We are blessed to be able to live a comfortable lifestyle in early retirement, by almost anyone’s standards. Our son thinks we are sometimes too frugal, but we’ve enjoyed many vacations, entertainment experiences, and everyday luxuries over the last 4 years.
In general, our spending is still in line or even slightly below what we planned for our FIRE escape. Still, like most people, we are more likely to think about what we spend too MUCH on, rather than too LITTLE.
Perhaps as Sam Walton, once the richest man in the world said, “even rich people like to save a buck.”
Which brings me to today’s question: “What are you wasting the most money on?” As background, here is a cool pie chart that shows what the average American household spends their money on:
The four big discretionary spending areas in our life are 1) our house; 2) our cars; 3) entertainment; and, 4) travel. I’m guessing if you look at our lifestyle, you could find $5K-$10K that could be cut pretty easily from our budget from any of those 4 areas.
HOUSE – We live in a house that’s much bigger than two people need, but our mortgage is paid off, and it is an appreciating asset over time. Other than taxes and repairs, we don’t spend a lot in this area, so I wouldn’t say this is the ‘worst’ thing we’ve spent money on.
Related: Building The Perfect Nest
CARS – We have nice everyday cars and a sports car for fun. I like cars more than the average person who might think of them only as ‘appliances’ for getting from A to B. We could switch from BMW & Mercedes to Honda & Toyota and save a lot per year, but so far we have been enjoying them as a ‘guilty pleasure’.
Related: Every Day This Man Takes A Vacation
TRAVEL – Being able to travel freely and see the world is one of the key benefits we sought in early retirement. While money is quickly spent on vacation, the dollars buy what I think are truly priceless experiences that shape your view of the world, of history, and stay with you forever.
ENTERTAINMENT – For us, entertainment includes our screens (cable, streaming, phones), dining out, concerts/shows/movies, and sports events. Like travel, most of these expenses are down dramatically in 2020. We had tickets to The Rolling Stones, Journey, and the Broadway Show ‘Frozen’ among many things that may not be rescheduled. Perhaps a lasting effect of the pandemic is that ticket prices will come down.
Related: The Price of Entertainment Keeps Rocking Higher
So what is worst? It is hard to decide. Of course, we spend money on all of these things today because we enjoy them. Still, my wife and I enjoy them to different degrees, so there is no one answer. My wife would cut back first on international travel, while I would cut back first on our cars.
We both would rank everyday entertainment as our #2 money wasting area, so that would actually likely be the area we would both initially agree to cut. Neither of us have a lot of energy for saying our house is our biggest money waste. We designed the house ourselves, love the space we have, and our neighborhood.
Again, thankfully we live a comfortable existence and enjoy the things we buy with our money. Four years into early retirement, we don’t have a need to cut back. Still, it’s hard not to ask what we get the least value from, is it?
Now I’ll ask you, “what do you waste the most money on?”
Image Credit: Pixabay
MrFireStation 
I would have to say, 1) Travel, 2) Entertainment, 3) House, 4) Gifts for us. We love traveling, but we have also cut back due to COVID this year, so we are building quite a war-chest of travel money for when this thing subsides. We spend a ton on entertainment, but I lump dining out, going to local breweries and wineries, etc into this category. Like you, the house is paid for, but we built the “custom-built” dream house compound about 12 years ago on 18 private acres in the country with a half mile of waterfront on a small lake. Heck, we don’t even go upstairs now that our daughters are grown! We definitely over built! But we love the privacy, the property, and the house really is incredible. Luckily our taxes and insurance are relatively low where we live, so the ongoing costs are actually very good. We definitely overspend on gifts, but it brings us joy to help our family and friends. With a new grand daughter, I only see this category getting more expensive! 😉
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What trips are you thinking about to spend your pandemic ‘war chest’ on – or is it too early for that? We haven’t thought that far ahead yet.
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It’s still a little early to say for sure given the COVID situation. We haven’t firmed up much yet. I doubt we will venture internationally unless things improve next year.
We have decided to shorten our normal month in the Florida Keys to a couple of weeks on the FL Gulf Coast this winter (due to the Mrs not wanting to be away from the new grand daughter too long!…ok, me either!) 😉 We are also thinking about a 2-3 week trip to Yellowstone/Grand Tetons/etc for late Spring/Early Summer, assuming COVID slows. (We were supposed to go there this summer, but held off.) We also both want to do an Alaskan trip, but we have nothing lined up at this point. Just beginning to research that option , so somewhat unlikely for next year. And we are planning a Nags Head, NC beach trip with the whole family next summer. I’m sure we will make several other week long trips next year, but we are really waiting to see what makes sense given all the craziness.
