I failed my first week of chasing FIRE.
Failure is not something to be ashamed of, so I wanted to post this today as this is quite an important topic.
I recently posted about getting started into my first month of FIRE. Today is the 9th of Movember* so I have only completed 8 days of my inaugural month….
…AND WHAT A SPECTACULAR FAILURE!!!!
I was out with a few friend’s last night and decided to have a few drinks. Lovely pint of Guinness, or “the black stuff.” The likes you can’t get anywhere else in the world except Dublin. Now you can get Guinness all over the world, but it is just not the same!
So back to the night out, I went up to buy a round when it was my turn again. Probably about 4 or 5 pints in and I handed over my card nonchalantly, and then I get a look from the bartender that gave me a flash back to college.
Remember during the college years, you would go out and you may not have the best looking back account, so you would pre-drink at someone’s house to make it a cheaper night. Then you decide to buy a drink. The bartender give you a look of annoyance but also of sympathy and pity…..THAT’S THE ONE! Card has been declined!
I am standing there trying to do quick maths in my head and realised that I wasn’t sure how much I spent. So a quick look on my bank app on the phone and there it is, a lone €6.52 in the account with a list of expenses that made my stomach turn.
I looked through all my expenses and categorised them. Let’s take a look at my intended month versus my first week:
Turns out the main things I got right were the necessary expenses. Save for a few cents here and there, it was actually very close and as you can see, the groceries are only 1/4 of the budgeted as we are only a week in.
My November budget was €1,710 and the spending at the end of day 8 adds up to €1,811.09
How did I get this so wrong?!
What I got wrong
It seems I made a a few mistakes that might be common, but I am also glad that I made them because I will never do them again.
I completely forgot to factor in the eroding expenses. I like to refer to these as eroding expenses because they are small, monthly expenses that you don’t even notice, and yes, you may not realise them going out of your account each month, but they add up over months and years, and eat away at your net worth. Much like the way small rocks can erode away a huge cliff given time, hence eroding expenses.
The eroding expenses I forgot to include were Netflix subscription, Spotify Subscription and Playstation subscription. Yes…playstation…I can’t let go of my youth! I like a bit of escapism just like everyone else.
There was an unforeseen down payment on a snowboarding trip next year. I have put away a €2,000 travel fund in a separate saver but it will take a few days to come back into the account so I am out until then.
I have put off the worst one though, where I spent 450% more than my budget on eating out. This included restaurants, take-away, bars and even small snacks on the go. No other comment. Just not good enough.
What I got right
Let’s focus on the positives. Otherwise I might cry.
The necessary expenses were almost exactly correct. Sweet!
The day I got paid, I moved all the money for necessary expenses into a separate account that I could not touch when I am spending. All those are sorted no matter what. Great! I will have a roof over my head so everything else will be grand!
I siphoned off the amount I need to save immediately along with the necessary expenses.
Another thing I did right was that I actually had a budget in the first place so I was able to catch this over spending early and try rectify it.
What to do
Discretionary income is the area in people’s lives that can be adjusted. This is the part where we can increase the gap between saving and spending.
When you are over spending, the unnecessary expenses need to be thrown out the window. One of the big mistakes I make, is similar to a huge number of people, particularly millennials. Stop eating out at bars or restaurants. Simply put, if you want to achieve FI, treating yourself to going out is fine if it is occasional. If you want to go out and spend more like I did this week, you will put back your FI year.
Eliminate eroding expenses. There is more of a grey area here. I use Spotify on a daily basis. I love music, and I have music going while I do everything. It is 14.99/month as it is a family plan that my parents and sister use. This 14.99 is totally acceptable to me as I would not like to have ads interrupting me while listening to music. With the eroding expenses, it comes down to weighing up the total cost and if you are happy to add on extra time until FI.
Budgeting is well and good but it is a guideline. Budgets need to be reviewed regularly. I did not expect to have to review the whole thing so early but lesson learned. Thankfully I had taken out the necessary expenses, rather than frivolously spending for weeks and then being left without anything to cover rent.
Track your spending. It is a good habit to get into early. Track all your expenses for several months so that you can figure what hole your money is sinking into, if it isn’t adding up. You can easily tweak little things to get yourself back on track or even kick your savings rate up a level to reach FI sooner.
Take home message
Already a week into my journey, I am seeing some of the early mistakes. The take home points that I have learned and hopefully will help you:
- Make a budget – but it’s just a guideline
- Track your spending
- Eliminate or reduce your eroding expenses
- Revise your budget regularly
- Cut out waste – eating out is expensive, you don’t need it
- Set aside your savings out at the start of the month
- Set aside your necessary expenses at the start of the month
- Be ready to adapt
- Keep reminding yourself why you are doing it (makes it easier to not eat a take away)
There you have it. I failed my first week of chasing FIRE, but there are positives as well. You can learn from failure, and can come back stronger if you are willing to adapt!
*Movember, if you don’t know about it, is a great charity raising awareness and funds to try make a difference in Men’s Health – Prostate Cancer, Testicular Cancer, Mental Health and Suicide Prevention. Please check it out here.