Sunday, March 28, 2010

Dissect Your Budget - Part 9 - Entertainment

Tip #245 - Dissect Your Budget - Part 9 - Entertainment. When we began dissecting our budgets at the start of this series, we were dealing with mostly necessary items. After food, clothing, shelter, utilities, transportation to and from work, the bottom of the budget list starts to become more and more optional. Obviously, if you need to come up with another $20 per month to buy milk for your children, then taking a weekend at the beach becomes a distant second choice as a way to spend that money. Only you know your financial situation. The more leeway you have, the more you can spend on optional items. The tighter your funds, the less you can spend. Keep that in mind when dissecting your budget. But remember, even with a budget of $0, you can still entertain yourself and "take a vacation" - even if it's just camping out in your sister's living room for the night.

Entertainment is definitely a budget category that has a lot of give. The budget can range from almost nothing per month for some to probably in the thousands of dollars for others. Your job is to analyze how much you are spending in this category and how you can reduce that amount in order to put that money toward more needed categories such as paying off debt or saving for retirement.

I generally think there are about three levels of costs for entertainment for most people. On the high end, we can buy tickets to professional sports teams, play expensive sports such as golf, go to professional theatre, eat out at fancy restaurants, and go to privately run swim clubs.

But what if you want to do these sorts of things but don't have a lot of leftover money in your budget after spending on more necessary items? For less money you can buy tickets to minor league baseball games, buy a tennis racket and play on public courts, go to community theatre, eat out at inexpensive, local restaurants, and swim in county-run pools.

But for some even those types of costs might be too much. On the budget plan, entertaining yourself or your family can be nearly free. Watch a local high school football game, exercise by running in the neighborhood, attend a play at a local elementary school, cook a special meal, and turn on sprinklers in the yard.

Even if you live in the middle of nowhere, there should be free or very cheap entertainment options available around your house, if not in your neighborhood and community. Entering homemade jelly in the county fair won't cost much but might bring a day of fun to a family who gets to enjoy the sights of the fair even if they can't afford rides or games. Play old board games that are lying around the house, travel in your favorite armchair by watching a travel video or reading a travel book or blog.

As long as you don't feel like you have to see the latest concert, buy the newest bestseller, or eat at the nicest restaurnats, you can keep your entertainment budget at a minimum if it's necessary. Be realistic about how much you have in your budget for this category and spend accordingly.

In Real Life (IRL) - I always loved the phrase "champagne taste on a beer budget" because I think many people are guilty of this. Watching how others "live" on television makes us think that everyone is out having a good time, going to parties each night, dining on steak, and joining country clubs. And if we try to emulate that lifestyle without having the funds to back it up, then we will fall into debt very quikcly or get way behind on our financial goals.

I have several "real life" friends who are in similar positions as my family - we live in the same town, have 2, 3, or 4 children, and the husband works, while the wife stays home with the kids. I haven't looked at any one of their bank accounts so I can only guess at how wisely my friends are spending their money but I'll take a stab. At one extreme, one friend buys all of her children's clothes at hip stores, takes them to the latest concerts, does frequent expensive vacations, buys the latest expensive toys and gadgets such as Wii and American Girl dolls, and eats out at nice restaurants, paying for babysitters each time. Everytime I turn around I hear some other great place they are going to, thing they are doing, or item they are buying. As far as I know they do not come from wealthy families, although the husband does seem to have a good job (hopefully a very good one!).

On the other end of the scale is my family who buys clothes at consignment sales, takes my kids to see plays put on by local high schools, goes on a budget beach vacation each year and a very cheap trip to Florida, staying with family, does not own anything like Wii (although my daughters are currently pooling their money to save up for one - they are up to $48), looks for American Girl items at thrift stores and Craigslist, and goes out with husband only when parents are in town to watch the children.

I AM NOT JUDGING! I AM JUST WONDERING? Does my friend's husband make that much more money that they can afford all of this entertainment? Or are they not putting the maximum per year into their IRA and 401(k) plans and not putting money away for their kids' college funds? Do they have an emergency fund? Or are they racking up debt? It's not just this one friend. She is probably the extreme. But many of my friends will go out to eat at a drop of the hat, spending $50 for dinner and another $30 for a babysitter. Tickets to Dora Live are bought for $50 per person including the 2-year old without much thought. Is this kind of entertainment spending appropriate for them?

I don't think we all need to be waiting for grandparents to visit so we can go out to a nice dinner, but we should make sure our entertainment budget makes sense within our family's income, expenses, and debt. If in any way, shape, or form, you need to pay down a loan, save more for retirement, or add more fruits and vegetables into your diet, seriously consider analyzing your entertainment budget and finding inexpensive ways to keep you and your family amused. (You can always find last year's fad at the thrift store anyway.)

Wednesday, March 24, 2010

Dissect Your Budget - Part 8 - Vacation

Tip #244 - Dissect Your Budget - Part 8 - Vacation. All work and no play makes Michele a dull girl. It also makes me anxious, frustrated, stressed-out, and tired. I am not alone in this. That is why I think each budget should have a line item in it for vacations. What? You cannot afford a vacation you say? You're trying to save money? That might be the case, but I guarantee that taking a break now and then from the working world will only make you more productive, more creative, and more motivated than if you do not take a break.

Besides, who said your line item on your budget has to be for trips to Europe or cruises to the Carribean? It doesn't. In fact, if you are trying to save money, this is one area where you can cut your expenses dramatically! If you are used to spending money for one big trip per year plus one trip to the beach, then make some changes. Instead of your one big trip, make it a small trip to a less expensive locale. Or drive to a cheaper beach than one you are currently going to. Maybe you go to a lake house every year. Why not budget for a camping trip instead or a no-frills cabin? There is something cozy and fun about roughing it. And the further away from your real life that it is, the more like a vacation, it will seem. Maybe you can visit a friend in another city, but make sure you extend the invitation back for a visit at your house.

