What follows is MY strategy for saving money. Your mileage may vary.
The state of our financial fallout in the US is due to one part government meddling, one part corporate meddling and one part personal irresponsibility.
You can't do anything about the idiotic decisions the government or corporations make, but you can do something about your own spending habits.
Before I go into how to save money you must do two things first.
• Stop depending on the government to bail you out.
• Stop making excuses on why you can't save money.
If you don't do these two things, nothing I tell you will help.
Let me preface this also with one certifiable piece of information. When we started out, we had low paying jobs, a mortgage and credit card bills. Sound familiar?
Within nine months of marriage, we moved for Greg's job. (Hello Texas!) I lost my job, but Greg's job became more lucrative. We bought a house and I got another low paying job that I loved very much.
Within two years we paid off every credit card and never again in the past 34 years have we ever carried a balance.
Within ten years, we paid off our first house, five years early. Within one year of paying off the house we also saved $20,000 for a new house we had our eye on. A house with land. We did that by living on my meager paycheck, socking away Greg's check, and living BELOW our means.
Important rule #1: Just because you have the money, doesn't mean you have to spend it.
I am not sympathetic to people who say they can't save. We had almost nothing. I bought bedroom furniture with my life savings the day after our honeymoon. Probably not the most intelligent use of our money, but the suite did last us 25 years before we sold it in a garage sale.
In 1975, we had pitifully paying jobs. We were young, inexperienced and had no equity. Within two years we turned it all around. I will not kid you. That first year on our own in Texas could have been a marriage killer. We lived from hand to mouth that whole first year. Never once did we ask for assistance from the government, our family or our friends. Not once.
Here is what we did to get out of debt and save money. Bear in mind that none of this is sacrificial. If you think it is, then you're not serious about saving money. Sacrifice means not eating and not having a roof over your head. Anything else is gravy.
How to save:
First and foremost, make a goal for yourself. For us, we really wanted a home in the country. In 1984, we planned to save $20K cash, in addition to paying off our first house. We did this by paying attention to every expense.
The first thing we did was pay off our debts.
All the experts tell you this, but very few spell it out. I will tell you in plain words.
Make a list of all your expenses. I mean ALL. Everything you write a check for, pay by credit, or cash. Every coffee, every tip, every piece of change you throw into a charity bin. Count every incidental for one full month. This will give you a snapshot of what your normal expenses are.
Break down your yearly expenses by the month. Count: Mortgage or rent, auto, home medical and life insurance, real estate taxes, clothing, food, utilities, phone service, internet service, cable, prescriptions, subscriptions, meals out, snacks out, entertainment, child care, vet care, school, clothing, trinkets, toys.
You should have a fairly long list. Now go through it with a yellow highlighter and mark off the ones that are nonnegotiable, like rent, mortgage, and taxes.
With a pink highlighter go through your list and mark off the ones that can be modified, like food, phone, education, or internet.
With a blue highlighter mark off the ones that are not life-necessary, like clothing, subscriptions, dining out and gifts.
Rewrite your list and place the yellow highlighted items at the top. Add up those costs. Your paycheck should cover these costs without difficulty. If it can't, you are in more serious trouble and need to reassess your finances fast.
Can't pay the mortgage?
Sell if you can, and look for a smaller place. Refinance if you still have good credit. Share a home and expenses. See if it's practical for the spouse to go to work. Sometimes it isn't. You can spend more on commute, wardrobe, lunches and child care than what the extra income will rake in.
There are ALWAYS options. It just may not be the options you like. I guarantee you, if there was a chance I could lose my home, I would work at McDonald's if I had to. My pride is not so delicate that I wouldn't do whatever it took to keep my family solvent. There is no such thing as work that's beneath you--not if it's honest work.
Our first home was so modest it cost less than the down payment that we put on our current house. It was an old sea captain's home, built in 1901. I loved that place. Back then old homes were given away, which was good because we couldn’t afford much, but it also helped us build equity and our credit rating. Both good things.
Place your pink highlighted items next. Call your phone and internet provider and see if they can offer you a better package. Cell phone? You'd be surprised what they'll be willing to offer you if they think you'd leave them for someone else.
Food is a subject all to itself. We'll discuss this in a future post, but start thinking on ways to cut costs. Hint: The more you make from scratch, the cheaper your meals.
Next, go through your blue highlighted items. Does your kid really need the newest Wii toy? Will you be a social disgrace without a new outfit? Probably not.
If you or your significant other is a little weak when it comes to saving, wean into it gradually. Instead of eating out four times a week, eat out twice. Instead of buying an entire outfit, buy the shoes.
Make it a challenge. For example: How long can you brown bag it without feeling deprived? How long can you go without buying a new gadget or toy? For more on this, see my post on the No Buy Challenge.
Your blue list is the cull list. This is where you'll find your savings. Go through it ruthlessly.
How often do you watch cable tv? Be honest. If you're constantly switching stations, maybe that $60 to $120 a month isn't as good a deal as you think. A lot of shows can be watched on Hulu and movie rentals are free at the library, or $1 at the Red Box kiosk in places like Walmart.
We are creatures of habit and mimicry. Just because the neighbor has a new car doesn't mean I have to have one. Think before you buy and ask yourself this question: Do I need it? If the answer is no, it's not important to buy it now. Buy it in a year when your finances are better. I'm willing to bet, it won't mean much to you by then.
Living BELOW your means having enough for your future.
I think the most fun we ever had was when we were poor. We did things back then. We walked, we explored the city, we spent hours at the library, museums and zoo. We enjoyed each other's company.
But our savings really started to jump when we started living on only one paycheck, my much smaller paycheck. I was making $12,000 a year back then-- only $1000 shy of the poverty level. But we paid our mortgage, remodeled our home, ate well, and raised five dogs, all on my pittance of a salary.
In the meantime we saved every penny of Greg's check, some going to our house fund and the rest going to the emergency fund. It put us way over our goal of raising 20K in cash and paying off our mortgage early.
By the way, we did this twice. We applied the same methods on the second home to buy the third home. Same principle, different decade and dollar amount.
If you live in a household with only one breadwinner, you can still save money, though it will require more diligence and more time. But a house with two incomes? I promise you, you can live on a lot less than you think you can, without government assistance and without starving.
Next week, we'll talk about saving money on food, perhaps the largest expenditure for most of us.
Copyright © 2009 Maria Zannini -- http://mariazannini.blogspot.com/.
For more posts on saving money go here and here.