The bells are tolling on the American economy.  Every day, another expert is warning us of the imminent demise of our way of life. If you’re paying attention, you can see it coming, like some huge storm system, bearing down on you. You don’t stand there and wait for it to hit you.  You don’t have to be a passive victim of the economy. It’s time to sit down and take a long hard look at where your money is going. Lots of financial experts give tips about reducing your discretionary spending but what about those fixed expenses? You can free up some large sums of money by reducing your monthly output.

Most of us have a set of fixed expenses.  Some of these are vital, some are not, and what is vital for me might not be important for you.

What fixed payments come out of your bank account every month?

• Mortgage/Rent
• Home Insurance
• Car payment
• Car insurance
• Cable/Satellite/Internet
• Gym membership/Exercise classes
• Loan payments
• Cell phone bill/Home phone bill
• Child support/alimony payments
• Tuition
• Extracurricular activities for the kids

Some of these, you can’t do anything about.  However, some of these payments can be reduced or gotten rid of altogether.

The real question is, if your financial circumstances changed dramatically, could you afford your current lifestyle? If the answer to that question is  “No” then you need to figure out how to reduce your regular monthly output.

Keep in mind that what works for my family may not work for your family.  It will depend whether your spouse is on board, how dire your situation is, and with how much importance you weigh your frugality makeover what you opt to change. Some of these measures would be drastic, and others would only cause a minor change in your lifestyle. Let’s take a look at each of these expenses individually and ask some important questions.

1. Mortgage/Rent This is often the biggest expenditure that many families make each month.  When you buy a house, realtors will nearly always show you homes at the top of your price range. When you are looking for rentals, most people search at the high end of their budgets.  That’s fine in good times, but if things go awry, you’re stuck at that same level because banks and landlords don’t care that you lost your job or took a financial hit.  Sometimes moving to a less expensive place is your only option if you wish to make big financial changes. This can free up as much as a thousand dollars a month for some families. Moving is expensive, though, and you have to figure that in to the potential savings. If you are only going to save, let’s say, $50 a month by moving, it will be more than a year before you recoup your expenses, and that is going to do little to change your overall outlook. If you are moving to drop your expenses, it needs to be a substantial monthly savings to make it worthwhile. If you own your home, consider refinancing at a better interest rate.
2. Home/Car Insurance You have to have insurance so this is not an expense that you can cut out of your budget altogether. However, you can shop around for better prices. You can look into changing your coverage. Do you have duplications in coverage? For example, my insurance company offers roadside assistance for about $40 per year, but my vehicle came with 3 years of free roadside assistance. You can drop your rate further by increasing your deductible, but if you do that, be sure you have access to the deductible amount should an accident occur.  If you have several cars in your family, you might not need to have rental car coverage on your policy.
3. Car Payment As with a home payment, most people push the envelope and get the nicest vehicle that they can afford. What you drive is a status symbol in North America, and practicality doesn’t always come into the decisions.  The best option is to get something that you can afford to pay for in full so that you don’t have a payment. Consider trading in the vehicle you are making payments on for one that you can pay for outright or make payments on for a short period of time. But if you made the decision in less frugal days, you might be what car dealers call “upside down” in your financing. That means that you owe more on your vehicle than it is worth. If that is the case, then you will basically have to pay someone to take it off your hands and that is not always worth your while. If you find yourself in that situation, the best thing you can do is use some of your freed up money to pay off your loan as quickly as possible. At least then, the bank gets less interest from you. If you have more than one vehicle, is it possible to become a one car family? This will drop your automotive maintenance costs, get rid of an insurance payment, and take away a monthly payment if both vehicles are being financed. If one of your vehicles is paid for, consider getting rid of the one that is being financed.
4. Cable/Satellite/Internet This is an area in which cuts can almost always be made.  We don’t have cable or satellite, but we do have the best internet available.  In our home internet is vital for my job and also for my daughter’s school.  Since we have internet, if we have the urge to watch something we can stream it for free online.  For your entertainment needs consider something like Netflix. It’s a fraction of the price of a monthly cable or satellite bill and you can choose what you want to watch commercial free at any point in time, not just when it’s on network television.  You have the added bonus of avoiding those pesky commercials too.  Expect an outcry if you get rid of these services, but also know that your family will get used to it quickly.  Trust me, they’ll live.
5. Gym membership/Exercise Classes Being healthy is a top priority if you want to live a frugal lifestyle, but that doesn’t mean you have to spend high monthly fees to do so.  You can kill two birds with one stone by coming up with some productive active things to do: chop wood, build, garden or farm.  If you live in a place where it’s reasonable to do so, walk instead of driving – you’ll get some exercise and save gas money and wear and tear on your vehicle.
6. Loan Payments Look at paying off your debts as quickly as possible using the snowball method.  Instead of just making your regular monthly payment, take the smallest debt and pay it off as fast as you can while still making your minimum payment on other debts.  Once the smallest payment is paid off, take what you were paying on that and apply it to the next smallest debt, and on and on until you are beautifully debt-free! Then, once you have no debt, commit yourself to staying that way.
7. Phone Bills Most people do not need both a home phone and a cell phone. One or the other will nearly always suffice.  I actually don’t have either one.  I use internet phone service which costs $2.99 per month for the odd telephone call I have to make and email for everything else. It takes some getting used to but you might find that you welcome the peace of people being unable to interrupt you just as you sit down to dinner. You can free up a lot of money each month by getting rid of the phone, but expect people to look at you strangely when they ask for your number and you say, “I don’t have one.”
8. Child Support/Alimony Payments There really isn’t a lot you can do about this kind of monthly expense. These numbers are set by the courts and you will go to jail or have assets seized if you don’t make them. As a single mom, I can tell you that there were times when we depended on child support payments to buy our groceries, so the argument can be made that if you have children, it’s your responsibility to make these payments.
9. Tuition If your child is in college or a private school, tuition payments are a fixed expense that you can’t really do much to reduce.  You can apply for scholarships, but aside from this, the price is the price. You don’t want your child to start off adult life in debt if you can help it, so if you can find a way to make these payments instead of using student loans, you are giving your son or daughter the biggest possible gift: financial freedom.
10. Extracurricular Activities for the Kids This one really depends on your family. If your child is just killing time, then the extracurriculars may not be of high importance.  On the other hand, if they are a talented athlete or budding musician, you may find this is a very worthwhile expenditure.  Some families who homeschool look to extracurricular activities as a way for their kids to socialize with their peers, and that is also very important.  If the activity is not a serious pursuit, sometimes it can be replaced with lower cost activities through the local community center or YMCA.  Some children are really over-programmed, with an evening activity every day of the week and two on weekends. Kids need downtime and the freedom to just go outside, climb a tree, and look at the clouds floating by.

