Chopping Expenses
Posted by Gail | Filed under Budgets
When the caca hits the fan, sometimes the only alternative is to chop expenses. It’s interesting to watch people react when I tell them to cut their cable, park their cars or stop getting manis and pedis. The blood drains from their faces and they look stunned. And yet, it’s often what needs to happen to turn things around.
When I asked y’all how much you could lower your fixed monthly bills by if you had to, 14% of you said you couldn’t at all. Wow! Living that close to the line, eh? Must be tough.
- 19% of people said they could chop 1-5% out of their fixed expenses.
- 30% said they could chop 5-10%.
- 15% said they could chop 10-15%
- 17% said they could chop more than 15%.
But here’s the number that really makes me take a deep breath: 5% of people said, “I have no idea how much my fixed expenses are.”
Lord love a duck!
I wonder if these are the same people who said that they spend more than $20 a week on coffee/tea. Might I point out that $20 a week works out to $1,000 a year. Make your favorite beverage at home as 41% of respondents to this poll do and you’d have money for savings. BTW, 44% of people spend less than $10 a week, and 11% spend between $10-20 a week.
At least when I got to the casino-usage poll my faith was restored. Of the 746 who responded, 62% think going to a casino is “dumb”, and 36% said they only go once in a while and limit how much they play with for the night. That’s a whopping 98% who have not been suckered in. So sad for the other 2%.
With an estimated 26 million adult Canadians, that 2% represents about a half a million idiots!
December 20, 2011 at 5:53 am
I don’t really see cable as a “fixed expense” – in our budget that comes out of our entertainment. It can always be cut, but it isn’t necessary.
I see our fixed expenses as:
- my metropass
- fiance’s car
- home inurance
- rent (though we are moving to a larger place, this is the easiest one to cut back on)
- insurance in general (wouldn’t cut back there)
- rrsp and tfsa savings
Everything else is flexible expenses, and that is where I would see the most savings by altering our spending.
In our situation, if living costs increase, or something comes up, we would adjust our saving for vacations or other future spending
December 20, 2011 at 6:52 am
We’ve cut the cable and cleaning people. We’ve gotten to borrowing books, DVDs from the public library and cleaning the place as we see the dirt. Saves over $250/month.
December 20, 2011 at 7:05 am
What I need to cut out is treating myself to eating out only once in awhile. e.g. When I take one of the children to buy what they need (winter boots, pants perhaps), but while we are out let’s go grab McDonald’s! I am teaching the kids that we need to add on to our spending with something unnecessary.
Perhaps I could save the eating treat for a special occasion instead.
December 20, 2011 at 7:13 am
Our fixed have been chopped to bone (according to modern standards?, except netflix. Utilities, mortgage, taxes, insurance on car, car payment, cell phone with minimum plan, internet service.
December 20, 2011 at 7:58 am
We started on a family budget in 2009. I started doing my own pedicure and hair colour which not only saves money, but the time to get to and from appointments as well as gas money. We rarely have take out anymore. We got rid of our weekly house cleaner which saves $3000/year and I make my coffee at home.
December 20, 2011 at 8:04 am
Fixed Expenses: mortgage, heat,hydro,water, insurance, phone, taxes, internet
Cut down on: yearly gift spending, entertaiment & grocery expences
Cut completely: car, cable & eating out
December 20, 2011 at 8:09 am
Julie, we cut down on yearly gift spending too, it was the only category left. I already cut all our hair.
December 20, 2011 at 8:37 am
The caca has hit the fan here at our house…the transmission went in our van. We are a family of 10 and have 2 cars, now we’re down to one. It’s hit the fan more than a few times in 2011 and we haven’t been able to build up that emergency fund to a healthy level. We went over several options to pay for said transmission ($2500), like cashing in RRSP’s (um, no, not an option), to borrowing from family (none of our families have that kind of money just to lend), to putting it on credit (didn’t want that). The only viable option we decided was acceptable was parking the van and being a one car family for a while. We get a bonus in January, and then by cutting back on variables, working overtime, and putting every cent away we figure it will take about 8 weeks to get the money. Eight weeks of creatively using the 5 seat car to do everything we need to do and using public transit if we have to. This too shall pass, right?
