How to Slash a Budget That’s Already a Skeleton

Over the years I’ve read various accounts of people who have made remarkable progress, either in savings goals or debt payment, by tracking spending and cutting hundreds (or thousands) of dollars from the monthly budget.

What if your spending is lean already?  Either by choice, or by circumstance, some of us don’t have $150 cable and phone bills, or biweekly dinners out, or a clothes shopping habit– all line items that are often the first to go.  In my case it’s been a little of both.  I haven’t necessarily felt desire for a new-off-the-lot car or cable tv or purses; those things just aren’t part of my lifestyle.  My income vs. expenses, however, has also ensured there’s not a big discretionary spending number to tempt me.

So how in the world do I go about trimming where there is no fat?  And how do I decide how far I can go?  If it were only up to me and the goal is to save as much as possible, I’d be selling everything including my house and car and moving into a small apartment blocks away from my workplace.  I’ve thought about that last bit a LOT over the past year, especially since our current housing market made my neighborhood very profitable for sellers.

I’m not the only person who calls this place home, though, and I’ve gone without a car before and found it miserable and defeating rather than liberating.  My body does not appreciate wind chill!  Those two things are currently not part of the plan.

 

 

For me the answer has been to regularly reevaluate my spending categories in relationship to my values.

How often do you review your finances? If you don’t, start! Start by tracking every single penny you spend – most of us are pretty darn surprised by the amount we don’t notice sneaking out of our bank accounts.

If you normally review your finances biweekly when you get paid, for example, schedule time to really sit down and look at your spending. Two years ago my only debt was student loans and a mortgage, and I thought I was doing pretty good in the budgeting department.  At that time Netflix wasn’t needed in the summer when I wanted to play outside so I’d suspend my account, but heck yes it was “necessary in the winter” when hot chocolate and blankets were calling my name. Our phones were prepaid and had been about $35 each per month for a few years. This seemed like a great deal compared to my iPhone using coworkers and friends. I bought food at the farmer’s market and co-ops, and it was budgeted so I didn’t pay much attention to the overall number. We ate simply at home, and went out to eat 4-5 times a year, so it didn’t occur to me I could make an impactful change to that budget line.

 

In the past year, however, I’ve come to detest every penny of debt I owe and am committed to paying it off as soon as possible, then keep right on socking that money away for financial independence and retirement. The first couple of times I looked at my spending, I couldn’t see a single thing to cut.

I spent a lot of my dog-walking time last fall thinking about what my ideal life looks like, and how my ideal spending would match those values. If you had unlimited financial resources right now, what would your day to day life look like? If you can’t envision a life different from now (I’ve been there!), take a look at the Frugalwoods’ Uber Frugal Month Challenge – stripping your finances to only the bare essentials will reveal your true needs versus wants.

The next time I sat down to study my spending through the eyes of my Future Self, there suddenly were line items that positively jumped out at me.

Changes I made that weekend in October, that seemed impossible in September:

• I cancelled Netflix – I realized that mindlessly watching videos is not part of my ideal day, and any rare insomnia-induced tv watching could easily be filled by free streaming services. $10.77/month * 12 months = $129.24 annual savings
• I reduced my kiddo’s phone plan since he now had consistent wifi access – my plan was previously changed, bringing our total to under $40/month for two smartphones. 2015 phone plan $74/month – new phone plan $35/month average = $39 savings/month * 12 months = $468 annual savings
• I switched auto insurance and paid six months in full for $349 – my previous monthly charge was $132, so 20 minutes of internet research netted me a 56% price reduction! $132/month – $58/month = $74 savings/month * 12 months = $888 annual savings
• I started shopping at Aldi as my “first” stop, then supplemented at the co-op.  By the end of the month, Aldi was first, followed by a local grocery store. I was never a good price-watcher, so it has taken the last five months to have a good understanding of where my dollars are best spent (and it’s still a work in progress). Average spent Oct-Nov 2016 $480 – average spent Oct-Nov $320 = $160 savings * 12 months = $1920 annual savings (and this was before I became a strict meal planner and Uber-Frugaled my grocery bill!).
• I decided I was no longer going to eat out just to eat away from home. Social gatherings are ok, but luckily for my budget these are maybe once a month and tend to be coffee or happy hour. Figure 5 * $40 tab = $200 estimated annual savings.
• I decided I was no longer going to purchase coffee for consumption outside my home.  Assume 3 coffees/month ranging from $2-$6 = $150 estimated annual savings.

Just these quick, done-in-a-day changes will add up to $3755.24 of savings this year alone!

 

Four months later and I don’t miss Netflix (my coworkers and I have easily found other things to talk about!), I can’t believe I didn’t check car insurance rates at least every six months, and the last time I went to the co-op I was shocked at the price of tea. It doesn’t even cross my mind to go to the cafeteria at work because I’ve already prepared my meals for the week. Coffee was the hardest habit to break emotionally, but being prepared and bringing a thermos has prevented backsliding. My new normal is already normal.

 

The key to ongoing savings is to evaluate categories regularly.  

A few years ago I had a back injury (muscle). I wasn’t allowed to do any weightlifting that put compressive force on my spine – which for me meant the only heavy lift I was doing was bench press. It took about a year for me to cancel my gym membership. If I was in the practice of sitting down with myself and my Future Self, looking at what we valued at that moment and in the future, I would have easily seen that powerlifting was not part of my life at the moment and could have cut that expense much earlier.

At the time I cut the gym membership primarily because I wasn’t using the gym as often, but I also was conscious of saving that money. I’d been vaguely kicking around the idea of socking away loads of money into savings. But instead, I took that “savings” and transferred that spending to another category: I started going to the salon more frequently, and had a stylist who loved to play with color and short cuts, necessitating even more frequent salon visits. Again, if I routinely examined my budget categories I would have realized that my “money saving” gym membership cancellation inadvertently led to even more spending!

 

Moving forward I think I’m in a really good place to be able to assess my finances against my true values. The last few years were all about deciding what those values are – I’m glad I took the time to experiment with being a girly salon girl but looking back the upkeep was a drag, and I wear a hat for work anyway. Win for my low-maintenance tomboy self, win for my wallet! Now….what else can I cut starting in April….