How to Cut Your Expenses

A few years ago I wrote a how-to book on cutting expenses. At the time I was looking for a way to design a small ebook-only how-to series. My idea was to produce small 80-100 page books that focused on an action plan and this book was my prototype.

Since it is the start of the new year, and for many that means thinking about cutting back on expenses and saving some money after the holiday splurging, here is a copy of my first chapter. I’d be interested to hear if you think this series idea still has legs.

Cut Your Expenses: A 21-Day Action Plan to Live Within Your Means in the New Economy

Day 1: Set Your Goal.

Every new endeavor should start with a clear purpose and direction. Today, you’ll set some wheels in motion by gathering up your tools and setting up a workstation. We’ll go over how to write a goal, and then you’ll write your personal goal for cutting back on your expenses. Finally, if you share responsibility for your household, you’ll set up a date with your partner or fellow householders for Day 3 to go over your finances.

Action #1: Set up your workstation.

Step One:  Find a place to keep track of notes, action items, and other items.

You need a place you to return to every day to do your planning and the exercises in this book. It could be your home office, your kitchen table, or wherever you feel most comfortable and will be able to keep your tools at hand. You’ll also want your computer and the Internet accessible for research. If you don’t have a home office and wish to set up at the dining table, then find a box to keep your materials in. This way your family can still eat at the table.

Step Two:  Find a notebook, a sheaf of paper, and a pen.

Don’t go out and buy yourself a fancy journal for $19.99. We are cutting expenses! See if you have something already at home you can use, or if you must buy a notebook buy the cheapest, shortest one at the drugstore. Look at the clearance rack—if you choose the SpongeBob one, you’ll be able to find it easily.

Step Three:  Set up a physical file folder.

Look around—you may already have a manila folder or envelope you can recycle for this purpose. Or if not—just get a small box. Resist the urge to run out and buy a set of 500 manila folders from the office super store. I’m speaking from experience here. In the old economy, my first inclination on starting any new project or goal was to rush out and buy a fancy notebook, 500 manila folders, a pack of new pens, and maybe even a fancy box to hold everything in. Resist the urge! Those were the old days. It’s a new day now, so reuse what you have.

Step Four: Set up a virtual folder.

Set up a virtual file folder on your computer and call it Expenses. If you already have a personal finance program, more power to you. If you don’t, we’ll set you up with an easy program on Day 3.

Action #2: Set your goal.

Now you’re going set your overall goal for cutting back on your expenses. You want your goal to be specific, measurable, and achievable. A good goal is specific—it states what you are going to do. A good goal is also measurable—you can see progress along the way. A measurable goal answers the questions, how much? How many? And how will I know when it is accomplished?  A good goal is achievable and realistic. It leaves you room to reach—but it’s realistic enough to be accomplished. A bad goal is missing one or more of these elements.

Good Goals:

I plan to have cut my household expenses by 10 percent by the end of this month.

Over the next 21 days, I will take a look at my current spending habits and make at least five cutbacks.

I will look over my expenses and find ways to save $200 a month by April 30th.

Take a look at each of these three and see how they are specific, measurable, and achievable.

Bad Goals:

I will stop spending too much.

I will cut my expenses by 75 percent within the next month.

I’ll save $200 a month from now on.

These are nice statements, but they aren’t goals because they are missing at least one or two of the elements needed for a goal. The first one, “I will stop spending too much,” is missing all of the elements. How much is “too much”? This statement is not measurable. And when will you know you’ve achieved it? The second statement is “I will cut my expenses in half by the end of this month.” Wow, that’s pretty drastic and may be unachievable. But at least it is measurable and it has a deadline. Now if you are in a serious situation where you have lost all of your income, then you may have to make a serious goal like this—but 75 percent would most likely be unachievable within 30 days. The last one about saving $200 a month at first look seems like a good goal. But it isn’t really. It’s a change of habit for sure, but again goals should have deadlines. This one is close. Change this one to “I’ll save $200 a month for the next six months or until I have a $1,000 in the bank.” Now we’re talking because this statement is a specific, achievable, and measurable goal.

