Friday, December 14, 2007

Strategies for Living within your Means

In many ways we are a very average family: 2 kids, 2 jobs, 2 political parties. But I am beginning to think we are not so average because we actually live within our means. My personal strategies include:

  • 30 year fixed interest loan (or shorter…we refinanced our first home into a 20 year loan when the rates dropped).
  • Pay off credit cards every month.
  • Put away the maximum in 401ks each month.
  • Check my receipts (especially the grocery store) for mistakes. I tend to find at least one every other week.
  • Count my change. Its amazing how often people give you the wrong change. And being the honest gal that I am, I give back the money if they make the mistake in my favor.
  • Keep our books. I use Quicken and update it every 3 months to keep a fairly updated picture of our financial situation (I did it more often before kids…but making the time is tough these days).
  • Don’t sweat the small stuff. I try and keep saving money in perspective. Its not worth driving 10 miles to a cheaper grocery store to save $4. The time and gas isn’t worth it. It is worth shopping interest rates for your car and mortgage payment, your two biggest monthly expenses. (Most of us don’t have much choice when it comes to health care so that doesn’t make the list.)
  • Time is money. As a working mom, my free time is valuable, so I tend to shop at places where they have good prices on average (Costco, Target). For me, getting a great deal on one item out of the 20 that you need isn’t worth an extra trip. I would rather go to one store and buy all the items I need and reasonably low prices than shop the sales (I liken it to dollar cost averaging).
  • Payoff you student loans before saving for your kids education.
  • No expensive personal care. No $100 highlights, no massages, no facials, no manicures or pedicures (I dont' even know how much these things cost, but I know they aren't cheap, especially if you do it every month). But we don't skimp on health related items. We belong to a gym and get flu shots. If you don't have your health, its hard to enjoy your wealth =)
  • Know where quality counts. The quality of an item I purchase depends largely on how often and how intensely I will use a product. For example, my wedding dress was only $200 (including some extras)…..after all, you only wear it for a couple of hours. But I don’t mind spending $$$ on a quality pair of shoes I will wear twice a week.
  • Try not to eat out more than once a week.
  • Don't forget to splurge every once in a while (we do on our date night).

I'm sure there are many more...but so much of this is unconscious behavior. I have been doing it so long, I don't even notice it much anymore. Other suggestions are welcome......

Do I feel sorry for educated folks (especially second time buyers) who bought into a lifestyle instead of their budget, or didn’t read their mortgage documents? Not really. Your home is by far the biggest purchase you will ever make. While I can understand not reading the terms of use for a software product, or the privacy policy on a website, I can’t understand how people can be so negligent about mortgage papers. I find this situation strangely similar to one occurring in the financial world. (Special thanks to Paul for the following write up):

“There is a parade of banks and other financial institutions in the news taking financial write-downs. In each instance, they have reported that there may be more write-downs in the future because they are not able to accurately value the subprime loans and CDO's in their portfolios. In other words, the banks and financial institutions have huge exposure to investments that even they do not understand and cannot value. If these so-called investments are so difficult to understand and value, what were they thinking when they bought them?”


HappyinSF said...

Great list..
I would actually consider the Gym membership unnecessary. I too belonged to a gym for a couple years, realized I was basically running on the treadmill one day and using free weights the alternate days and paying $50 a month. I bought a $100 weight set, started running outside, doing body weight exercises, free weights, jump rope and calisthenics inside. Paid for itself in 2 months. Even if you feel you require a specific expensive piece of equipment it would still pay for itself. Now if you are really into swimming, there is not much you can do.

Also, young adults don't need flu shots.

AgentBubble said...

Excellent post. I'm called the "coupon king" by all of my friends. I never go anywhere without a coupon! I buy gift cards at 15-20% off for the places we like to eat. Using that and a coupon saves me 35-50% on average when we eat out.

HappyinSF said...

Oh, I'd also like to plug a really amazing book titled Never Gymless by Ross Enamait. It's pretty much one of the greatest books on conditioning and fitness ever. He has a great website and answers any questions personally, he has a very creative and logical approach to conditioning. The book is totally a spiral bound self published deal sold through his website but it is well designed and packed with totally no-nonsense info.

I am totally not affiliated with Ross at all but finally bought his book a few months ago and am super impressed with it.

Buying Time said...

Thanks guys.

Speaking of coupons, I clip them for Mr. BTs dry cleaning and restaraunts too. But don't as much for groceries, unless its over $1.

Since women's clothes tend to cost a fortune to dry clean, I put the less expensvie ones on our front loading washer (which is more gentle) on the gentle cycle instead. Front loaders save on energy, water and are easier on the clothes. They just cost a bit more upfront.

