MAKING BUDGET CHOICES
When determining a budget, it’s important to know what’s essential and what’s not. That’s the first step in prioritizing and allocating our hard-earned dollars and trying to find areas to save money.
And that brings me to an important point I want to make about spending and expenses. And that is this: we often have far more discretion in how much we spend, even for essentials, than we realize.
In fact, the choices we make in these categories can have a major and lasting impact on our bottom line.
Here are some examples of what I mean.
When determining a budget, it’s important to know what’s essential and what’s not. That’s the first step in prioritizing and allocating our hard-earned dollars and trying to find areas to save money.
And that brings me to an important point I want to make about spending and expenses. And that is this: we often have far more discretion in how much we spend, even for essentials, than we realize.
In fact, the choices we make in these categories can have a major and lasting impact on our bottom line.
Here are some examples of what I mean.
HOUSING CHOICES
Of course, once we make a decision to move into a place, that housing cost becomes a necessity in our budgets. However, there is usually considerable choice in the criteria we consider in making that decision.
Whether to move into your own place or not is a choice in itself.
Sometimes living at home for a while makes more sense than trying to pay rent, particularly if your income is low, or there are major student loans to pay off.
In fact, if you’re in that unfortunate debt circumstance, my advice is to definitely live at home on a very tight budget so you can pay down that loan as quickly as possible to get out from under those payments.
Living alone or with others is another choice.
Even if staying with Mom and Dad or another relative is not an option, the costs of sky high rents these days make living alone a luxury few can afford when they’re starting out, and even beyond that point.
Sharing an apartment or house can cut housing expenses drastically and save you a bundle. (Just be sure you’re complying with the landlord’s lease requirements about roommates or sublets. You don’t want to find yourself on the receiving end of an eviction notice if you are breaking a rule.)
Of course, once we make a decision to move into a place, that housing cost becomes a necessity in our budgets. However, there is usually considerable choice in the criteria we consider in making that decision.
Whether to move into your own place or not is a choice in itself.
Sometimes living at home for a while makes more sense than trying to pay rent, particularly if your income is low, or there are major student loans to pay off.
In fact, if you’re in that unfortunate debt circumstance, my advice is to definitely live at home on a very tight budget so you can pay down that loan as quickly as possible to get out from under those payments.
Living alone or with others is another choice.
Even if staying with Mom and Dad or another relative is not an option, the costs of sky high rents these days make living alone a luxury few can afford when they’re starting out, and even beyond that point.
Sharing an apartment or house can cut housing expenses drastically and save you a bundle. (Just be sure you’re complying with the landlord’s lease requirements about roommates or sublets. You don’t want to find yourself on the receiving end of an eviction notice if you are breaking a rule.)
And even if you own your own home, having roommates is a great way to help cover those mortgage payments. You can choose long-term share leases with renters, or something short-term, such as finding guests through sites such as Airbnb, Homeaway, or VRBO, etc.
These short-term housing shares are most viable as an option if you live in a tourist area, or near a major urban or corporate center. But they also can work for rural settings. Some farmers now rent rooms and/or RV’s on their property so that visitors can get a taste of farm life.
And if you happen to live near a major hospital or health center, check out Furnished Finder. It's a site that caters only to traveling medical personnel looking for short-term rentals for their 6-12-week assignments around the U.S.
These short-term housing shares are most viable as an option if you live in a tourist area, or near a major urban or corporate center. But they also can work for rural settings. Some farmers now rent rooms and/or RV’s on their property so that visitors can get a taste of farm life.
And if you happen to live near a major hospital or health center, check out Furnished Finder. It's a site that caters only to traveling medical personnel looking for short-term rentals for their 6-12-week assignments around the U.S.
Other Housing Choices
Other common sense, cost-saving housing options include choosing a place that’s in a less trendy or convenient neighborhood. Or finding a place further from work where housing tends to be cheaper. It means a longer commute, but the savings are often substantial.