Travel off season, even if it means taking the children out of school for a few days. Or visit somewhere where it is "out of season" for that location but "in season" for you. For example, in the south, schools generally resume in August while in the Northeast and Mid-Atlantic, many children are still on vacation. You can save a bundle on vacation by traveling in late August to a beach in the south rather than in July.

When on vacation, balance expensive activities with cheap or free ones. For example, a day at the amusement park might be your expensive day, and possibly the highlight of your trip. But balance the week with some cheaper activities - like a day at a zoo, nature center, or just laying on the beach. This would be much cheaper than doing four consecutive days of amusement parks. When choosing activities, look local. A local, public waterpark may be a quarter of the price of a private one.

Get creative in your planning. Visit all travel websites for the best deals. Check into any group rates such as AAA. Talk to people who live in the city or town that you are visiting. I love visiting the forums at You can pick any state in the US and some cities and countries abroad and post questions to residents who live there. Most people on this site are very helpful and will narrow down your must-sees and your waste-of times. They may even tell you how to get the best deals.

Vacation is anywhere that you don't live. Try not to get in a rut and visit only much-hyped cities such as New Orleans, Miami, New York, and Chicago. Places such as Cleveland, Pittsburgh, El Paso, and Kansas City surely have great sites at much cheaper prices than the well-known cities.

If your current vacation budget is $200 per month, challenge yourself to lower it to $150 per month and see where you can cut corners on your vacations without cutting out the vacations themselves.

In Real Life (IRL) - I love me a vacation. If someone told me we were going to Fargo, North Dakota tomorrow, I would be so excited. Because it's completely different than where I live. Of course, it's not a top-destination vacation spot, but I'm sure that I could find enough activities there to last me a week, have fun while I am doing it, and not spend a lot of money.

When planning vacations, I try to find spots that aren't resorts or expensive destinations. In winter, I can have as much fun on a Fort Lauderdale beach as a Carribean one, without spending money to fly to an island and spend money on expensive, flown-in food. For our honeymoon, we went to Costa Rica for the same reason. A carribean island would have been much more expensive but given us the same type of enjoyment.

When I was single and a friend of mine and I used to take trips, we often went the last two weeks in May, returning on Memorial Day weekend just when vacation season was gearing up. The result? We had nice weather, fewer crowds, and hotel rooms that were 2/3rds (or less!) of the price two weeks later.

Here is a real-life example of how I saved money on one particular trip. My friend and I were going up to New England for vacation at the last minute. On our wish list were the city of Boston, Cape Cod, and Nantucket. We had one week to do it - the last week in May through Memorial Day weekend. The way we originally had the trip planned was to drive up to Boston, spend a few days there and then head over to Cape Cod for a few days and take the ferry to Nantucket. First I called the hotels in Boston. Everything was pretty pricy as cities are the priciest during the week because of all of the business people. Then I called the hotels in Cape Cod: they were all booked! After all, it was Memorial Day Weekend! Ugh, we had a problem on our hands. I was beginning to think that our last-minute plans wouldn't work out. Then all of a sudden, it occured to me - why not reverse our trip? Go to Cape Cod first during the week - before the holiday weekend, and while prices were still relatively cheap. Then we would hit Boston on Memorial Day Weekend when all of the business people had cleared out. Brilliant! Our plans were not only a "go" but the hotel prices were much cheaper, too. (Okay, maybe it wasn't brilliant; maybe we were just being dense, but at the time it was definitely an "ah-ha" moment).

The point is, we all need a vacation at some point, but they don't always have to be big and fancy. Look for ways to make them cheaper, but still get the break and relaxation you need. For other money-saving ideas, check out Frugal Friday.

Friday, March 19, 2010

Dissect Your Budget - Part 7 - Insurance

Tip #243 - Dissect Your Budget - Part 7 - Insurance. I just heard a collective groan from the readers of this blog. Because while shopping for places to live - even if it's a smaller house to save money - is a lot of fun. And going on treasure hunts in the thrift store for clothes on the cheap is often an adventure. Even finding alternative means to get to work isn't too bad of a job. But looking for lower-priced insurance is about as much fun as getting a tooth extracted, without getting the milkshake afterwards. But in an effort to examine all aspects of your budget in order to lower your expenses, looking into your insurance costs is a must.

Insurance can cover various parts of your budget - there is car insurance, health insurance, life insurance, and homeowners insurance, as well as possibly a few others. We touched on car insurance in the previous post. Today, let's discuss, property/casualty insurance also known as homeowners and renters insurance. We will discuss helath and life insurance in a post related to healthcare costs. Regardless of whether you rent or own your home, you really need to have insurance on it. Part of that insurance (property) covers the cost of replacing/repairing your items should they get stolen, lost, or ruined in a disaster. The other part of the insurance - casualty insurance covers you if someone should injure themselves on your property. A lot of renters do not bother to buy renters' insurance because they figure they don't have many expensive items to replace. But if someone burglarizes your house and steals your camera, television, and your computer, you would be spending a lot of money replacing these items. In contrast, renters' insurance is cheap. For just a few dollars per month you would have protection from big lossses. More people are likely to buy homeowners insurance as the potential for loss is much greater. Also, most mortgage lenders require the borrower to have homeoners insurance.

