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Family Life FatFIRE Guide

Be business class frugal with a Luxury Budget

How to Budget while including Luxuries or Luxury alternatives. I'll tell you how to grade your Luxury spending by Happiness and search for alternatives that give you the same buzz.

That’s an oxymoron! How can you be frugal with a budget and enjoy business class luxury at the same time. My last post on How much do I need to FatFIRE in the UK was contraversial. Some of you wrote in with a desire for me to tear up my blog as you didn’t think that I was being frugal enough and then others wrote in to say that they were finding it hard to drop their luxury spend. So here is a guide to finding that balance.

“…if you go all out MMM style and save like a mofo, it may not be sustainable for everyone.”

If you spend all you earn you’ll net out at zero or go into Debt (bad debt that is). But if you go all out MMM style and save like a mofo, it may not be sustainable for everyone. I know FIRE people will disagree here and say that it is all about motivation and delayed gratification; but not everyone will have spouses or kids that will be able to cut back their lifestyles drastically to accommodate. In my case FatFIRE mum is on-board, but we don’t agree on everything.

This is where Business Class Frugal comes in. It’s lifestyle design geared towards the luxury end of budgeting (there you go another Oxymoron). Basics first…

This is a follow on from the last post so please read through How much do I need to FatFIRE in the UK if you haven’t done so already. Download the following tools to help you with todays post:

Emma which helps you quickly collate and categories your spending. Click here to download Emma and get £10 Cashback!

FatFIRE Spreadsheets to help you:

  • FatFIRE - Emma Home Screen
  • FatFIRE - Emma Analytics Summary

Identify the things that make you happy in your Luxury Budget and decide which ones to remove, reduce or replace.

I am assuming you have optimised your essential budget (covered in How much do I need to FatFIRE in the UK). Let’s now look at how to optimise your Luxury Budget.

Its about identifying which parts of your luxury budget is actually making you happy and spending on them; and reducing the bits that don’t!

Go through it and have a frank conversation with yourself, partner or family. Do you have to go Skiing next year? Do you really really need to trade in your car for the newest and greatest? Do you need yet another 5* beach holiday in some exotic location? I’m not judging you and you shouldn’t be judging yourselves either (especially your partner – as this could get pretty messy).

My list of luxury expenses was fairly clear. I graded them against spend and happiness. For each of the items I decided what I wanted to do with it: Live with, Reduce, Remove or maybe find an alternative that will “scratch the luxury itch” without breaking the bank balance?

My Luxury Budget

Spending on a second car which happens to be an old but relatively high maintenance german sports car

Luxury Budget: £3500 (Low)

Happiness: Medium

For: Dream car, makes me smile when I drive it. I take it for a spin on the weekend and its pure joy.

Against: Only gets started on weekends and even then it just goes to Sainsburys. Rusting up sitting on the driveway. Needs to be driven more but I don’t get the time.

Verdict: Sell car

Alternative Spend: You can get Track days and Exotic Sports car experiences for £100 a pop. Why not spend £500 a year on a few track days and the odd car hire for a special occasion?

Net Saving: £3500 – £500 = £3000

Private Schooling for two kids

Luxury Budget: £15600 (V. High)

Happiness: High

For: Knowing that my kids have the best education and opportunity available in my area.

Against: None. I am not willing to impact kids education because of my financial planning decisions.

Verdict: Live with

Luxury Holidays

Luxury Budget: £6000 (High)

Happiness: Medium

For: Breaks up the year and allows us to live like royalty for 3 – 4 weeks a year.

Against: We did a few small cheap trips and we had a lot of fun. We realised that it wasn’t the luxury holiday and business class seats that were making us happy, it was the fact we were together as a family. Although the Business Class seats are definitely something I may not forego altogether (future travel hacking post).

Verdict: Remove

Alternative Spend: Cheaper holidays. More day trips. Try and keep it under £1500 a year.

Net Saving: £6000 – £1500 = £4500

Higher than average spend on Groceries (Organic produce, fresh produce, more brown stuff / less white stuff, less processed stuff, no ready meals etc.)

Luxury Budget: £3500 (Low)

Happiness: High

For: Peace of mind that the kids are being given Healthy and Organic food.

Against: None. Knowing that the kids are eating healthy food is priceless.

Verdict: Live with

Eating out in nice places

Luxury Budget: £2000 (Low)

Happiness: Low

For: We love exploring food and fine dining.

Against: We realised that we get more of a buzz with cheap eats and street food. We love food markets and decided to visit those more often (+ doing fine dining with 2 kids is a nightmare)

Verdict: Reduce

Alternative spend: Try food markets and street food places. Go for picnics or eat-in. Try to limit to £1800.

Net Saving: £2000 – £1800= £200

Gifts to each other, friends and family

Luxury Budget: £1200 (Low)

Happiness: Low

Argument for keeping: Making each other and people around you happy with gifts and surprises.

Why? We stopped buying each other gifts – waste of money. But we didn’t want to cut down on gifts to friends and family.

Verdict: Reduce

Alternative Spend: Give each other experiences rather than gifts. Knock down budget to £800 just for kids, friends and family.

Net Saving: £1200 – £800= £400

Total Luxury Budget saving of £8100 per year but still maintaining the same level of happiness!

So there you go! Overall we saved money while still having some luxuries and replacing others with things that are cheaper but gave us the same endorphin rush!

If you are in a family (like me), make sure you do this as a team. Whatever makes you happy may not make your partner’s happy. Have the discussion and compromise where possible. For example, getting rid of the second car was largely FatFIRE Mum’s idea. I protested at first, but she convinced me that it wasn’t needed. The reduction in the fine dining was my idea. My wife wasn’t too keen at first. So we went out once to a local Food Market in South East London for lunch then in the evening we went out to a proper meal in Central London. We compared the two experiences and then agreed that we weren’t really cut out for fine dining.

Where does the £8100 go?

The £8100 goes straight into our Stocks and Shares ISA accounts and will add up to almost £300k in 20 years time. Not a bad haul! Want an Excel tool to calculate this? See my FatFire Tools spreadsheet. Very small and simple tools. Use the spreadsheet or just rip out the bits into your spreadsheet. Do whatever you want with it, its FREE!

Why are we doing all this? Go read our FatFIRE Journey to find out more.

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2 comments on “Be business class frugal with a Luxury Budget

  1. I’ve believed for a long time that it is not luxury spending or even the latte factor which adds up most spending or determines your Financial performance but structural spending:
    Rent in London could easily be £30,000 a year.
    Private school as you say £15,600 (1 kid)

    Reduce the fixed spending costs (or know that they will end at some point) and that is the way to save.
    But opting for digestives instead of chocolate hobnobs? That’ll never save you much

    • Agreed. That’s especially pertinent, as you say, in London. I was earning around 2x after tax income up until June this year. And that confidence and high savings rate (at the time) afforded me things like private schooling. Now it’s a little harder but I don’t want to mess up my kids too much so I’m sticking with it. Mortgage in London is the same, but again, I’m not currently willing to up-end my family and cart them out to the countryside. They are not bought-in at that level. These are the “disagreements” I mentioned earlier on in the post. So we’re having to compromise and cut down in other areas as much as we can to compensate. Thanks for sharing!

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