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?”