Saturday, 4 December 2010

The Money Makeover: “Cut! Cut! Cut!”

So, we have our budget in place, some cash in our allocated savings and we are ticking along nicely. But how can we find some more cash, without getting another job or selling a kidney?

Simple, we need to cut back  on what we are spending.

Why?

  • Cutting back allows us to create some surplus cash that we can use for better things.
  • Surplus cash is great for getting the debt down quicker.
  • If your debt is clear, then it is more cash to have more fun with.
  • If we are spending stuff on what we can do without, why have it in the first place?

How?

So the idea is lovely – but how can we cut back?

Hunt

First off, we need to actively start hunting for ways for us to cut back. Your current expenses are there because you have convinced yourself you need them. Now we need to hunt for opportunities where we can convince ourselves to get rid of them.

The Budget

Our budget is the first port of call. This is where we can look for “tracks” that may lead us to taking down some expense-based game.

First, review all of the sections that are not based on “fixed costs”:

  • Recurring Credit Card Charges
  • Groceries
  • Utilities (while they appear fixed, you may be able to get rid of them).
  • Recreation and Entertainment

Now ask yourself “Do I need this?”, now ask it again. And again. And again. You need to keep asking it until you get that funny stirring of guilt come up. The first time you ask it, you will be like “sure” – but trust me, ask yourself 5 times and tell me you honestly feel the same.

If you can’t convince yourself for long, cut it.

Ignore Assumptions

I am a geek. I hack by day, I hack at night, I study, I love it.

Here are some assumptions that may be made about me, or I may have had about myself:

  • I study a lot, so need access to the latest and greatest tech materials.
  • I need to have a website.
  • I need the biggest and best broadband connection.

So, it would be no surprise that:

  • I was paying >£30 a month in hosting charges and domain names.
  • I was paying ~£8 a month for an O’Reilly Safari subscription.
  • My current broadband costs are £10 (ADSL) + £13 Line Rental

So I can’t do without them can I? Can I? CAN I?

Well, I CAN.

  • I ditched my old site and used Github’s awesome “Pages” feature. Currently, this redirects back to this blog, but I will update to do some more interesting stuff when I have time. Total cost: £0.
  • Safari subscription has been cancelled. I have instead focused on improving my signal:noise ratio in my RSS Reader. I also have got myself a library card :) Total cost: £0.
  • I intend to get rid of the broadband connection once the contract is up. You can get dongles for internet (which will be fine for me, I don’t need the 15Mbps connection, 1-2 is fine). Total cost: ~£15ppm.

Total savings: ~£46.

Now, based on the fact that I am averaging £40 a week on food. That’s not too shabby. Don’t think “what can I do without”, wipe the slate clean and ask yourself “what do I need”, whatever you have and isn’t on the list, cut it.

Act

So, you have taken some time out and identified some things you can cut. Now we need to act on this. Strike while the iron is hot!

Cut It! Just cancel it! Stop buying it! Sure, you are going to miss it at first (maybe) – but the “pain” will subside. Every time you wish you had it back, make a note of it. Watch as the days and weeks pass.. Notice how you start noting it down less? Yup, that’s called “not really missing it” baby!

Challenge Yourself

When I started looking at where I could save cash (after I already thought I had cut enough) I got hit by this strange feeling of fear.. And it was not a “being chased by a lion” kind of fear, but just.. Unsettling.. It was unsettling because I was convinced without surrounding myself with this needless crap (more to follow on this in the blog) that I don’t need, I was somehow going to ruin my life.

Hat tip to the advertising industry. You have done an amazing job of engineering a consumer state.

So all I want to say here is challenge yourself – step up to the plate. Can you cut by 5%? 10%? 50%? Break down the assumptions and the mental brainwashing to get back in control of your money.

You will be fine. Us humans are more resourceful than we are led to believe :)

Ideas for Areas to Go Hunting

Recurring Credit Card Charges

  • Cancel them!
  • If you are unsure, then track usage for 1-2 months
  • Restrain from adding! In the first place, if it helps, heed this warning from MoneySavingExpert.

Shopping

  • Groceries
    • Go part vegetarian (I can’t go all the way, I love meat). But meat is costly. Also cut down on cheese! (Oh how I miss fat steaks and massive chunks of cheese!) :)
    • Student websites are packed full of great tips on how to cook pretty decent food for practically nothing.
    • Cook! It is cheaper than buying pre-made meals.
    • Cut waste. One of the best things I did was stop throwing food out. Eat the same thing twice in a row (or more!) if you need to – it’s boring, but it will save a lot! Check out sites like LoveFoodHateWaste.
  • Junk
    • Stop adding to the hoard crap at home. Do you need that new bread bin? Will it not keep fresh in it’s own wrapper in the refrigerator (answer, yes it does – I haven’t thrown out stale bread in months).

Entertainment

  • Cut down on video games and the like. Lets be honest, most new games suck ass anyway.
  • Cut down the drinks budget (or go T-total if you are REALLY brave). I had a sad moment of realisation when I realised I am pretty much unable to have a good time without getting wasted. Serious character floor highlighted by not depression, but saving cash. Who would have guessed? Your liver with thank you also.
  • Find new ways to entertain yourself, or revamp old ways to be a bit cheaper. During the summer, I ended up going to pubs and clubs less and having more BBQ’s with friends. Much better time, great food, I enjoyed the summer more and saved a ton of cash.

Good times :)

In Summary

Get serious about cutting costs. Really serious. Bring down barriers. If you are unsure if there is a barrier there, run at it and find out. I am well on my way to be in a position by next year to be saving £300 a month with no loss of quality of life. In fact, I am a lot happier.

Good Hunting :)

Updates

@annwitbrock made a good point with regards to cutting – ensure that you only cut things that are obviously wasteful. DO NOT cut things like insurance unless you are aware of the risk this brings (and willing to assume responsibility for it).

1 comment:

  1. Copied from Yaël's Comment - I think Google (or she) went crazy :)

    Hit the nail on the head talking about breaking down the assumptions.

    So much of the minimalism view comes down to just breaking free of this "mental brainwashing" of consume consume consume and taking some time to figure it what it is we actually need. I think in Rework today I glanced at the idea of 5 Whys which you allude to at the beginning. Just tried it on a couple of my budget items and its a really good strategy to break down the reasons for why you think you need something into lame-sounding excuses!

    The minimalist stuff really translates nicely to your money makeover stuff, good tips!

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