December 20, 2011 at 9:42 am
I have a co-worker who is not only unaware of her fixed expenses, but the amount of her paycheck or when it drops in the bank. I get a cold chill whenever I hear, “Did we get paid this week or last?” I can’t even imagine not knowing where my money is going. Even if I am having an irresponsible week and p^ssing money away on something frivolous, I know where it is going.
Giving up cable was the easiest thing I’ve ever done, though before I did it the thought gave me cramps. $10/month for a netflix subscription and I watch TV online now, thus making it a part of the internet expense I would be paying for anyway.
December 20, 2011 at 9:44 am
My fixed expenses wouldn’t change much, but I could probably cut about 5-10% of my variable just by never going home to see my family, which would suck but I could do. My fixed expenses are the leanest part of my budget!
However, when things got really tight about 6 months ago, my response wasn’t to cut back, it was to earn more. I’d rather earn more than cut out the little things that I enjoy (like getting my hair done a few times a year, or dinners out with friends, or trips home to see my family, or saving for a big trip). Of course, if it was crisis, I could cut those things, but if my finances dip to the point of lifestyle overhaul, it’s probably because (at this point in my life anyway), I am injured or disabled and unable to work more. In which case, I have insurance for that.
While I definitely see the value in cutting spending, and I get that this is a community that favors that approach, I just thought I’d throw it out there that there is (sometimes, for some people) the option of earning more money instead; and eventually, there is a point where you really can’t cut anymore without going bankrupt. Boosting income is much more open-ended.
December 20, 2011 at 9:46 am
@FatMonica Any chance that coworker is so financially stable that it doesn’t matter when she gets paid – because she has so solid a financial buffer that two weeks off a pay cheque doesn’t matter?
Let’s hope!
December 20, 2011 at 10:41 am
I know transportation (metropass) is NOT a fixed expense but I need to get to and from work and if I walked it would take me four hours there and back, cycling is also out of the question. So I’ve included metropass in fixed expenses for now.
My fixed expenses are:
- mortgage payments (bi-weekly) – I could trim this if I had too but I’d pay more interest in the long-run.
- condo maintenance fee (includes hydro and utilities) – no way to trim here.
- metropass (but I am considering getting rid of this and buying tokens instead).
- condo insurance, mortgage insurance (very small and hope to get rid of soon).
- phone (regular land line with a really good long dist. package, no cell phone)
- savings (TFSA – includes EF, and RRSPs) – RRSP savings CAN be put on hold but I’ll cut elsewhere before I do this. I’m not getting any younger.
My variable expenses are:
- food (includes kitten food and special occasion food) and personal care (includes cat care – vet (kitten $$!$$ – I tell her it’s a good thing your cute!!), and kitty litter) groceries – I do not buy over-processed junk and I bring my own coffee and lunch to work every day. I dye my own hair, no manis or pedis, no spas, no massages
- internet (I was serious thinking of getting rid of this but it is part of my entertainment. I have no TV)
- transportation – occasionally GO Train to see my brother, CANAR (coach bus) to see my parents.
- gifts and clothing – I’m not buying any new clothing unless something wears out. Gifts – family birthdays in : Mar (2), Apr (2), Jun (2), Aug (1), Nov (1) – mother’s day, father’s day – no upcoming weddings or baby showers that I know of.
- entertainment – the occasional movie (I have 3 see a movie for free coupons)
- Replace Appliance/Furniture fund – $50/mth in ING account
- General Home Repair – I’d better start saving for this which means further cuts somewhere else. My condo is 11 years old now.
- other – medications, renew driver’s licence in 2014 and other pet expenses (toys and treats – only as needed)
I think that’s it.
December 20, 2011 at 10:45 am
Oopsie. Forgot property tax – definately a fixed expense.
Also, vacation is missing from variable because I’m not having one this year.
December 20, 2011 at 10:51 am
It’s not so much hitting the fan, as we are realizing how deep we are in. We’ve made a string of errors lately, and now our debt is over $70,000. We’re making cuts, but the variable expenses are being cut first.
