Uber Frugal Week Day 1: Know What You Spend and Where You Can Save
Welcome to Day 1 of my pandemic-inspired, 8-day, what-do-I-do with my money, Uber Frugal Week series. For more about this series, including an overview of what I’ll cover each day, check out this.
Uber Frugal Week: Day 1
We’re in a weird, uncertain time and when things get weird and uncertain, it’s time to save more money. I’m going to skip the goal-setting and discernment exercises we do during the Uber Frugal Month and assume we all have the same goal here: to stay afloat, pay our bills, and not go into deep debt during this coronavirus pandemic/recession/end times.
I’m writing under the assumption that there are probably three categories of people reading this:
- People who’ve already lost their jobs due to the pandemic
- People who fear they might lose their jobs soon due to the pandemic
- People who believe their jobs are stable at present, but want to be prepared in case the recession is worse than anticipated and they lose their jobs at some point in the future
This is an oversimplification of everyone’s unique circumstances, but keeping these three categories in mind will hopefully help me to tailor my suggestions to meet your needs.
As you go through the Uber Frugal Week, please understand that my advice isn’t going to be perfect–or applicable–for everyone. The series is designed to get you thinking about what YOU need to do with YOUR money. And what you need will be different from what the next person needs. Everyone’s spending is different, everyone’s circumstances are different. Focus on what you need to do for your family and let others do the same.
If you’re in category 1 or 2 (you’ve lost your job or think you will soon), you need to figure out what your monthly income will be from unemployment benefits. Identify that number and work backwards to craft a budget that’ll fit that dollar amount. As a heads-up, Day 2 will cover specific resources for people who’ve lost their jobs and Day 3 is about how to save more money (find the full table of contents here).
The bottom line:
- If you’ve lost your job, you should plan to live on your current unemployment benefits for at least the next six months.
- Maybe you’ll get another job, maybe your benefits will be enhanced, but it’s wise to plan your spending with the worst case scenario in mind.
Disclaimers About Me
Be forewarned #1: there will be humor and levity in this series because that’s the way I stay sane. Do not interpret my irreverent tone as tone-deaf to the trauma and death happening all across the globe. I know it’s bad and I know it’s going to get worse. Let me lighten things up a tad with terrible puns and subpar humor.
Be forewarned #2: there will be math involved because money involves numbers. Don’t worry, you can use a calculator. I know I do.
Be forewarned #3: a disclaimer that I am not a trained financial professional and I encourage people not to make serious financial decisions based solely on what one person on the internet advises. I encourage everyone to do their own research to determine the best course of action for their finances. I am not a financial advisor and I am not your financial advisor.
Ok, let’s get to it!
Step One: Write Down What You Spend Every Month
Before we can make a plan for saving our money, we’ve got to know how we’re spending our money. It’s my favorite, it’s the thing I harp on all the time, it’s what I’m know for, oh yes, it’s time to review your spending!
In an ideal world, you track your spending every month so that you have a complete overview of what you spend in a year. If you haven’t been doing that, no sweat, because we’ve all just learned that the world is not ideal. If you don’t have past months of spending to reference, do your best to estimate your monthly expenses and write them down.
If you’re a spreadsheet person, I highly recommend busting one out for this exercise. Full disclosure: it’s possible I’m a tad obsessed with spreadsheets. What, everyone doesn’t have their grocery list in a spreadsheet?! Listen, they’re useful. But if you’d prefer to write your expenses longhand on dinosaur-themed stationary, that 100% works. Don’t get flustered by the format, the point is to create a comprehensive list of your spending.
If you do want to use a spreadsheet, you can copy the format I employ in the below examples. You will recognize this format from my monthly expense reports and my Reader Case Studies. I’m a creature of habit, what can I say.
If this is your first time compiling your expenses, here are a few tips:
For bills that are paid annually (or quarterly, etc), list what the monthly amount would be:
- For example, if you spend $500 on Christmas every year, record that as $41.66 per month, because $500/12 months = $41.66 per month.
- Also for example, if you pay your property taxes in installments of $1,000 every six months, record your monthly expense as $166.66, because $1,000 x 2 = $2,000 (what you spend on property taxes in a year) and $2,000/12 months = $166.66 per month.
- Don’t fear the calculator here.
Remember to include all of the following:
- Mortgage/rent payments (and property taxes)
- Utility bills (electricity, gas, internet, etc)
- Cell phone service
- Insurance (car, home, life, etc.)
- Household supplies (toilet paper, laundry detergent, soap, toothpaste, etc)
- Pet expenses (food, medications, vet visits, etc)
- Subscription services (such as Netflix, Amazon Prime, Hulu, etc)
- Restaurants, take-out, coffee, bars
- Entertainment, concerts, movies, etc
- Clothing, shoes, accessories
- Personal care (haircuts, salon treatments, etc)
- Home goods (vacuums, candles, pillows, etc)
- Debt repayments (car loans, credit cards, student loans, etc)
- Car-related expenses (gas, insurance, maintenance, repairs, parking fees, inspections, taxes, etc)
- Vacation and travel expenses
- Holiday, birthday, anniversary, and special occasion gifts
- Kid-related expenses (diapers, daycare, sports/activities fees, clothing, etc)
- Medical expenses (prescription medications, co-pays, over-the-counter medications, therapy, chiropractor, etc)
- Charitable donations
- …and anything else you spend money on!
