In April I started a Low Spend Year. This is my update after three months sharing what I’ve learnt so far, how I’m doing towards my financial goals and how those goals and my outlook is changing.
The TLDR is that I’m loving it and will be continuing for another three months (at least). I was expecting it to be “successful” if I could put new habits on autopilot and get on with the rest of my life with as little changing as possible, but being more careful with money and focussed on savings has made me totally reevaluate our goals and lifestyle.
What a Low Spend Year Means to Me
For me a Low Spend Year means a year of more intentional spending than I am used to. To others it won’t look uber frugal or restrictive. I’m conscious that there are luxuries in there that many would not include in their normal budget, much less in a savings challenge.
I started it because I knew that if I wasn’t more careful with my money I would continue to put very little towards our investing goals during this period of our lives. This is mostly because I’ve gone down to working 4 days a week, we still have high childcare costs, and we’ve also been putting more towards my partner’s investments to even things out.
How It Has Been Going
You can read more about the principles I’ve been following in my Ultimate Guide to Doing a Low Spend Year.
Essentially I set budgets for three areas of discretionary spending (Food, Stuff, Family Experiences) and also allowed myself to keep a couple of luxuries in our fixed budget (Cleaning, Counselling). Other than that, everything discretionary had to come out of those three budgets, including holidays (from “Family Experiences”) and gifts, things that the children need or items for the home (from “Stuff”).
My original budgets were: £100 for Food; £50 for Stuff and £100 for Family Experiences.
I’ve been overspending, overall, since the start of the challenge, but I know that I am spending less than I would if I weren’t doing the challenge and learning a lot along the way, so this is no reason to give up. Here’s the round up:
|Food (£100 budget)||127.01||71.38||65.84|
|Stuff (£50 budget)||83.5||202.96||252.64|
|Family experiences (£100 budget)||28.1||39.7||211.45|
|Other: Transport/my hobbies||28.1||20.96||32.2|
|Amount extra I invested||350||500||500|
Our Food budget is just my contribution to our food spending (i.e our groceries and any eating out). My partner pays for the rest (as I cover our other bills and childcare) but relies on my help with at least one shop.
Where I overspent on Food in May was because we had a few meals out/takeaways. It made me realise that the spending wasn’t worth it for us and motivated us to eat even more at home. Since then we’ve had the odd fish and chips, which we enjoy, but the rest of the food spending has been on in-store grocery shopping or online bulk wholefoods orders, which last us a long time.
I blew our “Stuff” budget in May and June because I bought a car seat and also some workout clothes and trainers. I’ve had the same workout clothes for more than ten years and they are too tight for me now. I bought good quality bamboo clothes that will hopefully last a long time, and for a good discount, so I do not regret that spending. As I’m doing a Low Spend Year rather than a short challenge, I still have a chance of meeting my budget goals if I have months where I spend less. I’ve also saved lots by buying my daughter’s clothes preloved where I can.
In my first couple of months I was shocked to see how little we were using of our Family Experiences budget, making me wonder if I had my priorities wrong – what we were doing other than eating together and going for the odd trip to the playground? At around that time, my partner was also keen to join a gym, so we decided to join a local sports club, which would mean adding a big line item to our everyday budget.
I felt very conflicted doing this in the middle of a Low Spend Year, but it’s been great and well worth the money. We go all the time, either as a family or sneak off ourselves for some “me time”. My other half and I also go together sometimes at lunchtime or in the evening – much cheaper than a “date night” would be and just as enjoyable. As the gym has a lot of kids activities, they are enjoying it too while we do our own classes. It also means we go swimming together at least once a week. I won’t go so far as to say it’s saving us money, but we are definitely getting our money’s worth.
As we are getting so much value from this it has put other spending in perspective. For example, we have reconsidered some of the “non-negotiable” other discretionary spending we had. We’ve done more of our own cleaning and after reducing the frequency of counselling decided to stop that. We’ve also been happy with a long weekend away that we took last month (a gift from my partner’s boss) and have decided not to go away for the rest of this year.
This month we’ve gone over our “Family Experiences” budget because of holiday camps during the school holidays, but I been saving more than this into a sinking fund, so it did not affect our ability to invest the extra £500 a month that I have been targeting.
What I’ve Learnt
In the first month I felt obsessed with what I was spending and earning and it didn’t feel good. I decided not to track so closely and do a monthly round up based on my credit card statement (which I pay off in full, but use for cashback).
As I said before, I noticed I was spending very little of family experiences (other than food) or my health, so we actually added in the sports membership to our “fixed” everyday budget and have taken out two items that we thought were “non-negotiable”.
We also realised how much room we have to save money on food and are doing a few things to optimise this budget, including: shopping more at Aldi, resisting the urge to eat out (when it’s for convenience) and experimenting with finding new low-cost vegan recipes, like this incredible Lentil Rice dish.