December 20, 2011 at 10:53 am
The only expense I have left to chop is to park my car. I’m lucky in that I drive my dads car (no car payment or insurance payment for me), but I have to fuel it. At almost $250/month, that stuff ain’t cheap! I live in an area where I would have to leave 2 hours and 50 minutes early in the morning to get to work with transit, so it’s not an option.
However, I’ve cancelled cable, lowered my cell phone bill (it could use some more lowering, though), got basic, cabled internet ($30/month) (which is necessary as I’m a student), and all of that. I do have a gym pass – at $22/month, I suppose that could be eliminated too. I use it so much, though.
To the people that don’t know what their expenses are – I have no words at how dumb that is.
December 20, 2011 at 10:58 am
@Judi – wow! Lots of thought was put into your sensible solution. It’s good to see such cooperation from your family members too. So admirable!
December 20, 2011 at 11:03 am
@Jessie I was going to say that too….. I often have said is it pay week this week or next? And it’s because the money really doesn’t matter because I don’t have debt except an RSP loan, and a healthy emergency account.
December 20, 2011 at 11:07 am
Cut back on gifts. Lower the price point of “obligation” gifts or better yet just don’t give anything. I use to drive myself crazy by thinking I had to pay people off at Christmas and actually getting sucked into believing they expected it. Why do you need to get an obligatory gift for all your relatives and inlaws at this time of year when you never see them during the rest of the year anyways.
Cut out the obligatory sending of holiday greeting cards and all that money for postage for cards that just get thrown in the recycle bin anyways. You can email a holiday greetings and for my relatives anyways… It has the same amount of happy value. Everyone writes the same thing on the email as on the card without adding to the landfill, our stress level, and wallets.
Although we usually get the odd birthday card here and there for the dollar store, I was shocked to see regular greeting card prices be in the $5 to $7 range plus sales tax. What’s up with that?
December 20, 2011 at 11:13 am
Very timely topic – ten minutes before reading this blog (as I do every morning) I had called & given one month’s notice to cancel my monthly parking. It’s not that I can’t afford it, but I decided that I could use more outdoor exercise in addition to my daily gym workouts, so I will park elsewhere and walk about 30 minutes to & from work and treat myself to a warm indoor spot when the weather is miserable.
The $525 + GST that I was paying for my indoor spot (crazy, I know, parking in downtown Calgary is very expensive) will now go towards paying off my car loan, my only consumer debt, and my new spot will only cost me $4 a day!
December 20, 2011 at 11:14 am
Sorry – another post from me. After reading Daisy’s post I also have other variable expenses memberships – $50 a year for hiking club and about $34 month for bus (hike average 2x per month). Running Club – One clinic $69, $80 race entry and cost of new shoes (varies) 2x per year.
Lots of areas in my budget to cut back on.
December 20, 2011 at 11:22 am
I don’t think I could cut my fixed expenses at all – they’re pretty much slashed to the bone: Utilities, property tax, internet… that’s pretty much it. Grand total of about $500/month.
Not that I live a spartan lifestyle – just most of the rest is all variable that COULD be cut (with the exception of food).
December 20, 2011 at 11:27 am
I’d cut life expenses first. We can certainly cut our grocery bill (which inlcudes booze) and scale back entertainment, including our cable bill. Annual vacations to a warm climate would be scaled back to less expensive stay-cations. Those measures would be substantial in our household as we love cooking – and I love cooking fancy gourmet meals with expensive ingredients (although nowhere near as expensive as going out to eat a fancy gourmet meal).
Then I’d visit fixed costs to see if there could be savings there although what I have noticed with electricity, gas heating and water is that the more we cut back on usage, the cost never seems to decrease because the rates keep going up.
It would be easy for me, but then I have no debt, a very healthy emergency fund and I have a good paying job with a decent disability insurance plan. Those cost-saving measures would only work if the caca was temporary (i.e. furnace dies), or if the life-changing event was short-term (say one to two years). After that serious cutting would have to take place, and other measures (like income boosting) would need to be considered.
December 20, 2011 at 12:00 pm
I’m tired of chopping expenses and I have the good fortune to work for myself so I can increase my income and that will be my number one goal for 2012.
