January 9, 2016

Here Come Those Holiday Bills - Now What?

The holiday bills from credit card companies will soon start to pile up. All that spending and giving, partying and enjoying friends and family was fun, but now the not-so-fun part of your satisfying journey starts. How are you going to handle all those bills, along with the basics that must be paid, like heat, food, gas, and clothes?

The most important message I can communicate in this post is that a financial decision can be short-term. That is, some of the ideas I list below may not be necessary for any longer than it takes you to get back on top of the financial mountain. Don't say to yourself, "Oh, I could never live without this or that. They are too important to my happiness."

I'm not here to judge whether that is a legitimate position for you to take. One person's necessity is another person's extravagance. But, too often when we think of cutting back we picture it going on forever. Faced with such a future, we often can't take that step. So, just remember, what you choose to do now doesn't have to be permanent, just long enough to get back to an even keel.


Keep a budget
This will always be first on my list. Keeping a budget makes a person much more conscious of how money is being spent. Having a monthly limit for each category helps rein in spending. One fail proof method is to put cash into envelopes for each category. When the money is gone, stop spending until next month. If the envelope is empty before several months' end either the amount budgeted must be increased or spending for that expense must be cut back.

I used the envelope method for years until I was comfortable with my budget-setting skills. Today, I use software as my "envelopes." When the amount in a particular category has been spent for that month, I stop (usually!).

Cancel Unnecessary Services for now

Find your newspaper or magazine subscriptions heading into the recycling bin every day with most of it unread? Do you find you watch less TV than you once did. Do you find you stream very few Netflix or Hulu movies? Do you find yourself cleaning up after (or before) the cleaning people? Cancel what you can and reassess after the holiday bills are taken care of. You may discover you don't even miss some of those services.


Cut Way Back on Going Out to Eat

We used to allocate almost $300/month to dining out. It was a reward after being on the road many days each month and was one of my family's favorite forms of entertainment. That spending pattern extended into the first year or so of retirement.

Now, the dining out budget is just over $150 a month. If we are careful and make a few of them a lunch instead of a dinner that works out to about once every 5-6 days. Suddenly, the meal away from home becomes more of a special treat, something we look forward to. I know couples who spend that much (or more) in an average week. If we did, dining out would cease being special and the money would be wasted.

At a few points in my career our dining out budget was zero. When I was between jobs or things were not going all that well we simply stopped eating in restaurants until the situation improved. It caused no harm and didn't leave us feeling deprived. It was simply a necessary, short-term step.


Coupons and Discounts are Your Friend

I receive many e-mailed discount coupon offer available: Groupon, Goldstar, Living Social, ..some I don't even remember the names of. I delete at least 90% of them, but restaurant or vacation deals get used. 

Our supermarket lets us "price match." They will match any special price offered by any other supermarket in town, By checking prices on Wednesday we design our shopping list for Thursday and save money. Rarely are national coupons a better deal than the generic house brand, unless there is no substitute. Then, a coupon is used.


Cut Out Starbucks, Dunkin' Donuts, etc.

Is Dunkin' Donuts, Einstein Bagels, or a coffee shop a regular for you? Stop going until you can afford it. Make your coffee at home. Donuts are bad for you so your body will thank you. Yes, I know Starbucks offers free WiFi, but then so does your home. 


Stop Carrying Extra Cash

How does this fit with the suggestion to use cash in envelopes? If there is little or no extra cash in your wallet impulse purchases might be reduced. It is wise to have a few $20 bills tucked away someplace for an emergency cab home or similar problem. But, carrying hundreds of dollars with you makes it much too easy to spend a little here and a little there.


If possible use your debit card for local purchases so the money comes right out of your checking account and you instantly see the purchase on your on-line account. Or, if you prefer, take the cash from the grocery envelope when you go food shopping. One caveat: use credit cards instead of debit when buying something on-line. That provides you with more protection if something goes wrong or your account is hacked. 


Remember, you may not need to take all of these steps and none of them need be permanent. After the holiday bills are paid, decide what should be reinstated and what you never really missed.



