By Liz Pulliam Weston
Lou knows his family is in a vicious cycle with credit cards. He's just not sure how to get out.
Bills and credit-card payments eat up most of the Mansfield, Ohio, family's income, leaving them little left over to pay for groceries and other basics. So they wind up charging more.
"My family has about $12,000 in debt to credit-card companies," Lou wrote in an e-mail. "We want to stop using these cards and get this fixed. But we are 'bridging the gap' with credit."
Like many families, Lou's clan already has trimmed some of the obvious expenses, such as eating in restaurants. But really getting your budget in line may require rethinking just about everything on which you spend money.
Look at the biggies first
The biggest savings often lie in the areas where you spend the most money: housing, transportation, food, insurance, health care and clothing. Here are some ideas for places to look for savings.
| Average household spending | ||
|---|---|---|
| Average income (before taxes) | $51,128 | % of expenditures |
| Average annual expenditures | $40,817 | N/A |
| Housing | $13,432 | 33% |
| Transportation | $7,781 | 19% |
| Other | $6,153 | 15% |
| Food | $5,340 | 13% |
| Personal insurance and pensions | $4,055 | 10% |
| Health care | $2,416 | 6% |
| Apparel and services | $1,640 | 4% |
Source: U.S. Department of Labor, Bureau of Labor Statistics' Consumer Expenditure Survey 2004
Housing and utilities
If you're struggling with an unaffordable mortgage or rent payment, moving to a cheaper place or getting a roommate may be options. Otherwise, some ways to lower your housing costs include:
- Refinance your mortgage to get a lower rate or to switch from a 15-year mortgage to a 30-year loan.
- Raise your deductibles on your homeowner's or renter's insurance.
- Challenge your property-tax assessment.
- Eliminate premium channels from your cable or satellite TV service.
- Drop the pay TV services altogether.
- Reduce phone extras such as call forwarding or call waiting.
- Cancel your land line in favor of cell service (or vice versa).
- Seek a cheaper long-distance carrier (try SaveonPhone.com or LowerMyBills.com ) or switch to Internet calling if you have high-speed service.
- Investigate whether bundled service (phone, high-speed Internet and television) might save you money.
- Wash only full loads of dishes or clothes.
- Use a clothesline and use your dryer just to soften air-dried clothes.
- Use shades, blinds and drapes to regulate your home temperature: Keep them open in the winter to let in light and drawn in the summer to block the sun's rays.
- Install a programmable thermostat so your home is heated or cooled only when you're actually there.
- Don a sweater in winter and shorts in the summer so you're not overheating or cooling your house.
- Douse unneeded lights and turn off TVs, computers and other electronics when not in use.
Rob Seiss of Pearl River, N.Y., said he's constantly nagging his family to turn off the lights and TV. He also turns down the thermostat at night and when his family is on vacation.
"Now, I don't just sound like my father," Seiss said. "I am my father."
Transportation
Buying used cars and driving them for years is a great way to reduce your lifetime transportation expenditures. But there are other, more immediate ways to save, as well:
Raise the deductibles on your auto-insurance policy.
- Get all the discounts you deserve, such as good-driver, good-student and multiple-car discounts.
- If you're driving less, tell your insurer; you may get a cheaper rate.
- Cancel collision and comprehensive insurance on cars older than five to seven years.
- Investigate carpools and public transportation, and see if your employer offers any subsidies.
- Bike or walk as often as possible.
- Avoid repair bills by maintaining your vehicles properly with regular oil and filter changes.
- Group your errands and, if you have more than one car, use the vehicle with better gas mileage.
"Just because you have a gas-guzzling SUV," said Kevin Schilling of Kansas City, Mo., "does not mean that you have to drive it to the store to pick up a gallon of milk."
Food
Dining out consumes about half the average family's food expenditures, so eating in more often is one of the fastest ways to trim your budget. Other ways to control costs include:
- Bring lunches and snacks to work.
- Cook once, eat twice: Double whatever you're making and freeze the excess for a later meal.
- Make at least one or two meatless meals each week.
- Avoid over-packaged, over-processed and highly advertised foods. The closer a food is to its natural state, the less it tends to cost.
- Buy fruits and vegetables in season.
- Cruise through your fridge daily to use items before they go bad.
- Give up a vice (smoking, drinking, soda, salty snack foods).
- Use the weekly grocery store circulars to see what's on sale and plan meals accordingly.
John and Carla Robertson of Denton, Texas, have turned meal planning into a family affair, soliciting input from their three kids, ages 7, 4 and 1.
"Every weekend we sit down and make out the next week's menu," John Robertson wrote. "We refer to old menus for meals that we enjoyed, and we put together a lunch and dinner menu for the entire week. We also plan on cooking extra at some meals so that the leftovers can be used for lunches a day or two later."
Marcia Spires of New York City has another tip: Avoid recipes that require you to buy exotic ingredients you're unlikely to use again.