Budgeting Matters #3

I have become the loss leader queen! 

Let me explain. Since retiring, I have taken over the chore of grocery shopping from my still-working spouse. The first thing I did upon taking this chore back was to resurrect my old pre-employment habit of planning out seven days worth of meals at a time to minimize trips to the grocery market, saving on both gas and impulse purchases (It's a proven fact - every trip to the market resulted in mysterious items like cake and ice cream somehow ending up in my basket!). I then dutifully made up a shopping list of the items I needed to buy and headed out to my local chain supermarket. My first foray out was pretty eye opening. I easily located everything on my list, but I also ended up way over budget.

Since I didn't want to increase our annual Grocery allocations at the expense of another  category like Dining Out, Entertainment or heaven forbid, my beloved Travel, I went home and tried to figure out what I was doing wrong. Coincidentally, as I was doing this I happened to hear Dave Ramsey, a personal money-management expert and extremely popular national radio personality, tell one of his radio callers that most people spent less in their first year of retirement than they had anticipated, with one notable exception . . . they spent considerably more than on groceries.

Here are some of the mistakes I identified, and what I did to change things around -

• We were purchasing way to many convenience items, and paying the corresponding higher cost. Out went pre-packaged chicken broth, ready made pudding cups, mini cans of V-8, individually purchased breakfast bars, frozen entrees and name brand products. In came bouillon cubes, make at home instant pudding, refillable juice containers, granola bars packaged 6 to a box, deli meats, and no name products.
• I noticed for the first time (I know, no excuse - I plead workplace exhaustion) that every Tuesday in my mailbox I received sales ads for all of the grocery stores in my area. I began reviewing the ads diligently to see what was on sale before making up my menu and shopping list for the week. I began to visit a number of grocery stores each week, rather than just one, in order to purchase the majority of my weekly grocery items on sale. Many sale items, particularly those that are deeply discounted and therefore generate little if any profit, are known as loss leaders in the retail industry. The loss leader business practice is based on the theory that the appealing sales price of the advertised item will bring customers into the store, who once there they will likely purchase far more than just the loss leader items, thus increasing overall revenue for the store. Clearly this theory holds true in the grocery industry more often than not, since grocery stores continue to do it. And that is great news for people like me that can resist retail temptation and stick to their lists. 
• I began price comparing non-sale items between each grocery store and noticed that Target had the lowest price by far on name brand items, generally at least 50% lower. With regard to non name-brand items, Trader Joes was the consistent price winner, particularly in the grains category. And with regard to produce - Sprouts came in with the best pricing, compounded by a hugh percentage of their produce department being on sale each week.
• I double dipped - that is, I planned meals with an eye toward using the leftovers in other meals. Homemade marinara sauce topped spagetti noodles one night, and became the base for lasagna later in the week.
• I began stockpiling items as they went on sale, using a six month consumption estimate to determine how much to buy. I thought six months made sense with regard to both freshness and our taste buds (they do change over time . . . remember Cheez Whiz?). I also immediately divided and froze perishable meat products bought in bulk into smaller packages that allowed me to defrost and use small quantities at a time.
• Any extra grocery money went to buying sales items that were not on my menu for the week, but that were too good to pass up. At the end of the day, a good deal is a good deal, and I simply work the items into my menu over the next couple of weeks.

So here is an example of how the above can work. Last week Albertson's was advertising whole roasting chickens on sale, and Russet potatoes and green beans were both on sale at Sprouts. My Sunday night dinner, absolutely delicious by the way, consisted of roasted chicken (5 lbs @ .69 per lb), mashed potatoes (2 lbs @ .49 per lb) and steamed green beans (1 lb @ .88 per lb) at a total cost of approximately $5.30. I set aside the remaining white meat to use in chicken enchiladas later in the week, made up two lunch containers with the dark meat, mashed potato and green bean leftovers for my husband to take to work, and made chicken broth with the remaining chicken and bones that I then divided and froze in one cup quantities to use later in soups, stews and rice dishes.

Multiply that by 21 meals and you can see how the savings just go on and on. And although I do spend an additional hour or so each week perusing sale ads and making up my weekly menu and shopping list, I thoroughly enjoy the challenge of trying to beat the system.