Regardless of whether you are a homeowner or a renter, it is a good idea to have at least a minimum amount of insurance on your home or contents. Assuming you have insurance, there are ways to bring down the costs. The first way is to take stock of what type of coverage you really need. There are numerous online calculators that can help you determine how much insurance you need. Be mindful of the ones sponsored by insurance companies, however, since they have a vested interest in your buying more insurance. After you determine the type and how much coverage you want, you need to decide how much of a deductible you are willing to pay as a deductible if something happens to your home. Some people prefer to carry high deductibles to keep costs down and to use the insurance in only catastropic events rather than small ones.

After you have decided on the amount of coverage and the deductible, it is time to shop around. Coverage costs can vary quite a bit among insurance companies. The first place you want to contact is the company that insures your car. They will usually give a discount if you have multiple policies with them. Next, you should talk to friends and neighbors. In some areas (such as Florida), there are only a few companies that will insure there, so it's best to hone in on that information. Lastly, you can search the internet or just call around for competing quotes.

Even if you have insurance and love the company you are with, it is still worth it to look into other companies' policies every few years. Prices change, needs change, and competition changes, so another company might better meet your needs at a different time. Sometimes inertia can be bad for the bottom line. Insurance is not something any of us want to spend a lot of money on, but it is something that most of us should have. Finding the best price for what you want is the best way to keep this cost down.

In Real Life (IRL)
- I mentioned in the last post that my husband works in insurance. Specifically, he is an insurance underwriter. So while I am the main finance person in our household - setting the budget, deciding on where to invest, and what to save for (with his input, of course, but he's just not that interested), I defer all insurance purchases to him.

Having said that, my husband called around and found a good deal on homeowners' insurance on our condominium in Florida, which was not an easy feat due to all of the hurricanes there. When the roof on the building was recently redone, my husband found out that we could get a better deal on our insurance because of the extra protection it provides. By paying a mere $20 for some kind of certificate certifying the roof, we were able to cut our yearly insurance premium by over $100.

In the meantime, my parents who own a condo in the same complex were paying much more in insurance than we were. In addition, my husband was able to walk them through the steps to bring down their insurance premium because of the new roof. Just a few simple phone calls, a bit of back and forth, and another certificate on their part, and my parents were able to lower their bill, too. It's not fun to make those calls, bring up your insurance bill in converstation at cocktail parties, and research the best rates. But in the end, when the savings goes into your pocket or into your bank account, the extra work is worth it.

Tuesday, March 16, 2010

Dissect Your Budget - Part 6 - Transportation

Tip #242 - Dissect Your Budget - Part 6 - Transportation. In this series, we are taking an in-depth look at each line item in our budget in an attempt to squeeze out some of the "fat" that is in there in order to put away more money. So far we have talked about housing, utilities, telephone/Internet/television, food, and clothing. Next on the list is transportation. To many people, this would be "automobile" but that would not be the case for everyone, so transportation covers this area more generally. This line item is a "need" in nearly everyone's budget (in the US). It is the very rare household that would not need a way to get them to their job or to the store to get groceries. Some people in NYC might get away with it - if they walk to work and to the grocery store - but even then they probably have a bike, take the subway, use a cab or need to rent a car occasionally, all of which have costs associated with them.

Depending on how fine you like to break up your budget categories, this area takes into consideration auto maintenance, gasoline to run your car, car payments, public transportation (if you use it), and car insurance. This can be a very big line item or many small ones. We will discuss them as a group today. So how can we reduce our transportation costs? If your household needs a car, the first thing would be to buy a car that is a good value. In other words, a Honda is probably a better value than a fancier Lexus. A Kia may be a better value than a Honda. Consider your car a way to get from Point A to Point B or as we used to say in college, "an AB car" - it gets us where we want to go and nothing more - no fancy features, expensive styling, or name brand status. If you need a car to drive you to your job, get one that is reliable and will last a long time, and that doesn't have extra features that you don't need. Find one that is good on gas and one that does not involve costly repairs (Saabs come to mind). All you need is a car to take you where you need to go.

When buying a car, find one that is most affordable to you. For many people this might be a used car. Some suggest buying one that is two years old when most of the depreciation has happened. If you go this route, make sure you have a good mechanic who can spot trouble. I prefer to buy new cars that aren't being sold after a year or two because something is wrong with them. If you are really low on funds, then find a solid used "beater" car. Whichever you choose, keep your car for 10 years or more. A good car with proper maintenance should last at least that long. The biggest expense is the initial expense. The longer you keep the car, in general, the less per year that the car costs you.

In addition to the car itself, there are other ways to reduce your transportation costs. Check out gasbuddy to find out the cheapest gas prices in your area. It probably doesn't make sense to go out of your way to get gas there, but you might find a cheap gas station on your everyday routes. Get the best insurance for the cheapest price. Call around for different insurance quotes. You can probably lower your insurance costs with a few phone calls. Some companies that are know to have low insurance rates are USAA, GEICO, and Erie Insurance. Or you may want to consider changing your policy - perhaps with a higher deductible. If the car is old enough and not worth much you might want to take the collision off your policy or lower the amount of it. Keep your car maintained - rotate tires, change the oil, keep the air pressure full on your tires, and do other routine maintenance to keep your repair costs down.

Use your car less. Look for alternative ways to travel - walk, ride a bike, or take public transportation, if available. Combine trips. Pick up milk on the way home from work - don't make a special trip. Carpool with friends when you go out or with co-workers when you go to the office. If you are a two-car household, consider whether you really need two cars. Maybe when your second one stops working, it will be worth it to not buy another car. All of these options may take an adjustment to your mindset and your schedule, as using methods besides solo driving takes longer and more creativity than jumping in your car and going. But all are good for the bottom line (and for the environment). They are worthy of consideration.

If you are one of those people who relies on public transportation, think creatively to bring your costs down. Most public transportation methods offer monthly or frequent-user passes. Try the bus instead of the subway if it's cheaper. Challenge yourself to walk ten blocks rather than take a cab. Bike to work. Or maybe you can chip in for gas for a co-worker who drives by your house on the way to work.

