rule. Work lunch should never be bought.
There, I said it.
This might be a WAYYY out idea for some, then again you might be reading this nodding along going “aha… damn straight Mortgage Mutilator”. Either way buying your lunches whilst at work is like walking around having dollar coins fall out of your pockets all day, it’s stupid. It lowers Your Real Hourly Wage, is quite often way less healthy for you, stunts your mortgage mutilation powers and has many easy solutions. I always keep some cereal at work for those few times when things are going crazy and I can’t organise anything or just simply forget to make my lunch somehow. Cereal isn’t always the most nutritional thing and I’m not saying you should eat it every day for lunch but it does make for a great emergency food that’s cheap and lasts a long time in a locker or under the desk. For the normal days just prepare your lunch the night before hand. It really is that simple and if you’re not doing this you need to start ASAP. Buying lunch a few days a week or even every day gets ridiculously expensive with most meals costing around $8 or so for the food and maybe $3 for the drink. That’s ($8+$3) * 5 * 48 = $2,640 per year. $5,280 if your significant other buys out too. That costs almost as much as running a car!
A final idea that may help if you work at a standard work desk is to purchase a second hand mini fridge (like this one for $89) and stock it full of regular, supermarket bought food just like you do at home. If that fridge is a bit too big to fit under the desk there are even smaller ones available and you can even go halves with a co-worker to cut down on costs even more. Ultimately you shouldn’t be spending a cent whilst working. Not on coffee, not on muffins and not on lunches. Every dollar you spend at work eats into the very time you’re exchanging for money and as such slows you down. Plug every hole you can, man up and stop wussing out by handing over your hard earned cash to someone else who then just gives you food that makes you fatter. No complainypants here, bring/make your lunch every single work day.
The End Result:
Some of these things you might already do, you might even do ALL of them (congrats if that’s the case). However if you don’t it means there are savings to grab onto and cram into your mortgage instead, lowering it’s Loan Term.
So which one is your Achilles heel and what do you plan on doing about it? Also as always, if you have any good tips of your own feel free to post them in the comments!
*The macaroons in the featured image were made by DW and were delicious. Usually costing about $2.50+ each in the shops, that tray would probably cost upwards of $75 to buy! By levelling up her cooking skills to “French Pastry Chef” and being able to make them at home, we got them for less than $6-7 or so.
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The benefits include: 1) How to pay off your mortgage faster than 99% of people with one hour a month of work 2) How to get rid of your debt and have the freedom to spend money on the things you love, guilt free 3) Clear outline of how to setup your expenses, mortgage and general finance 4) How offset accounts work and how to get the same result without being gouged by the big banks 5) How to cut through the crap and focus on the things that truly matter when taking down a mortgage 6) How to adjust the strategy so it works for you, even if you have kids, even if you only have one income 7) How to do all of these things and maintain a normal social life (and never be cheap).