Rancid-Tea

My thoughts on life

May 13, 2013 Home Brewing, Personal Finance

Saving for a Down Payment

A little over a year ago, Ethan and I started saving up for a down payment on a new house. We want to save up enough to put a 20 – 25% down payment on our next home to avoid mortgage insurance, plus cover moving expenses, and possibly cover any gap between the sale of our current home and its mortgage.

When we started saving up, we figured out an amount that seemed reasonable, and tried to determine how long it would take us to save up that much. The shortest timeline we could come up with was about 3 years, if we tightened down our expenses a bit. Ethan and I have always lived pretty frugally, so I was initially concerned with our plans, but I figured that at worst, we’d have to adjust them and push back our move out date by another year.

So what did we do to bring down our expenses and increase our savings? Primarily, we made a conscious decision to spend less money on restaurants and alcohol.

As a double-income, no kids household, we have a fair amount of expendable income. We used to eat out about once a week, sometimes at spendy restaurants, sometimes at dives, but it as a regular thing for us. Looking back at our finance for July 2010 – July 2011, there was only one month where we spent less than $150 on restaurants. That’s kind of a scary thought for me, but considering it’s about $50 for two people to eat a good meal at a restaurant, it shouldn’t be all that surprising. If you order a drink with dinner, the price goes up. Since August of 2011, we have only had a single month over $150, and that was while we were on vacation, and were forced to eat out most days. In fact, for 2013, we have spent less on dining out than we did in an average single month in 2011 and 2012.

I was worried that it would feel like a sacrifice to not eat out so often, and for the first month or so, it was. After that we got back into our college routine of planning to make several meals a week at home, and having plenty of leftovers, and once that became normal again, it hasn’t seemed like a sacrifice at all. Now we eat out for special occasions and when visiting family. We did recently splurge on a Hell’s Kitchen breakfast the day before a 12 mile run, but I found myself enjoying it more, knowing it was a special treat, rather than a weekly routine.

With cutting down on restaurant eating, our grocery bills have gone up, but even the most expensive meal we make at home (a delicious four cheese lasagna) comes out to less than $10/serving, and it is definitely as good as anything you can get in a restaurant for twice the price.

Some of the alcohol savings we’ve made came just from not going to restaurants. Obviously beer and liquor bought retail is cheaper than that bought at a restaurant. We made a couple other significant changes with our home alcohol consumption too. The first was to build a kegerator. This did cost more up front, as we had to buy some new equipment, but we already had the fridge (and mostly used it to store beer anyway), so it wasn’t too bad. This saves us money because the price per glass in a keg versus a bottle is pretty significant.

As an example, a six pack of Alaskan Amber is roughly $9 plus tax, so just over $1.50/12 oz bottle. A 1/6 barrel keg of the same beer is about $65 plus tax, and contains¬†636 oz, or 53 12 oz glasses of beer. If you drank exactly 12 oz in each glass, that would save you over $13 for the whole keg, but if you drink 8 – 10 oz of beer each night, you can draw out the keg a little longer, and get about 70 glasses of beer out of it. That glass of beer will only cost approximately $0.93, and over 70 pours, will save you roughly $40 over the life of the keg, versus bottled beer. True, you’re getting a little less beer each night, but I find a smaller glass of beer equally satisfying, and the only reason I drink 12 oz of beer at a time with bottles is because that amount is predetermined by the bottle, and there isn’t a convenient way to drink slightly more or less.

The second way that we have been saving on beer has been to start brewing our own. This also had some up front expenses, because it involved some (somewhat expensive) equipment, but it should pay itself off over time. The material cost of brewing 5 gallons of beer (not including that equipment) is about $35 – $50 depending on the beer you’re brewing. The commercial kegs we buy run $60 – $100 for a similarly sized keg. It’s possible to save quite a bit of money in a year, if you drink two glasses of beer almost every single night.

So far on the alcohol front, we’ve probably broken even, but in the long run we should start seeing a return, and the ability to save on beer through kegs and home brewing should last us the rest of our lives. Plus, it has led to a new hobby. As far as food, we’ve definitely saved hundreds of dollars in the last year, and that feels more satisfying to me than any meal could. I don’t feel deprived or like I’ve given anything up, and I’m looking forward to buying a new home.

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