There are many ways to bring down your transportation costs. Many will take extra time or more effort or creativity. But when combined with savings on other items in your budget, it can be very worth the effort to put more money in your pocket.

In Real Life (IRL) - We are a two-car family. And I hate to admit that my husband commutes about 25 miles to work EACH WAY. Oy. In our defense, we picked our housing location because it was midway between both of our jobs. But now that I am not working, it seems silly that my husband works so far from where we live. But at this point, we love where we live, so we have to put up with the commute and the expenses that come with it. I, fortunately, drive my car very little during the day. As long as the weather is nice, we try to walk at least one way to preschool as well as to the library, piano lessons, and gymnastics at our local community center. I might put 20 miles on my car per week, if that. Because I put so few miles on my car, my husband and I have switched cars for the past year to put off buying a new car. His car is getting up there in miles, and mine was pretty low. By doing that, we have delayed making a huge purchase, and it is giving us time to save up for a new car.

When walking takes too long, we sometimes ride our bikes to do errands. We have a bike trailer for the kids that we bought for recreation purposes, but it works well for groceries, too. On the rare occasion that I go for a Mom's Night Out or when my kids go to activities, I try to carpool with other moms as often as possible. When we go downtown, we always take Metro. We have a stop that is just a mile from our home. And for nine years when I worked downtown, I always took public transportation. In fact, our company paid toward our Metro use. Combined with walking to the Metro stop, it made for a nearly free commute for me - almost unheard of. My husband has called around for the best insurance prices (he works in insurance so I leave this job up to him). And he is very strict about maintaining our cars. They are currently eight and nine years old, respectively. We hope to keep them for as long as possible.

Can we do better? Yes. We could bring those costs down more. I wish my husband would carpool with someone who lives relatively close to us. But because of office dynamics, he doesn't wish to do so. I wish we could cut out some unnecessary trips to thrift stores or grocery stores. I try to stop on the way home from other places, but it's just sometimes easier to go out alone at night without the kids. And lastly, I wish I didn't waste gas in the carpool line when it is raining or cold (I'm a cold-weather wimp). As I said, there's always room for improvement. How can you reduce your transportation costs?

Saturday, March 13, 2010

Dissect Your Budget - Part 5 - Clothing

Tip #241 - Dissect Your Budget - Part 5 - Clothing. Like food, clothing is one of the ncecessities in life. But just like we can get by with hamburger meat versus filet mignon, non-brand clothing meets our needs as well as Ralph Lauren and Versace. At a most basic level, we need clothing to keep us covered to protect us from the sun in the summertime and to keep us warm in the wintertime. In addition, depending on the climate we live in, we need outerwear to further protect us from harsh cold. Once we have these basic clothing needs met, everything else is just fluff. Being in style and wearing clothing without rips and stains are nice, but at a very basic level, they are not necessary.

Having said all that, living in the United States, we do have a certain basic clothing expectation. And unless you are truly counting your pennies for your next meal, we have a general standard to uphold. But it is not necessary for one's clothing budget to be large. As an adult, our size generally will not vary much from year to year, and most of us should be able to get by with a basic wardrobe. Now that a new season is upon us, it is a good time to go through your clothing. Pull out clothes that haven't been worn in more than a year and donate them. Parse your wardrobe to a certain number of pants, shirts, dresses or skirts, undergarments, socks, shoes, nighttime wear, and outerwear. Make sure you have enough clothing to cover one to two weeks of basic outfits. In addition, you should have a couple of occasion outfits for religious services and special events. Depending on your needs, you may also have a few outfits for exercise, outdoor activities, or other specific regular activity.

Once you have thinned out your wardrobe, take inventory of what you have and what you are missing. Do this for each person in your family. Write down what articles of clothing you need to buy in the coming year to round out your wardrobe and break it up so monthly expenses on clothing are even. For example, you might need two pair of pants, three shirts, one dress, one pair of pajamas, one spring jacket, and a pair of work boots to complete your wardrobe. Estimate what that will cost and then divide it by 12 to make that your monthly clothing budget. It doesn't mean that if you see a great deal on shirts, that you should just buy one, but you should stick to your overall yearly budget and try to spread the costs throughout the year.

Speaking of costs, I mentioned above that it is not necessary to have designer brands to meet your clothing needs. If money is tight, you can find decent clothing in discount stores such as Marshall's, TJ Maxx, Ross, Kohl's, WalMart, KMart, and Target. End of season sales are a great time to buy needed articles of clothing. And in the US, end-of-season often comes smack in the middle of the season so that you can still get use of the item during the current year. If you don't have an aversion to pre-owned clothing, then thrift stores and consignment stores are fantastic places to get deep discounts on clothing. Used clothing is especially helpful for young children who outgrow clothes season to season. In spring and summer, there are consignment sales all over the country selling used kids' clothing for much less than new. You can even score designer clothes for a fraction of the original price at both thrift stores and consignment sales. Another method of getting low-cost clothing is to swap clothing with a good friend, a sister, or at an organized clothing swap.

The main point of your clothing budget, however, is to stick with only buying what you need. If you only need two shirts, then don't buy three no matter how good the deal is. And that pair of sandals that will make your freshly painted toes look so nice? Not necessary, unless you have it in the budget.

In Real Life (IRL) - I have written many times that I am not a shopper. And to a fault, I am not, at least when it comes to retail stores. My clothing can certainly use some updating. And ever since I have stopped working nearly three years ago, I have less of a need to go shopping for clothes. So buying too many clothes or more than is in my budget is generally not a problem for me. Although I have been guilty of buying 'just one more cute dress' for my youngest daughter because there are so many of them out there and at such good prices. And I realize that is where other people go over budget on themselves for clothing, as well.