It’s far better to make these changes before you’re forced to do so by circumstances.  If you can reduce your fixed monthly expenditures, you’re less likely to default on things that are true necessities, like keeping a roof over your head and food in the cupboards.  I would prefer to control the cuts myself rather than have the decisions made for me by foreclosures or repossessions.

Despite what the government wants us to believe, the financial situation in this country is not getting better, and it isn’t going to improve for a very long time. The economic storm is bearing down on us, and the most important preparation you can make right now is to figure out how to weather it.

Lots of experts will give you excellent advice on how to create a budget.  Creating a budget is actually pretty easy.  You figure out what your expenses are, take this from your income, and then figure out what to do with the money you have left over.

Sticking to the budget…that’s the tough part.

This is where most people experience financial failure. They know what they should be doing, but that little treat is just calling out to them, and they think, “One off-plan expense won’t matter.” Or perhaps they have a spouse who is not really on board with the whole budget business and they are constantly playing catch-up because of unplanned expenses. The economy is certainly not getting any better, so it’s important to get control of your finances NOW.

With careful planning, you can keep everyone happy, have the occasional treat, and still stick to your budget.

Budgeting is like dieting.

Really, if you think about it, a budget is a lot like a diet.  Everyone hates doing it, but sometimes our pants won’t zip and we’ve got to do something about it.

So, you figure out what your caloric intake should be. Every bite of food you eat should be measured and accounted for and you subtract the amounts from your allotted intake.

Sometimes you have an off-plan meal – a piece of cake at a birthday party, a celebratory dinner out, or an ice cream cone with the kiddos.  You have to account for this too, and you can’t do it too often, or your diet will fail.

Sometimes you have loved ones who sabotage your good intentions, either deliberately or thoughtlessly.  They might be food pushers (come on, one bite won’t kill you), guilters (but I made this especially for you), or influencers (just because I buy chips doesn’t mean you have to eat them.) Whatever the case, the result can be the same – your careful plan is in shambles.

It’s exactly the same with money.

It is often the influence of others, no matter how well-meaning, that causes you to go over you financial “calorie limit”.  If you plan carefully, you can allow yourself some wiggle room to enjoy something outside of your normal diet (or budget).  For example, when dieting, if you know that you have a party to attend, you might eat fewer calories for a day or so leading up to the event so that you can splurge without guilt. When budgeting, if you know there is an outing planned, you might cut back a bit on the grocery bill that week in order to have extra money to spend during your event.

When dieting, if you want a treat, you can have it – but you might be eating steamed veggies for the rest of the day if that treat is the equivalent of your daily caloric intake.  Likewise with spending, if you want a Disney vacation, you can have it, but you might need to live in your uncle’s car, since you won’t also be able to afford to pay for that, your mortgage, and your car payment.  Eating whatever you want can have unpleasant consequences. So can spending whatever you want.

Here’s how to create a budget.

Most folks have created a budget before, so feel free to skip over this part.

Creating a budget is simple. In one column, you have your money in, and in another column, you have your money out.