December 20, 2011 at 12:13 pm
I agree that increasing your income is another option to decreasing spending, but it requires much more work. If your extra earned income is taxed at 35% plus you pay 13% on your spending, every dollar you earn (and intend to spend) is worth about 50 cents. Following the logic that every 50 cents you spend actually cost you $1.00, then every 50 cents you don’t spend “saves” you $1.00. Then you have to look at what it costs you to work…
Your Money or Your Life advocates looking at money in terms of life energy, not just dollar value. Take your gross income and subtract from it all of the expenses involved in working, including commuting, work clothing, different food choices, child-care etc., even vacations you need just to get away from the job. Then consider all the hours required to work, including commuting, upgrading skills for work, extra prep to dress/maintain appearance just for work. Finally, take your new decreased “gross” income and divide it by your new increased hours involved with work. This will give you an idea of your real hourly wage (before taxes are taken off of course).
These are two different considerations. One is looking at the marginal advantage of working more – the other at the overall life cost of working in general. They aren’t part of the same calculation, just both worth consideration. Once you have an idea of the life energy your little treats are costing you, in money and in life energy, you may just start viewing some of the necessary expenses a little differently.
December 20, 2011 at 1:01 pm
I think reducing fixed expense in our house would be relatively easy. For example, we are agressively pay off our mortage (on a 15 year plan) and this could easily be scaled back to a 25 year plan. Since we are in our early 30’s we would still have it paid before retirement and this would save us almost 500 dollars per month. So if we needed to increase our short term cash flow, this would be the best way. We are also a two car family. ONe is paid the other has only 12 months left. If need be, we could sell one car and have 15 K in our pocket. It would not be as convient, but we would be fine. We also have bell expressvu at 120$ per month and netflix, which I would be glad to see disappear, but since the husband is a massive football fan, for now it stays! It is reassuring to know that if we needed to, there are many places to save money. The other thing that is good to keep in mind is that in the event one of us loses our job, we would also be saving thousands in tax. Right now, we don’t qualify for any deductions with the exception of RRSPs, but if we were a one income family, we would actually get to keep more of our paycheck.
December 20, 2011 at 2:25 pm
I heard on the news today that inflation has been calculated at almost 3%… how do they get such a low number? Fuel has gone up about 15%, groceries (fresh veg for example) has gone up about 6%, my hydro, natural gas, property taxes, medical insurance, house insurance, municipal and ALL the fixed expenses (except mortgage) have gone up 3-5% this year. So HOW has inflation only been measured at under 3%? The only things I can think that have gone down to offset all the ups are maybe clothes, electronics and appliances (all cheaply made and having to be replaced more often anyways so no real savings).
PS; our income has NOT gone up at all. No cost of living raises for us. Usually an optimistic person, I am getting despondent and the trickle-death my budget has been experiencing.
December 20, 2011 at 2:26 pm
It’s as if Gail is reading my mind – just looking over my Budget to see where the fat can be trimmed – shopped around cell phone plans – found $30 plan which included favourite 5 numbers (one of which is long distance – many chats to friend in Vancouver coming our way) – called cable company & “re-grouped” tv stations – these two calls alone will save me $600/yr. and the calls/shopping will continue – sometimes it’s easy to trim and not give up much just by dialing some numbers – think I’ll make it a yearly event.
A suggestion if I may, I work for a utility company – lately I’ve seen charges as high as 39 cents per cubic meter of gas on broker contracts but the utility company rate is 12 cents per cubic meter, less than a third of the price **** I’ve spoken with many people who don’t even know they are under contracts or the difference they are paying in EXCESS of the market rate. Even if you think you can’t trim on utilities, it doesn’t hurt to check your gas & hydro bills.
To Gail and everyone who posts here – thanks for the wisdom and advice – I hope everyone has a very Merry Christmas (or any other holiday you celebrate)!
December 20, 2011 at 3:12 pm
Last January my husband was laid off, but immediately found new work. His new job was $35,000/year less than the previous job, and it turned out to be the best thing that ever happened to us. At the time we were living and spending unconsciously, in arrears with personal income tax (because it hadnt been filed) and property tax. We didn’t have any credit debt, other than our mortgage, but we did have an account with a local store for a new furnace that had to be paid. Since last January, we’ve paid $20,000 in taxes and furnace debt, saved $1500 for a slush fund, and have $2800 set aside for an emergency fund. Not muchin savings, but its a start.