Back when I was younger in the 1970's and '80's, there were not sales year-round like there is now. And there weren't as many discount stores around like WalMart, Ross, and Kohl's. We had Sears, Penneys, and KMart for a long time until Marshall's came to our city. That was it. Thrift stores were not regular stopping points on a shopping trip for most middle class people. Today it is much more acceptable and even expected to buy used. So in a way we are lucky because there are so many "cheap" clothing options today. But they come at cost, and that cost is overbuying. Cheap prices lead us to buying more than we need. And that is why we need to keep a good inventory of what items really are necessary in our clothing budget and sticking to it. Buying more than we need because it's a good deal or beacuse something is adorable is where we waste our money. Make up a clothing budget for the year and stick to it. And when you want to hand over the $20 bill for that unnecessary cute pair of sandals that is not in your budget, ask yourself if that twenty will be better in your retirement savings account or paying off some credit card debt rather than on your feet?

Wednesday, March 10, 2010

Dissect Your Budget - Part 4 - Food

Tip #240 - Dissect Your Budget - Part 4 - Food. Along with shelter, clothing, and water, food is the fourth item on the list of items that humans need to survive. Therefore, food must be in everyone's budget. But costs on food for the month can range from tens of dollars to thousands of dollars. Clearly, filet mignon is not a necessity but eating some kind of protein, over the long term anyway, is. So clearly we need to evaluate our food budget. Do we have money for the filet mignon or will ground beef serve the purpose? Along with it being a necessary budget line item, food is probably also one of our bigger line items. It is also one that has a lot of flexibility. In fact, there are hundreds of blogs dedicated to keeping your food budget low. Generally, the major ways to reduce your food budget is to do any combination of the following:

1. Cook from scratch
2. Plan your meals in advance
3. Buy at set target prices
4. Use coupons
5. Buy in bulk
6. Reduce meat consumption
7. Eat out less

These strategies are all very good ways to bring down your food budget. Some of these will work better for some people than others. Let's discuss each strategy as a way of lowering your food bill:

1. Cook from scratch - While cooking from scratch may sound daunting to some, it is not an all-or-nothing event. You may start small by just cooking one or two meals per week. Or perhaps start by buying cake mixes instead of the whole cake. Then once you've mastered that task, learn to bake the cake from raw ingredients. There are great websites on the Internet that provide lots of easy recipes. My favorite is which has people rate each recipe, so it's easy to pick out good ones. I also like tammysrecipes which is a blog of many basic, healthy meals. And smittenkitchen is a fantastic foodie blog that will excite you to start cooking, although some recipes might be a bit challenging. Even by incorporating some "scratch" cooking into your life, you should be able to cut down on your grocery bill.

2. Plan your meals in advance - It sounds so simple, but knowing what you are going to eat will cause you to be more likely to actually cook your meal rather than grab the phone for take-out. You don't have to be formal about it. Even just having ideas in your head for dinner for the next week will be a step in the right direction to cooking meals and cutting down on cost.

3. Buy in bulk - while this may not always be the cheapest way to buy, it is usually at least a fair way to buy. Sure you may do better by clipping coupons and matching them to price sales, but not everyone has time for that. Buying in bulk at Costco or other warehouse stores might be just the ticket to bringing down your food bill. This is especially true for basic ingredients rather than processed or prepared foods.

4. Buy at your target price - As you shop for groceries, get to know what the costs are. If you know that the cheapest you can buy chicken for $2 per pound then don't buy chicken until it's $2 per pound. And then stock up on those items when you find them at your lowest price.

5. Use coupons - Clip coupons from the newspaper and online. By using coupons and matching them to sales, you can reduce your food costs dramatically. They may not be available for all products you use, but unless you are completely strict about brands, you should be able to use some coupons in your grocery shopping. There are hundreds of sites dedicated to how to use coupons to their fullest. My favorite is moneysavingmom. She alerts you to new coupons and gives weekly posts on the best deals at many stores.

6. Reduce meat consumption - If you are serious about cutting your food bill, you may have to change what you eat. Eating meat every night is expensive. And it is not necessary for health reasons to eat that way. Try cutting meat out of some of your meals by having a few meatless dinners per week. Or, reduce the amount of meat you eat at certain meals so that it's not the main course but an add-in like meat sauce instead of meatballs. Lowering your meat consumption will reduce your monthly grocery bill.

7. Eat out less - This idea may be very hard for some people because eating out is very easy. But if you only do one thing on this list of ideas, this is it. Because eating out can cost more than four times what eating at home costs.

Using a combination of the above ideas should reduce your food bill. You might not have time or want to do all of them. But I guarantee that encorporating at least some of these ideas will save you money. But remember, that food is only one part of your budget. Once you have reduced your costs here, don't spend an inordinate amount of time trying to save a few more cents. There are many other budget items that can use your attention.

In Real Life (IRL) - I use a combination of all of the above ideas to reduce our food bill. I am reasonable about it, though. Since I have stopped working part time, I have been able to cook many more foods from scratch and I see the savings. But I don't cook all of our foods from scratch. I plan our meals in advance - usually in my head. If I have six ideas in my head for entrees for dinner for the week, we are good to go. I don't have an elaborate written plan. I do bulk shopping at Costco once per month for items that we normally eat and that are sold at consistently low prices. I do not buy large bags of potato chips or similar snack foods because that does not save us money!