The results of these small, simple changes have been pretty amazing - not only have I completely stopped overspending, I've actually been able to cut my grocery budget by $20 a week, an impressive $1,020 in annual savings, while still keeping my fridge, freezer and pantry all fully stocked. Which brings me back to where I started  . . . would someone please pass me my crown?

So, bored yet?

Someone I knew casually asked my last week if I was getting bored now that I wasn't working. My inititial response was "The only reason anyone would ever be bored is because they choose to be!"

High horse aside, I did then share what I had learned since retiring, primarily about the need to replace the 40 hours of structure formerly provided for me by my employer with a new 40 hours of structure that served to speak to my own passions and interests. It did take a few weeks to establish a very basic framework on how I would spend my days. Once I had that in place (i.e., exercise every day, do the laundry on Tuesday, go to the market on Wednesday, etc.)  I set a goal to add one new item each week until I felt I had an adequately robust set of weekly activities to look forward to and enjoy. I used the internet, word of mouth and the library primarily, and little by little new and interesting possibilities began to come into my life.

Six months into retirement, below is exactly what my Outlook calendar shows I had scheduled last week:

Monday
6:00 AM to Noon   -Hiking in the San Bernardino mountains with my hiking club.
1:00 PM to 5:30 PM    -Two back-to-back OLLI classes;  The History of Early Christianity and Spanish Pronunciation.
6:00 PM to 8:00 PM    -Book club dinner meeting to discuss The Great Gatsby by F. Scott Fitzgerald.

Tuesday
1:00 PM to 5:30 PM    -Two back-to-back OLLI classes;  The World at War (A Study of World Wars I and II) and Advanced Digital Photography.
6:30 PM to 7:00 PM    -Piano Lessons at city community center.

Wednesday
11:00 AM to 2:00 PM    -Meet my mother in Pasadena for a birthday celebration lunch.
6:00 PM to 8:00 PM    -Tennis with my singles partner at my lighted HOA courts.

Thursday
9:30 AM to 5:30 PM    -Three back-to-back OLLI classes;  Beginning Spanish, A Study of the Laws of Journalism and Keys in Retirement, plus a sack lunch session with some of my fellow Spanish students to practice our dialogue.
7:00 PM to 9:00 PM    -Book club meeting to discuss East of Eden by John Steinbeck.

Friday - Sunday
-Three day, two night camping trip to Calico with my camping club.

And not included in my Outlook calendar are the multitude of activities that I do in my free time -piano practice, Spanish practice, exercising, cooking, baking, gardening, chores, grocery shopping, meal planning, book club reading, blogging, facebook perusing and travel planning . . . and I'm sure I've overlooked a few more.

So no, my well meaning acquaintance, boredom at this point is definitely not a problem.

Budgeting Matters #2

I just did an analysis of our six month spend rate and compared it to our twelve month retirement budget to see where we stand. The goal at six months was to have spent less than 50% of our annual budget, and it looks like we are achieved that in every one of our categories. Hooray! 

I wasn't completely confident that would be the case back in April when we implemented our new retirement budget. In fact, when I sat down to enter the first week's worth of receipts into my spreadsheet, the new budget suddenly seemed a bit austere. Some of my pre-retirement spending habits were highly impulsive (like shopping for new clothes on a whim) or really expensive (like regularly enjoying front row seats at our regional performing arts theatre) and I wasn't entire confident how I would feel about doing things differently. What I did know though, is that having a robust travel budget was a top priority for both my husband and myself, and we were more than willing to change a few things if it meant we could add even more funds into that bucket.

The first thing I did was to begin to track every expense diligently. We have access to a banking website that consolidates all of the spend from our various accounts and credit cards into one screen, allowing me to easily track every financial inflow and outflow. By doing this daily I began to identify where every dollar was going, and whether it had been properly allocated for in our budget. The next step was to determine the value that each item delivered in order to assess whether it would remain, would remain with changes, or would be removed from our budget (and our lives) altogether.

