The author says "I realized that it wasn't the little luxuries here and there that got me in trouble. It was the large, irregular expenses -- like vacations, major repairs and the holidays -- that did all the damage. To avoid overspending, I had to do a better job of planning for those." Dammit if he didn't just take the words right out of my brain.
He realized that committed (or fixed) expenses needed to stay below 60% of the household income in order to be able to contribute a decent amount of money to a savings account. What I like about his plan was he didn't advocate getting rid of your TV or only having pay-per-use cellphone like so many financial "experts" advise. The only task is to keep it under 60%, which is great for us, since we love our TV and our iPhones.
He also states if it's too hard to keep the committed expenses under 60% due to credit card debt then to use the money that would be going into a savings account to pay the debt off faster. "Every dollar in interest that you don't pay is just like getting a guaranteed, risk-free, tax-free return on your money equal to the interest rate on the debt."
My monthly take home pay is approximately $2,100 so 60% of that is about $1,250. Now let's try to break down my monthly fixed expenses:
Total: $1,660 - or about 79% of my take home pay and I didn't even include food on the list! No wonder it's a struggle to stay afloat some months.
The good news is I've already taken a few steps to reduce some of the expenses. A few weeks ago, I detailed how we switched to a new electric provider. March will be our first full month with Constellation, so hopefully, we will see the savings on our next bill. Last week, I started car pooling with a co-worker, which should cut my monthly gas budget by at least 25%, though I'm hoping for about 40-50%. It will also decrease the amount EZ Pass takes out for tolls, since I won't be using it as frequently.
I also decreased my retirement contributions for the time being while I work to pay off the credit cards. Previously, I was contributing 12% of my pre-tax income to two different plans, in addition to what was being taken out for my pension. I knocked the outside contributions down to 3%, but there's not much I can do about the pension (even though I'm 98% certain there won't be a pension by the time I'm old enough to collect it).
Unfortunately, there's not too much I can do about the student loans. I'm already on an interest-only payment plan with Sallie Mae for the next three years. I'll have to look into ways to decrease our cell phone bill without getting rid of the iPhone (I love it. So so much.)
|it's not like I wore those boots regularly, or anything.|
Day Twenty-Two Spent:
Day Twenty-Two Saved:
$40.00 - found money in my badge! score!