Tuesday, November 3, 2015

Saving money in economic hard times

I've written many times about the economic hardship that many of us are already experiencing, and which I expect to get significantly worse in the not too distant future.  Many of us are already taking what precautions we can, reducing our exposure to risk, and trying to put aside a 'rainy day fund' for emergencies.

Many blogs are talking about this, or that, or the other way to prepare;  but very few that I've seen focus on the simple solution of trying to save money on our everyday expenses.  If you go through every penny you spend in a month, asking yourself "Is this really worth it to me?", you may be surprised to find out how much you're spending on non-essentials and luxuries that you can well do without.

Miss D. and I have been going through this for over a year now.  We moved into a small rented duplex, deliberately choosing a smaller place because it would force us to cut down on our clutter.  (When two individuals marry, you're combining two households worth of what my wife derisively refers to as "Stuff!")  Over the past year, slowly and steadily, I've been sorting through all my "stuff" and getting rid of a lot of it (mainly because I'm the worst offender in accumulating so much of it over the years).

Now, with another move in prospect in the short to medium term, our pace has accelerated, and the cutting down is intensifying.  I've gotten rid of enough clutter that we're giving up our large-size storage unit for one less than a quarter as big, thereby saving a significant amount in monthly rental.  What's in that unit will mostly move with us in due course, but even there, I expect to thin things out as and when I can find the time.  Rule of thumb:  if I haven't used it or missed it in six to twelve months, out it goes.  (Sometimes it'll be a donation to a thrift store, or go into a dumpster;  other times we'll sell it to a used book store or in a yard sale, adding the proceeds to our cash reserves.)

We've also gotten rid of many things that people today take for granted.  Since our marriage, we've never subscribed to cable television at all.  We simply don't need it.  Most of the programming on the broadcast networks is abominable, and most of the cable networks have declined drastically in their standards, to the point where they have very few programs worth watching.  When we find a program we really want to see, we can either buy the DVD (often for pennies on the dollar at a used book store or on Amazon.com) or find it on Amazon streaming video, which is largely free to us as Amazon Prime customers (and when it's not, the price to watch something is pretty low).  The savings on not having to pay a cable TV subscription rapidly add up.

We're also re-evaluating essentials.  Cellphones fall into that category.  We've been Verizon customers for some years, largely because Miss D. finds their extensive network useful when she flies;  but they're also very expensive.  However, if you ask around (particularly if you know the right people) you can get much, much better deals through Verizon, even cheaper than switching to Straight Talk or another prepaid service.  We've just reduced our monthly payments by more than half, thanks to one of Oleg's buddies who's in the business and helped us to find the best deal.  That'll save us something like a hundred dollars a month, or twelve hundred dollars a year - not small change.

Another area to consider is health insurance, life insurance, and insurance in general.  By comparing rates and accepting a few limitations in terms of policy costs and conditions, one can often save a great deal of money (although we've chosen to keep our vehicle and household insurance with a company that we trust, which has a great track record of supporting its policyholders, even though we could save up to 20% by going to another company).  At present we're switching Miss D. over to my health insurance.  It costs more in co-pays than her old policy, but will save about half her premium every month.  Again, over the course of a year, this really adds up.

One must also be realistic about where one lives.  For those who are tied to a job and can't move, or who have family they want to be near, or have any other factor limiting their mobility, this is obviously out of the question:  but for us, who can move with relative freedom, the cost of living in an area is becoming an important factor.  We want to save for a projected move several years in the future, to a state where costs of housing and living are considerably higher.  We'd like to do so with a decent nest-egg in the bank, including enough to put down a substantial deposit on a house.  To help us accumulate that sort of money, we're seriously looking into moving from where we are now to a state and city with a lower cost of housing and living.  There are disadvantages to that (particularly moving away from friends here), but also advantages (being closer to friends there);  and when we're talking about saving up to a thousand dollars a month in housing, utilities and other costs, that can add up pretty rapidly.  Five years of such savings will yield $50,000 to $60,000 more in the bank than we could otherwise accumulate.  That's pretty persuasive.

If we add up all the potential savings we've identified over the past couple of months, even without considering housing, Miss D. and I can save up to $500 a month that we're currently spending.  Adding housing, we're looking at anywhere between $1,000 and $1,500 per month in savings, or $12,000 to $18,000 per year.  There are people living on that - and less than that - in the USA today!

Do your own math.  Check your monthly bills, and see where you can make savings.  The answers may surprise you.



Gorges Smythe said...

I once read a book entitled "Your Money or Your Life." It's not as relevant on some things as it was then, due to a changing economy, but the idea of tracking your income and expenses TO THE PENNY for a year (or permanently) is still valid. I tracked it for nearly three years, and it was a real eye-opener.

shugyosha said...

Just a data point,

I can't remember WHICH UN agency published it, but there was a study on urban poverty (i must have it somewhere in my drives...) that instead of using income/individual in a household used income/square root of individuals, precisely to account for the savings in buying for several people.

Take care.

Anonymous said...

Some good thoughts and great tips up there - much obliged sir. For our situation, we started out with keeping the home small (<1600 sq. ft) to have it paid off quickly, reduce furnishing cost, utility bills and upkeep. Space is pretty tight, but we manage (mostly :^).

We have three vehicles. All are paid off, the youngest is 2004 and we maintain them in good shape. The reason for three is that our youngest (14) will probably need a car and keeping this one for her eventual use is likely more reasonable in the long run. Insurance (liability + uninsured motorist) on all of them.

Our biggest savings - we eat as home as much as possible. We rarely eat out for work lunches, preferring to take our meals from home. Suppers do have some take-out, with full blown restaurants a rare occurrence - maybe three times a month.

Quentin said...

You probably already know this but when you move, there are two opportunities for junking stuff: once when you pack, and once when you unpack.

Phssthpok said...

RE Housing:

Several folks at work have 'ragged' on me about my choice to rent an inexpensive ($575) older Mobile home in a park a mere 2 miles from work. It's not a fancy 'trailer', and it's an older model (2x3 walls!), but it has two bedrooms (one for storing 'stuff') and a W/D hookup (saves on the laundromat).

Between the cheap rent (for the area/amount of space), and the 2 mile commute (on a scooter getting 89 MPG in the summer) I have managed to save (Read: Squirrel Away) more in the last year, than I have ever GROSSED (in one year) in my life!

Of course this new job working me an average of 65 hrs/week doesn't hurt on the in-flow end of the equation! ;-)