How to Live on Less

Cal Feminist FCU ~ PO Box 16587 ~ San Diego CA 92176 ~

Tel. (619) 298-SAVE (7283) ~ www.feministcu.org

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I had studied English Literature in school and written poetry. I'd thought--incorrectly--that art and money couldn't mix.

When I started volunteering for the credit union I was spending all the money that ran through my checkbook. I never planned. I had no savings. I owed money on student loans and had maxed-out my bankcard.

One year I hit financial bottom and decided to get it together. You know what inspired me? That same year Gloria Steinem, the noted feminist and author, asked an audience: if a biographer were looking through your checkbook and credit card slips to determine what your priorities in life had been, what would they conclude?

I gasped with embarrassment. I was an armchair feminist who had never paid dues to feminist organizations. I held strong views about political candidates, but had never made any political contributions. And the other causes I believed in? I hadn't supported them either.

It took me 5 years to pay off all of my debts, 10 years to build up 1 year's income in savings.

If I could do it, you can do it. Here are some techniques that have worked for me along with some suggestions from other CFFCU members. Everyone's circumstances are different. But see if there isn't something in this list that could help you out or stimulate ideas that could work for you.

Determine your priorities: it's easier to spend less on some things when you know that your priorities are covered.

Using the "Setting Goals" Worksheet (or a blank sheet of paper) set some short-term, intermediate, and long-term goals that you can achieve by setting aside money. Be sure that at least some of the goals are for you, perhaps something you've always wanted to do. As women we are conditioned to be other-oriented: saving money to put your children through college is a goal for them, not for you. If you share finances with other people, involve them in household decisions on goals and how money will be allocated. If everyone can agree you can minimize conflicts.

Write down your goals. Next to each goal write the amount of money you think it will take to achieve your goal. Next, list the date by which you want to accomplish your goal. Write the amount you've already saved. Then note the amount you'll need to save each month (or week) in order to achieve your goal. If your goal is unrealistic, shift things around.

There’s Still Time

Example: you want to save money for a class. Fees and books will total $l,400. You want to start the class a year from now. You've saved $200 toward your goal:

If you decide to start the class in 6 months you'll need to save twice as fast: $200 per month. If you can't afford $100 per month, change your target date to 24 months from now and save $50 per month.

Decide what's important in your life; use at least some of your money to achieve your goals. Review your goals periodically and change them as you do.

Consider separate savings accounts for each goal: normally you will earn higher dividends (interest) on your savings if you leave them all in one savings account. But I find it hard to keep track of what portion of the account is for this purpose and what portion for that. Taking advantage of CFFCU's sub-accounts, I use different accounts for different purposes: my main account #0000 for my emergency fund; #0000-2 for theatre tickets; #0000-3 for health insurance premiums; -4 for the deductible on my health insurance; -5 for vacations; -6 for my tax-preparer; -7 for car insurance; -8 for car repairs; -9 for shoes and clothes; -10 for teeth cleaning, annual physicals and shots not covered by my major medical insurance; -11 for gifts. All accounts appear on the same CFFCU statement. It's easy for me to keep my money organized. Might sub-accounts work for you?

Track Your Spending: in order to live on less in the future, you need to know how much you're spending now. Start with expenses that are easy to track using credit card slips and copies of checks and money orders you've written. To keep track of cash you've used, keep a Spending Diary for a month. See the instructions for keeping such a diary in the Spending Plan.

Reorder your spending to REFLECT your priorities: once you've listed some goals and kept a spending record for 1 month, use your eraser and revise your spending plan so that you'll be able to accomplish some of your goals.

My spending diary shocked me: I'd been spending as much each day on snack foods as bus fare; as much on eating lunch out 5 days a week as I wanted to contribute to candidates and organizations.

I switched. I stopped buying lunch and started bringing it. My taste buds grumbled, but I felt a sense of pride as I made out one check per month to each of a dozen organizations.

Where can you cut? Start with the 2 largest monthly expenses most of us have: housing and transportation.

