Saturday, August 20, 2011

Saving the Moola: Living Within Your Needs, But Below Your Means, Part 3

This week, Jason and I will be sharing our greatest expenses for next year. You can read Part 1 of this series here, where we explain the basics of living within your needs but below your means, and you can read Part 2 of this series here, where we share what the average American family spends on items and what they should spend on items.

For 2012, our biggest expenditures, tied for first place are: housing and a new car.

You don't need to look twice - we're really going to spend as much on a new car as we are on housing. That's because we're paying cash for a new car (new to us - we're looking for about a 2008 car). Housing includes rent, water, sewer and trash. In the post here, it is estimated that the average American household spends about 32% on housing and what we should spend is about 25% - ours is far lower than this.

One key to a great budget that really works is keeping your overhead low. Your overhead is what you literally must spend per month in order to "survive." For us, our overhead includes such things as housing, car insurance, cell phone, internet, etc. (Jason works completely from home, and I work 32 hours a week from home so internet and a cell phone (and a landline) are a must - plus we just prefer to have those things anyway).

Paying cash for a car not only prevents your overhead from becoming bloated, but you'll save hundreds or even thousands (in our case) in interest. We'll save money during the long haul, the car will be ours free and clear, and our overhead will stay low. In the post here, it's estimated that the average American household spend about 15% on transportation. It's suggested that the average American household should spend 10%. Our percentage is higher next year for this, but our transportation costs in a typical year are far lower than this. In 2013, we plan to funnel the extra money we'll have from not saving for a car into savings for an 8-month emergency fund.

The next highest expenditure is groceries. Jason and I could spend less on groceries. We could eat simpler meals, we could never eat out at restaurants, we could buy cheap, ucky meat from Meijer and Walmart. But we prefer hormone-free meat. And Jason is a huge foodie. He loves trying new meals and sometimes, eating really strange things. We both enjoy a treat out once in a while where no one has to clean dishes or prepare the food. Our grocery budget is quite high for a human family of 2, but it works well for us. In the post here, it's estimated the average American household spends about 12% on groceries, and we should spend about 10%. Keeping in mind that our entire grocery budget not only includes food, but housekeeping supplies, candles, batteries, and other items like that, I feel our grocery budget is in line with this.

Your family's budget should be realistic. If you need a new car but aren't willing to save the money for a new car, budget in a car payment. If you always eat from home, you can budget less than the normal American for food. But if you always eat out, even if it's at fast food, you need to budget that in. At the end of the day, you want to work on a zeroed-out budget (or at least we do!). This means that every dollar is accounted for. Some of our dollars are accounted for "spend money" - money we can spend on whatever we want, such as garage saling, dinner out, a new Disney movie, etc.

Next week, we'll take a look at our middle-of-the-road expenses. In our last week's post, we double dog dared all of you to take one day of the week to consciously not spend a single cent. We had planned to do this on Sunday but failed miserably! But on Monday, we didn't spend any money. I was very proud! It's important to make a specific note to do this. So many times, you'll run to the grocery store for an item that you probably could have went without and you end up buying another item, or two, or three. All that money adds up!

I Double Dog Dare You: Until next week, I challenge each of you to operate on as much cash as you can (no credit or debit cards). When you spend hard cold cash, you tend to spend less than you would if you used a credit or even a debit card.

No comments: