This post is part of the series Budget Guide
Other posts in this series:
- Budget Guide: Monthly Income and Bill Schedule
- Budget Guide: Evaluating Housing, Bills and Expenses (Current)
- Budget Guide: Organize Your Savings!
In the first post of our Budget Guide series, we shared the importance of knowing your monthly income and having a bill schedule. It is hard to set a budget without a clear understanding of how much you bring in every month and when bills are due.
Today we are taking it one step further. We are going to be evaluating our housing costs, monthly bills, and additional expenses. By doing this, we can see where we might be spending too much and what we might be able to cut back.
One of the most importance decisions you can make is where to live and how much you can afford. You need to take into consideration your work commute, safety of the location, and any needs that you cannot live without.
Many financial experts recommend that your monthly housing cost should not exceed 20-25% of your monthly income. If you can find a place that costs less, then that is more money you can save!
Unfortunately, many of us are limited in our housing options, and local housing costs can very widely across the country. Sometimes we may have to make sacrifices to be able to live within our means if we are stuck in an area with a very high cost of living or we may have to make the hard choice of moving somewhere more affordable, though this is not always feasible.
For example, my family currently spends 35% of our monthly income on housing and, though it is not ideal, that is lowest we could get in regards to our current circumstances. It does mean we have to work harder in other areas to budget and save money.
My suggestion for anyone looking for affording housing is to be patient, constantly re-evaluate what is on your priorities and housing “must haves” list, and shop around.
Re-evaluate Your Monthly Bills
Another way you can save money is to re-evaluate your monthly bills.
First, determine what you need and what you can live without. I decided a long time ago that I did not need cable or satellite television. I am able to get local channels for free (digital), I have a Netflix account with a single screen ($9/month), and I can get any news I may want online. As a web developer, however, I cannot live without Internet and so I opted for high-speed Internet instead. Still, choosing just internet over an internet/tv bundled package has saved me on average $40+ dollars a month for over three years. That is a minimum savings of $1440!
Do not be afraid to shop around or switch providers when you need to. Last summer, after my Internet provider began consistently raising rates so it was no longer cost effective, I switched to a different provider with a set rate. That change has saved us $20 a month!
For those bills that everyone must have, such as utilities, figure out ways to keep your costs low. When I was renting an apartment, I did not use the heat in the winter because all four of the apartments that shared walls with mine ran their heaters. As a result, my small one-bedroom maintained a nice temperature as long as I wore slippers and a light sweater on the coldest days.
To lower your electricity bill, consider keeping the air conditioning off in the spring/summer/autumn for as long as you possibly can stand it and turn off lights and unplug appliances when not in use. To save on your water bill, fix any leaky facets or running toilets, take shorter showers, turn off the water between rinses, and don’t leave the water running while brushing your teeth.
Nowadays mobile phones are the primary mode of communication, and most homes no longer have landlines. However, is it absolutely necessary to have the latest iPhone on an expensive and hard to break two-year contract with all these bells and whistles that you may never even use? Carefully determine what you actually need from a mobile device and service provider. Then find a phone, carrier, plan, and price tag that is affordable.
Lower Your Monthly Expenses
Once you have determined what housing you can afford and re-evaluated your monthly bills, it is time to look at your additional expenses. This includes purchases such as groceries/food, gas, clothing/household necessities, discretionary spending money, etc. I recommend tracking your expenses for a few months to get an average of what you are spending. You can use the spreadsheet from the first post as a guide and add a new table beneath the income for expenses.
Once you have an idea of how much you are spending each month, give yourself a reasonable budget and force yourself to adhere to it for the next month to test how realistic it is for you.
I have certain food allergies and sensitivities that mean that many of my food “staples” (like bread, pasta, butter, milk) are extremely expensive compared to the average person’s staples. For a while, I knew I was spending far too much on far too little so my husband and I began shopping around to find better deals. We now get the bulk of our groceries from the 99 Store, Fry’s (with their card, we save on average $10-$15 dollars each time we shop), and occasionally Wal-Mart instead of paying more for the same items at a fancy store.
By limiting our grocery shopping to every two weeks, being more picky on choosing my high-price specialty food items, and finding the best prices for the items we purchase regularly, we have been able to save $200 a month on groceries without having to do any time-consuming couponing or price comparisons that neither one of us have time for. If you do have the time and patience to take it one step further and master the art of couponing, I say go for it!
Another way we have saved money is that, before I became pregnant with our first child, I biked to work. Yes, it was five miles one way, but it saved us a considerable amount of money on gas and parking fees. If walking or biking is not possible, look into public transportation and see if it is cost effective for your area. (It is not always.) Once I was pregnant, I saved money by parking a mile away from my office at the church we are members of because I can park there for free. I then either walk the mile in or hopped a free campus shuttle. Sure, there are annoyances and inconveniences with using public transit, but it saved us a lot of money each month. Or maybe carpooling is an option for you.
After looking at all of the options available to you, you may end up determining that driving and paying the parking fees is the most affordable and/or realistic. That is okay. At least you did your due diligence and looked into it!
Tip: Curb the Spontaneous Shopping
Give yourself a very modest “discretionary” budget for those little impulse buys to help curb any spontaneous shopping. A water or soda from a soda machine one day, a bag of chips another, too many lunches/dinners out instead of preparing meals ahead of time, and you can quickly blow your budget without even realizing it. These little purchases are often more expensive then you realize at the time, especially vending machines and corner stores that market themselves as convenient but sell items at a higher than normal price.
I am also trying to implement in my own life the phrase: “One thing in, one thing out.” If I see something that I really want, I force myself to take time to think it over: Do I need it? Can I use it? Am I replacing something with it?
Tithes and Donations
Each month, I set aside a tenth of my income for tithes and offerings. Not everyone tithes, so for those who do not, this also refers to donations to charitable organizations or non-profits. Donating to trustworthy organizations is a good way to help your community and others in need, and if you track your donations you may be eligible for discounts or refunds on your state and federal taxes.
If you take the time now to evaluate your housing costs, bills, and additional expenses, you may discover areas that are draining your money. Saving a little here or there on your monthly expenses will add up over a full year or two.
Next time, we’ll take a closer look at savings.
Continue reading this series:
Budget Guide: Organize Your Savings!