I don’t advocate to focus too much on cutting micro budget items. Most people interested in FI know that housing, cars, and food are the 3 main expenses to focus on.
The rest is just the cherry on the sundae, and damn it, sometimes, you just have to have that cherry. I want you to have the cherry. But if you want to cut it too, read on to see what impact it can have.
I don’t obsess over an occasional ice cream or Starbucks, or going to watch the new Minions movie. And yes sometimes, I do overpay for the crab ball appetizer that always ends up disappointing, and I even buy a flight of craft brews or a delicious piece of Chocolate cake from Portillos that is a beautiful, decadent heart attack on a plate.
You should be able to live your life without micro-managing every penny and still reach FI early.
But some of my readers have asked me to evaluate the impact of cutting in the smaller slices of the budget. There are a ton of possibilities: cutting cable or dish, changing cell providers, cancelling Netflix, or buying clothes second hand.
If these things are increasing your quality of life and bringing value to you personally, don’t cut it – the payoff isnt worth the small impact. However, if you don’t value these thing minor cost items, feel free to cut them loose.
In this post, I am going to examine 2 micro budget items that I personally adhere to because its easy money and no sacrifice to me.
- Credits cards points
- Do-it-yourself haircuts for Mr. FI
There are some surprising results for minimal effort.
DIY haircuts are free
My dad has gone to a barber every month his whole life. His current rate is about $20 . . . for a buzz he could do himself. It was perhaps cheaper in prior years, but the pandemic jacked the price of everything up, and this rate is middle of the road.
Its about $240 a year. I on other hand (with more hair I might add) cut my own hair with a Wahl trimmer and various clips that I bought 15 years ago. I’ve even gotten gotten good enough to do my own fade from the neckline up to the top of the head where my hair is longer.
Take a look at this pic. Muy guapo, no? And free!
Credit card points are free money
My dad is old school. He carries a cash clip like a drug dealer and buys everything in cash. He is not alone. Some finance gurus recommend against credit cards due to the potential to pick up high interest debt. Not me!
Outside of property taxes, 95% of my expenses go on a credit card that I pay in full every month (about $35K of my expenses a year). I currently have 4 cards (2 chase, 1 amex, and 1 target) with varying rewards. I earn about $750 a year on points alone for doing . . . nothing.
I have automated payments setup with my cards so I pay in full automatically, and I earn free money on every purchase. Multiple websites even have a tool you can research to find cards with the best rewards that fit into you personal lifestyle and where you like to shop or travel. Cool!
I could even earn as much an additional $1000 or more through credit card sign up rewards (and some years I do when I am motivated enough) if I play the credit card system. The MadFIentist has a terrific guide on this, for reference.
For the sake of simplicity, I am only including the cash back point values of credit cards in this post because you can earn this with zero effort and it is something all FI adherents should do at minimum. “Harvesting” sign up rewards/points multipliers/etc. on multiple cards a year can potentially double your haul of free money but it is not effort free, so I am going to ignore that for now.
So how much can DIY Haircuts and Credit Cards Points save?
Over 15 years my credit cards points alone and DIY haircuts combined have saved me about $15K, enough for a used car.
If I invested those savings yearly in the Total Stock market, however it would have grown to $32K by now. That’s enough to max out Roth IRA contributions for 5 years in free money! If I leave those IRA contributions parked another 15 years, they’ll grow tax free to an incredible $105K (assuming a 8% return in the total stock market including reinvested dividends).
Not too shabby for just just using plastic instead of handing over sweaty cash. And if I was eager enough for easy money and played the revolving credit card sign up bonuses game, I could easily double that amount of money.
Conclusions
As you can see, micro budget cuts can add up . . . over time. There is some value in finding expenses outside of food, housing, and cars to cut – but nothing groundbreaking.
If you want to achieve FI early, like in 15 years or less, cutting your own hair isn’t going to get you there. But certainly, if you can cut things out of your budget that hold little value to you, it can certainly reward you with a little bit more disposable income for things you do care about. You can even invest it, perhaps in your child’s 529 education fund.
So if you don’t value the cherry on the sundae, by all means cancel Netflix tomorrow. Stop your monthly run to Oink’s Dairy Dream for your favorite turtle sundae. Cut your own hair and sew your own clothes if you want. As long as you are willing to play the long game and its not an impact to your quality of life, these savings will add up to 6 figures in 30 years.
In the comments: How about you? Have you calculated what you saved through cutting small things in your budget? Have you found other low sacrifice savings (or easy money such as credit card points, statement credits, etc.) that you tracked and invested? Share your comments below. I’d love to hear how others are living a modest (not frugal) budget to achieve FI.