Renting or buying a place with smaller square footage is cheaper, both from a rent or mortgage perspective, and also in terms of the lower cost for the related insurance, maintenance, repair, and utilities expenses.
And finding a place with fewer amenities is also a wise cost-cutting move. After all, things like granite countertops and stainless steel appliances can up your rent by a couple of hundred dollars a month and the purchase price of a house by tens of thousands.
That’s a steep bill to pay for something that’s simply a status symbol and does nothing to improve the quality of your life.
Housing usually constitutes such a huge part of any budget that it pays to consider all the options and make informed and wise choices about how we spend those dollars.
Other common sense, cost-saving housing options include choosing a place that’s in a less trendy or convenient neighborhood. Or finding a place further from work where housing tends to be cheaper. It means a longer commute, but the savings are often substantial.
Renting or buying a place with smaller square footage is cheaper, both from a rent or mortgage perspective, and also in terms of the lower cost for the related insurance, maintenance, repair, and utilities expenses.
And finding a place with fewer amenities is also a wise cost-cutting move. After all, things like granite countertops and stainless steel appliances can up your rent by a couple of hundred dollars a month and the purchase price of a house by tens of thousands.
That’s a steep bill to pay for something that’s simply a status symbol and does nothing to improve the quality of your life.
Housing usually constitutes such a huge part of any budget that it pays to consider all the options and make informed and wise choices about how we spend those dollars.
FOOD CHOICES
Choice is hardly limited to housing essentials, of course. Food is one area that is near and dear to my heart.
I know people who spend $100 per person per week and eat mostly processed junk, and I know people who spend $30 per person and eat mostly whole foods because they carefully plan and shop the sales.
That huge difference in individual food budgets can add up to a couple of thousand dollars in savings for even a 1-person household over the course of a year. That’s significant.
And even a $10 per person difference in the weekly budget amounts to $520 per year.
Multiply that by the number of members in a household, and you’re talking thousands of dollars in a single year’s budget. Carry that out over a decade, and the savings can easily amount to tens of thousands for a family.
There is simply no reason for anyone to spend huge amounts of money on food. After all, one of the major goals of this blog is to show you that you really can eat very well for very little.
Keep that in mind when making your food choices.
Choice is hardly limited to housing essentials, of course. Food is one area that is near and dear to my heart.
I know people who spend $100 per person per week and eat mostly processed junk, and I know people who spend $30 per person and eat mostly whole foods because they carefully plan and shop the sales.
That huge difference in individual food budgets can add up to a couple of thousand dollars in savings for even a 1-person household over the course of a year. That’s significant.
And even a $10 per person difference in the weekly budget amounts to $520 per year.
Multiply that by the number of members in a household, and you’re talking thousands of dollars in a single year’s budget. Carry that out over a decade, and the savings can easily amount to tens of thousands for a family.
There is simply no reason for anyone to spend huge amounts of money on food. After all, one of the major goals of this blog is to show you that you really can eat very well for very little.
Keep that in mind when making your food choices.
TRANSPORTATION CHOICES
While it’s true that we all have to be able to get around, there is actually quite a lot of discretion in this essential budget area as well.
To Buy a Car or Not Is a Choice
For starters, there’s the choice of buying or not buying a car. If you live in an area that offers it, you can choose to do without your own vehicle and use mass transit instead.
Or some areas of the country, and some cities make commuting by bicycle a viable option.
In fact, if you can get by without owning a vehicle, I strongly recommend doing so, since it can typically save you hundreds and even thousands of dollars a year.
If you’re a 2-person household, you have the option of at least trying to get by with just one car to save those costs.
You might also explore whether using a combination of mass transit, taxis, Uber or Lyft, Zipcar, and other occasional car rental options represents savings over car ownership.
The thing is that just because it's the norm to buy a car does not mean it's the only way to go.
While it’s true that we all have to be able to get around, there is actually quite a lot of discretion in this essential budget area as well.
