“I’m living so far beyond my income that we may almost be said to be living apart.” ee cummings
If you are living beyond your Bare Necessities (the 50% of your Disposable Monthly income) then you need to find ways to reduce what you are spending on all those things you actually need to live. This is not any easy task. You might be required to downsize your house, get a less expensive apartment, sell the upscale car and replace it with a moderate cost vehicle, carpool to work or plant a garden (even on your windowsill like my mother does in NY). There are many creative ways to save money and meet the 50% budget. You need to find them for each Bare Necessity.
For example, get new quotes on your insurance policies for your home or vehicle every time they are renewed. Shop around with reputable businesses and get multiple quotes. You would be surprised how much you can save. I added a car and driver when my son turned 16. The underwriters for the company which insured our cars (and home) increased the premium by over $1,200! I was motivated to shop around online. Another reputable company offered the same coverage that increased my premium by only $250. It seemed impossible but true. Then two years later when my son went off to college we sold the car (and had one less driver). My insurer reduced the rate but not as much as I thought it should. So I went back to my original insurance company, asked for a quote and was offered a very substantial reduction.
Negative situations also arise that can be turned into an opportunity if handled intelligently. The phrase “if you are dealt lemons, make lemonade, ” is good advice. A recent experience illustrates how opportunities do come up to make smart adjustments to place you within your Bare Necessities allotment.
Living in Iowa one knows it gets very cold. This fall in preparation for the frigid season we turned on our heating system (water boiled furnace). Unfortunately it leaked severely. Getting a few estimates we learned it was going to cost $4,000 to replace the furnace or $1,400 just to patch it up without any guarantees. We were facing a very large financial hit. Speak ing with the family I brought up how much propane costs (mostly for the furnace) and the reality that fuel costs would spiral upwards over time. We will spend over $3,500 this year on propane (plus $4,000 for a furnace). To add to the pain, it was going to take more than 6 weeks before the work could be scheduled and done. We were slipping into an icy hole. Burrr…
My wife is a very expansive positive thinker. She said, “let’s call Glen”, who is a friend and owner of Mr. Sweeps Chimney & Stove. “Maybe we should get a wood stove.” We live in the country so that seemed charming but we have a fairly large house with three floors that need to be well heated. (Kids get awfully unpleasant when they are cold). I had my doubts that a stove would do the trick. After speaking with Glen, doing some personal research (isn’t the internet a fabulous tool) and working out the finances for the stove and wood, it became clear that at least financially we would save a bundle. And the savings were not just this year–but every year to come because of the escalating propane cost (it went up 40% since last year).
It seemed a little risky but we purchased a high quality wood stove which was installed within the week. (As an aside local reputable businesses can be your best bet for service). The results were that it not only heats the house marvelously well but is a hearth in the home, drawing everyone together to sit and chat (my wife and I cuddle up) and to enjoy the charm and beauty it creates. A loss became an opportunity and a huge savings in the long run.
Your task then is to continue to find opportunities to reduce the expense of your Bare Necessities without compromsing the overall quality of your life–and perhaps enhancing it! Explore, investigate and negotiate. Look for ways to improve your finances. Do not take on any new debt in the process. When you start living within your 50% allocation, a huge pressure will be taken way from your life and your foundation to build your Wants and Savings will be rock solid.
*Post theory is primarily derived from the book All Your Worth by Elizabeth Warren & Amelia Tyagi which is highly recommended reading.
Iowa Bankruptcy Attorney Robert Liptak
Fairfield, Southeast Iowa