It’s Not the Small Stuff
I was reading an interesting article today where the author suggests that our spending problem isn’t because of the little stuff, it’s the big ticket items. The author says that “in 2005 the median-income family was spending substantially less of its income on clothing, appliances and food – even after including meals out – than families did in 1972.” He says that our problem is the big stuff – private school, fancy cars, ritzy addresses, and the like.
Ok, I definitely agree that the big, fixed purchases play a major role in depleting our savings accounts; however, I don’t think he’s giving impulse shopping enough credit for American debt. I can’t speak for everyone, of course, by my debt was caused by nothing more than my impulsive shopping habits and failure to budget for the expenses. I didn’t even have any of these large ticket items he’s referring to.
There was a time I used my credit cards to fund my movie habit exclusively…that, and fast food. I started with an extensive VHS collection and, unfortunately, didn’t time that transition very well. I ended up with a boat load of VHS tapes I couldn’t do anything with. I ended up donating a lot to libraries and Goodwill. So, I didn’t get to sell any to make up the cost. Then I moved into buying DVDs and those were a bit more expensive than the VHS tapes. My bills were getting a bit steeper by this point.
About this same time, I realized I could also use my credit cards to fund trips to L.A. Yeah, let’s just say that flights and hotel stays add up pretty quickly…not to mention food in L.A. is three times more expensive than it is here in Texas. At any rate, I was quickly racking up debt on the SMALL stuff. I didn’t own a home, I had a hand-me-down car, and I certainly didn’t have private school tuition to fork over. And, the reality is, most people in debt find themselves there via the same route. Not all, but most.
The author of the article says they tried cutting the minor expenses out of their budget and it helped them save a whopping $75. He goes on to say that it’s not about cutting the little stuff out of the budget, you have to cross out a line item – like the private schooling or fancy address. Here, I agree with him. It’s not all about cutting out Starbucks and your entertainment completely. That’s not what being frugal is all about, and it certainly isn’t going to be a long-term solution to getting out of debt. You’re just not saving much money there. Instead, you’ll have to make some hard decisions.
The BIG Stuff That Makes A Difference
Housing Expenses. So we all know this was a big problem for most people. Too many folks got into houses they couldn’t afford and now they’re struggling to make ends meet. Everyone’s using the excuse it’s not the right time to sell because they’ll take a loss. That may be, but if you’re facing foreclosure and can’t make ends meet, it may be the only option short of a bankruptcy. It never hurts to look at the numbers and just see. Moving to a less expensive neighborhood may make the most sense.
Fancy Cars. So you were making a ton of money before the crisis and got into a vehicle that’s more than you can handle now. Well, you’re not the only one. But, the thing to do now is try to get rid of it…in a good way, of course. Sell it, trade it, whatever you can do. If you can get it off your plate and avoid a repossession, that’s always a good thing. We’ve had a lot of people at the credit union voluntarily repossessing their cars – which means they’re coming in and giving us the keys. This is just as bad as a repossession. Try to sell the vehicle if you can.
The “Working” Situation. Lots of couples have one spouse working and the other staying home. There are lots of reasons for this, and all of them great if they fit your personal needs. But, if you’re struggling to make ends meet, then it may be time to entertain the notion that the stay-at-home spouse get a job – even if it’s just part-time. Bringing in a little more income is better than trying to cut already tight corners in your budget.
Early Retirement. Unfortunately, I think a lot of people had this one taken away for them with the stock market tank, but it’s also another option to consider. If you’re planning to retire early and seriously stocking money away for that day, you may be able to keep a little more for yourself when things get tight. Of course, I’m not suggesting that you give up contributing to your retirement, but cutting back the excess that will get you to early retirement may help you in a struggling situation.
The Reality
The thing is, we’re all faced with making the choices of these big items. Some people are lucky enough to do all of these and then some. That’s great, but that’s not the majority of us. Most of us are perfectly capable of making the choices, but we may not be able to achieve all of them. Now’s the time to prioritize which items are most important to you and your family, and then act on them.
I don’t agree with all that the author of the original article had to say, but I do agree that getting your budget in line and reducing debt is about more than cutting the little stuff. While these things will help, they don’t make that big a difference. Where you’ll really see the difference is in adjusting your big items.
What do you think? Have you had to make decisions on cutting these big ticket items? Do you think you can make ends meet better by cutting the little stuff?
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I know what you mean. I cut out most of my “frivolous” expenses and still found my expenses too high. So I renegotiated my car insurance and other expenses I thought were fixed (it’s amazing what happens when you just ask) and that’s when things started to make a really big difference!
I’ve read a few articles like this before. Personally, I think you have to do both – big and small things. The author of that article says he was only able to save $75? Hmmm… I am itching to get my hands on his budget. Bet I could find a few more small cuts – and those small cuts add up! Plus I find a frugal lifestyle grows the longer you do it – the first month might just be $75, but the next month you might find a few more things you can drop and you are at $100, and so on and so on. If you are into it, it can become a game.
Pat doesn’t mention entertainment. It seems like entertainment/communication expenses today are higher than in the past. Add up the cost of cell phone, internet, cable TV, movies, games, concerts.
Housing can definitely get people into trouble. A co-worker mentioned that the bank said that he and his wife qualifed for a mortgage that would be about 2.5X the cost of my own house (we have roughly the same household income). Essentially, this would have allowed them to buy their dream house at roughly age 27. They smartly decided to use less than half that amount. When my wife and I went househounting, we went to the banks with a specific dollar amount – we didn’t just ask “hey, what’s the maximum amount you can give us?” We both have degrees in accounting (and she is a CPA) so we’re probably a bit more financially aware than the average couple.
As for the small stuff – Pat mentioned that cutting these only saved his family $75. I think he has a leak somewhere else in his budget. The single step of switching lunch from a $6 meal to PB&J (which I’ll price at a very high $2) would save $4/day, or $80+ over the course of the 20+ work days in a month. I think the cutbacks on the small stuff is saving more than $75, but that some of the savings is leaking out into other expenses.