Control your Recurring Expenditures
All too many penny-pinching advocates talk about the virtues of trying to avoid impulse buys. We all know how hard it is to avoid impulse purchases, so perhaps the better way to save is to try to reduce recurring expenditures-the sums that we pay on a daily, weekly, or monthly basis. These expenses generally are for utilities, rent, and subscriptions.
The True Cost of a Device with a Subscription
Some subscription-based devices, like cell phones, are unavoidable. When possible, I prefer to avoid purchasing anything that has a monthly subscription component. Imagine that a device has a $10/month usage fee. Over the course of a year, you will have to pay $120 in service. If you keep the device for two and a half years, you will end up paying $300 in service charges. This amount may be far greater than the cost of the device. The reason I do not use a BlackBerry is that I do not want to have to pay the recurring fees associated with data service. At approximately $40 per month, a BlackBerry costs $480 per year to use; nearly $1,000 over the course of two years. The device itself is rather inexpensive, but the service costs are staggering. Instead, I prefer to check my e-mail using WiFi devices. Although they have larger up-front costs, they have no service costs. As I’m rarely in a WiFi-free location and get sick while reading in vehicles, I see no need to pay for data service.
The Impact of Rent/Mortgage Payments on a Budget
Two other large recurring expenditures are rent and mortgage payments. Usually, it is unwise to take a mortgage whose monthly principle, interest, tax, and insurance payments exceed 36% of your income. Renters often pay a far larger portion of their income in rent, as they tend to have lower incomes. As a result, housing is many people’s largest expense.
Budgeting Backwards
I think that the best way to budget is to start by taking your income after taxes, and then to subtract out your annual housing payments and recurring fees. After that has been done, subtract out your annual projected retirement contributions. Divide the remaining number by $365 to determine how much you have to live on each day. If you feel the number is too low, either slash some recurring expenditures or try to find a different job (or an additional job). While it is definitely difficult to slash telecommunications expenses and it may be hard to reduce housing expenses, one place to start may be reducing media expenses. Eliminating your subscription to cable or satellite television may save you between $0.33 and $3 per day, depending on the level of service you are receiving. As an added bonus, eliminating television media from your home will give you additional time for other pursuits, including earning money.
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Great tips! I’m a student, so I know how hard it is to keep money where it belongs – in the bank… I’ve always budgeted backwards: the question is not ‘what do I need’, it is ‘what do I have’. My mobile phone is pay-as-you-go and I’d never have it any other way, even if I do pay a bit more for texts. Your idea about thinking ‘per day’ is great, I might try that!
Really good blog post. I like how you explained the costs of the Blackberry. How it cost $40 a month and how that can add up to almost $1000 in just 2 years of service.
I also liked how you commented that you can save $3 a day if you eliminate your cable service.
A very good post taking a measured approach to personal finances. I took a very similar approach to my own finances for some years but always made an allowance per day for savings which I considered inviolate. My aim on this was to get to the position where I always had three months income in “safe savings”. The sooner you start working to this end the better!
McDonalds now offers free Wifi:
How to access the Internet inside a McDonald’s Wi-Fi location: Requires a Wi-Fi enabled laptop computer or other Wi-Fi device.
1. With your computer on, select “Wayport_Access” from the available wireless networks.
2. Open your browser.
3. When the McDonald’s connection page appears, select the coupon option.
4. Enter the coupon number above when prompted. For Technical Support, call 1-877-MCD-WIFI (1-877-623-9434).
A lot of bookstores, etc also offer free or discount wi-fi to college students. Check your local college bookstores to see if they participate.
One thing not mentioned about Blackberries and the such: the cost of not knowing about an email until you have the time to check it. If it is from someone saying “I have two tickets to tonight’s basketball game, wanna go?” or “wanna see a movie?”, etc. and you decided to watch tv and not check your email, well … you just lost out.