As guidelines, try to spend no more than 1/3 of your average monthly after-tax income on your share of the rent or mortgage payment. Try to deposit 1/10 of your monthly income in your emergency fund.

But this is about setting priorities. If you are willing to eat bread and water for dinner every night so that you can use 50 - 60% of your income on your mortgage payment, go ahead.

If early retirement is a priority for you, maybe you'd like to keep your rent and car expenses low and save 30-50% of your income. If you are the kind of per-son who likes like to travel on a moment's notice, you might consider renting a room in a big house that someone else manages and doing without a car entirely.

1. Finance charges: stop buying on credit or limit credit purchases to home and car. When you make only minimum payments on credit card purchases you end up paying for the purchase several times over.

2. Maintain a record of on-time payments on loans and credit cards; maintain 2 - 6 months' income in savings. That way you increase your chances of qualifying for loans through lenders (such as credit unions) that charge lower lending rates than finance companies do. The savings account helps you protect your good credit.

3. Refinance your debts at lower Annual Percentage Rates and/or longer terms: Consider cutting up all but one credit card. Use the credit card only for ID when paying with a check. Or, promise yourself that you will pay your new purchases in full each month or stop using the card.

Next, consider taking out a loan to pay off your credit cards. Even if your monthly payment on the loan is the same as the total payments you were paying on your cards, chances are you'll pay off the loan in 3 or 4 years vs. the 5 or 6 years you'd have paid on the cards.

4. If you rent, ask your tax preparer to help you figure out how much you can save in taxes by buying a home. A $600 per month mortgage payment combined with lower income taxes could end up costing you no more than $400 - $450 per month in rent combined with higher taxes. If you live in San Diego , call the non-profit San Die-go Home Loan Counseling Service to learn some of the jargon and how to qualify for a home loan.

5. If you buy a home, consider a 15 or 20-year mortgage vs. a 30-year one. Find out how much you would save in interest. You might be able to take 10 years off the life of your loan by paying a little bit more each month on your payment. Maybe you could retire sooner, or live better when you do.

6. If you rent--and can't buy--either: move into a home that has one or more roommates or consider having one or more roommates in your present home. If you decide to have roommates, approach it in a business-like manner. Require written applications. Check their credit. Ask for a security deposit. Have them sign a rental agreement. (Be sure it's OK with the owner of your rental to have them sub-let from you. Or, make them co-renters on a new rental agreement.) Ask that they have their own telephone so that you can't be stuck with their phone bills.

7. If you share a household: consider having 1 car vs. 2 or 3. One of you drives herself (and some of the others) to work or school. The others use bus passes, or car pool (in San Diego the number to call is 619 237-POOL - note: you do not have to drive one day a week in order to join someone else's pool). On rare occasions, take a taxi or even rent a car. By the time you add up the monthly payment, taxes, annual registration, insurance, upkeep, gas and oil, doing without a car--or living with one less car--can save you hundreds of dollars every month. Is your goal to support auto manufacturers, mechanics and insurers? Or do you have higher priorities?

8. Increase your rent: (What???) If it means you can move close enough to your daily activities (such as paid or unpaid work, shopping) to enable you to walk, ride a bike, or use public transportation instead of driving a car. A $200 rent increase could save you the $400 - $600 per month it can cost to own a car.

a. Move closer to work or school: and rates drop. Car insurance rates are affected more by the number of regular miles you drive per week than by the total number of miles you drive per year.

b. Raise deductibles on your comprehensive and collision insurances. Place the money you save on premiums in a savings account to cover the higher deductible.

c. Eliminate unnecessary/redundant insurance: Consumer Reports magazine has periodic articles on understanding car insurance. Ask your current insurance agent to go over the basic types of coverage. Ask what they are for. Ask, "What is the worst that could happen if I did not take out this coverage? Might any other insurance I have--such as homeowner's, medical or liability--cover a potential loss for less?"

d. Compare coverages dollar for dollar: Some coverages—such as car rental insurance--cost less per year but pay out very few dollars for losses. Consider, instead, depositing in a savings account the car rental premiums. That way you can choose your car rental company.