To Buy a Car or Not Is a Choice
For starters, there’s the choice of buying or not buying a car. If you live in an area that offers it, you can choose to do without your own vehicle and use mass transit instead.
Or some areas of the country, and some cities make commuting by bicycle a viable option.
In fact, if you can get by without owning a vehicle, I strongly recommend doing so, since it can typically save you hundreds and even thousands of dollars a year.
If you’re a 2-person household, you have the option of at least trying to get by with just one car to save those costs.
You might also explore whether using a combination of mass transit, taxis, Uber or Lyft, Zipcar, and other occasional car rental options represents savings over car ownership.
The thing is that just because it's the norm to buy a car does not mean it's the only way to go.
Choices if You Do Buy a Car
Even if you do buy a car, there is vast degree of choice in the type of car you purchase.
You can decide to buy a new one and take out a loan, or you can buy an older, used model.
Or you can pay with cash.
And when it comes to the new models, they also range widely from very basic models with few add-ons to high end models with many bells and whistles.
Those choices, in turn, affect the insurance costs as well as the maintenance and repair ones, and may also determine gas mileage and those associated expenses.
Each one of these choices will invariably affect your bottom line. Little expenses and amenities definitely add up.
Even if you do buy a car, there is vast degree of choice in the type of car you purchase.
You can decide to buy a new one and take out a loan, or you can buy an older, used model.
Or you can pay with cash.
And when it comes to the new models, they also range widely from very basic models with few add-ons to high end models with many bells and whistles.
Those choices, in turn, affect the insurance costs as well as the maintenance and repair ones, and may also determine gas mileage and those associated expenses.
Each one of these choices will invariably affect your bottom line. Little expenses and amenities definitely add up.
UTILITY CHOICES
There are many, many options and ways to control spending in this category, so I’ll just touch on a few here.
For starters, beyond the base monthly charges we all must pay, there’s a good degree of choice in how much we use.
As an example, you can run up your hot water bill by choosing to take 30 minute showers, or you can opt to take 5-minute ones instead and save big. And help the planet besides by burning fewer fossil fuels.
You can turn off lights in rooms that are empty, or leave them blazing and run up your electric bill.
You can keep the thermostat turned down in the winter and wear extra layers, or crank it up and run around in shirtsleeves and pay the extra cost for that self-indulgence.
You can raise the temperature of your AC settings a few degrees so you’re comfortable in regular summer attire. Or you can blast the AC in the summer so you need a sweater even in July and see an electric bill that runs to hundreds of dollars a month.
RELATED ARTICLES: For more on money saving ideas with heating and cooling, check out my blog posts here and here.
You can also do multiple tiny loads of laundry, or run just one full load. You can run the dryer, or you can hang your laundry.
You get the picture. You have a great deal of choice in how much you spend in this category.
There are many, many options and ways to control spending in this category, so I’ll just touch on a few here.
For starters, beyond the base monthly charges we all must pay, there’s a good degree of choice in how much we use.
As an example, you can run up your hot water bill by choosing to take 30 minute showers, or you can opt to take 5-minute ones instead and save big. And help the planet besides by burning fewer fossil fuels.
You can turn off lights in rooms that are empty, or leave them blazing and run up your electric bill.
You can keep the thermostat turned down in the winter and wear extra layers, or crank it up and run around in shirtsleeves and pay the extra cost for that self-indulgence.
You can raise the temperature of your AC settings a few degrees so you’re comfortable in regular summer attire. Or you can blast the AC in the summer so you need a sweater even in July and see an electric bill that runs to hundreds of dollars a month.
RELATED ARTICLES: For more on money saving ideas with heating and cooling, check out my blog posts here and here.
You can also do multiple tiny loads of laundry, or run just one full load. You can run the dryer, or you can hang your laundry.
You get the picture. You have a great deal of choice in how much you spend in this category.
CELL PHONE CHOICES
It’s open to debate whether cell phones are a want or a need. But given how much the younger generation relies on them for communication, and the fact that they have replaced wall phones in many households, I am inclined to include them as a budget necessity.