We did it by lowering our internet, phone and satellite bills – the satellite could be gotten rid of altogether, if need be, same with the internet, but we found a way to keep it in our budget. We took a truck off the road and replaced it with another vehicle that was cheaper to insure and cheaper to keep filled with gas. We stopped eating out, unless we set aside grocery money for it. We planted a garden and used it to its fullest – I have a freezer full of produce and marinara sauce, etc. We cook almost everything from scratch – it really cuts down on grocery bills because prepackaged foods cost a lot more than scratch ingredients.
We went to our insurance broker and found less expensive insurance coverage. We replaced our rented hot water heater with a more effecient one that we bought from another home owner – now we own it outright and dont have to pay the rental. We vacationed for free at a family owned cottage that we do maintenance on in exchange. We also cancelled subscriptions, newspaper delivery and buying new books – we read on line or go to the library.
I cancelled our cleaning lady (which I do miss, since I have MS and now struggle with working full time and finding energy to clean and cook). My kids’ piano lessons were cut too, but hopefully just temporarily, we should be able to reinstate this next year. I managed to save extra paychecks during the year (when you get an extra pay in a month) to pay for hockey for my girls.
I shopped thrift stores and garage sales for any clothing needs – we also have always traded children’s clothing back and forth between friends. We never buy coffee on our way to work – always make it at home or at work.
We are lucky enough to have a side business, and we used all of the income from it for the debt payments. By the end of this year, we should be back on top of it and from there on in, we will try to live the same and sock away as much savings as we can. Now that we know we can do it, there will be no stopping us.
December 20, 2011 at 3:15 pm
I agree with Jessie on earning more is really what’s required for some. Aside from this though, I have a strong opinion that if you are going to nail & hair salons, iphone packages, etc. and complaining about the cost of food & gas, electricity bills etc. . . making more isn’t your problem.
I see way too many with luxuries for their external appearances but then complain to no end on the cost of electricity, gas prices, etc.
December 20, 2011 at 4:01 pm
Yes we have to cut,
8$ less on my home phone.Just by making the phone call!!! It’s a start…
Well see tomorrow.
December 20, 2011 at 5:13 pm
@Julie – I disagree that earning more money always means more work, and also that even when it does, that this is necessarily a bad thing, and doesn’t work out to enough of a difference. I own Your Money or Your Life, and while I like a lot of the points they make (I completely agree that there is such a thing as enough), I think a lot of that book assumes that people (a) are not in jobs they enjoy, (b) believe that the only way to earn more is to work more hours, and (c) that you work a job with these requirements, all of which are false assumptions. While some of these things are obviously true in some cases, if you’re in a job you truly like, working more or taking on more work is not always a terrible burden, and you certainly don’t need a vacation from your job (I would never do a job from which I required a vacation to stay sane unless someone in my family was gravely ill. That’s my nightmare). For some people, advancing in their jobs means more freedom to work flexible hours or from home, saving them on childcare costs, clothing costs, communting costs, etc. In some cases, it’s as simple as regularly asking for performance reviews and a subsequent raise for the work you already do (I can’t believe how many people don’t do this). In other words: if you have the kind of job they describe in YMOYL, I think you need a new job. Ideally, one that pays more!
I totally know that this is off-topic, and I’m still on board with cutting expenses – but if we’re going to say that getting a raise is barely worth it after taxes, etc., then why should I think it’s worth it to save “only” a $1000/ year on coffee? My point is that they both have their place… and while some people really enjoy the extreme frugality lifestyle (blogs abound on this!), it’s not for everyone, nor does it have to be.
December 20, 2011 at 5:21 pm
We’ve been cutting and cutting and cutting. I think our standard of living is less now than even 5 years ago. I looked at our budget from 5 years ago and we still have approximately the same or less amount of money allocated to each category, but now the pile has to stretch so much further. We’ve increased our family from 2 adults, 1/2 kid (50/50 custody) to 2 adults 3.5 kids. Plus 2 of those kids are less than 2, so we also have the extra “baby” costs.
