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- Family Budget
Reducing monthly expenses
Giving financial advice is always easier than following it. Each of the tips that followed have been learned through hard experience and 20/20 hindsight. So with that in mind, here are some effective ways to lower your family expenses. Remember, any reduction in expenses requires a change of priorities.
- Don't buy stuff you can't afford.
In general, day-to-day transactions, this means exactly what it sounds like -- if you don't have the money in your bank account, don't spend it. Do not buy it with a credit card, do not say, "Well, I'll have the money in two weeks. Just wait until you have the money and buy it then.
- Calculate a budget and live within your means.
The most effective way I've found is to first subtract the bills, then buy your groceries. Take the remaining amount of money and divide it by the amount of days left until your next payday. Do not spend more than that amount of money a day. If possible, put $50 or more into savings each paycheck.
- Bargain shop and learn to cook.
A lot of people today don't know how to cook, and feel intimidated by it. I recommend finding a cooking blog -- I like Smitten Kitchen -- or going to Allrecipes. When I search Allrecipes, I like to sort by "rating", I always read the first few reviews for any recipe tweaks. Also, buy a slow cooker and one of those slow-cooker cookbooks. This is a super simple way to cook meals on a budget.
- Pack your (or their) own lunch.
It's easier to buy a lunch, I don't think anyone denies that. But it saves money to pack a lunch. For my husband to buy a lunch at work every day costs $2 ($40 for 4 weeks), and daily school lunch for our son is $2.75 ($55 for 4 weeks). This works out to $95/ month on lunch. If I'm sending a lunch made from leftovers or ingredients already a part of our regular shopping list (bread, peanut butter, jam; cheese (sliced into cheese sticks); ritz crackers), then it may be a little repetitive, but it saves money in the long run.
- Save money on cleaners.
It is ridiculously easy to make your own household cleaners. Next time your Windex runs out, save the bottle. Fill it with 3 tbls vinegar, 1/2 tsp dish soap, and 3 cups water. Also realize that cleaners are pretty cross-platform. We go out and buy Windex to clean our windows and Scrubbing Bubbles for our toilets, but a cleaner is a cleaner and works pretty well in both spots. For hard-to-clean, ingrained dirt, sprinkle it with baking soda and spritz on some undiluted vinegar. It'll foam out, and when the chemical reaction is done, the dirt and/or grease will be significantly loosened.
- Mend clothing.
If you have access to a sewing machine, iron, or needle and thread, most minor clothing damage can be easily and quickly repaired -- things like seam tears or worn-through pocket corners can be neatly re-stitched; while ripped jeans can be quickly patched with iron-on patches. It's less expensive to sew up a tear or stitch on a new button than it is to buy a new shirt.
- Shop at consignment stores or 2nd-hand stores.
It doesn't matter whether it's your local trendy consignment store or a nationally-recognized 2nd-hand chain like Goodwill or Salvation Army. Most consignment stores will give credit or (sometimes) cash for clothing in good condition. At children's consignment stores, this means you can trade in the barely-worn 10-month jeans or never-used newborn clothing for clothing that fits your toddler. If your toddler is set for clothing, most children's consignment stores also sell toys, shoes, and books -- you turn in the toys/ books/ clothing your child no longer wears or uses, and get different ones in return. It's a win win.
Live within your means
Basically, what it comes down to, is pay your bills and don't buy anything you can't afford. I admit this is easier said than done, especially if you can't afford to get groceries and pay bills with the same paycheck. For someone in that situation, where life expenses are higher than incoming wages, I offer the following advice:
- When you do your budget, take the timing of your pay period into account.
- See what non-necessities you can cut.
- Budget per day.
- DO NOT use check-into-cash places.
How do your pay periods affect your budget?
The reason I say "take the timing of your pay period into account" is pretty simple. My husband and I were homeowners, but we had to foreclose on our house. The frustrating thing was that we technically made enough money to afford the house, even with the outrageous interest rate -- the problem was that we could never get anything into savings because of the way the paychecks and payments lined up. Basically, it was a situation like this:
- Pay period 1: Receive paycheck of $1,400.
- Pay mortgages ($1,306 total)
- Money for remainder of 2 week pay period: $94
- Overdraft account to pay for groceries and gas for daily 1 hr work commute.