Along the lines of buying in bulk, I have a target price in my mind for most items we buy. That is the best price I can generally get on regular sales or in bulk for the products we use. For example, I know I can get peanut butter on sale for $1.50 on a regular basis. So I only buy when it goes that low. (Again, however, I am not militant about it, if we run out before it goes on sale again, I will buy a jar or two for $2.00 until the next sale, and buy more the next round so I don't run out at the best price again.) I also use coupons to reduce our costs. I get them from a newspaper and online. I don't spend inordinate amounts of time clipping coupons and doing price matching, but I do spend some time before I go shopping for the week to see where I can get the best deals that week using sales and coupons. Combining coupons and sales usually result in better than my target price, and I view those as extra cheap prices but not my regular target price.

Eating less meat is normal for my family because I am a vegetarian. By default most of my meals are cheap. But since no one else in my family is a vegetarian they do get meat meals - just not everyday. When I buy meat at the grocery store, I realize how much higher the costs are. I have lived healthfully for 30 years without meat and know it is not necessary for a balanced diet. By eating meat only a few times per week, our food budget stays low. Also in an effort to keep our food bill low, we only eat out once per week. When we made a commitment to do that, it was hard at first. But now that I have been cooking from scratch more, I find that the foods I make are nearly as good as some of the restaurants we used to frequent. (Now if I can just get someone to clean up after me! That is what I miss the most about eating out.) I have found that eating out less was our greatest grocery saver. Sometimes when I'm in the market deciding between the $2 canteloupe or the $4 watermelon I have to laugh because that $2 extra I might spend doesn't come close to how much we spend if we eat out for the night. It's all relative.

As with all of our budget categories, I try to be reasonable about our costs but not militant about it. Of course, if you are in dire financial straits, then being militant might be necessary. Otherwise, there are many ways to reduce your food category and it will go a long way to saving money. For other ways to save money check out Frugal Fridays.

Saturday, March 6, 2010

Dissect Your Budget - Part 3 - Telephone, Television, and Internet

Tip #239 - Dissect Your Budget - Part 3 - Telephone, Television, and Internet. In this series we are going beyond just writing up a budget but actually analyzing each line item in your budget in order to reduce your spending in some areas. In the first part we tackled housing, and then we tackled utilities. Today we'll discuss optional utilities such as telephone, television, and Internet. Before we do, I just want to add to the last discussion that you should make sure your appliances such as your refrigerator are running optimally. They should be kept clean and not over or underlaoded. Make sure your freezer and refrigerator are not keeping your food too cold. If so, you can lower the temperature. Dishwashers should be fully loaded before being run. you might be able to cut down on the amount of detergent you use and you can avoid things like heated dry.

Now on to telephones, televisions, and Internet. One hundred years ago these items were not expenses on anyone's budget. And just 50 years ago, people weren't paying for two of these items. Twenty years ago, we weren't paying for one of these. But suddenly all three are "must have" items on most people's budgets. But unlike housing, heat for warmth, and power for cooking food these items are truly optional. As such, we really need to take a deep hard look and figure out if they are really necessary in our budget depending on our financial circumstances. Obviously, if you are a web designer and you do some work from home, fast Internet access is necessary. And it would be rather difficult to convince someone in the United States that they do not need a telephone. But how many do we need and at what cost? Are some of theses services overlapping? Do you pay for long-distance on your landline but also get "free" long distance on your cell phone? Can you do away with a traditional landline and just use your cell phone or perhaps use Skype or Magic Jack? It's not 1985 anymore, and we have more choices than just Ma Bell.

Take a night to sit down and analyze the plans that you are on. Call around to competitors and find out if you can get on a cheaper plan when yours end. Or ask if you can bundle your plan with your current carrier. Consider getting rid of one of your telephone plans. Eliminate any options that overlap. Be honest with your needs. Do you have to have Caller ID? Are you paying for cheap calls to Canada that you do not use? Are you wasting all of your long-distance minutes on your cell phone and paying for that capability on your landline phone, as well? Chances are, there is a way you can reduce line item in your budget.

Finally, let's talk about the television bill - whether it's cable, sattelite, or other. Is this a necessary expense? If you are trying to save money, ask yourself if it's really worth it to pay $1 or $2 per day to watch t.v. Could you get away with some rabbit ears and watching videos on the high-speed Internet that you are already paying for? Could you save $40 per month by renting videos or borrowing them from the library? If your cable bill is $50 per month then you are spending $600 per year for television or could that money be put to better use in a college or retirement fund? Maybe you don't want to take such a drastic step. Maybe you can cut some of the extras such as digital video recording or HBO or the extra sports pack. Again, be honest with yourself and how often you are taking advantage of these extras that you pay for.

Remember, your budget is supposed to work for you. You have a limited amount of funds that needs to be spread around many different categories. The ones that are most important to you should get the funds. Necessities should come before wants. And wants should be prioritized. Within each category, try to get the best deal that you can and be efficient so you aren't paying for duplicate items or services unnecessarily. Your optional budget items are where you can make the biggest changes. Analyze them carefully.

In Real Life (IRL)
- I am fortunate (or unfortunate) to live in a very populated part of the country. While it may be bad for some things, it is good for getting the latest and greatest technology pretty early. Along with these changes have also come competition. Years ago we had combined service for our telephone and Internet, but our cable was from a separate company. Then 3 years ago Verizon FIOS (fiber optic technology) came to our neighborhood and by bundling all three services - phone, Internet, and television with them, we would pay about $30 less than having separate cable. Two years later, we have added a second phone line to our house through Magic Jack for only $40 per year.

We are not efficient as we can be, though. We get free long-distance on nights and weekends on my husband's cell phone (which is paid for by his company), yet we also pay for this service on our landline phone. We also get "free" long-distance on our Magic Jack phone. Clearly, there is room for improvement on our part for this line item. However, we are locked into a contract now and it's not worth it to break it for this change. But when the time comes up to renew, we will need see if there is a better plan for us so we aren't paying for the same service twice.