- Make a list of all of your expenses.
- Include everything you spend money on every month.
- Be realistic. If you cheat, you’re only cheating yourself. No one else is looking at this list, so it’s kind of weird if you lie to yourself about what you spend. Just saying.
Step Two: Sign-up For a (free) Expense Tracking System
If you’re not already doing so, now’s the time to sign-up for a FREE expense tracking system. I use and recommend Personal Capital (because it’s easy to use and free). Having an automated way to know what you spend every month will make it easier for you to understand what you truly spend over the course of a year because spending varies wildly month to month. Skip this step if you already have a system for tracking your spending.
Step Three: Categorize Your Spending
This is my favorite thing to do! I know it’s yours too. In fact, I don’t think I’ve met anyone who doesn’t list “categorizing spending” as one of their top five fave activities. It’s up there with flossing, people.
We’re going to categorize every single one of our expenses as: Fixed, Discretionary, Reduceable, or Forbearance Eligible (brand new pandemic-inspired category!).
Here’s what each category means:
1) Fixed expenses are seriously unchangeable and include things like rent/mortgage and property taxes. You should have very few Fixed expenses because, as we will learn in a moment, most expenses are able to be reduced or eliminated. For example, a cell phone bill is not Fixed, it is Reduceable. Groceries are not Fixed, they are Reduceable.
2) What are Reduceable expenses? I’ll admit, I made this word up because pandemic. Reduceable refers to any expense that could possibly, potentially be reduced. The grocery store bill could be reduced, the cell phone bill could be reduced, the household supplies line item could be reduced. Fear not, I’ll cover HOW to reduce the Reduceables on Day 3. The goal of this exercise is merely to identify them.
3) Discretionary expenses can be eliminated wholesale. Discretionary expenses include stuff like take-out, haircuts, and entertainment because these are all things that can be eliminated. Is it fun to eliminate this stuff? Heck no. But is it necessary? It very well might be. Plus, you’re not committing to eliminating this stuff forever, just for now.
4) Forbearance Eligible are expenses that might be eligible for some type of pandemic-related forgiveness or delay from either the government or private lenders. I will address these programs in greater detail during Day 2. For now, it’ll be helpful to identify which expenses might fall into this category. Examples include: federal student loans, credit card debt, and mortgage payments.
Here’s an example of what your list might look like after completing Steps 1-3:
(this is an example and not my actual monthly spending; see my Monthly Expense Reports for my family’s monthly spending)
|Item||Amount||Notes||Fixed, Discretionary, Reduceable, or Forbearance Eligible|
|Mortgage||$1,500||Includes insurance and taxes||Forbearance Eligible|
|Groceries||$700||Includes all food||Reduceable|
|Household supplies||$200||Includes toilet paper, vitamins, toothpaste, floss, laundry detergent, etc||Reduceable|
|Dinners out||$200||Includes take-out, fast food, and restaurants||Discretionary|
|Home goods and home repair/maintenance items||$200||Includes candles, tools, throw pillows, etc||Reduceable|
|Student loan repayments||$160||For two people||Forbearance Eligible|
|Cell phone service||$150||For two cell phones||Reduceable|
|Cable||$125||Doesn’t include phone or internet||Discretionary|
|Haircuts||$100||For all family members||Discretionary|
|Kid stuff||$100||Includes toys, clothes, and camp fees||Reduceable|
|Pet food and supplies||$100||For dog and cat||Reduceable|
|Medical||$50||Co-pays for doctor’s visits and prescription medications||Fixed|
|Beer and wine||$50||Discretionary|
|Water and sewer||$50||Reduceable|
|Holiday, birthday, and Christmas gifts||$50||Discretionary|
|Home phone service||$40||Discretionary|
|Credit card debt repayments||$25||Minimum monthly required payment||Forbearance Eligible|
Step 4: Identify A “Proposed New Amount” For Every Single Expense
It’s time to set a savings goal. Write down what you think you might be able to spend on every item on your list. This is your “Proposed New Amount” and it’s your goal of how much you think you can save.
- For all Fixed expenses, the “Proposed New Amount” will be the same as what you currently spend.
- For all Discretionary expenses, the “Proposed New Amount” will be $0. As in, zero dollars. As in, that expense is axed, gone, iced, and heretofore removed from your budget.
- For all Reduceable expenses, the “Proposed New Amount” is your estimate of how little you can spend in that category every month. For example, if you’ve been spending $500 per month on groceries, you might set a goal of spending $50 less, which means your “Proposed New Amount” will be $450 (because $500 – $50 = $450).
