Cutting Expenses Part 2

An area where cuts can help a lot with your bottom line is utilities, primarily heating and cooling. Of course, the cost of utilities vary greatly depending on where you live, both because of the climate and the cost of power. The latter varies greatly with the source of power. Several years ago the cost of natural gas became extremely high and people who used it were wishing they could heat with electricity. Now, natural gas prices are down, and the reverse is true. But apart from the type of energy you use for heating and cooling, the only real way to control its usage, assuming your house is insulated properly, is to lower the thermostat in the winter and raise it in the summer. (And by lowering and raising, we do not mean moving it close to the floor in the winter and near the ceiling in the summer.) We know this can be difficult, especially for older people. We used to keep our house at about 70 deg in the winter, but as we aged, this became unacceptable. So, now we keep it at 73 deg. Right now we can afford that, but should prices rise, we may have to resort to using space heaters just in the part of the house we are currently in or bundling up more. We have always kept the house at 78 deg in the summer, but Randy has to supplement with fans to be comfortable as he is more warm natured than Kathy. Anyway, in your case, you just have to find a balance between comfort and your checking account.

Other big power users are stoves, ovens, and clothes dryers. So, if you can limit the usage of stoves and ovens for cooking, you can save money. But if you make the alternative to eat out, then you’ve just shifted a few dollars in savings on utilities to a lot of dollars of non-savings on food. One thing we do is to use a toaster oven for smaller items rather than heating up the big oven. If push comes to shove, the clothes dryer can be eliminated altogether by using the old fashioned method of drying: hanging on a clothes line in the back yard. This may not be feasible when the weather is bad, but we can remember as a child having clothes hanging on racks around the house when it was raining. And we can also remember having ice on our clothes when they were hung outside and the weather turned cold unexpectedly. The point is: use your best judgment about when to use certain types of energy. If your budget is tight, these are the types of decisions that must be made on a daily basis.

Little things you can do include: turning off lights and devices when not being used, letting sunlight into the house in the winter and blocking it in the summer, putting insulation on your hot water heater, using fluorescent bulbs rather than incandescent, taking fewer hot showers in the winter, and hand-washing dishes rather than using a dish washer. In general, just become more aware of how you are using energy around the house and cut where possible.

Another area for a large potential in savings is communications. Are you paying for a landline phone service? Cell phone service? TV service? Internet service? Pager service? There are so many communication services available, it can eat up a lot of money. When it’s all said and done, you could eliminate all these services and still live well. It wasn’t that long ago that many of these services didn’t even exist. We know that in our modern society these things all seem essential, but in reality they are simply just desirable. Even if you decide you don’t want to rid yourself of any of these conveniences, there are ways to lower your cost.

Consolidate. If you have landline phone service with one company, cell phone service with another, and Internet service with yet another, then you can most likely save quite a bit of money by consolidating these services with one company. We just recently rolled our landline phone, TV, and Internet service into a bundle with one company. We will save about $80 per month for the first year and about $40 per month from then on. If you really don’t want to change service, we have heard about other people talking to the companies they currently have service with and asking for a good customer discount. Many times they will give you the same price they offer to first time customers for a year. If asking doesn’t work, you can tell them you are planning to switch your service to another company unless they can give you a better price. Although we still like having a landline phone, we have a lot of friends and family that have dropped this and converted totally to cell service. This can save you money for sure, especially if you bundle the cell service with TV and Internet service.

Another great money drainer is transportation costs. The current high cost of gasoline is driving much of that. However, if you have a proclivity for new expensive cars, most of your problem may be high car payments. If you are on a tight budget, you have no business buying expensive cars. Go for the lower cost vehicles that get high gas mileage. If you can find a decent used one, then you can save even more.

Buying used is what Dave Ramsey recommends, but we personally like buying new vehicles and driving them until they break down and are too expensive to repair and maintain. However, we do invest in having our vehicles serviced regularly, believing that this will prolong the life of the vehicles and thus save us money over the long run. But that’s us. We have a relatively decent income and have been able to afford new cars when needed. However, our son owns a used car and it has served him well now for several years. If our income were lower and we were in need of a vehicle, we wouldn’t hesitate buying used. Also, if you have the skill and the time, you might want to do some of the servicing yourself to save money.