But again, there is a great deal of budgetary leeway in this category.
For example, you can choose to get the latest model as soon as it comes out. Or you can rely on an older model. Or you can buy a used one.
You can also choose an economical basic plan or a costlier plan with mega data.
The cost differences are substantial and make a difference in a family budget.
It’s open to debate whether cell phones are a want or a need. But given how much the younger generation relies on them for communication, and the fact that they have replaced wall phones in many households, I am inclined to include them as a budget necessity.
But again, there is a great deal of budgetary leeway in this category.
For example, you can choose to get the latest model as soon as it comes out. Or you can rely on an older model. Or you can buy a used one.
You can also choose an economical basic plan or a costlier plan with mega data.
The cost differences are substantial and make a difference in a family budget.
INTERNET CHOICES
Internet access is another area where there’s a great deal of disagreement as to whether it’s essential or not. My own view is that having access to the World Wide Web has become a necessity for jobs, school, and communication.
That’s why I include it as an essential for budget purposes.
However, it's obviously not necessary for basic survival, so if you do not need it for work, then you can rely on your local library or places like Starbucks for your web access. That’s a huge cost savings right there of hundreds of dollars a year.
If you do have internet at home, shop around for the best deals from providers.
And be wary of bundled services with cable.
Cable is most definitely not a necessity. So if bundling the internet with cable service raises the cost of your internet billl, then you will want to skip it if you’re truly trying to pare expenses.
And, by all means, be aware of the lifestyle creep that comes with all the internet add-ons, such as program subscriptions, etc.
Those $4-$8 per month fees for things like Hulu Plus, Netflix, Amazon Prime, etc. can add up.
They may represent a cost savings over cable, but they’re not a necessity by any stretch of the imagination. So make sure you're actually using them all if you're paying for them.
And if you find you're not, then you might want to consider scaling back your subscriptions. Or getting rid of them altogether and switching to free library options. Most libraries offer free movies and TV shows in a streaming service.
Internet access is another area where there’s a great deal of disagreement as to whether it’s essential or not. My own view is that having access to the World Wide Web has become a necessity for jobs, school, and communication.
That’s why I include it as an essential for budget purposes.
However, it's obviously not necessary for basic survival, so if you do not need it for work, then you can rely on your local library or places like Starbucks for your web access. That’s a huge cost savings right there of hundreds of dollars a year.
If you do have internet at home, shop around for the best deals from providers.
And be wary of bundled services with cable.
Cable is most definitely not a necessity. So if bundling the internet with cable service raises the cost of your internet billl, then you will want to skip it if you’re truly trying to pare expenses.
And, by all means, be aware of the lifestyle creep that comes with all the internet add-ons, such as program subscriptions, etc.
Those $4-$8 per month fees for things like Hulu Plus, Netflix, Amazon Prime, etc. can add up.
They may represent a cost savings over cable, but they’re not a necessity by any stretch of the imagination. So make sure you're actually using them all if you're paying for them.
And if you find you're not, then you might want to consider scaling back your subscriptions. Or getting rid of them altogether and switching to free library options. Most libraries offer free movies and TV shows in a streaming service.
CLOTHING CHOICES
And here’s another necessity category that offers a huge range in spending options.
Of course you need appropriate clothing for whatever work you do, but that does not mean you have to buy designer duds at full retail prices.
You can wait for sales, or opt to get your wardrobe at discount stores, consignment stores, or thrift shops.
And the fact that clothes are a budget necessity does not mean you need a walk-in-closet to accommodate your attire.
There’s a great deal to be said for a minimalist approach to clothing and owning a wardrobe that is simple and interchangeable.
This approach means you can get by with smaller closets, which means you can get by with a smaller living space, which means lower housing costs.
That’s a prime example of the often overlapping effect of many of our spending decisions that affect our financial health.
And here’s another necessity category that offers a huge range in spending options.
Of course you need appropriate clothing for whatever work you do, but that does not mean you have to buy designer duds at full retail prices.