- For everything that’s Forbearance Eligible, keep the amount the same FOR NOW. Until you know for certain that an expense will be delayed/forgiven, you can’t delete it. Keep Forbearance Eligible expenses the same for now and happily delete or reduce them once you receive confirmation from the government/lender/landlord.
|Item||Amount||Notes||Fixed, Discretionary, Reduceable, or Forbearance Eligible||Proposed New Amount|
|Mortgage||$1,500||Includes insurance and taxes||Forbearance Eligible||$1,500|
|Groceries||$700||Includes all food||Reduceable||$450|
|Household supplies||$200||Includes toilet paper, vitamins, toothpaste, floss, laundry detergent, etc||Reduceable||$100|
|Dinners out||$200||Includes take-out, fast food, and restaurants||Discretionary||$0|
|Home goods and home repair/maintenance items||$200||Includes candles, tools, throw pillows, etc||Reduceable||$50|
|Student loan repayments||$160||For two people||Forbearance Eligible||$160|
|Cell phone service||$150||For two cell phones||Reduceable||$25|
|Cable||$125||Doesn’t include phone or internet||Discretionary||$0|
|Haircuts||$100||For all family members||Discretionary||$0|
|Kid stuff||$100||Includes toys, clothes, and camp fees||Reduceable||$25|
|Pet food and supplies||$100||For dog and cat||Reduceable||$75|
|Medical||$50||Co-pays for doctor’s visits and prescription medications||Fixed||$50|
|Beer and wine||$50||Discretionary||$0|
|Water and sewer||$50||Reduceable||$35|
|Holiday, birthday, and Christmas gifts||$50||Discretionary||$0|
|Home phone service||$40||Discretionary||$0|
|Credit card debt repayments||$25||Minimum monthly required payment||Forbearance Eligible||$25|
|TOTAL:||$3,935||Proposed New Amount TOTAL:||$2,595|
The reason for this exercise is to create a realistic, achievable savings goal. Saying you’re going spend $1,000 less every month without knowing where that $1,000 will come from doesn’t work. You need to know where you actually have room in your budget to save.
Remember that this spreadsheet is an example of a fictitious family who apparently has a dog and a cat. So don’t take this as a prescriptive spreadsheet, it’s merely an example. I, personally, am actually spending MORE on groceries right now because I’m making a concerted effort to buy farm products from my neighbors and to support small, local businesses. So everyone’s spreadsheet will look different. Once again: the goal is to get a handle on what you’re spending and where you could save, if you needed to.
Step 5: Total Your “Proposed New Amounts”
Now’s it’s time to total your “Proposed New Amount” column. This total will serve as your targeted new monthly budget. It’s still an estimate, but it’ll be an important guidepost in figuring out how little you can spend each month in order to weather this crisis.
Do not panic (yet) about how you will achieve these “Proposed New Amounts.” I’m going to cover that soon. The goal in this first day is to identify the areas in your budget that are accessible to you for saving. Trust me, I’m a professional. Actually, I’m not. Not at all. But I am here to help you and helping people save money is my favorite thing to do. So, there you go.
As you can see in the above sample spreadsheet, the savings I identified total a whopping $1,340 per month (that’s the current total of $3,935 – the Proposed New Amount Total of $2,595).
Summary of Day 1 Exercises:
- Write down all of your monthly expenses.
- Sign-up for a free expense tracking service if you don’t already use one (I use and recommend Personal Capital, here’s why).
- Categorize all of your expenses as Fixed, Reduceable, Discretionary, or Forbearance Eligible.
- Estimate how little you could spend on every single one of your expenses:
- Fixed and Forbearance Eligible expenses will remain the same
- Discretionary expenses will be $0
- Reduceable expenses will be your estimate of how little you can spend. This is called your “Proposed New Amount.”
- Tally up your “Proposed New Amounts” to reveal your barebones, baseline budget. This total is the absolute LEAST you could spend every month if you had to and it will serve as your “time-of-crisis” savings goal.
Under normal circumstances, I’m not an advocate for cutting every last discretionary expense. It’s not super fun and it robs us of luxury and stuff we enjoy. But in a time of crisis, in a time when people are losing their jobs and unable to pay their bills, cutting your discretionary spending–and reducing everything else–is a way to keep your house and feed your kids. This is a crisis time budget and the goal is to help you retain what’s most important to you and your family. Once the economy is better, once you’re employed again, once the risk of lay-offs has passed, you can (and should!) look at re-introducing your most beloved discretionary expenses. This is a cleanse, a fast, a diet for your spending. It might be hard, it will be hard, but hopefully it’ll allow you to get through this storm without too much damage.
Everyone’s circumstances are different–now and always. Everyone’s spending spreadsheets and goals will be different. And that is fine. The goal of Day 1 is to get a handle on what you’re spending and where you might be able to save–if you need to. This isn’t a time to judge our neighbor’s spending (or saving), it’s a time to look inward and identify what we can–and need–to do for our families. Some people will spend more on groceries (that would be me!), some will spend less. Some people will keep Cable, others have never had Cable. It doesn’t matter. What matters is that you know your own situation and what you need to do in order to come out of this recession as intact as possible.
What questions do you have about the Day 1 exercises?
If you’d like to receive an email letting you know when other posts in the series are published, sign-up for my email list in the box below.
Never Miss A Story
Sign up to get new Frugalwoods stories in your email inbox.