So now what will your goal be? You picked up this book for a reason—to learn how to cut back on your expenses. What do you want to accomplish over the next 30 days? Here are some suggestions and feel free to use or modify:

I will look over my spending and cut my expenses by __ percent within the next 30 days.

At the end of this month I will have found $___ worth of cutbacks in my household expenses. I will then continue to review my expenses over the next three months to cut an additional $___.

Now remember to set a reasonable amount. You can plan on cutting back 5 to 10 percent in the next 30 days and then add another 5 to 10 percent over the next 60 days. That goal might look like this:

I want to take a look at my spending and cut back my expenses by 10 percent in the next 30 days and an additional 10 percent over the following 30 days.

I would work with percentages rather than dollar figures. By the end of this week, you’ll have completed an exercise and will know exactly what you’re spending a month in dollars, but for now please use a percentage. If you already know what your expenses are every month, then you get a gold star: go ahead and plug in a dollar figure. Again, just make it reasonable.

Reasonable works if you have a job and are just thinking it’s time to cut back and save for a rainy day or a major purchase. But what if you can’t afford to be reasonable? If you or your partner just lost your job or the creditors are already calling, you need some crash cutting and fast. By all means, pick a more drastic number. Throughout the book, you’ll see special tips for you called out as “Crash Cutting.” When I look back now at what I was spending a year or two years ago, I managed to cut several hundreds of dollars of my expenses. It’s a good thing I did that because other expenditures, like utilities, have since gone up.

Crash Cutting Tip: If you OR
your partner just lost your job, try to cut back your expenses at least by one third in the next Thirty Days. Plan to cut your expenses Another 10 percent in the next month.

Action #3: Write down your goal.

Remember the notebook or the folder on your computer you set up? Now that you’ve determined what your main goal will be― write it down. This makes it real. Write it down somewhere you can see it first thing, every day.  Print a copy out and tack it up on your wall.

Action #4: Enlist help for your goal.

You have written your goal down, but now you should share it. You are more likely to achieve a goal by sharing it with someone. You can do this in a number of ways. First, if you have a spouse, partner, or other family, you definitely need to share this goal with that person and other members of your household because the cutbacks you define will affect them. You could also share the goal with friends who have expressed interest in cutting back themselves.

You can get also really bold and share it with an online community. There are great advantages to sharing a goal like this with a group of like-minded individuals. One of my favorite communities for sharing a goal is 43things.com. The idea behind 43things is to have a place where you can publicly list your goals, share your progress, and cheer on others with their goals.

Action #5: Set a date with your partner or other members of your household with whom you share responsibility for your expenses.

Right now set up a meeting with your partner to go over your current expenses three days from now. Tomorrow we’ll be preparing for that meeting. It is important to get your household on board with your goal and to let them know ahead of time that you are enlisting their help. Everyone responsible needs to look at expenses. Yes, I know this will be a difficult conversation in many instances. But for now just set up the date. You will need at least two hours. Set this up as an appointment now on all relevant calendars.

Whew! That’s it. Day 1 is accomplished. Not all days will be as an intensive as Day 1, but we had a lot of organizing to do. You had a lot to do the first day, and now it’s done—reward yourself. Relax.

Day 2: Collection Day

Welcome to the second day of taming your expenses. I like to call this collection day. In a sense, your bills, many of which might be the results of consumerism and might have brought you to living beyond your means (you’re not alone!), require a day of reconciling; everything is coming due today.

Are you ready? Okay, here’s what you are going to do.

Action #1: Look at the goal you set for yourself on Day #1.

Every day look at that goal and stay focused on it. Guess what—you have only 29 days left!

Action #2: Gather up all your paperwork.

Gather up a copy of all your recent bills and put them in your manila folder. This includes statements for credit cards, utilities, cable, internet, the mortgage, and so on. If you pay your bills online, then you will need to print out a copy of last month’s statements. Also find a copy of your recent bank statement and put it in the folder. You’ll be going through these expenses. And finally, grab a month’s worth of paystubs and put them in the folder.

Action #3: Make a list of other expenses.

