Pocket Change
Lori L. Embrey
Family budget stretched a little thin these days? Join the
crowd. As prices are increasing for everything from gas to groceries,
many of us are looking to reduce household expenses. Big-ticket items
seem to be the target of family budget-cuts. But, is this really the best
way to cut back? While it is certainly a worthwhile exercise to examine
the immediate need for a new car, house, or a theme park vacation, it
is equally important to examine daily spending habits. Chances are you
can save big by stopping the slow leaks of cash from the family budget.
Here are some tips:
Clean out your closet
If you need help getting motivated to tighten the reins
on your own pocketbook, spend a day cleaning out your closet. Come on
ladies, we all have clothes in our closets that still have the tags on
them! Maybe there are even a few items that we meant to return-before
they went out of style. We also have trinkets hiding in there that we
never use and never should have purchased. Some were bought on a whim
and others were purchased just because they were on sale. Buying "clutter"
is a slow leak that can really add up over time. If your closet isn't
motivation enough, head for the basement.
Give your kids an allowance
An allowance can be a fantastic tool for teaching kids to
manage money and it can also help save yours. Decide, in advance, the
expenses for which your child will be responsible. For young children,
these expenses can include toys, DVDs, and treats from the grocery store.
Did you know that a child will ask, "Can I have this?" an average
of 15 times during a trip to the grocery store? For older children, these
expenses can include things such as movies, video games, activities with
friends, the latest and greatest sneakers (after you just bought them
a new pair), lunches at school, gasoline, and automobile insurance. Decide
upon a dollar value that will reasonably cover the expenses you have chosen.
Clearly explain to your child the items for which they are responsible
and help them budget their allowance appropriately. Once the fixed expenses
are paid (school lunches, car insurance), your child will need to make
decisions about how the remaining, or discretionary, funds will be spent.
A parent's open pocketbook may not provide these same decision-making
opportunities.
Added benefit: Empowering your child with the responsibility
of deciding which activities and purchases are most important to them
may reduce conflict in your relationship.
Give yourself an allowance
For all of the same reasons mentioned above, allowances
are great for parents too! Sit down with your pay stubs and your monthly
bills. Get to know your own discretionary income and save and spend accordingly.
Do not ask your credit card for a loan when you run short for the month.
You would advise your children to defer their purchase into the following
month. Why not expect the same of yourself?
Pay your bills on time
Late fees can be brutal. Avoid these unnecessary charges
by being organized. Set aside a special place in the house for your bills.
Give the mail a quick glance on your way up the driveway and drop the
bills in your designated box or basket. When you have a few extra minutes,
organize them by due date.
Another strategy for avoiding late fees is to make automated
payments whenever possible. Most companies will gladly draw their amount
due from your checking account on or before the due date, free of charge.
Some actually give you a discount for paying this way. Many banks provide
automatic bill payment services as well. When utilizing this strategy,
it is important to keep track of available funds in your checking account,
lest you be bombarded with returned check fees and insufficient funds
fees in addition to the late fees.
If neither of the above strategies makes sense for your
family, you might consider establishing automated payments using a credit
card. Your automated bills are paid on time and you need only worry about
paying your credit card bill by the due date. Be sure your monthly bills
do not exceed your spending limit or, you guessed it, there will be more
fees.
Added benefit: Maintaining a good credit score by paying
bills on time will also save you money as you may be able to obtain lower
interest rates when you apply for credit.
Meals on the go
When my husband and I find ourselves wondering where all
the money went this week, we can generally point to food. We try to eat
out just once each week but, with our hectic family schedule, we have
a slow leak that is directed toward the super value menu and the ice cream
shop. These trips through the drive-through for our three boys seem harmless
and inexpensive enough, but they add up over time. To be exact, $20 per
week spent on after-school snacks and meals on the go adds up to more
than $1,000 per year. When you add these unnecessary purchases to the
impulse buys at the grocery store, we're probably seeping to the tune
of about $2,000 to $3,000 a year. Patching this leak isn't easy, but where
there's a will, there's a way. Here are a few ideas:
- Plan meals for the week and then make your grocery list accordingly.
This will help you buy only the things you need and you'll save on gas
by only driving to the store once.
- Have snacks on hand and ready for kids to grab when they get home
from school.
- When you prepare meals, make double or triple the recipe and freeze
the extra portions for busy evenings when you won't have time to prepare
a meal. You can also pack leftovers for lunch.
- Pack your lunch 2-3 days per week. Despite the wide selection of lunch
specials, this strategy may save you $1,000 or more per year.
Added benefit: Skipping the drive-through or take-out menu a few times a week in favor of healthier eating at home may improve your overall health and reduce your expenses for health care and life insurance.
Attacking the larger line items in our budgets may be a quick fix for the family cash flow but, making adjustments to daily spending habits is likely to have a greater impact today and may change our financial picture over the long term. My family has agreed to cut back on small daily expenditures, rather than foregoing the family vacation this summer-and all of the memories that will make us smile for years to come. I can't remember my last 99 cent hamburger.
Lori
Embrey, MS, CFP? is principal and founder of Fairfield Investments & Wealth
Management, LLC with offices in Pickerington and Arlington. Lori is also
a frequent lecturer for The Ohio State University's Family Financial Management
program.
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