If you’ve felt as if forces beyond your control are eating away at your financial security, you’re not alone. The souring economy has hit Americans with investment losses, layoffs, soaring grocery prices and a slowdown in the housing market.
Even couples who pride themselves on sound financial planning are finding that unexpected expenses can affect their bottom line in times like these. The most common result for families is uncertainty about their future, according to James Richardson, a certified financial adviser in Raleigh.
“Jobs in the banking and real estate areas have already been hard hit,” Richardson says. “For young families, this could mean the loss of a bread-winner in the short term. In the long term, planning for a future home purchase, college savings and retirement may be more difficult.”
He offered the following tips for achieving long-term financial security:
- If your expenses exceed your income, cut them until you’ve balanced your budget. Act as if there is no such thing as credit because it is going to be harder to get.
- Don’t plan on bonuses, raises or other income extras to cover spending. If you receive extra money, use it to pay down debt or increase savings.
- Ask yourself, “Do I really need this?” Differentiate between wants and needs before you buy.
- Save, save, save. Saving 10 to 15 percent of your income should be the first priority of your long-term plan. Determine your lifestyle based on what’s left.
Local families faced with a financial challenge shared some of their own money-stretching tips to help others spend – and save – more purposefully in 2009.
After having their second child in 2008, Jill and David Dykes of Raleigh realized that day care would consume much of Jill’s take-home pay, so she decided to work part time from home instead.
Challenge: Jill had lined up some freelance public-relations work to supplement her husband’s income, but those opportunities dried up when the economy slumped. The expenses of caring for their young children also were adding up.
Strategy: Shop smarter. Jill does more shopping at “big box” stores where bulk items like formula and diapers are less expensive. She enrolled in an e-mail service through her grocery store that customizes its weekly specials based on her preferences, making it easier to plan meals around available savings. She also makes fewer trips to the store each week, eliminating impulse buys.
Bonus: Jill has been able to stay home with her children even though she has earned less than she had planned. “It was the right decision,” she says. “We just have to trim a little meat along with the fat.”
Can’t-miss tip: Don’t pay for what you can do yourself. Jill will save $800 in 2009 by highlighting her own hair and giving herself pedicures.
For physical therapist Tara Jennette of Wake Forest, how much she needs to work is an ongoing debate as she and her husband, Mike, balance their financial obligations with their desire for a quality family life.
Challenge: After spending several years at part-time jobs to allow her more time at home, Tara was abruptly laid off just when gas and food prices increased. They found some savings by taking their daughter out of day care, but their finances took another hit when Mike’s car was damaged in a wreck.
Strategy: Look for flexible options. With their expenses rising, the Jennettes knew Tara could put her earning capability to good use, but child care remained a concern. “I started picking up shifts at hospitals where I could work evenings and weekends, so family members could keep the kids,” Tara says. “We’ve been able to rebuild our savings without having to pay for day care.”
Bonus: Tara’s shift work has led to the possibility of a full-time job in a setting she enjoys.
Can’t-miss tip: Eliminate extras. Mike and Tara immediately trimmed $38 per month from their budget by canceling Netflix and their telephone land-line. They also have saved an estimated $100 a month by eating most of their meals at home. Mike brown-bags his lunch as well, saving $7 to $8 each weekday.
With an accountant for a husband, Elaine Tyte of Holly Springs knows exactly where her money goes. Finding ways to keep more of it has recently become her passion.
Challenge: After taking on a mortgage and moving farther out from town, the Tytes’ gas and utilities expenses increased considerably. At the same time, unexpected bills for dental work, tuition for husband Rich’s graduate program and holiday spending threatened to derail their budget.
Strategy: Avoid credit card debt. Elaine and Rich made tough choices to stay in the black, including putting off a Thanksgiving trip to Vermont. They traded in his beloved truck for a more fuel-efficient car with cheaper upkeep. “It will hold its value longer too,” Elaine says. And Elaine, a stay-at-home mom, is using her group fitness certification to earn the money needed to promptly pay those unexpected bills.
Bonus: Elaine’s $25-a-month gym membership is now free, and so is child care while she works.
Can’t-miss tip: Go “green.” After buying a retractable clothesline for laundry and keeping the thermostat on its “socks and sweater” setting, Elaine saw her electric bill decrease by $60. She also lowered her water bill by investing in a rain barrel for irrigation.
Growing up on a farm in the Midwest, Teresa Heath of Cary has always abhorred waste. Her determination to get the most from her family’s limited financial resources has made her a champion of conservation.
Challenge: Teresa’s husband, Peter, has been on medical disability for almost a year, putting their family of five on a fixed income as their health care costs skyrocketed and his company folded, leaving them responsible for their own insurance premiums.
Strategy: Pool resources. During Peter’s convalescence, Teresa was struck by how much time and gas were saved when friends took care of her errands while doing their own. Now she organizes neighborhood carpools, grocery shopping and other errands, saving gas and wear-and-tear on vehicles.
Bonus: Teresa has freed up at least two hours a week by sharing errands. She adds that their disability insurance – she says it's equal to the cost of one meal out per month – has turned out to be “the single most important investment” they ever made.
Can’t-miss tip: Serve breakfast for dinner. By serving less expensive items like eggs and pancakes for dinner, a family of five can cut that meal’s cost in half. Do it once a week, and savings could be $20 or more a month.
Ken and Michelle Weeks of Mebane believe that a frugal lifestyle is the best way to honor the tenets of their faith and secure their family’s future.
Challenge: As a single-income family, Michelle and Ken have little margin for error, even in good times. The economic downturn hit just after their move into a larger home. “There isn’t much we can cut back on because we don’t do the extras many people cut back on first,” Michelle says.
Strategy: Stick with the budget. With a new home to decorate, there’s temptation to spend, but Michelle’s not giving in. “We’re going to wait, just do a little at a time,” she says. Meanwhile, they continue to exercise economy across the board – following a cash-only spending plan, trimming mileage on errands and looking for deals at the grocery store.
Bonus: They have been able to use their savings to purchase Ken’s stock options while prices are low.
Can’t-miss tip: Pass on expensive cleaning products and disposable convenience items. Michelle reports recording significant savings by using baking soda ($2) instead of brand-name cleansers ($4 to $5). She also replaced paper towels ($3 a roll) with reusable cleaning cloths ($3 a pack) and sandwich baggies ($2 to $3 a box) with plastic storage containers ($10 for an 18-piece set).