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Those sound like some great locations to visit, although a new granddaughter is even better. We’re thinking of staying in Florida longer this winter – probably 6 weeks – as long as things are reasonably OK with CV19. We also came close to going to Yellowstone/Tetons instead of the MN North Shore in a couple weeks. That is supposed to be beautiful and would allow me to get to Idaho, which is my 50th state.
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Personal vehicles is one of the biggest wastes of money we have. Tracking my expenses they stick out like a sore thumb. They are a real drain of money in gas, maintenance, insurance… We love having two vehicles ,but could do with just one. It would be possible to go without currently with Covid and working from home we have cut our driving down to almost nothing. Not driving saves money on gas, but insurance and repairs are still there. This year we had brake repairs and a coolant repair making the costs of maintaining two vehicles look like even more of a waste of money while driving so little.
On housing I would say it is a large % of our budget and we could cut there, but I don’t really want to figure out all the effort and impact to our current situation. Some people in the FIRE community have the opinion that having a paid off mortgage could be a hidden cost, as it does not include the opportunity cost of the capital locked into housing. My tracking of spending does not include the capital locked in my house. I would argue it is gaining value, if I were to sell it depending on the real-estate market, I assume that I am making a fair return on capital. I never really looked into it too much. I prefer the comfort of being debt-mortgage free. Although mathematically it is not the most efficient use of my capital.
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We had just 1 car for the first 5-6 years that we were married. I can’t see going back to that, although we got by with one car for the month we were in Florida earlier this year.
I don’t ‘buy’ into the idea that there is an opportunity cost to having a paid mortgage, because a paid mortgage is 100% risk-free, while any other investment carries risk. The most risk free investments have very little return. That said, we would have done well if we had NOT paid off our mortgage about 10 years ago.
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Chief, you hit the nail on the head at the end: What do we get the least value from? Waste is a hard question for me to answer, because we spend less than we make. Therefore, little of of our spending is “wasted.” This year, I had the dream-trip-of-a-lifetime scheduled: Safari to Serengeti. Two weeks, private guide, glamping and photos. Delta canceled my flights, and holds my money as “credit” for future travel (while absolving themselves from offering same cost or destination). Safari agency likewise canceled, holding my reservation funds for next year (likewise absolving themselves from responsibility to offer same trip). Did I “waste” our money? Time will tell. But so far I have received the least value from those expenditures. Here’s hoping it works out.
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That sounds like an amazing ‘dream trip’ and definitely on our punch list. Too bad they are holding onto your $$$, but hopefully it will happen in 2021. Our Zoo has offered a few Safari trips, but we haven’t signed up yet. The people that have gone have raved about it.
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Bowmanifesto,
Would love to hear about your eventual Safari trip. That sounds amazing! Hope it works out.
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Reviewing our monthly expenses, I realize that we are paying an amount for insurance that is second only to our housing and taxes. This is partly because we purchased two “almost” new cars last year. Of course insurance is not a waste, but I suspect that an hour or two getting quotes from competitive companies would bring this down by a significant amount. The fact that I keep putting this off is me wasting money.
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That’s a good idea to ‘shop’ insurance every few years. We last did it about 3 years ago and it is also probably time for us. We have are cars, house, umbrella, and a couple riders with State Farm. I’m guessing we could save a bit by looking around too.
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Big categories for us 1) Our son 2) House 3) Entertainment 4) Vehicles 5) travel 6) Mountain Cabin in CO … offset by rental ~6 months of the year. What would we cut back on? Well, the hope is our #1 expense starts coming off the books very soon. One semester to go. Certainly we could cut back on many things if we had too & we do play games occasionally to try out new spending models. I’m a fan of Ramit where he asks, what would you spend MORE money on? That’s an interesting question as well. I’d spend more money on entertainment right now … anything that is physical in nature (tennis, golf, hiking, … ). I’m sure that will change as travel opens up and as I get further into our retirement. It’s only been 7 weeks and it’s been awesome!
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Seven weeks retired – congratulations! Very glad for you to join the ranks of us goof offs and hope it is going well for you. One thing that I am looking at spending MORE on is an electric-assist bike. As you say, anything that is physical in nature is a good thing – even if it has an electric boost. Is your son lined up for a job when he graduates?
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Yes. He has an engineering major that is in great demand & has been in the same internship for the last year. You never know, but looks good. Love the e-bike idea! I’m really enjoying spending a LOT more time outside after so many years in a tech office. No complaints on my career journey tho. It was awesome, but on to new adventures … & try not to be enticed to go back to work.
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That’s great! Despite the pandemic, I’m guessing an engineer can write his own ticket into many jobs.
I seem to live outdoors now. Winter in MN is long – so we enjoy the warm weather as much as we can. Grilling steaks tonight!
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