Update 2016: How did Royally Frugal household do?

Why are Updates necessary? You ask. When we work towards a long term goal it can be very easy to get distracted. Are you looking at retiring in 10 years by saving aggressively? You are lucky if you can retain the gusto every month and every day. This is what makes it important to set smaller goals and keep reminding ourselves that there are smaller and seemingly needless decisions which will make that goal possible.
In our line of work it is very important that a concept be agreed upon and a vision for the finished product be clearly understood. However the stages of development are equally as important. Every small decision made and detail worked out will result in the final reality you want.
As this year closes we have seen a huge change in how we operate both as a family and as individuals. Our understanding of what our future could look like has improved while our capacity to take a messy house has reduced. When we started on the financial independence ‘journey’ early this year, it was to serve a completely different purpose. Also we were making some 50% less than what we make today. A year before that we were spending 50% more every month on our daily expenses every month.
Let’s talk a bit more about what happened in past year 10 months to be exact.

Income

We started 2016 thinking that we were a few bad expenses away from eating into our meager savings. The reason, in February we had to move to a new and very expensive city for our jobs . In this city a tiny flat rents 3X more than what we were dishing out for a two bedroom apartment, back in the old city.
Even if we could swallow a 300% hike in our rent even day to day necessities cost far-far more especially eating out. This meant we had to find a way to increase our income. Our first step was to ask our current company for some more money as relocation compensation. We did get some but that was definitely not enough to save a huge chunk.

Though this cash crunch was the reason we started on our frugal journey we kept on looking for a job and Mr.S found one overseas where he could make the more than what we were making here together. That was the first time we realized how easy putting in the papers can be and how most companies try to retain you.

We ended up staying with quite a considerable bump in the take home monies. December gave us another bump with the regular raise cycle of the organisation. So we can happily report we are earning quite a bit more than we were doing last year same time.

Another income stream opened up for us with rent from our property we have been paying EMIs for last few years. The flat was empty for a year before our agent found a tenant. We put in some of our own money to furnish the flat once we had a tenant and have been using the rent to make up for it till December.
In 2017 that money will go to equate our home loan once again.


Expenses

We started tracking our expenses around March and are finally able to come to an expense trend which spans for a considerable part of the year. Past year had quite a few ups and down and we realized our expense tracking method is probably not the best one.
We managed to reign in our expenses except for last 4 months of the year. Even with these high expenditure months we overall spent far less than what we were doing in the previous city. Below is the total spent under various heads.
Rent: 2,30,000
Household expenses: 2,14,969
Parental Support: 2,10,000
EMI paid (includes interest payment): 2,51,000
Gifts and other expenses: 20,000 (we did not track this but I am assuming a high sum)
Total Expenses tracked: 9,05,969
Total expenses: 9,25,969

This is an average expense of around 90K every month which is a huge sum for sure and it hasn’t been long since we started seeing this amount in our accounts. Every time I see how much we are spending I am shocked. However once I look into the various heads it starts making better sense.
Rent: Our rent is a lot and it has gone higher as the lease period ended. We did consider shifting but this high rent is still the lowest in the area we live unless we shift over 30-40Km from office and resign ourselves to 4 hours of daily commute. The only solace I have is that this is still less than the other houses we saw a year ago, new construction and ample space for the two of us.
Household expenses: We are trying to get our expenses down to 10K a month and Frugalwoods’s UFM challenge has been a good starting point for us. The expenses you see includes our one time setup costs like bed and mattress, a cabinet and a few other knick knacks required to get the kitchen more efficient.
This year we resolved to not buy replacements till we could repair the appliance. We can say for sure that it saved us over 5K in food processor after we got the jars repaired instead of creating more trash. (How do people in India trash their appliances? I have not had to do it even once; do you sell it off to the kabadi waala or repair shops?)
EMI: we have talked about our home loan earlier and how we decided to use part of the equated money to put into our investments. Around 80% of our EMI went into principle and with the rent now coming in from the property we plan on equating the balance again by the end of the year. This equated amount is the emergency fund we have for anything form a sudden medical emergency or a great opportunity.
This March will complete four years of our loan term and we are happy to report that we should finish our loan way before the full 10 year tenure and should not be paying any interest as we start equating the loan principle with the rent.
Gifts and other expenses:
This is something none of us are happy about not because we spent it, because we did not track it. We are sure what I have assumed here is too much but there is no way to confirm how much we actually spent. This category includes gifts we bought for our family, clothes shoes and other personal items. This year onward we will keep a better track of it all and hopefully this year we will have a single head with every expenditure tracked.


As I said in the start it is easy to lose sight of your goals; we are clearly defining our goals for the coming year which should be coming out sometime soon.
If I had to be true I am a bit disappointed in us. We have not been able to rein in our spending for past 4 months. We definitely have a very real reason for most of the over budget amount but that still means we have not achieved the well-oiled machine we hope to run. This year we are working harder to make more efficient budget a norm for us.
That being said there are still times when we look at our spending habits and are surprised at how far we have managed to come within a year.
Did you manage to save and invest better past year?

9 Comment

  1. It is good to know that you are progressing from where you started last year. The rent and EMI are the major contribution in the expense list. I too have the similar expense, feel like we are spending more than 50% towards accommodation.

    1. Yes, once we factor in the EMI the amount we spend on housing is crazy. However, the flat has finally started giving returns so it should be better this year. We are currently working out the math of our house and whether the decision was right in terms of money and not emotions. Even though I really hope we come out ahead I doubt we will.

  2. I may have missed it, but do you have alternate income sources than your salaries and recently the rental?

    1. We did and to some extent we do. We do freelance but we usually don’t count it as an income since till last year we have been using it to exclusively fund our travels (which are not counted in our expenses as well). From this year onward we are including both of these in our finances and planning to allow 10% of our income for travel and other such expenses.

  3. Hi, interesting read. It is great to see that you were able to segregate your expenses into different categories and track it through the year. However, since your target is FI and you already seems to have worked out the number you need to save (between INR 2-3.5 crore from what I saw on your other posts), it would be great if you could show with this annual update how much progress you have made in terms of achieving that number.
    Great job! And I wish you success.

    1. We have bee talking about putting the numbers out but we are not sure if it is the wise thing to do. However we do intend to have a few graphic representation on in a short time.

  4. […] have been trying consciously to reduce our consumption and expenses. Surprisingly the easiest area to cut was the kitchen. Utilities, rent and maintenance of other […]

  5. Nice writing… am almost done reading your entire blog and will reach back out when am all done. You guys are doing a great job.
    Meanwhile, please fix the title of this post, it should read “How did Royally Frugal household do?”
    You need to be frugal with the ‘did’; you already got one at the beginning, cannot have another after it 🙂

    1. Thnaks for tyhe heads up!
      The things which slip our notice my high school English teacher would hang her head in shame. 😀

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