As for fitness, we had dropped our gym membership for the same reason. But now with the little ones, we can't leave them home alone yet, so the gym is the best option. If we try to exercise at home, they won't leave us alone =)

big n rich said...

Here are my money saveing ideas:

Do not pay full coverage insure ance on car.My car insurance is 25.00/month on 2004 chevy colorado

Do not have whole life insurance.If you have small kids buy a 20 yr level term policy.

Do not drive a gas guzzler if you drive a lot.

Shop around for major purchases.I usually save at least 50% on things for shopping around.

sacramentia said...

Good list.
Something I started in college when I was really broke and have stuck with: We take out all our fun money for the week in cash on Friday and when it is gone it's gone until next Friday.

Pay attention to the total debt - Total debt less than 2x annual income is my rule. Interest only, neg am, all ok if you manage the total debt.

Pay as much attention to the top line than the bottom line.

And if you are talking about the Gym in EDH, definitely worth the money in my book!

Paul said...

Great list! But of course you are anti-American, because 70% of our economy (GDP) is based on folks buying something they don't need and/or can't afford! The trillions of dollars in money removed from homes by way of refinance or HELOC's and spent on toys, is what kept our economy propped up after 9/11. As your readers know, this is now coming home to roost in a big way. The Chinese workers in the factories (who make about $250/month and have a 50% savings rate) think it is hysterical the useless"trash" they make and sell to America.

Cmyst said...

We belong to a historical re-enactment group and we discovered (with much joy) years ago that you can find enough wooden plates, wooden utensils and wicker ware to host a banquet at the Goodwill.
Occasionally, you can find decanters and glasses, goblets, and steins as well.
Shameless plug: If you love Ren Faires, but hate the cost, consider looking up your local SCA group and finding out when and where their events are being held. There is an admission fee at most big events, such as Crown Tournaments and the upcoming 12th Night celebration, but it is less than half what you'd pay to go to Ren Faire and the merchants at SCA events usually charge much less than Ren Faire prices, as well. Plus, our tournaments are real, and the fighters that win them usually get to act as ruling royalty for 4 to 6 months. WWW.SCA.ORG The majority of people who attend SCA events are not card-carrying members, and you do not need to join to watch or play. There is also loaner clothing and fighting equipment for people who show up "naked".
(Ren Faires are a really bad joke to me now, and I used to love them and drag all the kids and their friends to them.)

Our other big savings:
Drive a Matrix and wave merrily to the Hummers at the gas station.
Choose a mate who loves to cook, and does it well.
Vacation at state beaches, parks, etc. My fondest memories are of seaside camping with the kids.
Ditto collecting rocks and shells, pinecones, etc.
The Sacramento Farmer's Market is great entertainment if you get up early enough. And there are great bargains on locally grown and organic produce. It smells fantastic. (I don't like the EDH market so much. Too small, too overpriced.)

Gwynster said...

Great list though you list a few of my vices that I just can't give up like my gym. I have to be really careful as my asthma doesn't like me when I run outside at certain times of the year so I keep my gym which also has yoga and spin classes.

I'll admit to not giving up personal gromming expenses but I also don't go out much so my monthly bill would easily be half of a lot of people's entertainment budget.

Cmyst, the SCA is not a cheap hobby anymore. I'd say online gaming is now the ultimate cheap date.

HappyinSF said...

I seem to recall a rather crude saying from back in high school that went, if you can't get laid join the SCA.. As it was apparently a place where nerds could go to mate. My only experience with the SCA was driving by a park on Fair Oaks Blvd (back in the early 90's) and being struck by the rather funny image of dudes sword fighting, backlit by the lights of the tennis courts.

Goodwill is good but there are a lot of really amazing thrift stores in Sac all of the sudden.. Thrift Town on Fair Oaks is amazing! Ecothrift is great and there is another really good, large thrift store on Greenback just past Sunrise where they sort housewares by type (like a whole large area with only silver plate or brass, copper). I think you could actually make a living through an Ebay store just sifting through those stores cos they are good and way cheaper than Goodwill even.

My family came to visit us last year and we went to the Dickens Fair, that was fun.

Cmyst said...

I rank high on the Nerd-o-Meter. I try to keep it hidden, which is why I didn't mention how cheap and entertaining online gaming is. Not very healthy, though.

Cmyst said...

I rank high on the Nerd-o-Meter. I try to keep it hidden, which is why I didn't mention how cheap and entertaining online gaming is. Not very healthy, though.

big n rich said...

How boring is online Gambleing?A lot of fun gambleing is meeting new people why you play.Never even thought of online gambleing.
This sca place you all talk about must be where all the nerds who played dungeons and dragons ended up.I wondered where they went.

Sippn said...

Some good reading

The Millionaire Next Door
The Richest Man in Babylon

The same story plot (non-fiction) written 2000 years apart about debt and managing your life.