A Few Ways to Save a Few Dollars
Desperate times call for drastic measures. As the Coronavirus shuts down the planet, you may be looking for ways to save a few extra dollars. Now is an excellent time to review your spending habits and create a budget. However, creating a budget is about as fun as getting your wisdom teeth pulled, but it’s imperative to know where your money is going.
The best way to prepare a budget is to review your credit card and bank statements for the past six months. After you dissect your statements, find areas where you can make changes. Organize your expenses into broad categories like home, work, education, children, entertainment, etc. After setting up your groups, subdivide them further. For example, the home category might consist of food, utilities, landscaping, and so on. Dividing your expenses will help you refine your budget.
Identifying your automatic payments is another opportunity to reduce your overhead, especially if you set them up years ago. Are there any you can eliminate or suspend during this downturn? Common electronic monthly payments include book or magazine subscriptions, childcare, tutors, club dues, entertainment, house cleaning, and lawn care services. Can you mow your lawn or clean your home? If you have kids at home, introduce them to manual labor like mowing your lawn or cleaning the house. Many years ago, I was mowing my lawn when a friend of my daughter’s told me she had never seen one of her friend’s parents mow their yard before.
Walking, hiking, biking, have temporarily replaced the gym. Do you miss working out at your local gym? If no, ditch the membership.
Currently, there is nothing worth watching on TV, so can you finally cut the cord? Do you need cable TV or a landline? I have not missed watching TV, and I’ve spent my free time playing board games, reading books, or learning to play the guitar. When I do watch a show, it’s on Netflix or Amazon Prime.
Family dinners are back in fashion now that restaurants are closed, allowing you to spend less money dining out. We are getting creative with dinners, and we are limiting our takeout dining.
My family and I recently built a vegetable garden, so in about 45 days, we will have a bumper crop of tomatoes, lettuce, beets, and cucumbers. I’ve seen posts on social media where others are also building gardens. If you have space in your yard, consider making one.
If you have adequate savings, use your cash to pay off high-yielding debt. In a zero percent world, it makes no sense to keep paying on a note with interest rates at 4%, 5%, or higher. We recently paid off a car, and we’re using the old payment for other purposes.
Refinance your mortgage. The drop in interest rates is an opportunity to lower your mortgage payment. It’s also an excellent time to refinance to a 15-year mortgage. The interest you’ll pay for a 30-Year, $300,000 mortgage is $215,600. If you refinanced to a 15-year, your interest payments would drop 66% to $72,900, a savings of $142,700!
I like my home office, so I’m contemplating letting my office lease expire in September. I can save a few thousand dollars a month by working from home and I can apply the extra savings to technology or marketing. Zoom has been a tremendous benefit, and I’m happy to avoid rush hour traffic. My dog and cat are loyal office mates, and they don’t drink all the coffee! Are you in a position to work from home permanently? If so, explore this option to see if it makes sense.
Insurance is another area where you can make changes to your budget. If you have adequate savings, raise your deductible on your policies. By increasing your deductible, you’ll be able to lower your monthly premium. Talk to your insurance agent to get a few quotes at different deductible levels to find out how much money you can save.
Can you get rid of a car or two? We have three vehicles, but we are currently only using one – barely. Is it possible for your family to share a car? Can you rely on Uber or Lyft? If so, consider selling a car to raise cash or eliminate your car payment.
Do some spring cleaning. Can you find items to sell in your attic or basement? Once you find something to sell, list it on Craig’s List or eBay – one man’s trash is another man’s treasure.
When you finish your budget, you’ll know where your money is going, allowing you to spend less and save more. With technology, it has never been easier to create a budget – yeah! You can use Mint.com or Every Dollar to automate the budgeting process, so it becomes second nature.
If you’re able to reduce your spending or cut back on services, allocate the money to your savings account or emergency fund. Increasing your savings account balance will give you a cushion if the shelter-in-place extends into the summer.
Good luck and happy hunting!
For where your treasure is, there your heart will be also. ~ Luke 12:34
April 2, 2020
Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.
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