Automatic federal budget cuts, known as the sequester, are expected to result in furloughs for many government employees. These workers will be faced with cuts of approximately 8 paid hours each week for the next six months. This comes out to a loss in income of about $550 each month for those making $40,000 and about $1,300 for those making $100,000. Regardless of your annual salary, a 20% reduction will have a big impact on your monthly budget. Clearpoint Credit Counseling Solutions is here to provide tips and financial strategies for those experiencing furloughs. Even if you haven’t been hit by the sequester, use these tips to help reduce your spending and cut costs from your monthly budget.
Determine Needs and Wants when You Cut Costs
We don’t want you to take risks or cut spending that is essential to your livelihood. With that said, you should be prepared to make sacrifices, including cuts to non-essential spending. A great example is eating out. Eating is a need, but there is a way to do it affordably without going out to a restaurant (a want). Once you define needs and wants, you are ready to make the cuts.
Eating Out vs. A Smart Grocery Budget
Eating at home will save you a lot of money over the next few months and will be even cheaper if you are a smart grocery shopper. Compare grocery prices to get the best deal, and you will be able to maintain a reasonable grocery budget. Eating out costs around $10 per person, and doing this several times a week adds up quickly!
Scenario 1: A couple eating three meals out per week (13 per month); Cost after six months: $1560
Scenario 2: Replacing the “going out to eat” meals with frugal meals from our Feed a Family for $5.55 e-book; Cost after six months: $433
Cut out duplicate services:
- Do you have a landline telephone and a cell phone? Do you really need both? You could save money on your phone bill by cutting one of these expenses.
- Have home Internet service and unlimited data on your smartphone? Not only is paying for both of those pretty expensive, but you are essentially paying for the same service twice. Think about getting rid of one.
- How about television? Do you have cable and a service like Netflix or Hulu? Cut one.
Triple Play Packages vs. Internet and Netflix Subscription
Triple play packages (phone, Internet, and cable TV) cost an average of $160 per month. Internet is probably the most important of these services, assuming you have a cell phone (without a data plan). That’s because Internet can connect you to news and websites where you can manage your finances. A great strategy might be to pay for Internet only, and cut the landline and cable costs. The average price for Internet only is about $40 per month. You could add a service like Netflix (to replace the Cable TV you are missing) for a total of about $50 per month (a grownig number of people are doing this: the “Zero TV” movement). You can also consider free streaming TV shows and movies at sites like Crackle or on network websites.
Scenario 1: Using a triple play package for cable, Internet, and telephone; Cost after six months: $960
Scenario 2: Paying for Internet service and a Netflix subscription; Cost after six months: $300
Smartphone Plans vs. No-contract Plans
Cell Phone plans can be really expensive, especially for smartphones. U.S. families spend about $139 for smartphones each month. Consider cheaper options—they are out there. Several carriers offer no-contract plans with unlimited talk, text & web for around $50. Look at company websites for specifics. We found one carrier, Straight Talk, that offers unlimited everything for $45. If you are willing to settle for just talk and text, you can save even more. Straight Talk offers 1,000 minutes and texts for $30, while T-Mobile offers 1,500 talk and text for the same price. If you don’t need that many minutes, consider plans that only charge you on days you use your phone (usually $2 for unlimited minutes on those days) or plans that charge around 10 cents per minute. If you only use 100 minutes, that comes out to $10 per month. With whichever plan you choose, considering sharing with other family members to cut costs from your monthly budget even more.
Scenario 1: Maintaining smartphone plans for the family; Cost after six months: $834
Scenario 2: Using two no-contract phones at $30 per month (plus the “startup cost” of two new phones at $50 each); Cost after six months: $460
Scenario 3: Using two no-contract phones at .10 per minute, each using 150 minutes per month (plus the “startup cost” of two new phones at $50 each); Cost after six months: $280
Savings in Scenario 2: $314 Savings in Scenario 3: $554
Vacations vs. Staycations
The average family vacation costs between $1,000 and $2,000 dollars. The U.S. Bureau of Labor Statistics cites the average as $1,415 per family vacation. Forty-four percent of this cost is spent on transportation. You can avoid transportation costs altogether by planning a staycation. We have a guide for that—Staycations: Budget Vacations in Your State.
Scenario 1: Average family vacation, such as a weeklong trip to the beach; Cost after six months (assuming you budget throughout the year for vacation): $708
Scenario 2: A weekend staycation, including trips to affordable points of interest; Cost after six months (assuming you budget throughout the year for vacation): $150
Total Costs Cut from Budget
If you follow these guidelines and suggestions, you will reach an impressive amount of total savings. Your total savings over six months will likely be around $2,700. One tip: some of our suggestions involve changes or cancellations in major services such as cable and cell phone plans. In some cases, these can bring cancellation charges and fees, so you will need to assess your particular situation carefully. It will likely still be cheaper for you to cancel or downgrade these services.