If you're not happy with your values as reflected in your
spending, you have the power to change it.
It is simple, but not easy.
Within 1 year, six months to assess your situation and then six months
to create new routines for yourself, your values and spending will be aligned.
1. Keep a monthly money chart. The first step in improving any situation is
to understand the situation as it currently exists. You need to know what you are actually
spending. You can make a spreadsheet or
do it by hand if you wish. It doesn't
matter how you do it. You just need to
do it.
If you are like my
family, you have settled into a routine.
You will need to keep track of spending, on a monthly basis, for about 6
months. It will vary somewhat from month
to month, but not significantly. You should get a pretty good idea of monthly expenditures after 6 months.
Break down your spending into various categories. There are the necessities-- food, shelter,
clothing, medical-- and subcategories such as groceries (but distinguish
restaurant spending), utilities, HOA, etc. Then there is optional spending. You can break down into entertainment, education,
exercise, gas, maintenance of vehicle, etc.
You should also create a separate category for interest on debt, other
than a mortgage, and credit cards. You
will also probably have a miscellaneous category. Everyone does.
I recommend rounding off.
If you spend $19.73 on groceries, then you spent $20. Adding the pennies at the end of the month is
not worth the time. They will balance
out anyway if you round off.
2. Limit or eliminate luxuries. Now that you've done your assessment, it is time to start making changes. Distinguish between a luxury and
necessity. A luxury is a choice. If it's not food, shelter or clothing, it is a
choice. A TV and cable bill are not
necessities. Although watch movies at home on occasion, I haven't
had either in years. Significantly reduce or eliminate luxury spending. You can do so without negatively impacting the quality of your life.
3. Pay down bad debt, borrow no more except
for a true emergency or a home. I
have not had a credit card for 10 years.
I stopped using it 20 years ago, but kept it in case of
emergencies. Once I built up a
sufficient savings, I got rid of the card altogether.
If you use a credit card, you contribute to your own
impoverishment and increase the wealth of people who already have too much. Pay
down your debt, and rip up your card.
Mortgage debt can make sense. Everyone has to live someplace, and we
usually have to pay for that place. It
is simply a question of whether you choose to own or rent. If you wish to own, you will probably need a
mortgage. So long as you have a fixed
interest rate and it is affordable and you intend to pay it off in full one
day, a mortgage can make economic sense for you. The mortgage will also decrease your taxes
because you can deduct mortgage interest from your income. Ideally, your mortage is the only debt you have.
4. Buy in bulk and buy quality. if you've eliminated or significantly reduced
luxury spending, you can now work on reducing expenses on necessities. Two strategies which were the subject of a
prior post are buying in bulk and buying quality, http://frugalitariancatholic.blogspot.com/2013/07/too-poor-to-buy-cheap.html
5. Share expenses. It is cheaper for two people to split
expenses for two than for each to pay for their own expenses. A simple example will illustrate the
point. Two people splitting the monthly
rent of an apartment in the amount of $1,500.00 will pay $750.00 each, but each renting their own
apartment might pay $900.00. So the
recommendation here: get married, or move in a really good friend! If you get married, you also have the added
benefit of decreasing your tax burden.
There is no marriage penalty.
there is a singles penalty.
6. Insource repairs and upkeep. To the extent possible, do your own repairs. Don't call the handyman if you can do it
yourself. My wife, who is our resident
handyperson, recently fixed our stove.
It was not working one day, so through a quick internet browse she was
able to identify the problem and locate the broken part. She ordered the part and installed it, and
the oven was good as new. The part cost
$39, to have a handyman come to our home and install would have cost $175.00.
Do not have people clean your home. That is the most luxurious of all luxuries
and, absent some extraordinary circumstance I can't imagine, should never be
done. This is not just about reducing
spending. There is moral dimension to
this as well. There is a special place
in purgatory reserved for people who pay other people o clean their
toilets. Don't end up there.
7. Buy used. Consult your local thrift store and
Goodwill. You would be surprised at what
people give away. You can get near
brand new sunglasses for 75% off, hardbound books for $3.00, kid's bikes for
$10.00, etc. There is no stigma in
getting your goods second hand. You save
money by doing so, keep perfectly usable stuff out of landfills, and, in the
case of Goodwill, contribute to an organization devoted to training and
employing the otherwise unemployable.
8. Entertain yourself for free. Even in this era of austerity, even in
the reddest of counties in Ownership Society, USA, even in Orange County, there
are plenty of free community events available to the general public. There are free concerts, lectures, documentaries,
walking tours of historic neighborhoods and buildings, all manner of things available
to you, free of charge. Museums often have
free days once a week or month. You should never need to pay for a gym. There are public parks with walking trails and exercise equipment, bike trails, secret (but public) staircases, nature centers, boardwalks etc. And take advantage of your local library, not just for free books and movies but also for children's storytime and arts and crafts and community events. Information is readily available on the internet.
Free entertainment is also generally more productive,
educational and meaningful than entertainment you pay for. You can go to a Dodgers game, or read a
book. You can take your kid to the mall,
or you can take him to see volunteers clean dinosaur bones at the Museum.
9. Reduce transportation expenses. Bike or walk when you can. Driving is not fun. It is to be used only to get from point A to point B, and used only when necessary. Weather
permitting, you should almost always be able to run an errand within a mile
from your home without a car. If you
have to drive, then combine errands so you kill two birds with one stone. To calculate the true cost of driving, which
includes not just gas but also depreciation and maintenance, use the rate the IRS
allows to deduct for business miles driven.
The IRS allows $.56.5 per mile, and this is what you should use. So, if you drive across town 10 miles to see
a movie, then the true transportation cost is $11.30.So....
Assess your spending. Do some research. Create new habits for yourself. Have fun, have patience, and be proud of yourself. After a year or so, you will have effected a transformation in your financial and spiritual life. Your spending should align more closely with your values, and you should find you have significantly more money left over at the end of every month. What to do with the extra money? That will be the subject of future posts.
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