3 years ago I cancelled my disability insurance because I had enough money saved to insure myself. I had a group policy through my employer, Kaiser Permanente, and I had a private policy which cost me $471/month. I was looking over my spending and realized that I no longer needed my disability insurance. I called them up and cancelled that discretionary spending.
Just as some necessary spending became discretionary, some discretionary spending has become necessary. I had a very anemic condo insurance policy in place when I as working full-time. Once I retired, I needed much better coverage and upgraded the policy.
To figure out how much I spent in which category, I use my YNAB software to identify the discretionary categories and then look over to the right where the software shows me my average monthly spending.
It’s a good habit to evaluate your spending categories, to figure out which expense is no longer necessary. I still need a roof over my head, so my condo HOA dues, property taxes, and utilities won’t be discretionary anytime soon.
1. Cell phone – $30/month
My cell phone is a luxury. This beautiful, black iPhone is sitting next to me and it lights up when I get a text message or an email. It sucks up space in my pocket, electricity in my house, and my attention. It’s nice to have, but it’s not necessary.
I don’t make any phone calls using my cellular service, I always use WiFi. My text messages, phone calls, and data mostly go through WiFi, in fact. I use Google Hangouts and Google Voice for my communication needs. This works over cellular or WiFi.
I spend $30/month on my cell phone which doesn’t include the electricity needed to charge the little guy. It doesn’t include any accessories I have purchased, and it doesn’t include however much I will need to spend to replace this phone in the future. Most of the cell service I use is mobile data which I can do without.
2. Coffee – $150/month
I don’t need coffee, I want coffee. In fact, I have 2 coffee categories: coffee at a cafe and coffee beans I purchase for home brewing. That’s around $150/month of coffee.
I could switch to tea which is cheaper and I could stop buying coffee at the coffee shop and instead go hang out at the library for free.
3. Dining out – $100/month
When I eat out, it’s mostly because I didn’t make food ahead of time or because I was too lazy to cook at home. It’s not like I’m eating high-end food, we’re talking a sandwich on the go or a salad. These are often full of simple sugars and salt – and I’m paying for these fucking things!
I could completely stop dining out and bring back to life an extra $100/month. It’s the kind of discretionary spending which is certainly convenient but doesn’t add to my health and robs me of money.
It’s so easy to get used to eating out. As a single dude, getting something on the go is so much more convenient than making a dish at home.
4. Entertainment – $430/month
This is a lifestyle expense – it’s socializing with friends, hanging out at a bar, buying movie tickets, or going to a show. Because I’m retired and I have earned income coming in, I’m lazy when it comes to cutting out my entertainment spending.
I can still hang out with friends and socialize without this kind of spending. It’s something I’ve been working on… forever – I’m just very susceptible to peer pressure when it comes to social spending.
5. Gym – $105/month
I have a gym membership which costs $80/month and I have some gear expenses for my rock climbing shoes. Fortunately, rock climbing is a cheap sport. But because I’ve gotten used to rock climbing as a sport, when I’m traveling, I will pay for a day-pass at a rock climbing gym. This will often cost around $20/day.
I could cancel my gym membership, give up rock climbing, and switch to yoga and calisthenics and hiking.
6. Personal finance – $125/month
I pay for a financial advisor but I have spent 6 years learning about personal finance. I feel comfortable managing my finances alone. Even though $125/month is a steal compared to the going rate for a financial advisor, it’s discretionary spending, nevertheless.
I could cut this category out. But my biggest fear is that I might panic during a market crash or make poor financial decisions on my own. When it comes to behavioral finance, I have very weak muscles in that category and feel that it would be better for me to have a professional in my corner.
Cutting my spending
I feel some pressure to cut my spending due to my recent medical board issues. That’s the main reason why I have been tracking my discretionary spending recently.
In total, I spend about $940/month on discretionary items. I derive some joy from each of these categories but I also recognize that some of these items are wasteful and unnecessary.
I’m not inherently frugal. I am a spender at heart. Leave me be and I’ll buy whatever I see – gadgets, clothing, watches, books, experiences, and food. So I have to set some boundaries for myself so that I don’t spend wildly.
The most important thing is that I’m aware. I’ll reassess on a monthly basis and see how I’m doing financially. If I need to go on financial lockdown, that’s not hard to do. I’ll have to break a few habits but I don’t think it’s anything major. Certainly not like back in the day when I had a Hummer, 2 condos, expensive clothes, and a fine dining itch.