Artwork Courtesy TheVintageMoth
My last post was about how to create a budget and discover, retrospectively, how you’ve spent your resources.
With that information in hand, it’s time to triage and stop the bleeding and with any luck, heal the wound.
If you didn’t read and follow the instructions in my “how to make a budget” post–stop. Do not pass go. Do not borrow $200. Return, and follow the instructions STAT.
Some of us have a bleeder budget, and some of us are hemorrhaging. When I was laid off in December of 2008, I had to stop a hemorrhage (1/2 of household income—customarily spent as soon as it arrived).
Step 1. Collect your data!
Get out your budget and 90 days of spending history (see earlier instructions on how to create this).
Pile up your last 90 days of fixed bills.
Step 2. Take a day off
Keep reading, I’m not crazy. This is worth doing. You wouldn’t want your ER physician fixing a bleeding artery after a long day of surfing in the sun, or working overtime in the IT department after a mainframe crash. If it isn’t your job to get your finances in order—whose is it?
Besides, you’ll want to use business hours to your advantage.
There’s two main steps to this process. First is triage, second is treatment.
Triage
Take a look at those past 90 days and see how you spent your money. I surprised to learn my family spent $1500 dining out one month. (Holy #)*%)*#!) We’ve got two little kids—we don’t even go to places that don’t have mascots, so it’s not like we had one or two great dinners out. Food is our black hole—but yours might be auto expenses, or shopping or bookstores.
Take your grocery receipts (or the offending receipts from the black hole in your budget) and figure out a way to eliminate the eight most expensive items on your list. Beer, meat, laundry detergent…etc. We eat at least one vegetarian dinner per week, and I started making my own laundry detergent (it costs me $2.90 per year now vs $17/mo) and we’ve cut back on our alcohol consumption. We cut our food budget from $170 a week in March, to $100 a week now.
A few more quick ways to cut the food budget
1. Learn to cook. It’s worth it.
2. Buy in bulk. We buy rice 50 lbs at a time, and pasta, oats, beans etc 5-10 lbs at a time.
3. Buy fruits and vegetables in season and store them (freeze, can, etc).
4. Check out liquidators—I found some yummy (albeit expired) pasta for 1/5 the normal cost at a liquidator. I checked out the realistic shelf life at www.stilltasty.com, it was expired, but safe to eat for years to come.
5. Find a few meals you can automate. I know that a breakfast of steel-cut oats for the whole family costs about $0.60. We eat that frequently because everyone likes it. The budget has noticed!
Treatment
Call every single “vendor” to your household. Seriously. Ask for a lower fee, a better rate, or a promotional bundle. Make them make you a deal. Here’s a few of mine, and how I managed them:
1. Call cable/mobile phone/Internet/phone provider. I asked for a smaller package. Comcast offered to “rebundle” my existing package into the (same) latest promotional bundle at a fee $60 lower per month. “Can you make that stick for two years?” I asked. “Yes!” SOLD.
2. Call the electric company—what can I do to reduce my costs? They suggested a energy consultation (free) and I found out I’m loosing energy with insufficient weather-stripping in my front door. They also sent me free water saving shower heads for my bathrooms—and the plumbing tape and everything to install them (cool!).
3. Call the pre-school, day care, whatever. I work at home, but my toddler goes to pre-school. I worked out a half-day arrangement so she’ll come home every day and have her nap at home, instead of at school, because this puts her down to part-time status, it saves me $100 a week.
4. Call your insurance company and ask them what they can do. We dropped the gap coverage on our two paid-off, high-mileage cars, and now just carry replacement cost insurance. We also cleaned out the garage and started parking one inside (saves us $ on our car insurance). Finally, we increased our deductibles to $1000 (from $200). This gets us a much better auto insurance rate. Better yet—shop around for a new rate BEFORE you start negotiating with your current company!
5. Call your HR department and figure out if your tax withholding is still the right amount. Maybe you can get some of that back now instead of next year, by withholding correctly?
6. Call your credit card companies and student loan companies and ask for a lower rate. And put a note on your calendar to call them in three months and ask again. This almost always works for me.
Anyone who bills you needs to get a phone call to see if you can find a way to pay them less. If you can’t think of what to say just call and ask “hey, I’m trimming my budget around here and looking for a better deal. What can you do to help me out?” They want to keep you as a customer, and they don’t want you to stop paying bills because you’re stretched. They’ll try to work with you, and they seldom laugh or hang up.
Have fun and good luck. When you’re done with this education, you’ll be able to call yourself a “budget doctor” and you won’t have any student loans to show for it. Now that’s healing!
{ 5 comments… read them below or add one }
My husband lost his job back in Feb and we’ve increasingly felt the money crunch. We decided to call around to see if we could lower rates etc and found for the most part companies are willing to help. We made one mistake by deciding not to call on our home equity line of credit because we thought they would take away our available credit if we told them we needed help (it was the only money available for us if we had an emergency). We finally got to the point that we couldn’t pay, called them up, and they gave us a 0% interest rate for 2 years and cut our monthly payment 75%!!! I was shocked! And it only took one 15 minute phone call! Now we owe $46 a month instead of $200! It all goes to principle and anything we can pay over the $46 goes to principle too! What a relief! Please call your lenders!! It is worth it! And they did not take away our available credit (we have no intention of using it but it is there just in case).
Jessica,
Your post here is right on! One must definitely review and categorize where you spend money and figure out where to cut back to get the most benefit. Grocery, cars and housing are the three biggest expense areas, so cutting back or stopping the bleeding can bring big savings.
On the budget issue, our family has been for 15 years using an allowance system, where each member gets a set amount of money each pay period (that you set) where they can spend as they need or please. Allowances are created/budgeted from the money that is left over after fixed expenses are paid for. Therefore, each member has their own money to spend as they please and the budget master knows the spending stays within budget. Visit http://www.theallowancesystem.com for more information.
One thing I think some people do once they lose their job is wait too long to either search for a permanent replacement and/or go out and getting a lesser job till they find the job they are really looking for. Bringing in $1,000 a month for 6 months goes a long ways to helping get through the tough times, rather than waiting for 3-4 months before going out and finding the temporary job when all funds are absolutely exhausted. Getting that hold over job immediatly, means you have something coming in. Clerks and other low paying jobs are not fun, but they are temporary and should not last forever.
Thanks so much Kristy and David for the pointers! Kristy, I never even tried on our HELOC–instead, we were already planning a refinance, and now I wish we’d tried that before doing the refinance.
We weren’t in too drastic of financial shape with my layoff–once we calculated the costs of having two parents working (commuting, daycare, etc), so we knew that this being a down time in the economy would actually be a good time to start my business.
I actually only “looked for a job” for a week until we’d done our budget and discovered we didn’t really need it (now I’m feeling awfully sheepish for our spending habits in the prior several years!)
Not being in the midst of an adoption right now eases the financial strains–we’ve been midway through or deeply into paying on one for so long, I forget what a financial relief it is to not be starting on another right now.
That said, as soon as I build up more income, I can’t wait to invite more kids into the family! For now, our two seem like plenty. Ha ha! (Can you tell it’s been a long day at the park for this mom? I’m beat!)
thanks again for the comments Kristi and David!
As the real “Budget Doctor” (TM), I’m not sure I want everyone calling themselves a budget doctor, but the advice is very good!
Mike, my apologies, I had no idea there really was a person by the nom de plume “Budget Doctor,” though thanks for the endorsement of the advice doc!
Jessica