If you live a long distance from your job, you seriously need to think about carpooling to save money. We know this can be inconvenient, but if saving money is your goal, it will be well worth it. If you use public transportation, you might consider riding a bicycle or even walking, if possible and the weather permits.

Be creative. Record how you are spending your money and put together a plan on how to reduce that amount. You must begin to be totally honest with yourself about what is really needed and what is merely wanted. Thinking that something is needed rather than simply wanted leads many people to becoming impulse buyers. They’ll go to the store to pick up a few needed items and leave the store with three times as many wanted items as needed items. This is not good. But some people have a bad habit, or even a compulsion, to rationalize to themselves that a wanted thing is really a needed thing. Like, “I really need an iPad. It’s so much easier to play solitaire while riding down the road than using cards. And I can check my Email without having to get on my computer.” Come on now. That’s not a valid reason. Unless you need an iPad to do your job, then it remains a luxury item for those that want it and can afford it. If you don’t have the money, let the iPad remain at the store. Then have a long discussion with yourself. Conduct an intervention if you will. On YOURSELF. Tell yourself, “I don’t really need all this stuff, I just want it. So, get over it, self! Quit borrowing money to support my spending habits. I’ll be glad I did.” Once you have these ideas firmly planted inside your head, you will find that you really can leave those wanted items on the store shelf. If you find that you cannot, then you may need to seek professional help.

So, let’s stop here. We hope you take these suggestions to heart and that it helps you to live within the budget your income allows.

Cutting Expenses

One thing that can destroy relationships quickly is the mishandling of finances. Soon after marrying my wife almost 30 years ago, she told me she wanted us to start a budget. She had heard that one of the most frequent things couples argued about and got divorced over was money. Although I was a bit skeptical, she soon persuaded me that we should have a budget. In those days, home computers were expensive and rarely seen. So our first budget was done using a ledger book. Later, when the Commodore 64 became widely available, we bought one and began keeping our budget in a spreadsheet. This made budgeting much easier and less prone to errors.

Now, after nearly 30 years, we still keep a budget and very much believe in them. It has helped keep us on the straight and narrow when it comes to spending our hard-earned dollars. However, creating a budget is easy; living by it is another matter. For those of you fortunate enough to have relatively good salaries, sticking to a budget may not be difficult at all. However, for those that struggle daily with having enough money to live on, living by a budget may be extremely difficult. For that reason, we now present some ideas on how to cut your household expenditures.

First and foremost, whatever you do, DO NOT look to the federal government for an example of how to run your household. Our leaders have gone bonkers over the last 50 years and are about to drive our entire country into bankruptcy. Did you know that our national debt has now exceeded $15 trillion and that it is projected to increase by about $1.1 trillion in fiscal year 2012 alone. Because of this debt, we spend almost $500 billion a year in interest. Yet, revenues are only expected to be about $2.6 trillion. Let’s scale these numbers down to the average household in the US and see what they look like.

Household income:   $50,000

Total existing debt:   $288,462

Additional debt for 2012:   $21,154

Interest to pay in 2012:   $9,615

Can you imagine being in a situation where you are spending almost 20% of your income just to cover the interest on your debt? Perhaps you can. If you are young and just getting started on your career, you could be in debt this much because of a mortgage and car loans. But keep in mind these are loans you are working to pay off without incurring additional debt (unless you are going wild with the credit cards). But what if you only paid the interest on your debt, never paying anything on the principle. Then, on top of that, you buy new $20,000 cars every year and start making interest payments on them also. This is what the federal government is essentially doing. It is completely unsustainable. The party has to end at some point, hopefully without too much of a hangover. Therefore, we have decided to help you cut your spending should you find yourself in a situation where this is necessary.

The first thing to think about is the absolute essentials of life. These are normally considered to be food and shelter.

Yes, you need a dwelling place. But do you need one as expensive as the one you have?  If you find yourself hating that dream home you own because the cost of the mortgage, taxes, insurance, and upkeep are eating into your lifestyle, it may be time for a change. We like having a DREAM LIFE more than having a DREAM HOME. Of course, it may still be difficult to part with the home, so the first thing to do is to see if you can reduce the mortgage payments by refinancing. You have to be careful here because closing costs can be so high as to negate any benefits of a lower interest. Also, you may find yourself in a situation where the value of your home is less than the amount you owe. But if the overall housing market is depressed in your area, it could still be feasible to greatly reduce your cost of home ownership by selling your existing home at a loss and buying a much lower cost home. Because there are so many factors affecting cost, it is a good idea to consult with a real estate professional about your options.

