Cutting household expenses during a financial crisis can be really hard. It is human nature to think the crisis will be temporary. Hence, you will get out of the crisis before you and your family need to change your lifestyle.
The best thing to do is to start by cutting day-to-day little luxuries. Luxuries such as trips to the fancy coffee shops and the liquor store. Yes, I know those feel like life lines for many of us, but they are unnecessary and expensive. Basically, anything that is not subject to a contract, and is not an actual necessity, should go first.
Some items on the chopped list would be the juice bar and the prepared foods sections of the supermarket. There are a lot of us that eat on the run and we are trying to still eat healthy. But there’s a hefty price tag to that lifestyle. I had a client with a $1400 a month food budget that we reduced to less than $700 a month. How, you ask? By just having him cook at home and make fresh salads from whole vegetables. He used to buy prepared foods and bagged salads.
Second is anything that has a contract but we can live without. Like, do we need Netflix, HBO-Go and Disney Plus? Gym memberships and specialty fitness classes also have to be on the chopping block. We need to stay fit, no question about it. However, when times are financially tough, we need to give up the cross-fit and personal trainer. Rather, go for a run outside. And, consider reducing the gym membership to the most basic level. Get in there with a plan to work those muscles on our own. I have a personal trainer and love my workout. I am not giving this advice lightly.
Then I think we need to take a good hard look at what we call necessities. I think this pandemic has opened a lot of our eyes. It has forced us to really think about what is “essential” and what is not. My daughter and I, like most people in quarantine, have need spending an inordinate amount of time in our PJs and stretchy pants. Even with virtual school – “distance learning” as they are calling it – I have caught her going to class in her PJs and then just changing into new PJs for bed!!! But that does not make 6 new pairs of PJ pants essential. They are “non-essential.” It can wait. Maybe it’s not necessary at all. I know so many people with clothes they bought on sale and never wore at all. Or, only wore 2 or 3 times before they realized it wasn’t that great looking on them and they couldn’t return it anymore (ahem… yeah … guilty). Cut the clothing budget. Or, better yet, actually establish a clothing budget!!!
Rent, Mortgage & Utilities
Pay your rent and your mortgage if at all possible. It doesn’t matter that the governor said the landlord can’t evict you right now. Once this is over, the landlord is going to expect his/her rent. They have payment obligations too. If you qualify for a mortgage forbearance but don’t need it, don’t ask. If you need it, go the extra mile and ask for a “deferral” of the forbearance amount so that it does not become due in full as soon as the pandemic is over … which is what forbearance means and which will crush almost everyone who gets that “relief.” A deferral means you get time to pay the amount back without being called in default. Many lenders are even putting the forbearance amounts on the “back end” of the loan or adding months to the end of the loan and just extending the repayment time that way. But this relief is not automatic. So, again, if you can pay your rent/mortgage, pay it. Cutting household expenses should not include the essentials.
Showering is not optional. We all need to pay our water and sewer bills. Let’s not cut that.
For reference, I find this budgeting worksheet provided by the “Savvy Ladies” is really simple and helpful. Also, although I like to consider myself savvy, I don’t work for or endorse or have any relationship with the “Savvy Ladies.”
I do help clients with regard to cutting household expenses. Please call me before your financial crisis becomes unmanageable.