One of our main partners at Wela, my digital advisory firm, and his wife recently decided it was time to reset their spending habits and undergo an "Economic Shutdown" – a concept I outline in my book, You Can Retire Sooner Than You Think.
For the month of May, Eddie and Rebecca Goepp (pronounced “Gep”) committed to only spend money on what they outlined as necessities and to cut all frivolous spending. They also agreed to blog about it for Wela, so people could follow along on their financial journey.
This was such an interesting series that I want to share some of my favorite highlights from it.
In the first blog, Eddie does a great job of explaining how an Economic Shutdown doesn’t mean giving up all of life’s joys:
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!
Eddie and Rebecca examined their normal monthly budget and found that they spent more on food than they did on their mortgage. There was an immediate place that they could take action on whittling down their spending. Rebecca gives a wonderful description on their budgetary realization in the second blog:
Full disclosure: When I looked at our "typical month" break down… I was shocked by the "dining out" tab. Mainly because, before looking at this, I would have probably told you all about how much Eddie and I both love to cook meals together, and how we really don't go out to eat very much. I'm fairly confident I've had almost the exact conversation before with multiple people…
Some other person: Rebecca, have you tried {insert cool new trendy restaurant here}?
Me: Gosh no, you know Eddie and I really don't go out to eat a ton. But it sounds awesome.
…
What we didn't realize was that while we did love to cook together, we also loved to make Starbucks runs, or getting out of the office for lunch, etc. etc. ALMOST EVERYDAY. Say we BOTH spent $8 at lunch every week day… That's $320 out the window. Breakfast or coffee out, even half the time, tallies another quick $100 very easily. Throw in a couple of dinners out (I counted 3 in March…) and that very quickly adds up to close to $1,000 of easily trim-able cost.
This dynamic duo put together meal plans for each week to hold themselves accountable for the money they spent out of their food budget, and they shared the plans throughout their posts. Their strict meal plans allowed them to not spend a dime on restaurants, lunches out or coffee runs. They were clicking along with their Economic Shutdown and saving money when an unexpected expense hit in their third week:
Driving home from a cookout on Saturday night, we caught a nail in the tire of the Nissan Leaf! Huge bummer. By morning it was flat as a pancake. One blown tire turned into purchasing two new tires in order to keep the car’s balance in-line…so we walked out of Costco’s Tire Center $280 dollars poorer. Always looking for the takeaway lesson during Economic Shutdown, while this expense was not anticipated and the $280 was certainly not pleasant to part with…having the additional cash flow due to saving in so many other areas make the “Uh Oh’s” in life a lot less painful…We didn’t have to dip into our emergency savings to cover the cost of the new tires.
Life is full of unexpected expenses. However, this literal bump in the road didn’t derail their finances because this family was already in Economic Shutdown. In the final blog, we learn what Eddie and Rebecca were able to save with one month in Economic Shutdown, along with some of their lessons learned:
Now, on to the results…We’re happy to report that we ended up saving over 35 percent of our take-home pay! It was 35.3 percent to be exact! That doesn’t include our 401(k) contributions, which we’re both maxing our employer’s match and we contribute to a Health Savings Account (HSA). We also set aside about 3 percent each month to a cash savings account for our 1 – 3-year expense fund. This account is above and beyond our emergency reserve fund. Sorry, enough financial planning. Back to the results, that 35.3 percent was previously being spent! As many of you are now well aware (Wela-wear…I’ve been pushing this as a new line of clothing to promote our company, ha!) most of that was spent dining out sporadically or just generally slipping through the cracks. And we weren’t blowing it out at Bones every week either. The little decisions that we make each day add up in a big way. This month has been living proof of that for us.
I would encourage anyone who is in need of getting their savings and budget under control to use my Economic Shutdown for at least one month. See what you can save, and how it changes your attitude towards money. If you're thinking about getting started, be sure to read all of the Goepp family's experience with an Economic Shutdown.
Certified financial planner Wes Moss offers financial and accessible investment advice to Atlanta Bargain Hunter readers.
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