You can wait for sales, or opt to get your wardrobe at discount stores, consignment stores, or thrift shops.
And the fact that clothes are a budget necessity does not mean you need a walk-in-closet to accommodate your attire.
There’s a great deal to be said for a minimalist approach to clothing and owning a wardrobe that is simple and interchangeable.
This approach means you can get by with smaller closets, which means you can get by with a smaller living space, which means lower housing costs.
That’s a prime example of the often overlapping effect of many of our spending decisions that affect our financial health.
LOAN AND DEBT CHOICES
Debt is stressful and often disastrously burdensome. But sometimes we have options we don’t realize to cope with this.
First, a word of caution about loan renegotiation or debt consolidation. You do not want to end up in a position where you're paying down a loan for a longer term than the original one. So any renegotiation or consolidation must pay off the loan in the same or a shorter time frame than the original loan.
To explore your options, I recommend seeking out non-profit counseling services. They are available all over the country and can help you in managing and eliminating your debt and getting you back on track in terms of your general finances. You can get more information on what to look for and be aware of at this government link.
But the best way to cope with debt is to get rid of it as quickly as possible. One way to accomplish that is to pare down your spending in other areas of your life through the use of a strict budget, and applying any savings toward paying down the loan.
That strategy will sharply shorten the length of the loan by reducing the principal amount more quickly. That, in turn lowers the overall interest costs and payments– sometimes by tens of thousands of dollars.
Debt is stressful and often disastrously burdensome. But sometimes we have options we don’t realize to cope with this.
First, a word of caution about loan renegotiation or debt consolidation. You do not want to end up in a position where you're paying down a loan for a longer term than the original one. So any renegotiation or consolidation must pay off the loan in the same or a shorter time frame than the original loan.
To explore your options, I recommend seeking out non-profit counseling services. They are available all over the country and can help you in managing and eliminating your debt and getting you back on track in terms of your general finances. You can get more information on what to look for and be aware of at this government link.
But the best way to cope with debt is to get rid of it as quickly as possible. One way to accomplish that is to pare down your spending in other areas of your life through the use of a strict budget, and applying any savings toward paying down the loan.
That strategy will sharply shorten the length of the loan by reducing the principal amount more quickly. That, in turn lowers the overall interest costs and payments– sometimes by tens of thousands of dollars.
HEALTHCARE CHOICES
This is one area where our choices are quite limited, but they still exist. It pays to shop around and check different insurance options, whether you have employer-based plans or are in the individual marketplace.
The differences in premiums and deductibles can be substantial and quite complicated.
For example, you will need to investigate and weigh the advantages of a large deductible/lower premium plan vs. a small deductible/higher premium plan.
And if you end up with a large deductible plan, you can save money by researching which are the lowest cost providers of any service you need.
The price differences among medical service providers can be positively enormous. Check out my blog on the topic here.
This is one area where our choices are quite limited, but they still exist. It pays to shop around and check different insurance options, whether you have employer-based plans or are in the individual marketplace.
The differences in premiums and deductibles can be substantial and quite complicated.
For example, you will need to investigate and weigh the advantages of a large deductible/lower premium plan vs. a small deductible/higher premium plan.
And if you end up with a large deductible plan, you can save money by researching which are the lowest cost providers of any service you need.
The price differences among medical service providers can be positively enormous. Check out my blog on the topic here.
________________________________________________
So there you have it. Just because something is a budget necessity doesn’t mean you don’t have substantial choice and latitude in how much you spend in each category.
Keep all this in mind when you are trying to determine how much money you need to meet your living expenses.
And see if you can’t find ways to save ---- even on the essentials in your budget.
So there you have it. Just because something is a budget necessity doesn’t mean you don’t have substantial choice and latitude in how much you spend in each category.
Keep all this in mind when you are trying to determine how much money you need to meet your living expenses.
And see if you can’t find ways to save ---- even on the essentials in your budget.
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