Almost everything you have spent may show up already in your statements if you use a bank card for all purchases, but think about expenses you have that won’t show up in this month’s bank statement—a one-time expense or quarterly expense. For example, that subscription to TV Guide or Newsweek or a quarterly auto insurance payment. Either write it down or slip a copy of the magazine or newspaper in your folder to remind you later. Think about activities you regularly pay for—fees for a sports league or piano lessons for the kids.

Do you still use cash a lot? Good for you—except, unless you are diligent about keeping receipts, cash is harder to track. Using a bank card, if you can control how often you use it, is great because you get a statement every month; you can see exactly how many times you went to Starbucks. Think about any regular expenses you may pay for with cash. You don’t need the exact dollar amount, just jot down approximately what you spent on the list. Remember, put the expenditure here only if you are using cash and it isn’t showing up on another statement. Here are some examples:

Latte Twice a Day

Car Detailing

Lunch or Dinner Twice a Week

Daily Big Gulp from 7-11

Sunday New York Times

Annual Fishing Trip

Twice a Year trip to see Family

$40 cash you regularly pull out of the ATM every payday

Later when we review this list, we’ll begin to determine what’s important, what‘s not, what can be eliminated completely, and what may be adjusted for just a cutback. For example, you aren’t willing to give up your lattes completely, but you may decide that you will buy only one a day instead of two, or go only 3 times a week.

Crash Cutting Tip-seeing a list of how you’ve been living and knowing that you won’t be able to Live the same way in the foreseeable future may Deliver a huge shock to your system. Do not panic about the thought of cutting back drastically. You will have to cut back drastically, but remember, it’s only temporary. Bad times do end. Every recession is followed again by good times. You will have to make some hard decisions in the next few days, but you can do it. Again, do not panic.

Action #4: Add up your current income and current expenses.

We are going to some “back of the envelope” figuring of your income and expenses. If you‘re unfamiliar with that term, it means going for some simple, quick addition and subtraction. We aren’t looking for complete accuracy now. Just grab your bank statement and look for the total of your expenses for the month. Write this figure down. Now remember your goal? If you wrote down that you wanted to eliminate a percentage of expenses, multiply that percentage by the dollar amount of your expenses to find out the dollar amount you will need to save. Now write that figure underneath your goal. You now have a number to work toward.

Action #5: Gather up the coupon and ads section of the Sunday paper.

Find the coupon and ad section of the Sunday paper and put it aside for safekeeping. Don’t bother looking through it now, but it would be a good idea to put a sticky note on top of it with the date. Don’t get your scissors out just yet―you’re getting ready for a later exercise. Save this section and every new Sunday circular for the next 30 days.

If you are under the age of 35, you probably don’t get a printed newspaper. Don’t rush out and buy a copy if you don’t already receive it. Once we’ve gone through the exercise on Day 9, then you can decide if getting a Sunday paper is worth it. You could also synch up with a friend to share their supplement. And don’t panic—this action plan is not about cutting your grocery bill down from $300 to $30 using sales and coupons.  I seriously admire those folks, but for them, shopping for bargains is an extreme sport. But more about saving and shopping for another day. For now, just put the sections aside if you have them.

Day 3: Tracking Your Expenses

Yesterday you collected all your bills and statements in one place, and today you’ll set up a financial dashboard. You may already have a system for tracking your expenses. You may have Microsoft Money or another software package like Quicken. The best tools are those that are accessible and easy to use.

Action #1 Sign up for Mint.com.

If you already are using software programs like Microsoft Money or Quicken, or if you have another spreadsheet solution that works for you, keep doing what you are doing. If you don’t have a current solution, I’d like to suggest Mint.com.

Mint.com is an online money management and budgeting software service—and the best thing about it is that it’s free. It is a good tool and very easy to use—the service can get you up and running in five minutes. You can tie it in with many of your accounts—your banking, credit card, investments and so on―so that you have one clean financial dashboard to view all your financial transactions in one place. How can Mint be a free service? If you take an advantage of a special offer on their Offers page, then the other company pays them a referral fee. You’ll also be able to access your Mint.com account from any PC or mobile device, and your information will always be up-to-date.