Being able to sell a few things around the house has helped me to still reach my investing goals when I’ve overspent, but I’ve also realised that there are so many other benefits to selling used things other than the money you receive (and the obvious environmental benefits). Not only is the house clearer and easier to look after, but it also makes me a lot more conscious of the value of money and less likely to fritter it away.
What I love about a Low Spend Year is that it’s long enough to take a balanced approach and spend smartly. For example, if you are doing a No Spend Month you are unlikely to bulk buy something at a good price to last you all year, but with a Low Spend Year you have a longer horizon. That’s why we feel OK about the Sports Club Splurge – we are looking at the long game and seeing how it benefits our wellbeing and reduces our need for holidays and date nights.
At the same time, a year is short enough to be able to make some sacrifices without feeling like it’s forever. For example, I’m not spending any money on the garden this year. This is usually quite a big spending area for me, particularly as the garden is still establishing itself. But I’ve decided this year to put all of my gardening energy into taking the best care I can of what I already have. I’ve still been able to grow a veg bed of rocket, herbs and other greens with seeds I already had. It’s easy for me to do this as I’m only committing to one year of no garden spending. At the same time, I’ve earmarked anything I make from FreeJackpot (see my Side Hustle Round Up if interested) to go towards National Garden Centre Vouchers 🙂
Our New Financial Strategy
One of the big realisations coming out of the Low Spend Year for me is that even closer control of our spending does not allow me to prioritise our financial goals in the way that I’d like to. This has pushed me to focus more on our biggest financial levers, which are being able to eliminate childcare costs and going back to work 5 days a week, which I plan to do in month 6 of our Low Spend Year.
I went down to four days a week because my son’s nursery was closing on a Friday and I also wanted to spend Friday afternoons with both children as my daughter finishes school at lunchtime. From August my son will have a place in a nursery that has the same hours as my daughter and if I go back to work 5 days a week and do compressed hours then I will still be able to spend Friday afternoons with them. This will allow us to cut out both nursery and childminder costs, and we will also get the additional income of one day a week.
This is huge for us in terms of our ability to save and has pushed me to think about how best to use the extra money. It will mean an extra £1000 approximately that we are saving on childcare and about £800 for the extra work day.
As we still have a large mortgage outstanding (£400k) it’s been difficult to be motivated about overpaying it since we’ve already reached a 60% loan-to-value ratio, which was our main motivator before.
However, if we can use the money we will be saving on childcare to overpay on the mortgage for our house then at the end of 5 years we will have a balance of about £250k outstanding. As we have this amount of equity in a rental property, this will give us the option of being mortgage free if we sell that off.
We will then have a few options. We will still be investing through this time, so we can add what we would have normally put into the mortgage into investments and then may be able to both be financially independent 4 to 5 years later (less than 10 years from now).
Alternatively, we could still sell the rental and pay off our mortgage but drop our working hours until we retire as we would have much lower living costs.
The last option would be that we keep the rental and continue to overpay the mortgage on our main house, which would make us mortgage free in our early 50s, with a rental property (although the rental property would still have a hefty mortgage on it).
I know that the markets over long periods of time outperform the savings you make from overpaying your mortgage, but what I love about this strategy is knowing that after a certain period of time you will have these options. If we put all of our extra income into investments, we don’t know what options we will have.
Our plan would be to continue to budget and to grow our income so that we can make the most of our Stocks and Shares ISA allowances each year.
All in all, I don’t think I would have had these realisations, or changed our strategy, without doing the Low Spend Year.
We have another three months before we see the savings from our big life changes, so this quarter I’ll be focussing on resisting temptation to make any big “stuff” purchases, using points or vouchers (or buying secondhand) where I can. For example, I’d like to get a cupboard for our hallway, but I’m converting Avios points from years of business travel to Nectar points to get this from Habitat, as we never fly as a family.
I’m also adding to our sinking funds, which I’d like to get to the £2000 mark. This will make me feel more confident using our extra income for overpayments and investments, knowing we have a certain amount we can access easily. The rest of our emergency fund is in a Cash ISA, but that is not as easy to access and I’d like to transfer that to my Stocks and Shares ISA one day.
I’m having fun experimenting with cheap and healthy meals, particularly ones using grains, pulses and our home-grown veg. As well as cutting down our grocery costs I’d like to cut out our “treat spending” when we are at the gym and the kids are desperate for a snack, so I’d like to be smarter about stocking up on drinks and snacks that we can take there.
I’ll also carry on trying to declutter and organise the house. I’ve started to feel really overwhelmed when the house is messy, and it also motivates me to overpay when I’m keeping the house nice and clean (and to clean when I’m overpaying!).
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