16 comments:

  1. Good morning Bob. A few years back my husband and I decided to forego Christmas and birthday gifts for each other. It just made sense for us. Instead, we moved the money we would have spent into our travel budget. This has worked well for us. As I type this, we are getting settled into our condo we rent every year for 3 months to escape from harsh winters.

    Adjusting the discretionary spending as we go; it just makes good sense. I would also say that we have become less enamoured with eating out. A pet peeve of mine is paying too much for poor quality food that is served in portions that are unappetizingly huge. I'd rather pay more for a better quality dining experience, and perhaps go less often.

    The new computer chips in our credit cards should give us more security. I've noticed that not all retailers have transitioned to the newer technology at check out, where you insert your card and leave it there until the transaction is complete.

    The knowledge that we are financially secure is worth its weight in gold. Even with the recent fluctuations of the stock market, we know that no matter what happens, we will be OK. Taking control of your financial future is what it is all about.

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    1. Feeling in financial control, at least as far as we are able, is vital. The last week of massive drops on the stock market has not been pleasant, but I know we are well positioned for the future so I try to shrug it off.

      Betty and I almost always bring home a portion of a dinner out to serve as lunch or dinner for another day. It saves money and our waistlines!

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  2. Another great post, Bob. Just a few observations: Since my wife retired in October, our dining out has been reduced tremendously. Nothing really looks good out, and meals at home are so cheap! Eating out was by far our biggest discretionary spending category. As for groceries, we've discovered Aldi's. It really is much cheaper to shop there, and nothing that we've found is sub quality. Since we have no grandchildren yet (I can hope, can't I?), our Christmas spending is not as high as others, I expect. Our two adult children are good to give us lists so we can plan. BTW, our driving and gasoline usage has plummeted since both of us have been retired. Sure wish the gas price would have been this low a few years ago!
    Jeff in OK

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    1. We just got back from an RV trip to Palm Springs. It felt much better to fill up the rig on $1.89 a gallon rather than twice that.

      Grandkids can punch a hole in the budget if one is not careful! We have cut some of our personal items to allow for spoiling them a bit.

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  3. Excellent ideas, Bob. We've seen our dining out expenses reduced, also. Part of the reason was some health issues I had, and knowing exactly what was in my food required that I cook more. Time has passed, I'm healthy, now, but we (especially my family) like what comes out of our own kitchen. We've become more selective about eating out, and like you, we seem to enjoy it more than before. At the beginning of every new year, I clean out the pantry, freezer and frig, making sure to use foods that might be getting close to their due dates. It's amazing, but most of January, I only shop for fresh produce and dairy. It helps to make up for all the extra money spent during the holidays.

    Another thing hub and I have started to do is pack fruits, nuts, and other healthy snacks when we travel. Primarily, we do it for health, but it saves money and often limits our needs to eat out while on the road. I have become my mother....scary.

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    1. My heart issue this past year did require a shift in what we eat and buy. It is a bit more expensive but the long term benefits are obvious. Fruits, nuts, and granola bars are some of the first items we put in the RV or car before a trip. I become a bit of a bear when my blood sugar falls so Betty is always sure to have healthy munchies nearby...smart woman.

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  4. I know that the number one thing every financial guy in the world says is “You need to have a budget” but I have never kept one and it’s worked out fine (we both retired this year and I write this from the house we rented in Mexico for the winter). This is not to say I didn’t track spending, I did, but never a budget that says so much for this and so much for that. What I did have was a spending priority list which was pretty basic but did the job. To a certain extent it was like looking at Maslow’s hierarchy. Start with basic survival stuff; food housing, light heat and so on all of which are pretty much fixed and if you don’t pay they’ll soon stop – each subsequent spending category followed on; saving was next (pretty much predetermined by what the government allowed us to put in tax advantaged retirement accounts); after that “extras” were added to the on-going priority list and we just worked down the list (or up hierarchy) and when the money was gone we stopped. It is a pretty simple strategy, no moving money from this bucket to that bucket, no trying to anticipate costs, not much of anything really just keep track, pay the “survival” bills first, and the rest is up to us as we go. Of course my wife and I discussed non-trivial spends as they came up – Want a new couch? If there’s still money left then no problem but that means something else drops off the list (or that’s the end of the list) and we decide from there. Anyway, it worked for us.

