Budget is Not a Four-Letter Word, or, Cutting Back Creatively

• barrieabalard
• October 29th, 2009

Budget. For a lot of us, it’s a difficult, joyless word that means deprivation and pain. It’s human nature to avoid things that bring us pain, so we often don’t take a hard look at our finances when the money is plentiful. But when a setback such as a job loss, a pay cut, or unexpected medical costs occur, the way to avoid pain is to go through your finances and determine what you can afford. Sticking your head in the sand, financially speaking, will only bring on more pain if your outgo exceeds your inflow.

To pursue financial health, you can:

• Make more money than you spend, OR,
• Spend less than you make, OR,
• Do both (and save the excess).

If you’re un- or underemployed, choice number one means, find a job/second job. When no jobs can be found (and believe me, I know what that feels like), you might have to swallow your pride and take any job you can land, regardless of what it pays. Doing so is difficult for most of us. After all, few people have the career goal of becoming a greeter at Wal-Mart (no knock on Wal-Mart greeters intended). But any employment beats not having any money at all coming in the door. Of course, if you already have a job, you might want to take on a second one—or start a hobby you enjoy that can make you money, such as fixing small engines or writing articles.

Today, I’m going to focus on choice number two—spending less than you make. To do that, you need to examine your income, your fixed expenses (such as a mortgage or car loan), and your lifestyle. Your income and fixed expenses should be a no-brainer. Most people know what they make, and they know how much they pay to service their debts. That leaves lifestyle choices. These can be anything from buying every shoe your heart desires to keeping the heat cranked high in the winter. All of us have some areas where we prefer to spend our money. The key to creative, less-painful budgeting is, find which purchases mean the least to you, and cut them. This is a gradual, ongoing process, so keep sorting through your purchases looking for more and more things to cut back.

During this process, mental attitude is everything. If you think, I have to cut out my morning latte and weekly manicure because we can’t afford it, you’ll feel deprived and resentful. Remind yourself that you are engaging in a choice—you’re choosing this path so that your financial health will improve. You are giving up some things to afford others you like or need more. Go through your values and discover what you cherish—and what you don’t. If that weekly manicure isn’t something you truly live for, give yourself a manicure while watching television. Or do so three weeks out of four, having a professional manicure once a month. The choices you can make are endless, and only you can make the ones that are right for you.

Last winter, when my husband had no job, no prospects, and was owed six months’ salary, with our IRAs down forty percent, we had no idea what our financial future would look like. We were both looking for jobs with nothing coming our way. In short, we were terrified—the only thing we had going for us was that we had absolutely no debt except a tiny mortgage, and that we had about three months’ salary saved. We’d never been in such a situation before, but we both knew how to budget, so we went over our expenses with a fresh eye. These are some of the things we decided to change—note that it’s not a complete list. Some of the items we had already cut back to very occasional treats, so those items were completely eliminated in our new budget:

• No coffees, drinks, or other food bought outside the home, except for groceries;
• Hanging laundry in the basement instead of running the dryer;
• Less meat and convenience foods, and making most of our food from scratch;
• Not purchasing clothing, shoes, or any personal services, except as needed to be presentable for job interviews;
• No driving if the distance could be walked;
• No movies outside of free ones;
• No landline and cell phone service that went beyond the cheapest we could find;
• No lawn mowing/shrub trimming services;
• Setting the thermostat no higher than 66 for the winter (we violated this twice when family members were miserably sick and cold);
• No vacations or entertainment outside the home, unless it was free.

Ever the optimist, I decided to treat our problems as a challenge—how far could we reduce our non-fixed expenses? I started buying more food at the warehouse store (Aldi’s, a chain in about half the US states),  and less food at the regular grocery store. We wore heavier clothing rather than raise the thermostat. We put off any expense that could be put off. But we did not go without health insurance—we thought that would be financial suicide. So we paid the high premiums (nearly nine hundred a month for both of us) and cut back, cut back, cut back.

More importantly, though, my husband and I talked about what we were doing—where in our budget we could reduce our expenses further, and what the expected savings would be. Talking and being honest with yourself (and your partner, if that applies) is the only way to accomplish cutting back in the least painful areas. Sit down and go through everything you’ve spent in the past few months. If you don’t have a clue where some of your money is going, restrict your pocket cash per week or month to a certain amount, and don’t let yourself use a credit card when the cash runs out (or leave the card at home). Doing so will force you to think twice before spending your cash. Another method some people use is to jot everything you spend for a week or two in a small notebook or pad of paper. (I did this once many years ago, and was shocked at where much of my money was going. That was when I started bringing my lunch to work four days out of five.) However, some folks find the notebook thing difficult, so you can always try limiting your pocket cash to see what happens.

To help you stay on your new financially-healthy path, create a mindset where you are always thinking of ways to cut back, even on the smallest items. Can you use less shampoo in the shower? Wash your towels less often? Eat more beans and rice? Carpool to your job? When you’re pinched for funds, you must scrutinize every single non-fixed expense. We had a lot of discussion about whether to keep paying for cable television, reluctantly concluding that we’d rather cut back in other areas than do without it. We had no premium channels to eliminate, so cutting back would have meant having an antenna to receive local broadcast channels. We discovered we were willing to cut back in many areas, but we weren’t willing to go without cable television and internet. We felt we needed the internet because I was learning to trade stocks, and because my writing business is 100% internet-driven. Having it also made it easier for my husband to search and apply for jobs in high tech. Plus, the cable TV was our only real entertainment, except for books and other free items from the library.

Cutting back in the areas that mean the least to you is the essence of frugality—you spend only on what you truly appreciate. Take the path of least difficulty in cutting back, and track your bank account. I hope you’ll be as pleased as we have been to discover a gradually rising bank balance. Don’t stick your head in the sand and hope everything will turn out fine. Take charge of your money and your life.

(A note to those in more dire straits: if you’re so short of funds that you must get rid of everything that’s not food, shelter, heat, and transportation to and from work, there is no question you are facing pain. But bankruptcy and homelessness are more painful. Remember that no cost-cutting action is too extreme if you are at risk of losing everything. I urge you to seek out more information than I can provide here if you are facing huge debt problems or are desperate for income.)

Tickers: Aldi's, budgeting, financial health, frugal living, frugal mindset, saving money, spend less than you make

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