What you’ll need to sign up:

Your e-mail Address

Account Information for your bank, credit cards, home loan, and investment accounts

Action #2: Look over your new financial dashboard.

If you’ve chosen to sign up for Mint.com, now take a look around at your dashboard. There are currently five tabs on the dashboard—overview, transactions, trends, investments, and ways to save. Right now we’ll take a step through each one.

Overview

On the overview page, you’ll see a listing of your accounts—cash, credit cards, loans, investments, property―and a quick look at your net worth and cash flow. There will also be a list of alerts. These alerts let you know if money was recently added to one of your accounts, remind you of bills coming due, or inform you that you’re being hit with a bank charge or fee. There will also be a graphic representation of your budget and where you’re spending is going for the month. You can also add or delete items to track in your budget.  The last box shows you where Mint believes you can save your money through better deals.

Transactions

The transactions tab shows you where all your money is coming from and where it is going. I personally like the way it shows you every account in one place. You can also zero in on a specific category from here to see how you are doing. Remember how we decided to cut back on fast food and dining out? You’ll see that Mint has categorized those items for you under Fast Food and Dining Out.

Trends

If you’ve just signed up for the service this tab, will be bare, but over time you will learn a lot. The trends tab will show you how your spending has changed over time. You can go back and look at specific months. Once you’ve started cutting back, this tab will be a great resource to watch your progress. Remember how I told you that I cut back on my own daily latte habit? Proof for me is on this tab. If I look at October 2007, I visited my favorite coffee chain a total of 25 times and spent $116. In February 2009, I went only 6 times and spent $29. Give me a virtual high five! In October 2007, I made 13 trips to the grocery store and spent $780 on groceries. In February 2009, I made only 3 trips to the grocery store and  2 trips to a warehouse store and spent $450. Give me another virtual high five!

Investments

If you’ve added your investment accounts, the investment tab will show you over time how your investments are performing. As it is for most folks right now, this may be the most depressing tab for you. Now don’t cry when you see your 401(k). How do you stack up against everyone else? If you hit the comparisons tab, it will show you how your investments are performing against the Dow Jones, NASDAQ, and S&P500. At the bottom, you’ll find a great little resource—it shows you your highest value investments, your best and worst performers, and the biggest movers in your portfolio.

Ways to Save

The last tab, Ways to Save, highlights deals on credit cards, checking, and savings. You can go through each area, adjust the filters, and find some deals. But for now, save that for another day.

Action #3: Add specifics to your overall goal.

Read through your overall goal one more time. Now, with your financial dashboard in front of you, find out what your expenses were last month, if you haven’t done that already. If your expenses last month were $3000, and you determined that your goal was to cut by 10 percent, now you know you need to trim $300 from your expenses.  Go back to the place you wrote your overall goal, and add this information.

Action #4: Remind your partner about your date for tomorrow night.

If you do not keep your bills all together, ask your partner to also gather his or her bills, bank statements, and so on together in one place. You can also, with your partner’s permission, set  up access to Mint.com and add those accounts as well.

Day 3: Have the Conversation.

Today is the day that you and your partner are going to sit down and look over all your expenses together and determine where you can cut back. If you don’t have a partner, have another family member or a friend sit down with you to go over your expenses. Make sure your relative or friend is someone who isn’t afraid to challenge your expenses.

What’s the number one thing that married couples fight about? Money. What’s one of the leading causes for divorce? Money issues. Most couples enter a relationship without exploring their conflicting ideas about money—how to spend it and how to save it. He usually buys video games two or three at a time, and she deliberates over every purchase and keeps track of every single expenditure in a spreadsheet. He has been cutting back to save money for a car; meanwhile, she just spent $300 on a new pair of designer jeans when she already owns five. She is obsessive about buying local produce, and her partner knows they can get a better deal at Wal-Mart. It is very rare (and it would be boring) to be in a relationship with someone exactly like you.

Think about your own personal relationship with money. Think about your parents and how they grew up and the ideas about money they imparted to you. Do you agree with your parents or do you differ from them in your financial habits? Think about your partner the same way—what drives that person’s relationship with money?