As far as television goes, I'd be quite happy getting rid of it altogether, but my husband would have nothing to do with that. And while I would be happy spending the money that goes for television elsewhere, we are not not saving money because of this unnecessary "extra." If you are not as financially secure as you hope to be, however, please consider cutting down or at least optimizing the deal you get on these optional luxuries.

Thursday, March 4, 2010

Dissect Your Budget - Part 2 - Utilities

Tip #238 - Dissect Your Budget - Part 2 - Utilities. In this series we are going beyond just having a budget but actually going through your budget line by line to take it apart, analyze it, and improve upon it. In Part 1 of this series we discussed the biggest line item of most people's budget - housing. One idea I failed to mention to lower that cost is to take in a roommate or renter. If you are single, one-half of two can live more cheaply than one. In other words, half of a two-bedroom apartment is cheaper than a one-bedroom apartment. If you have a family, having a roommate is not ideal, but depending on how dire your circumstances, taking in a boarder might be the answer to cut down on housing costs. It doesn't have to be a stranger. You might have a brother-in-law, nephew, elderly aunt or other relative in need of cheap housing, so it could be the perfect solution. In addition to making your housing costs cheaper, having a roommate or two can cut down significantly on utilities, which brings us to today's topic.

The cost of housing does not stand alone. Along with that major line item in your budget comes ancillary costs, one of which is utilities. This can be thought of as electricity, gas, and water. Nearly everyone has electricity in their home. It is what controls the power to lights, air conditioning, and appliances. It might also run your gas furnace or be your heating source. Some people also have gas lines which is their heating source and possibly their cooking source. There are alternatives such as propane or wood heating as well. Many, but not all, people are hooked up to city or county water and along with it come standard fees plus cost of amount of usage. Others have a well which has more startup costs and possible maintenance fees but no monthly fees. Unless you live in the perfect climate and like to rough it, these expenses are necessary utility expenses. So because we generally have to pay these costs, how can we lower them?

For heat, regardless of the type, the best way to keep the costs down is to keep the temperatures as low as possible and still be comfortable. A good investment is a programmable thermostat that allows you to change the temperature of the home based on time of day. If family members are gone for a good part of the day then it is worth it to lower the temerpature when no one is there. Additionally, you can program it to be lower when everyone is asleep under heavy bed covers and have the temperature go up before familiy members wake up. Another trick to keeping heating costs down is to walk around your home and find places where cold air is getting in. Weather stripping can be added to doors or even putting a mat or stuffed strip of material in front of doors or windows can keep cold air from leaking in. Make sure your furnace or heat pump is in good working order and that you change air filters on schedule. Lastly, in order to keep your monthly budget balanced, get on an equal payment schedule with your gas or utility company so you don't have high bills in the winter and low bills the rest of the year. By keeping your gas bills the same each month, you won't be scrambling to find a way to make up the extra money in the winter to pay for your heat.

For lighting and power purposes, most of us have electricity. In order to lower these costs, it is necessary for you to turn off lights and appliances when they are not in use. The television should not be blaring if no one is watching it. Rooms do not need to be lit up if no one is sitting in them. And computers should be turned off or at least set to a sleep mode if they are not being used. Buy lower wattage light bulbs. Not every lamp needs to be set to 60 or 100 watts. Even better, buy compact Fluorescent bulbs which use up significantly less wattage to give off the same amount of brightness as a standard bulb. During the heat of the summer keep air on a steady, moderate temperature. You don't need to walk in from the heat to a blast of cold air. Just by having the air conditioning on, the humidity will be taken out of the air and will cool you down. Try to go as late in the season as possible before turning on the air. Use fans if you have them. And if you are going to be in your home for a long time, look into investing in ceiling fans. They can lower the temperature of a room dramatically without using up too much electricity. Lastly, install a clothes line and use it. By reducing your dryer use, you will save lots of energy and costs. Again, ask the utility company for an equal payment plan to keep your monthly electricity bills the same.

For cooking purposes, some people have all electric and some have a mix of gas or electric. Others have all gas. Again regardless of the type, the tips to lowering your costs in this area are the same. When using the oven, try to cook more than one thing at once. Most ovens have two racks. A cake and a lasagne can both be cooking at the same time. Double your recipes. When cooking a dinner or baking cookies, why not double the recipe and freeze some for later. By using an oven that is already heated up, you save money when cooking the second batch. Cut down on your cooking and baking in the summertime. At least when you cook during the winter, the heat of the oven can warm up a room, keeping the heat from turning on, even for a short while. When buying new appliances, find energy efficient ones. Use a toaster oven when making small meals or for heating up. Crockpots are also energy efficient. Lastly, plan ahead. By pulling food out of the freezer in advance or taking butter out of the fridge, you will not have to use the microwave to warm things up.

Finally, we will discuss the water bill. We all need water to drink and depending on where you live, it can be relatively cheap. But there are still ways to conserve it and save money. First and foremost, don't let the water run unless you are using it. This includes brushing your teeth, washing your dishes or taking a shower. Also, keep your activities as short as possible. A shower does not have to run for 15 minutes. Similarly, you might not need a shower everyday. Every other day may be just as good unless you work out in the field, a construction site, or at the gym. Look at weather forecasts. Don't water your grass if the weathermen say it will rain the next day. Only do full loads for both dishwashers and washing machines. Collect water, if you can. For example, use rain buckets outside to water the plants.

