Revisiting Expenses

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When I was first getting out of debt, I found many little ways to save bits of money here and there to put towards my debt payoff. At the time, I needed every extra cent. Frugality was the name of the game. Now, my perspective has shifted. I’m not desperate anymore, because I’m out from under my debt! I no longer feel like I struggle for every dollar, because we’re ahead on our bills.

However, I’m not ok with feeling this way. The truth is, I got into debt a few dollars at a time, and if I don’t watch out, it will happen again. So, I’m going to rededicate myself to getting rid of the extra expenses to keep our budget lean!

There were some obvious cuts to be made initially. We budget $50 for household decor/furniture, because we’ve been setting up a new (rental) house since we married in June. However, we’re pretty much set on furniture and decor for now, so cutting this to $10 will be enough for the occasional picture frame, and to build up some savings for larger things later. Next went World of Warcraft, which I simply don’t play anymore. As a substitute, I’m going old school with a text-based MUD. Just as fun, but totally free!

After these obvious trimmings, I dug a bit deeper. I’ve been spending $35/month for my own virtual private server, which is indeed a good deal. However, I’ve been using the free Heroku plan for hosting the occasional small development application, and thus the only things left on my server are this blog, a few other miscellaneous blogs, and a few sites I used to host for a friend. I’m no longer getting my money’s worth, and even worse I don’t have the time to administer the server and keep it secure. So, I’ve switched to DreamHost, which costs less than $10/month, and is a pretty awesome hosting service. I’m totally happy with it thus far!

Then, I reduced our dining out budget by $10. We probably won’t even notice this decrease. I reduced the grocery budget by $20, which we also likely won’t notice. Tomorrow I plan to call the cable company to put us on a plan to save a few bucks each month but with better service. I reduced our entertainment budget to basically allow us to do Netflix and then a movie theater trip every other month. Finally, I called to see where my student loan consolidation was, and realized they were waiting on one company. So I called them to get the ball rolling for the consolidation, which will save me $150 per month in costs.

Overall, these changes amount to about $300 or so per month! Those little charges do add up! And even though you think some may not be changeable, you may be surprised when you try to cut costs. It’s particularly effective if you do it in a way where you won’t notice (cutting the dining budget by $10), or where you have a good alternative (MUD instead of WoW). The key is feeling like you just won extra money without sacrificing at all.

So, the lesson here is to always revisit your expenses, and never let your budget stagnate. Things change, and you have to be able to roll with it. And rolling with it in order to salvage 10% of the budget is always a positive thing!

Weathering the Tough Times

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We got bad news at work last week. There’s an issue with cash flow, and our pay has to be cut in half for the next month, maybe two at most. While the economy is finally improving and we have work coming in, we’re simply out of money. Perils of a small business, I suppose. But since it’s small, we can adjust and make it out, instead of losing our jobs!

I’m just happy that half pay is not going to kill me! I’m down to my last 2 grand or so in debt repayment, and my monthly expenses are noticeably less than they used to be. While I won’t have any extra money and my debt repayment will be on hold, I’m not freaking out. I have an emergency fund in the bank, my expenses are down, and by using coupon shopping the past month, I am well-stocked on enough groceries to supplement me for a month!

So in light of many people having to adjust to similar situations, or possibly having to adjust in the future, here are the things I’ve done to help me weather what would otherwise be a dark time in my financial life:

1) Build an emergency fund. A month’s income is about right. That is enough to fix a car, pay for small medical bills, keep you afloat for a month in case of job loss, etc. Since I’m at half salary, I could easily live at my current means for two months before I felt an impact. That’s a long time, and enough time to find a small side job or take on small projects.

2) Reduce expenses. It goes without saying, but the best way to reduce debt is by spending less. Now that my budget is way below the money I make, making less is not going to kill me! I won’t be able to put as much extra money towards my remaining debt, but I can survive on half salary, possibly without even dipping into my emergency fund! The money is there if I need it, but now that my expenses are low, I won’t need much of it. Now, this isn’t easy to do. You’ll have to become frugal…

3) Become frugal. There is a “cheap” person, and there is a frugal person. The latter is pretty much the same, just less annoying. Don’t go to a restaurant with people and bring grapes and crackers to eat – that’s being cheap; just pick something that doesn’t cost much, or don’t go at all. Frugality is a mindset in which you don’t spend more than you have to on the things you need, and don’t buy the things you don’t need. Chances are, you don’t need a lot of things. You probably don’t need digital cable or satellite, a netflix subscription, and internet. Most TV is available for free online. Use the library for books, which can provide hours of entertainment per week. Borrow DVDs from a friend instead of buying them all the time. Use coupons when you shop (google The Grocery Game). Check for better prices on phone, insurance, and utilities. Research online ways to get those services even cheaper.

4) Calm down. Stress is evil. If you freak out about losing pay, then you will not sleep, your productivity will be down, and you might even lose your job! Just keep calm, and plan for these situations ahead of time. If you are well-planned, you have nothing to fear. Calculate a worst-case scenario, and find a way to live through it. My worst case scenario was temporarily moving back home, and lately it is moving up to get married earlier. Yes, it would be terrible to have to do things that way, but it is the worst case.

5) Build relationships. We’re in a new era, and people are starting to go back to relationships. In the end, the government won’t be able to help you, your boss won’t be able to help you. The people you can trust to keep you afloat are your family and friends. Build a network of close friends that can support you. Then, the worst case becomes bunking on someone’s couch for a few weeks. I have volunteered at a lot of soup kitchens, and the common thread among the poorest among us is that they didn’t have family or friends to fall back on. When you’re building a career, it’s easy to sacrifice other people along the way. The problem is that careers are fickle. People will stand by you forever.

I hope this helps some people. A year or two ago, this would have nearly done me in. I likely would have had to move back home. I probably wouldn’t have met my fiancee, and things wouldn’t be going this well at all. Get rid of your debt today! You’ll gain peace of mind, financial freedom, and the ability to weather small storms in life, like this one. It’s tough, but if you persevere, there’s nothing that will be able to take you down!