The conversation you have today will be important. Things may get ugly, old arguments may surface, and accusations are easy to make that the other person is in the wrong when it comes to money. Just remember to be prepared, and try to keep the discussion on target. This is not about you accusing your partner of spending way too much; this is about you both finding ways to cut back. The good thing about this exercise is that it offers the two of you an opportunity to take a look at each other’s expenses and suggest changes. Just try to keep it light and if the tone turns bad, try to pull it back to a better place.

My husband and I had this conversation. It wasn’t easy. We have completely different relationships with money. I can walk into any bookstore and easily spend $100 without blinking an eye; my husband will wear a pair of shoes until they fall off his feet. I like to buy a lot of little items and find it hard to save for big purchases like furniture, while he buys big things like cars only because “I can sell this later and make a profit.” This is why we have a house full of books, a yard full of cars, and mismatched furniture. My husband goes out for dinner rarely, and I chose a career that involves taking people out. I like to have fun and take vacations; he is content to work seven days a week as long as it’s toward our retirement.

Over the years, we have made our partnership work to our advantage. When I met him, I had just accepted a well-paid job but had a leased car and $23,000 in student loans and credit card debt. While we were still dating, he convinced me to turn in my leased car and to pay off all of my debt. I taught him how to take some time off, while he showed me the advantages of taking care of my money. We have made short-term and long-term goals that we are on schedule to meet for our retirement. I learned to save and invest my income. We both saved enough to buy homes, which we then sold with profit sufficient to allow my husband to start his own business.

But like everyone else, we have had to take a step back and adjust our plans based on the economy. We had reached a place where expenses like utilities had climbed and our groceries had skyrocketed and our money wasn’t going as far. And our investments took a hit. We held our cutting-back conversation over two different sessions. One day, we looked at his credit card statement and our checking account. Then a week later, we went through my Amex and the rest of our bills. It was uncomfortable at times, but we were also able to give new perspective to each other, and more important, we made the decisions together.

Joint decision making is really what this conversation is about. Painful as it may be to discuss money, having the conversation is an important part of your partnership. If times are bad, then this is a good time to be there for each other.

Action #1: Gather your folder with all of your bills and statements.

Find the folder you set up yesterday and bring it with you to the conversation.

Action #2: Distract the kids or block other possible interruptions.

If you have young children—make sure they are occupied during this conversation. My favorite tactic is to put a two-hour movie in the DVD machine. Make sure they have snacks and a drink.

Action #3: Set the ground rules.

Make your own, but if you need help here are some suggestions:

No yelling.

Back away if either partner gets upset.

Welcome suggestions.

Remember that this is a temporary situation—it may help to keep in mind that if you decide to turn off cable, it doesn’t mean this deprivation is forever; it’s just for the next few months until things are better.

Keep your focus on what is important to you both.

Be flexible.

Action #4: Go through each bill and statement and look for areas to cut back.

Have your notebook and a pen and then go through each statement and bill together. Write down any suggested ways you can cut back, and write down the dollars it will save. Hard as it may be, let your partner look at your credit card and bank statement. He or she may be able to question an expense and give a suggestion because it is always easier to make suggestions about how other people spend their money!

As you go through each statement, here is what to look for:

Services or subscriptions you can cancel or cut back immediately

Services and subscriptions to investigate for hidden savings

Regular expenses you can cut back on

Services and Subscriptions

Look for services or subscriptions you can cut back on or cancel immediately. You can decide not to renew a magazine subscription or to cut your daily newspaper back to once a week. Check your credit card statement for Web services you are no longer using. You may have signed up for something months ago, such as a subscription to a diet Web site or a genealogy Web site that you aren’t using on a regular basis. If you have a Netflix subscription, consider cutting back the number of movies you have at one time (we’ll spend a whole day later on entertainment). Make the decision to cut back on the premium cable channels.