I have mentioned the cost of food in previous posts. This is the one area that our family tends to have the most problems since we enjoy eating out so much. One of the reasons we shy away from home meals is the time it takes to prepare them and clean up afterwards. We have a fairly busy lifestyle and don’t like taking that big a chunk out of our leisure time. Sure, we could just heat up a can of soup, but we like variety. Some foods simply take time to prepare.

One thing that helps us to eat at home more is planning a week in advance what we will have each night. This allows us to purchase what we are lacking ahead of time and have everything ready to go each evening rather than having to make a run to the grocery store on the spur of the moment. Also, we can plan easier meals for busy nights and more elaborate meals for free nights. If, however, you are on a really tight food budget, planning ahead will be only one step in your savings plan. You may also have to greatly cut back on more expensive food items such as steak, or at least concentrate on the cheaper cuts. We have discovered that even fresh fruit can be expensive because many times the fruit is not good or it spoils before we have time to finish it. Canned and frozen items are better choices for longer term storage.

You might want to start couponing. It’s also a good idea to look for deals on more expensive food items that can be frozen. We buy a large quantity of meat when on sale, vacuum seal it, and put it in the freezer. But if push comes to shove, you may regrettably have to cut out eating some foods that you really like. Better that than going broke.

Another area that can be problematic is the purchasing of technology items. Just look around. Big screen TVs (now with 3D!), stereos, Blu-ray players, cable service, satellite service, computers, laptops, printers, tablets, wireless phones, cell phones, iPods, iMacs, iPhones, iPads, iThis, and iThat. Temptation is all about. Our household consists of tech geeks, liking all these new gadgets. Yet, when you think about it, are they really necessary. No, they are not! If you find yourself spending thousands of dollars you do not have on technology, STOP IT! This is an intervention. Look seriously at what you are spending on these items and scale back to only what your budget allows. You might also consider selling some of your existing stuff on eBay. We’ve got a Nintendo Wii and accessories waiting to be sold right now. Anyone interested? Only those who can afford it need apply.

Look for more savings tips in the next post.

Introduction

Hello everybody and welcome to our new blog. Our names are Randy and Kathy Finch. Back when we got married over 29 years ago, Kathy said she wanted us to start a household budget. Randy was a bit skeptical at first since he had been managing his money as a single guy fairly well without a budget. Fortunately, she was insistent because she had heard that many of the marital problems couples faced were money related. She did not want us to ever have a conflict over money. She wanted us to create a budget and only make changes that we both agreed to. So, Randy finally gave his consent. In the early 1980’s computers were just beginning to make their way into people’s homes. They had very, very little power compared to today’s multi-gigahertz multi-core processors and were quite expensive. So, our initial attempt at a budget consisted of a ledger book, a calculator, and a pencil. It turned out that our concept of how to do a budget was very good, but the pencil and paper implementation was a chore. We can’t tell you how many times our numbers just didn’t match our bank statement. Finding errors in entries or mistaken calculations were a real pain. However, when we eventually did get to switch our budget to a computer, things really got better.

Over the coming weeks we are going to be passing on to you the knowledge and skills that we have garnered over the past 29 years of budgeting. We will also talk about how to set up an easy-to-use spreadsheet to maintain your budget. Even though we now use Microsoft Excel for budgeting, any spreadsheet software will do, even some of the popular free ones. Our first electronic budget was accomplished using Microsoft Multiplan on a Commodore 64 computer. Later we bought a Commodore Amiga computer and switched to a program named Analyze. Then when we bought a PC, we began using Quattro Pro. We finally settled on Excel since it ultimately ended up being the standard spreadsheet software used at our places of work. So, as you can see, home budgeting can be done with limited computer and software power.

We will try to update this blog at least once per week. We will start with the basics of budgeting and build up to using software to accomplish this task. We will also eventually share with you the spreadsheet that we currently use for our personal home budgeting. We think you will find it very easy to use.

Randy & Kathy

P.S. Check out Randy's new novel, "Passion is a Harsh Taskmaster." It's currently available as an eBook at Amazon, Barnes & Noble, Apple iBooks (via iBooks app), and Smashwords.