Over the course of the last month (September through October), I’ve cut my household expenses by 10%, with the help of Mint.com, based on the rationale that you cannot improve what you cannot measure. I intend to chop and slash another 10% beyond that. This has become possible due to the halving in the price of gasoline (saving $120 per month) as well as categorizing and eliminating any discretionary spending. I know our President advised us to go shopping after 9/11, but those days are long gone – I must act in ruthless self interest.
I know what some are saying – this is exactly the kind of thinking that causes panics, bank runs, hoarding, and all other ‘irrational’ economic behaviors. If anything, it is the reality we currently are trying to save which is irrational.
If I ran my household as a business, I would be encouraged to be fiscally responsible, to way the utility of any purchase of goods or services prior to spending funds. Cutting out lunches and cups of coffee are no different than cutting expense accounts and making executives fly coach. Freeing up funds that would normally be spent allows me to improve my cash flow, pay down debt, and accumulate reserves.
I’ve drastically cut the amount of groceries I buy – and cut the amount of food that I prepare and then waste. I’ve also engineered a way around my natural tendency to hoard (usually ketchup, pancake syrup, and mayonaise) by walking around the house to see what I need. I also make a calendar of meals for 2-weeks at a time, list the ingredients that I would need, and then see what ingredients I need versus what ingredients I have. Aside from perishable items, I ignore the sales flyer and focus on comparing unit prices in store. I’ve found this to be quite effective.
I’ve also needed to replace a vehicle that has been coming off-lease. The current economic environment is not favorable to purchasing (leasing) on terms similar to those I’ve had in the past (purchasing a new minivan versus leasing is at least $150-200 more expensive monthly). I’ve decided instead to extend my current lease by six-months and wait out the market. Every month I don’t spend that $150-200 is a month I can save.
The next phase will be grueling to those from whom I buy goods and services. Much like any other investor, I will be demanding the highest yield possible, meaning that my preferred regional bank may fail to earn my business. Plenty of other service providers, such as TV, cable, internet, mobile phone, burglar alarm, and the like are going to have to fight for my business. I will aggressively seek out alternatives.
Lastly, I will finally take full advantage of the various tax incentives available to me, particularly transit checks, flexible spending accounts, and health spending accounts. These should theoretically save me 20% of the amount spent on those items (and deny governmental entities the same amounts).
In looking at housing sales, automobile sales, and now consumer spending, I can see that I’m not alone.