Services and Subscriptions to Investigate Further for Hidden Savings

Think about four particular expenditures: cable, home phone, cell phone, and Internet access. See if you can make immediate cuts (like canceling premium services or cutting back on minute plans), but also make notes about what to investigate for further savings. Right now, the cable and satellite providers and the phone service providers are battling with each other to give you a better deal. Take advantage of that.

Take a look at what you are spending on transportation—car payments, insurance, and gas. Make a note if you want to look further into the following—getting rid of a car or saving on fuel by switching to other modes of transportation. Make a guess how you’d like to cut here, based on the overall goal you set.

Regular Expenses You Can Cut Back On

Looking at your electric and gas bills should spark a discussion about how to cut back by using less. That means deciding together the ambient temperature of your household and who will be on patrol to keep the lights out. Get creative and get green. On another day, we’ll talk about specifics on utilities. But for now, take a stab at how much you want to shave off your future bills, and write it down.

Some everyday expenses can add up big. If you are an average coffee drinker, according to the Specialty Coffee Association of America, you drink 3.2 cups of coffee a day. The average specialty drink costs $2.45. If you drink two of those a day, that is about $140.00 a month. If you can’t go cold turkey, at least cut back. Try one a day instead of two, three trips a week instead of five. Soft drinks, fast food, and snacks are other little expenditures that can be cut back. They are bad for you anyway, and you know you’ve been meaning to cut back! Another big expense is food—for both dining out and groceries. You don’t have to eliminate eating out completely, but make a few decisions now, and put a dollar amount down that you think you can spend for eating out.

When you looked at your bills, you may have been surprised at how much you are spending on groceries. Look again and see how many times you are going to the grocery store. More on that for another day, but write down that you plan to cut back on your groceries by a percentage or dollar amount.

Look for other expenses that can be trimmed. Trimming may not mean complete elimination so don’t panic, but do note some. Here are some examples:

Salon visits

Insurance other than car or health coverage

Mortgage

Decorating

Happy hours

Vacations

Lessons or classes

Household items (this means all those trips to Target, Wal-Mart, and so on.)

Crash Cutting Tip-You will need to make major cutbacks now and quick. Again—remember this is just for now. Make a game of it and see how drastic you can cut back. Look at things in terms of what you will need for your job search. Cutting cable would be a good idea, but not eliminating your internet provider if you need it to do your job search. Even if you have a savings cushion, cut back as if you don’t. If you get another job next week Great, but the average job search now takes XX, you need to be prepared to be without work for now. It is easier to make cuts now than later.

Action #5: Thank your partner.

The hardest action item is now behind you! Even if things got a bit ugly and some yelling occurred, smile and tell your partner you love him or her. Thank your partner for going through this exercise with you and tell this relieved human being there is no one else you want to go through an economic downturn with!

Tomorrow you’ll start working on the cuts you’ve made by making a few phone calls.

Day 5: Make a few phone calls.

Yesterday was perhaps the hardest step in your 30-day plan, and now it is all about putting your plans into action. Today, you are going to make a few phone calls and write a few e-mails to cancel services or make the cutbacks that you had immediately identified. For now, set aside any services you are planning to research for a better deal—this includes phone, internet and cable service providers. Also put aside any services that will impact a local small business—like your gardener or landscaper. We’ll talk about that on another day.

Action #1: Cancel services by phone.

Take out your list of cutbacks. There will be some you can handle through e-mail and the Web, but others will require a phone call. Start with the phone calls because they require the most time and may require callbacks. Many companies have 24-hour support for billing, while others are limited to regular business hours. Call each company on your list and keep track of the following:

  1. Date
  2. Name of company.
  3. How much money you’ll save by canceling the service.
  4. If no one is available to help you, write down the call-back hours.
  5. If you do reach a real person—a company representative―tell that person you need to cancel the service.
    1. Be prepared for obstacles. The company may want to offer you a better deal to keep your business. If it sounds like a good deal, make a note of it and add it to your list of research topics. Tell your contact you need to discuss it with your partner, and find out if there is a special code for this deal.
    2. Write down the confirmation number for the cancelation.
    3. If you need to turn in any equipment—find out how and where.

Action #2: Cancel Web services.