My final suggestion for lowering utility costs is to call your utility companies and ask them about an energy-saving plan. Many of them have plans that you can utilize to lower costs. If no one is home during the day, you may be able to go on a plan that does allow you to use above a certain amount of power or gas during the day. Depending on your areas needs and resources, there may be a plan that would work for your family to lower costs. Above all else, use common sense and conservation ideas when using your utilities. Each time you use less or use resources wisely, you will save money.

In Real Life (IRL) - I grew up with a dad who was constantly telling us to turn off lights. So, in some ways, it's ingrained in me to do so. Although, I have to admit I am not one who enjoys being cold, so I tend to keep the house warmer than I probably should and my gas bill each winter shows it. Having said that, I utilize common sense when running appliances and using electricity and gas. In fact, I use most of the ideas I suggested above. We have ceiling fans in almost every room. We have a clothes line (that gets used!) in our basement and outside. We have a programmable thermostat. My husband has added weather stripping to drafty doors. I bake double batches when I can and use the toaster oven frequently instead of the full-sized oven.

When I was single and living with a roommate, we used the energy-saving plan from the electric company. We both worked during the day and weren't home. I don't remember exactly how it worked, but I beieve we got cheaper rates because we didn't use above a certain amount of power during the day.

Utilities are not something we can easily get rid of in our budget unless we want to make drastic changes like powering our homes by solar or wind power. In the meantime, there are smart things we can do to reduce the resoucres we use and in return we will have a lower monthly bill. For other ways to save money check out Frugal Fridays.

Tuesday, March 2, 2010

Dissect Your Budget - Part 1 - Housing

Tip #237 - Dissect Your Budget - Part 1 - Housing. The whole purpose of this blog is to show people how to save money and how my family has accomplished it. When I say "saving money" I mean not just how to buy things more cheaply or how to live on less, but how to actually put money away and build up wealth. One tool that I, and most people in financial circles, promote to save money is to have a budget - that is a line-item list of everything that you spend money on each month and the estimated amount that you spend on it.

Oftentimes people write a budget at the beginning of the year, try to follow it, and then at the end of the year they may review it in time to write up the next year's budget. But I want to take a more active approach to your budget. Let's go through it line by line and evaluate where we can cut out extra spending so less money is going to your expenses and more is available for your savings/investing line item.

Let's start with most people's biggest expense - their home. Whether you are renting or own, your apartment, house, condo, townhouse, etc. probably takes up the greatest percentage of your monthly expenses. Let's evaluate it. In general, housing is a pretty inflexible cost. However, whether you rent from a private individual or from a corporation, there are ways you can decrease it. Compare your rent to other rents in your area. Are there other less expensive places for you to rent that would give you the same amount of amenities, room, and enjoyment? Or perhaps there are similar places that may be slightly smaller, slightly older or have fewer amenenities - no pool, no exercise room, etc. If you rent from a different place that can save you money over the long run (taking into account moving costs, startup costs, etc.) then it is worth looking into to decrease this greatest line item on your budget.

If you are unwilling to move, then perhaps you might still have pull. Maybe you have been a long-term tenant who hasn't cost the management company or private owner much in move-in/move-out fees - no carpet replacement, no yearly cleanup charge, no painting charge. Talk to your landlord and see if he can give you a discount because of that. Or maybe your area is hurting for rentals and your management company has new lease specials, ask if you can get a one-year special, too. If you are renting from a private owner, perhaps you might volunteer to mow the lawn or shovel snow in exchange for cheaper rent. Look at your circumstances and see if there is any way to lower this cost.

If you are a homeowner, check your mortgage statement and see what type of rate you are getting. Is there any way you can improve upon it? If you have a 30-year loan, can you consolidate it to a 15-year loan at a lower rate without increasing your monthly payment? Are rates better than what you are locked in at for you to be able to refinance and drop your monthly payment without increasing your term? Do you belong to a credit union? Check out their mortgage rates. They are often very competitive and have lower fees than traditional banks and mortgage companies. Is it worth it to switch to them? If you don't belong to a credit union, find out if you are eligible to join one that has good mortgage rates.

Unless you are in a dire financial situation, I don't usually recommend moving. The costs of selling a house, moving, and buying a new home can be huge. However, if you overbought a home - one that is too big or too fancy or in too exclusive of a neighborhood - it might be worth considering. Many people bought homes with their eyes and not their pocketbook. If this is your case, moving to a smaller, less fancy or less exclusive home could save you thousands upon thousands of dollars. While there will be short-term costs associated with moving, it may be worth looking into depending on your situation.

If your housing costs are too much, consider making changes to them. You may or may not be successful at it. If not, we have many more line items in our budget where we can cut costs so more can go into savings. Stay tuned.

In Real Life (IRL) - My husband and I bought our home in the year 2000. The market in the Washington, DC area was high at the time. But little did we know how much higher it was going to get. We bought a home for $290,000 and put $70,000 down on the house, taking out a $220,000 mortgage for 15 years. The rate was about 5 1/2%. We were able to get a competitive rate at the time because our credit union had about the best rates out there. Also, they never resell their mortgage loans so we always pay directly to them, which we like. About a year or two later, the mortgage rates had dropped a bit from what we were paying. While there were fees associated with refinancing, we figured out that it would take about one year or so to recoup the costs of refinanciing, yet we would save quite a bit each month and overall.

We were able to secure a 4 3/4% rate that we still have today. Every so often I check the mortgage rates at our credit union to see if they are lower than what we are paying. While they are a bit lower now - about 4 1/2% for a 15-year loan, it is not worth it to make the change on such a small spread. Because we did not buy a big house or a fancy house in an exclusive neighborhood, it would be hard for us to reduce our housing costs much unless we wanted to move much farther out of the city or to a different city altogether, which we don't. We currently pay about $2,300 per month on housing which isn't high for this area. What do you pay? Do you think you can get this line-item on your budget any lower?