Money in might be:

• Salary from work
• Bonus check
• Tax return
• Alimony or child support
• Rents due to you from property you own

Money out might be:

• Mortgage/rent
• Utility bills
• Credit card bills
• Car payment
• Insurances
• Loan payments
• Groceries and miscellaneous spending

So your first step is figuring out those two totals.  In most cases, your money in will be more than your money out. If it isn’t, you have a serious problem and you need to look at lowering your fixed expenses ASAP, or your financial problems will spiral so far out of control you’ll end up destitute.

Assuming you have some money left over, this is for your variable expenses.  You may want to allot this money to savings, to preps, to paying off debt, or to spending money for the members of your family.

Are you surprised when you see the numbers there in black and white?  Maybe you bring in more than you thought. Maybe you are spending more than you realized.  Either way, now that you can look at it all on paper, the next part will be a lot easier.

Ditch the credit cards

If you are going to keep spending money using credit cards, then you might as well skip the rest of this article. You’ll be paying exorbitant interest if you don’t pay them off in full each month, and what’s more, it’s impossible to control spending when people can just swipe a card.  This is especially true if other family members who are not as budget conscious have access to the cards.

Lock them up in your safe and use them only when it is necessary. Then immediately pay the balance off in full.

Sticking to the budget

So, planning the budget is easy. Anyone who can do basic math can create a budget. But how do you stick to it and get your finances under control?

Control…that’s the key word.

This is the method that I use.  Feel free to adapt it to your situation.

I have a bank account that I use specifically for fixed expenses. All of my payments out go through that account. Everything that is not  earmarked for bills comes out of the account.  I don’t carry a debit card with me for this account, to reduce the temptation of knowing I have that money there…maybe I could just buy this and replace the money real quick before the bills come out.

The money that comes out is immediately organized into…Altoid tins.  (Finally another use for those little tins!) The tins go into the safe until they are needed. It’s like the envelope method, but in a different container.

If there is money left over after I’ve sorted my variable expenses into the Altoid tins, this goes into my wallet and is my spending money.  I keep grocery money in  (you guessed it) an Altoid tin in my purse.

When spending grocery money, the change and the receipt go into my tin.  That way, I know I’m sticking to my budget for food. When the tin is empty, it means I’m out of grocery money. Sometimes I have extra money left at the end of the week, and that stays in the grocery money tin to allow me to make some large bulk purchases.

Some of the variable expenses that I delegate money to are:

• Emergency fund
• Gasoline (I’m going to need a bigger tin for this pretty soon)
• Groceries/stockpile
• College expenses (one done, one yet to go in my house)
• Preps
• Medical expenses/dental care
• Vision care (Two family members need corrective lenses)
• Clothes (growing kids!)
• Spending money for family members
• Gifts (a little each week towards holidays, birthdays, etc.)
• Fun money (for road trips, school field trips, dinner out, and miscellaneous adventures)
• Garden supplies (this is my addiction! seeds, plants, tools, oh my!)

It’s important to prioritize these areas.  Just because the tin exists, doesn’t mean that you have to put money into it each month.  I’ve listed these in the order of importance in our family.

Just because there is money in the tin doesn’t mean it gets spent each month. The beauty of this is that you less frequently have a big expense that you haven’t planned for. If my daughter needs new glasses, the money is there, available for the appointment.  If we want to go visit a museum or national park, we have some money set aside to do that.

Alternatively, if the tin is empty, the expense has to wait. Maybe the birthday celebration will be a bit more humble, the greenhouse will have to wait to be purchased for a few more months, or we’ll have to make do with clothing that is a little snug for a couple more weeks. Our entertainment will be limited to Netflix, a nature walk, or a trip to the library.

Like I said, the key to this is control. One person has to be in control of the finances. I’m not recommending that anybody become a tyrant, doling out nickels after a family member begs and pleads.  However, if anyone can just go and help themselves to the money that has been budgeted, this is not going to work.  Unless both partners are completely on the same page, the person with the best financial sense needs to hold the key to the safe.  I know that if you’ve just been shaking your head, paying off the credit card bill, and belly-aching a little each month, that your family isn’t going to like this. You’ll probably have to listen to some adamant complaints. It will be worth it in the end when you have the peace of mind that comes with having your budget under control.

A budget is not about a total spending freeze.

Most people hear the word budget and automatically cringe, picturing a state of horrible deprivation, old clothes, and perhaps their big toes poking through that hole in their sneakers. Much like the word “diet” (see above) “budget” is thought of in negative terms.

I’m not going to lie…sometimes it’s like that, especially if things are really out of control.

But usually, at least after the first couple of months, it isn’t bad at all. Being on a budget doesn’t mean that you can’t spend money. It means that you plan for your expenditures so that you can afford the stuff of everyday life. It means that you pay for the necessities first and that you get the extras second.  It means that you scrutinize where your money is going and you make certain that your purchases are worthwhile – do you really want that fancy meal out each week, or would you rather put that money towards a fun family outing at the end of the month? It means that those expenses that you know will come up (like new eyeglasses) will be planned for, and they won’t make an enormous dent when it’s time to pay for them, leaving you rolling pennies for gasoline to get to work.

The peace of mind that comes from having control of your money is priceless.