Now that the first round of phone calls is out of the way, it is time to get online and cancel extra Web services. Your list includes any Web subscriptions you pay a monthly fee for—including services such as Netflix, eDiets.com, Ancestry.com, music subscription providers, and others. Many companies hide their cancelation process some layers deep in their Web site. A few may even have you call in. The most likely place to find information about cancelation is in the Help system, Support page, and in FAQs.

As you did with the phone calls, follow the same steps keeping notes:

  1. Date
  2. Name of company.
  3. How much money you’ll save by canceling this service.
  4. What questions the company representative asks you .
  5. If you have to make a phone call—write down the number and call.
  6. If cancelation online is available—take the steps to cancel.
  7. Write down the confirmation number for the cancelation.

Action #3: Add up the money you just saved.

You’ll have service providers on your list that you didn’t reach today and may have to call tomorrow. But quickly add up how much money you have already saved yourself. At this point, don’t worry that some of your services will send you a prorated bill this month. It feels good already to see that number, right? Now compare that to the dollar figure you came up with for your original goal. How does it compare? How much more saving will you need? If you are like most folks, you may have been surprised at the amount you were spending on some items. Now take the monthly totals and multiply them by 12. That is how much you will save in a year’s time!

Day 6: Follow-up, Research, and making some mini-goals.

Today is for finishing up your service cancelations. You’ll also start researching better deals on your phone, cable, and Internet providers. Then remember how you decided you were going to cut back on expenses like lattes, eating out and other luxuries? Today you’ll make some mini-goals around two expenses to stay on track.

Action #1: Make clean-up calls and cancelations.

Go back through your list from yesterday and continue making any calls or cancelations that were delayed or missed from yesterday. If you were offered what sounded like a good deal to continue a service, then talk it over with your partner and make a decision. If the decision is “no,” then cancel the service.

Action #2: Start research for better deals.

You may have decided to research several items. Right now, today, we will concentrate on your communications group—this includes your home phone, cell phone, cable/satellite and Internet service provider. I’m linking them together because there are a lot of package deals out there right now if you use the same provider for multiple services.

One way to find a better deal is to check Mint.com. Based on your current bills, they will have suggestions for you on ways to save on your phone, Internet and cable providers. But don’t take their word for it; do some Internet and phone research.

For months, I received mailings from my cable provider and my phone provider.  Each was now offering high-speed Internet access, phone, and cable services in my area. When my husband and I decided to cut back, we determined we would save money by picking one service over the other. There were advantages to each, especially in the short term. But we wanted a plan that would suit us for the long haul. We researched the deals on the Internet on their sites, and then we called both providers and asked them questions. I also found discussion forums on the Internet and read discussions by customers about which service was better. I found some great digests of information by local people that gave me some good reasons to choose one company over another.

We also determined that it was time to get rid of our home phone service. We debated this a while, but since we both have cell phones and no one but solicitors ever used our land line, we decided we could try living without it. I also called my wireless provider and cut back on services on my cell phone. I could access the Internet several ways including my phone, so I decided to cut the service and also cut down on my texting plan. The customer service rep also discovered that I had an extra $9.99 fee that wasn’t originating with the phone company. This was a bogus fee—I had inadvertently signed up for something through Facebook and this company was texting me every month, and then charging me a $9.99 fee! I had no idea this was on my bill—so check your bills! The customer rep was even kind enough to connect me directly with this texting company so I could cancel the service.

Action #3: Write down tasks for cutbacks.

During the conversation with your partner, you identified some areas for cutback that included things like coffee, entertainment, dining out, and reducing your expenditures on groceries. I hope you wrote those down. Identify two of those items right now, and we’ll go through the steps of setting up mini-goals for them.

Step One: Choose the two items for cutback.

Go through the list you wrote down with your partner and identify for now two items for cutback. A likely area for cutback was on groceries. Leave that one for now because we’ll give your groceries its own day in the next week. Pick two areas of regular expenditures—such as daily lattes or restaurant meals. Later you’ll have the chance to list some other goals. For now, we want to focus on two; more than that at this stage could become unmanageable.