    - David

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    1. I'd call your approach using a budget, just one that is not formal or on a spreadsheet like some of us. If you are spending the winter in Mexico you have a good handle on things. You place needs before wants which is really the basis of any sound financial plan.

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  5. Since I quit working in late 2015 (hopefully for good), we've cut back on several things that we don't really miss. We eat out less, although it did creep up over the holidays while shopping, pizza for football gatherings, etc. We decided to install an HD antenna and cancel our 300 TV channels. We get along just fine with the major networks and PBS, since that's what we watch + Netflix. I cut back my cell phone data plan and traded in my car for smaller, less expensive model. We are cooking more and spending less on groceries with a little planning. Using the library and not buying every book we want to read. Etc. The one expense we're struggling with is our dog. He's had some health problems that have been pricey, but nothing serious enough to end his sweet life. But overall, there are so many ways to cut back, and I'm enjoying the challenge of finding them.
    Hope

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    1. Like you, Hope, I like to look for ways to trim our expenses while maintaining, or even enhancing, our lifestyle. It is really is not difficult; I find it kind of fun.

      Betty has finally shifted to a smartphone after losing her old flip phone just before New Year's Day. That has increased our phone costs but she is enjoying it so that is well worth it to us. She has discovered that the camera in the phone is every bit has good as the one she used to carry on trips. Now, she has one less bag to tote around and no batteries or memory cards to worry about.

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  6. Lots of good tips here. I'm one of those people who puts almost everything on my credit card and then pays the balance in full each month -- but what I find is critical in controlling my credit card spending is to enter the purchase in my budget as soon as I make the purchase. My budget line for gifts tends to build up over the year and then get spent in December, so entering those purchases as I go makes sure I don't get carried away. When I balance my household accounts at the end of the year, I have to make sure I subtract what's owed on my credit card from what's in the bank before I assess what is left. -Jean

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    1. I will take my yearly budget for a particular category, like gifts, and spread it over 12 months. Like you, that means by the end of the year there is a positive balance which tells me how much I can spend for Christmas. Of course, with grandkids, daughters, a son-in-law and wife, birthdays and special occasions seem to happen rather frequently, each taking a chunk out of that building balance!

      I will change credit cards occasionally to get a better deal. Since I pay off the balance each month what I am looking for is a good rewards program, like 2% cash back.

      Frankly, I used to be loyal to a particular credit card company. But, over time I realized they weren't particularly loyal to me, so I should just follow the best deals. The last time I checked my FICO score it was over 800 so apparently this shifting isn't detrimental.

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  7. I've always put a $100 bill away each month to save for Christmas. $1200 makes a nice Christmas for our small family. It allows gifts for everyone and a couple of nice dinners out with friends, all guilt free. I don't think I could handle starting the new year in debt. I love starting with a clean slate and the resolve to live within our budget. I still remember those lean, early marriage years and I have no desire to repeat them!

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    1. There is something very satisfying about looking at the ledger on January 1st and seeing it blank! Expenses build up quickly enough, but for the first day of the New Year it feels good.

      Your Christmas budget is not that far off from ours. Like Carole, Betty and I usually forgo specific birthday presents and keep Christmas gifts small. This year is our 40th wedding anniversary so we will do a few special (and expensive) things, but all to build memories and not collect stuff.

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  8. I always particularly enjoy your financial thoughts. We also use the "computer method" for our financial planning, but had used the "quasi-envelope" method earlier. Years ago, I would go to Barnes & Noble or Borders and peruse their Retirement section for advice re: post 65 life. Got a lot of good and practical ideas because many of us retirees are trying to get our retirements "right." We have never done this before and want to hear how others are doing " it."
    It is good to read your brief, yet thoughtful, ideas on finance. Simplicity is the best, since our collective gray matter is shrinking, yet we still want to proceed on our personal satisfying journeys our way and not turning our various life situations into a gutter- ball on this trip. Thank you for your help.

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    1. You are welcome, Jack. Thanks for your readership and support.

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