The results have been both fascinating and telling. Here are a few of the items we analyzed and revised over the last six months:

• Gym Fees. We had forgotten that our monthly gym fee included an additional $10 monthly fee for an adult child no longer living at home. It took about 15 minutes to make the phone call and get the additional membership fee removed. Annual savings - $120.
• Satellite Radio, We blanched after seeing a three year renewal charge of $480 hit our credit card account. After some discussion, we agreed that this service no longer delivered appropriate value and cancelled it. (A note that cancelling this service took me almost 45 minutes by phone, and it was not fun, but I was successful in getting the charge removed. As a result, see IMPORTANT LEARNING LESSON below.) Annual savings - $180.
• Life Insurance. We cancelled a small term life insurance policy that automatically debited monthly. (Also see IMPORTANT LEARNING LESSON below) With our kids grown and our retirement fully funded we no longer had need for a life insurance policy. I now had the time to make the necessary call to cancel it, and did so. Annual savings - $360.
• IMPORTANT LEARNING LESSON - I will never, ever again give any service provider permission to automatically charge or debit us for anything! Almost without exception these services make it very difficult and time consuming to discontinue service once it's been initiated. I repeat, never again!
• Auto and Homeowners Insurance Policies. We increased the deductibles on our auto and homeowners insurance policies. Since we view both of these as catastrophic policies that we hope to never use, moving up to a higher deductible made financial sense, and resulted in close to $200 in combined annual savings.
• Magazine Subscriptions. We put ourselves on a diet of just one magazine subscription each. When we took the time to sit down and review everything we were subscribed to, including online subscriptions, we both agreed it had gotten out of control. If we found ourselves having withdrawal pains, we could always drop by our local library to stock up on back copies at no cost. Annual savings - approx. $250.
• Technology. Consolidated our phone, cable and internet service with one provider. Annual savings - $620. (We will likely drop our land line next year for an additional annual savings of $399. We will also leverage a competing carrier's offer for bundled internet and cable service to ensure we do not get hit with a rate increase from our current carrier in the near future.)
• Haircuts. Moved our respective hair appointments from every five to every six weeks. Annual savings - $300.
• House Cleaning. Changed our house cleaning service from every two to every three weeks. Annual savings - $720.
• Books. Stopped purchasing them and began using the public library. Estimated annual savings - $500.
• Movies. Stopped ordering movies online (now a hefty $4.99 each from our local cable provider) and began getting them via Red Box instead for $1.00 each. Annual savings - Approx. $48. (As you can probably tell, we rarely watch movies. I'd rather read the book.)
• Theatre Tickets. We began purchasing tickets to attend performances at our smaller local community theatre rather than our larger-but-pricier regional performing arts center. The parking is free (compared to $10 at the arts center), the sight lines are excellent and the distance (and stress!) to get there is much, much shorter. Savings of approximately $100 per event.
• Groceries. I began reviewing grocery store ads each week in order to plan out meals that utilized the featured sale items. I now visit three to four different grocery stores each week, all within a three mile radius of my home, and aside from being economical, it's incredibly satisfying and fun. Not only have I managed to spend about $20 less per week, I'm also getting a lot more food for the money I am spending. Annual savings - $1,040.
• Restaurant Dining. Exploiting the heck out of online discount services like GroupOn and TravelZoo so that on those rare occasions when we do dine out, we do so at a 50% discount.

The sum result of these changes is pretty significant, as our six month budget review seems to nicely reflect. And nothing we've modified or cut out has had any negative impact on our lives . . . quite the opposite in fact. Our kitchen is now regularly and fully stocked, and I am thoroughly enjoying the art of cooking once again. Using GroupOn and TravelZoo to purchase discount dining certificates has exposed us to an array of new and interesting eateries we would likely not have enjoyed otherwise. And trips to the library are just plain fun in addition to being free!

So, at this point, with six months still to go before determining if our retirement budget is sustainable and satisfying over the long haul, I give us mid-year marks of "A" for both effort and results. And with the savings achieved in our first six months now happily moved over to our travel funds line, we've just added a couple of two week cruises to our 2012 travel plans. Well worth giving up a magazine subsciption or two to achieve!