Step Two: Create a subgoal or task for each.

Using the same steps you did on Day One, write a goal for each of these items. All tasks should relate to your overall goal of cutting back. Here are some good examples:

I will limit my lattes to once a day and will drink brewed coffee the rest of the day for the next four weeks.

I will buy fast food only on Wednesday evening for the next two months.

I will go to the movies only twice a month in the next three months.

I will find a cheap or no-cost entertainment source for my kids every other weekend for the next six weeks.

I will buy only two pay-per-view movies per month for the rest of the year.

For myself, I found two areas to cut back on–I decided to cut back but not completely eliminate my daily trip for a latte and to cut back on fast food. When I looked at my expenses, I found that I was buying one latte (or during special seasons, Peppermint Mochas) on the way to work every morning (and often having an apple fritter or scone thrown in to boot). On the weekends, I got up before everyone else to make a run to a local stand to get my latte.  I was spending around $120 a month!

To make it fun, I didn’t completely eliminate my trips, but I did get creative. I requested a coffee machine for Christmas—not a fancy one, but a brew machine. I started brewing my own coffee on the weekends to eliminate that extra early trip. I then cut back my trips through the local coffee chain’s drive-thru to 2 or 3 times a week and then drank brewed coffee at the office. I got lucky—we had a special fancy machine at work that had been installed recently.  It brewed and dispensed a nice cup within 2 or 3 minutes. I then started creating my own “mochas” by adding chocolate milk to my cup. I also brought into work my favorite tea to enjoy in the afternoons. I then experimented by trying a couple different brands of coffee for home and settled on Dunkin’ Donuts Hazelnut blend.

About this time, I got serious about losing some weight, so cutting back on the fancy drinks actually helped me lose weight (as did not buying that apple fritter). If I added up my new expenditures―the latte from an espresso stand two or three times a week, the pound of coffee and pint of half-and-half for home, I’m now spending around $30 a month. This is a savings of $90. I’m happy because I’m not denying myself something completely, but I now have a more reasonable habit.

When my husband and I had the conversation and looked over our bills, we discovered we were getting fast food two or three times a week, which wasn’t helping our waistlines or giving our kid a nutritious meal. But it had become a habit; we were busy, and sometimes hitting the drive-thru was a last-minute decision. We decided to make Tuesday night fast food night. Our child adapted to this the most easily of the three of us—it gave her some structure and stopped her begging on the way home (which a tired mom would often give in to). She now looks forward to Tuesday night. Suppose you hit the drive-thru twice a week at $10 or $20 a week or $1,040 a year. Just cutting that back to once a week will save you $520 a year.  Of course you still have to pay for food to eat at home, so that expense may have been partially added to your grocery bill. But remember that little cuts combined can be a surprisingly large number.

Step Three: Write down a subgoal or task for each.

Now that you’ve made the decision, go back and write or type your task under your main goal. It’s important to keep them together in one place.

Now go back through your bills and add up what you spent last month on each of these items. Then figure out what you will save on these through the cutbacks. Enter this amount on the savings sheet.  See how close you are getting to your original goal? It’s possible that if you stuck to your plan, you may reach your goal right now. I would put off changing the goal if that is the case. Better to overachieve than to miss the goal! And you don’t know what emergency expenses may be lurking around the corner.

Day 7: Clean-up Day

Congratulations! You are now wrapping up Week One and are a quarter of the way to your goal! Today we are just going to do some clean-up calls and review.

Action #1: Finish up calls and e-mails.

Finish any call backs or tracking you need to do to eliminate your first round of cuts. And make any calls for better deals you determined from your research from yesterday.

Action #2: Finish (or carry on) research for better deals.

Wrap up any research from yesterday that you may have been waiting on—discussions with your partner, information you were waiting on, and so on.

Action #3: Gather up Sunday’s ads and coupons.

Gather up any circulars or ads that may have arrived since the beginning of the week, and put them with the ones you gathered at the beginning of the week—don’t forget a sticky note to identify the date of the newspaper.

That’s it! You are done now with Week One! Congratulations and go find a no-cost or low-cost way to celebrate.

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