Being frugal takes work. One of the very first things I did when I decided to pursue FIRE was to sit down and figure out where I could save money. This included making a list of the non-negotiable items. In order to be financially independent, I need to know what exactly how much I spend each year. Otherwise I may underestimate my required nest egg or over-estimate the required time to retirement.
Part of budgeting is knowing where you can cut spending. There are some areas you need to be able to allow yourself to spend. You can always afford some luxuries in life, just not all of them.
Non-negotiables on my list:
- Travel – I will always want to travel, no matter what. I love experiencing new countries and cultures, meeting new people, seeing the wonders of each country I go to. I am glad to work for longer to be able to enjoy travelling even throughout my savings stage.
- Netflix and Spotify – These are relatively inexpensive services that I get endless enjoyment from. Obviously, I will cut them out if I ever need to tighten the belt but for now, I can live with them.
- Good food – I will not sacrifice my health just to save a little more. I will spend more on wholesome and nutritious food rather than processed rubbish.
- Living comfortably – I don’t need a big living space but I do want a comfortable one. I do not mind spending a little extra on a nicer piece of furniture, but also there is no need to spend excessively for things.
- Sport – I love NFL and I will try stream games for free, but a yearly subscription to all the games gives me hundreds of hours of entertainment.
I don’t need new clothes, new cars or the latest gadgets but I have this short list that I am OK with spending money on. This is something I will review each year in case anything changes. I will re-analyse the purchases as I mention in habit 4. I may decide to add or remove things to this list but as of now, these are my non-negotiables.
If you are saving or even if you have reached FI, make a list like this so you know when you want to cut spending last. Budgeting becomes a hell of a lot easier when you have pre-determined this.