e. Consider buying from a company that sells only by phone and mail. There are definite drawbacks: you lose the helpful, patient, friendly service of an agent. Claims service may not be available 7 days a week. But the insurance company saves on overhead. Some CFFCU members say they have saved 30% to 50% on their annual premiums. Before you switch to another company, give your current insurance agent a chance to compare apples to apples and figure out ways to save on your current insurance. Contact the agency in your state that regulates insurance companies; ask for complaints on the companies you're considering, or for ratings of the best and worst companies. Also, check with an objective rating service on the financial health of the insurance companies you're considering.

10. Reduce your health insurance premiums: study Consumer Reports. Consider buying major medical insurance or joining an HMO to cover only catastrophic health care, such as hospitalization. Be sure to find out if they have lifetime maximums and how much they are. If you pay for your own routine office visits, you can choose your health care provider(s) and save money on premiums. Set aside the money you save in a separate savings account to cover your regular health care and the deductible. As with auto insurance, see how much you can save by increasing your deductibles. If you're employed, see if your company has a plan whereby you put pre-tax dollars into a fund that will be used to pay your premiums and reimburse your medical expenses.

11. Cut down eating out: go to less expensive restaurants and eat out less often. Tell your friends with higher incomes that you have only a certain amount of money for eating out. Cook for your friends or cook with them. Too hot to cook? Go on a picnic, or meet your friends in the park with a sack lunch. Maybe you'll help them save money; maybe they'll treat you once in a while just for the pleasure of your company. When you do go out, order a main course only: no drinks, appetizers, or dessert. As any waitperson can tell you, restaurants make anywhere from 50% to 200% of the price of the main dish on such extras. Practice saying, "Just water with a slice of lemon." Many restaurants offer dinner menu items for less at lunchtime. Take advantage of discount meals offered in the early evening. If you save money each time you go out, you can go out just as often and still spend less, or go out less often and have even more money to use toward achieving your goals.

12. Buy new and used cars for less: contact CFFCU for a detailed article that lists steps and techniques. Remember: the lower the purchase price of the car, the more you save on sales tax at the time of purchase and every year on registration fees, insurance premiums, and finance charges on your loan.

13. Reduce the cost of giving gifts: for holidays, birthdays, and anniversaries, consider setting an annual cap, based on what you can afford. Make a pact with friends and relatives that each will spend no more than so many dollars per gift. Agree to give a service of some kind instead of a material gift. Give humorous gifts. Give only those you make yourselves. By making an agreement, you can all save money to accomplish your goals.

14. Save on the cost of food: consider joining a food project: in exchange for work you perform on a periodic basis, you can buy groceries--staples--at incredibly low prices. In San Diego there is a pro-gram called SHARE. Or join a food co-op if there is one in your area. Help a friend who has a garden work it in exchange for some fruits and vegetables. Or, participate in a community garden. If you're in a neighborhood where there's no ground to be found, you can grow food in a greenhouse or even in a window box.

15. Save on the cost--and pain--of dying: is there a hospice near you similar to the San Diego Hospice? Why should you or someone you love die in a hospital stuck full of tubes and disturbed every 5 minutes for a pointless test or injection? Hospices help patients meet death with dignity, controlling pain and maximizing comfort. Sometimes they can send a team of helpers to the patient's home so that he or she can die in familiar surroundings in the company of those they love. More humane and much less expensive.

16. Save on the cost of burial and cremation: non-profit memorial societies en-able you to plan and pay for your own burial or cremation at discount rates way in advance. This not only saves your friends and family money but it lets them know what your wishes are. You may even be able to sign someone up for a memorial society after their death! Stop being taken advantage of by salespeople who prey on one's guilt--and pocketbook--in a time of grief. In San Diego , contact the San Diego Memorial Society.

We hope this article will stimulate your thinking. Remember: every time you write out a money order or pull out a dollar bill you hold power in your hands. Use your money to benefit yourself and the causes in which you believe. $$$$$