Mike-Ward.Net

Managing Money – Rule #2

This is the second article in my occasional Managing Money Series.

• Managing Money

In the previous article I discussed the importance of measuring what you spend. Hopefully, you’ve made use of some the free or very expensive programs available to do this. If you have, you have probably already seen a few areas where you can save some money. It’s now time for Rule #2.

Rule #2: Spend less than you earn

Some might say this is un-American. After all, what’s credit for? :)

OK, seriously, if you’re spending more than you earning than you’ve got an issue. Sometimes, life forces us to do this due to unseen events, but if the situation is chronic, it needs attention. Now I realize some of you are in situations where it’s virtually impossible to live within your means. My heart goes out to you I wish you better times. I also understand that your life is your life and so are your choices. All I’m pointing out here is that money is a limited resource that should be managed like any other limited resource because once you run out of it, it’s gone.

So how do you spend less than you earn? By analyzing what you really need and how you spend your money of course. This is why you have to track what you spend. Now you might say you don’t have any room in your budget and that it’s all used up. That may be, but often what I observe is that there is usually way more fat in a household budget than one is willing to admit to. Here are some areas for consideration:

• TV – do you really need HBO (or Starz or insert your favorite premium package here)?
• Flat screen television – Have you ever observed that the smaller the house the larger the TV? OK, I’m generalizing here but I think you see the point. I have not bought a TV in 20 years. Seems like all my friends are always upgrading their TV’s and are more than happy to give me their old ones. Hey, I have the nicest TV I’ve ever owned, a 32 inch Sony Trinitron, and it cost me a half-hour of driving to go pick it up.
• Cell Phone – Never owned one personally. My wife has one to support her telecommunications services business, but I have never owned one for my use. Seriously, I see people spending upwards of $300/month on telecommunications services (TV, Internet, Cell Phones). When I need a cell phone, I borrow one. Seems like everyone around me has one. Another great alternative is a prepaid phone. Especially if you’re an infrequent caller.
• Land Lines – If you have broadband services, get a VOIP service. They can be had for as little as $15/month with almost unlimited local/long distance calling.
• Cars – We use to have two. We went down to one recently. It was inconvenient for about a week until we worked out our schedules. I figured out that with gas, insurance, car payment, etc. I’m saving $6,000/year. That’s $6,000 after tax dollars which makes the impact even greater.
• Used Cars – Not as sexy as driving a new one but not paying $500/month in car payments is it’s own reward.
• Lunch – I see people at work who buy lunch almost everyday. If you figure 20 work days per month and $7.00/day for lunch that’s $140 dollars. Could $140/month make a difference in your household? Bonus, I eat better and the food is healthier.
• Shop as a family – It’s hard to say why this works but it does. Most weeks, we grocery shop as a family. Seeing the prices and watching the money spent at the cash register has a way of driving home how expensive it is to eat in today’s economy.
• Turn your thermostat down – Geez, I’m amazed (make that appalled) at how hot people heat their homes. Try putting a sweater on and moving around a little bit.
• Own one credit card and pay if off every month – I could write a whole article on this alone (and probably will).
• Dollar Movies and NetFlix – We have a budget movie theater nearby that shows all the top titles about 4-8 weeks after the initial releases. NetFlix has a $4.99/month package that let’s you catch up on the ones you missed at the Dollar movies.

I could go on but I think you get the point. Am I living less or going without by cutting back on these services? I don’t perceive that I am and frankly, I’m likely living better. I’m healthier, not stressed about paying my bills, and most importantly, I have choices because I’m not locked into payments and subscription services.

It’s not that I don’t like to spend money. My wife will tell you I’m maybe to easy with a buck. On the other hand, I don’t like to spend my money unwisely. I work hard for my family’s income and I want to make sure it’s spent in a way that benefits our lives.

OK, your turn. I would really like to hear other budget trimming tips and tricks. I’m always looking for better ways to live and spend less.