- Pay period 2: Receive paycheck of $1,400
- Immediately deduct $300 + overdraft fees ($30) for overdrafted funds.
- Use $1,030 to pay household bills ($690)
- Use remainder ($340) for 2 weeks of groceries and gas.
As you can see, this left us nothing for all those little day-to-day expenses -- new shoes, haircuts, clothing, school supplies -- let alone things like medical bills, etc. The thing is, if we could have had a paycheck of $700/ week, we could have paid the bills on time (instead of waiting until money was in the account and paying late fees), which would have meant more money in the bank, which would have meant we could put aside a little each month in savings, and so on. It was just a situation where we were constantly paying catch up.
Now, we didn't have any credit cards, and by the time we found ourselves in that situation, our credit sucked far too much to get a card with an even semi-decent rate. But, if you already have a credit card and you find yourself in a situation where you are not financially solvent because the pay periods and bill due dates are aligning just off enough that you have late fees to deal with as well -- in that case, I'd recommend just using your credit card and paying off that balance with the pay check you normally use to pay bills and late fees.
What non-necessities can you cut?
Get creative here. Most people cut obvious things, like going to the movies or out to eat. That's great, and a really excellent first step. Other ways to save money include:
- Go to the beauty college for hair cuts.
- Get rid of any unnecessary services (examples: If you have both a home phone and a cell phone, weigh the pros and cons of each and get rid of the one you can live without; or if you have cable t.v. and cable internet, get rid of cable t.v. Cable internet is cheaper and streams most t.v. shows through the show websites or services like Hulu and Netflix streaming.)
- Forget sunk cost fallacy and sell stuff now -- it both declutters and puts a little extra moola in your pocket.
- Hang onto receipts and buy from places with generous return policies. If worst comes to worst and you realize you shouldn't have splurged on that new winter jacket, you can still return it.
- Downsize. Do you have a massive truck that only gets 10 mpg? Buy a motorcycle -- smaller, more efficient, and (depending on type), gets 40 mpg. Do you live in a 3 bedroom, but really only need a 2?
Budget per day
Pretty damn simple. It's exactly what it sounds like. You know your next paycheck is coming. You know it's going to be just about, say, $1,000. You know you have to pay $650 worth of bills with that, and buy $200 of groceries. That leaves you with $150 until your next pay period, or $10.71 a day for the next 14 days. Keep that in mind, and don't go over $10 a day if you absolutely must spend money. This might mean getting up early to ride the bus to work if your car is out of gas (although if you buy a motorcycle, you can usually manage to mostly filling up a tank for $10).
DO NOT use check-into-cash places
Seriously, those places are a massive, massive scam that are designed to prey on the poor. You end up in a vicious cycle of the interest building up and needing to borrow a little more every paycheck. The interest rates are astronomical. If you're at a point where you are willing to borrow against your next paycheck just to pay this month's bills, you need to do two things:
Look at which large expenses you can downgrade (moving into a less expensive place, etc.), and
Look at your banks overdraft plan. Seriously. Budget out the minimum amount of cash you need to get by and calculate in the overdraft fee. It's usually better (interest-rate wise) to take the overdraft hit than go to a check into cash place. REMEMBER: This is a temporary measure only!
A final word:
Most of these have to do with budgeting while in poverty -- keeping your head above water, that type of thing. Let's face it, the only thing that will really help in that situation is earning more money. Sometimes it doesn't matter how well you manage your money, you just can't squeeze honey from a turnip. In poverty types of situations, often drastic measures and temporary financial hits are the only solution. By that, I mean move.
During the Great Recession, fewer people overall were moving across state lines, but this was especially true for the younger generation, who often opted to move back in with their parents and familiar communities rather than spread out. The problem with this is twofold:
We dealt with the Great Depression in part through mobility: People moved to find jobs, and they moved to where the jobs were. That's not happening during this Great Recession; we're staying put and hoping the jobs come to us.
Some states are doing better than others and have been throughout the Great Recession. Their in-state records of unemployment, when compared to earlier years, may have looked bad -- but when you compare those unemployment records to some other states, it's still better odds. So go to where the jobs are, even if you have to scrape and sell everything you own to make the move.