Sunday, March 25

Where The Money Goes - A Primer

Here is a very quick list of the common expenses that most of us face on a daily or monthly basis:

  • Rent or Mortgage
  • Auto Payment
  • Insurance
  • Credit Card Payment
  • Phones and Cable TV
  • Heating and Cooling
  • Power and Utilities
  • Groceries and Supplies
  • Entertainment
  • Auto Usage and Parking
  • Clothing
Now let's take a look at each of these items and see how we can work towards a more frugal lifestyle.

Trimming Housing Costs
It's not easy to manage housing costs. The bank tells you how much your payment is or your landlord tells you how much rent to pay! However, when you are looking for a new place, you can possibly take steps to ease your payments. Consider the total cost of living based on all of your expenses, commuting for example, when making a decision.

If you are one of those people that saves a little every month, and I hope you are, then consider splitting your savings between something liquid, like a savings account, and a small payment on the principle of your mortgage. Most banks will give you a line of credit at very low interest, compared to a credit card, if you absolutely did need to tap into your savings at some point. This will save you a lot of money in the long term (assuming you don't rely on the line of credit).

Here is a mortgage calculator you can use to help figure out what you can afford. Depending on where you live, it's possible your mortgage would not be much more expensive than your current rent! Be sure to scroll down past the loan quote application to get to the calculator... then squint a bit to read the dark writing on blue background, and type in your potential mortgage particulars. Apparently this company specializes in Washington mortgages and Nevada mortgages.

Trimming Insurance Costs
Insurance costs can be managed to some degree by considering the deductibles and limits that you choose. Personally, I've always been willing to accept a high deductible on damage to my vehicle because I know I'll be happy to be alive and worried about monetary issues if something serious happens. As always, be sure to shop around for the best rates, but make sure to check into customer service issues before making your decision.

Trimming Credit Card Payments
Boo! Hiss! What are you doing carrying around a credit card payment? This is one of the easiest ways to throw your money away. The best way to trim your card payments is to first and foremost learn not to buy things on credit! Of course, once you have done so, then you simply must work to pay off all of your credit cards and get your finances back under control.

Unfortunately, depending how and why you dipped into your credit, this process can take years to accomplish. For example, an extended period of unemployment can rip a very large hole in even the most well planned frugal lifestyle. If you ever become unemployed don't hesitate to start cutting back on your expenses very quickly. Wait until you do get that new job to start spending and don't just assume you will land one soon.

Trimming Communication Costs
Many people spend way too much money talking on cell phones. Of course, text messaging should also be mentioned here. All this gabbing, texting, watching television, renting movies on demand, and so on really adds up. One way to save is simply to put the phone down! Once you have Internet connectivity, at home, sending email is generally free. Slow down a bit, deconnect a little, and enjoy the peace and quiet that comes with it.

Other areas to save may include trimming down your cable package or simply not going to the theatre. If you can't find anything good on the television then find something else to do. Hello? Does anyone remember what a book looks like? Okay then, write a blog entry or listen to your iPod.

Trimming Heating and Cooling Costs
Unless this is included in your rent it will likely be a large portion of your seasonal expenses. Look into this cost before you move into a new location. Can you get access to previous billed amounts? Is the place well insulated? Do the doors and windows seal well? If you are already in a place, then do whatever fixup jobs can help you save on this expense. You can also wear seasonal clothes and raise or lower the thermostat a few extra degrees.

Triming Power and Utility Costs
Do you leave the lights on when you leave a room? Do you leave the television on when you leave the room? Does your computer run all day long? Is the seal around your fridge worn and leaky? Do your taps drip? Extra demerits if your taps drip and it's your hot water that is leaking! Do you open your windows to get fresh air and then forget to close them?

Trimming Grocery and Supply Costs
If you are running your home well, then you won't be able to save a lot of money in this area. If you aren't, then this can be a huge place to save money! Most importantly, cooking your own healthy meals instead of buying breakfast, lunch or dinner is an incredible money saver. Sure, most of us can afford to eat out a lot once we enter the work force, but don't fall into that trap. Seriously, it will just leave you fat, lazy and lighter in the wallet.

Another area to save money is to consider purchasing goods, at least ones that won't go bad, in larger quantities. This is especially true when they are on sale. Keep a closet or cupboard dedicated to supplies that were purchased in quantity. Check flyers and coupons and then load up when a good deal comes along. As long as you don't get wasteful with your goods and supplies, because they are available in quantity, then you can save a lot over time this way. The freezer is handy in this regard also.

Trimming Entertainment Costs
As mentioned above, simply stay home and cook your own meals. Another thing to do is make it less convenient to purchase impulse items. Perhaps withdraw your weekly entertainment budget in advance and not allow yourself to use credit or debit for unplanned expenses except in an emergency situation. However, and this is important, don't be afraid to spend your alloted entertainment budget. Having fun is a very important aspect of life. Being frugal does not mean being unhappy!

Trimming Transportation and Parking Costs
The simplest way to save money here is simply not to travel. Are you able to work productively from home one or more days a week? Do you live close enough to work that you can easily walk or take convenient public transportation? During the summer is there a safe route for biking or rollerblading to work?

Other than travel for work, you may be able to organize your personal travel a little better. Perhaps you could plan your trips to combine a visit to several close together places at once instead of randomly visiting each separately whenever you get the impulse to do so. Look for ways to minimize the distance you drive and you will save on gasoline.

Trimming Clothing Costs
There are some folks out there who simpy love to shop. All I can suggest is setting a budget and sticking to it! For the rest of us, we simply need to make the clothes we have last as long as we can. For example, washing and drying the clothes appropriately can certainly help. I'm sure everyone has ended up with a load of pink laundry or shrunken items that no longer fitted.

So, consider your laundry habits before you buy something. If you don't regularly get items dry cleaned, don't buy something that can only be dry cleaned, at least not if you plan to wear it regularly. Another important consideration is wearing the right thing at the right time. Don't bother wearing a white shirt if you are having spaghetti for dinner. Pasta sauce stains on the front of your shirt will covert a shirt into a rag pronto.

Of course, there are more formal occasions that limit your clothing options, but choose wisely and save yourself some grief. Similiar, I've blogged in the past about wearing grey socks instead of white socks, since they don't seem to discolor so easily. When it comes to clothes it seems to come down to being aware of what you plan to do and then dressing accordingly. Simply avoiding or delaying the common ways that clothes end up being destroyed is a good way to save.

Finally, though we don't all have the skill, a few quick stitches in something that is just starting to unravel will delay the inevitable. This can work well for socks, shirt underarms, sheets, blankets, mittens and so on. When it is finally time to retire something, then it should be saved for use during cleaning or manual labor tasks. For example, it doesn't matter if your shirt is ripped or torn if you are wearing it while changing the oil in your car, does it?

Putting It In Perspective
If you think about this a bit you'll notice that there are two types of tips in this post. First, there are simple tactics you can apply to day to day activities to save money. Second, there are long term strategies you can apply when you are making large changes to your life in terms of significant personal purchases and decisions. While day to day tactics are important, applying wise long term strategies is just as important but often overlooked by mainstream society.

Frugal Guy said...
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Anonymous said...

Just discovered your blog and it looks real interesting. I am going through a divorce right now so I am living very fugally. Thanks for the tips. You'll be a regular stop.

Frugal Guy said...

Hi Anon,

Sorry to hear about the trying times. Anyway, I'm probably fairly radical in my search for cheap healthy and simple meals... which might be helpful.