We’ve had major caca hit us in the past 2 years that never ends. Going from 2 really good jobs to no jobs, to only 1 job with less money. Increasing our family (partly planned, partly surprise). Having to go back to courts for custody issues. It just never ends.
This sucked because when we were making the 2 really good salary, we didn’t live if up, instead we kept our old standard of living and dumped money into the mortgage. So it feels like we’ve been in a perpetual lower standard of living forever.
We’re doing it all without going into debt, but there just isn’t anywhere to cut anymore.
I don’t foresee any positive changes to our financial situation for another 1-1.5 years. That is when I probably can go back to work. However, even then, I’m not sure if I’ll be able to get back to my previous salary. If it’s a much lower salary, it might not be worth it due to daycare costs.
December 20, 2011 at 8:44 pm
@Jessie – no argument from me on your points. It isn’t the nature of blog responses to lay out detailed positions with all the variables.
My first point was simply that you need to “save less” than you need to “earn more”.
Of course, if you love your job, work more. Why wouldn’t you, if that’s what you love. I work 5 months a year, and I like my job. I just find that I like other things, like sleeping in, way more than I love a take-out coffee!
December 20, 2011 at 10:25 pm
@ Paris… so true about greeting cards being a waste… I recently decluttered my home and could not believe the number of cards I recycled. I shop around every year for better house/car insurance rates… Debt load at 1.9% til September so I am working hard in 2012 to eliminate it… Home cooking is the only way to go for work lunches… One week a month I am going to try to use up everything I have and save that week’s money from jars… Mortgage free
so I am planning on paying “rent” to myself as a forced savings… Planning my errands so that I am not back tracking around town and wasting gas… No shopping for ANY wants for three month minimum.
December 20, 2011 at 11:49 pm
I can’t remember what I voted, but it was probably that we were able to cut 1-5% off our fixed expenses, mainly because we’ve already cut back to the bone. We initially cut back to pay off debt. Once we were debt-free, we continued to cut back in order to beef up savings, so it’s not that we’re living so close to the line because our finances are out of control… it’s that we CHOOSE to live so close to the line in order to have savings for our future. I think your interpretation (or possibly mine?) of WHY someone might not be able to cut back any further, is perhaps too narrow.
December 21, 2011 at 3:29 am
I didn’t go out for coffee much, it’s an occassional treat, but I bought those little bottles of it for everyday. This year I finally learned to make iced frappaccino at home, that I like, with the coffee maker I already had. I think I save about $45. a month, but mostly I just feel good about it. And I can have MORE coffee this way, without feeling horrible about how much each of those little bottles costs. I sure don’t miss recycling all the bottles, either, all this entails is a coffee filter and the occassional empty coffee or sugar bag.
December 21, 2011 at 2:18 pm
Sad
I have been trying and trying to stay on a budget and get out of this huge debt hole. My brain knows what to do but somewhere I get lost. My biggest problem is not wanting my youngest daughter, age 12 to miss out on all the things we were able to provide for her older brother and sister age 23 & 26. Like vacations, summer camp, birthday parties and figure skating lessons. She is very bright, kind and deserves better. I have cut all expenses for myself so I can still give to her but my husband’s income has dropped dramatically. I feel like she will be grown up before I can get out of this debt and her childhood will be gone.
December 21, 2011 at 8:21 pm
I can’t think of anyplace I can cut at this point, I have cut everything down to the minimum except my gym membership at $40 a month, and my metropass if I decided I was brave enough to walk or bike everywhere (I have no car). I have no debt and a good amount of savings, the only fixed expenses I have are utilities, condo fees, property/school tax, homeowner’s insurance, and prepaid cell phone service (no internet or land line). I am living on about 30% of my income right now and it is working out – if things got bad I could cut back my savings and if it got dire I could sell my property.
December 22, 2011 at 4:52 pm
I plan on cutting my fixed expenses but it will be a while before I can. I have a lease where I live and it would cost $1000 to break it. But when the lease is up we plan on moving to a smaller place which means less rent and less utilities.
When I get my own house (several years down the road) I plan on making it energy effecient or even getting an alternative energy source for it (like solar or wind depending on where I live).