My husband and I have had our ups and downs when it comes to jobs and incomes. We were doing our best when he was a mortgage officer in our small town. Then we all know what happened. The housing industry tanked and he was left without a job. He scrambled and found a job in another local town but it was an entry level job. He has great potential to gain raises and promotions but in the meantime we must live on a reduced income. Despite our financial struggles we have successfully continued to live debt-free. (Note: I am defining debt-free as no other debts than our mortgage.) Here are the strategies we use to live within our income.
1. No Credit Card
We have no credits cards. Zero. We shredded all our credit cards when we made the commitment to live debt free. Having credit cards is only asking for debt. It is way too easy to swipe that plastic when you see something you feel like you need. Sure, it is easy to say that you will pay the credit card off each month and that is exactly what we did most of the time. But, there were often times that we justified a purchase and found we couldn’t pay the card off after all. We use our debit card for anything we would use a credit card for. It is a fact that you can use a debit card to reserve a hotel room, get a rental car, etc. just like you would using a credit card. We have done it many times without a problem. You can tell any cashier to run a debit card like a credit card and it will go through and it will offer the same protections as a credit card.
2. A Written Budget Each Month
We sit down at the beginning of each month and write out a budget. We give every dollar my husband and I earn a name. We keep this written budget in a binder and we record every purchase or bill we pay. That way we can actually see where we are. Are we still under budget in that category? Or are we going over and need to make adjustments? It isn’t fun to make the budget each month but we have found it essential to living debt free. It is hard at first to get into the habit of making a budget but after a few months it becomes second nature.
3. Pay In Cash
We are firm believers in the “envelope system.” When we are doing our monthly written budget we calculate how much cash we need to withdraw for certain categories. We pay for certain things like groceries, family fun events, dates, yard supplies, clothing, and haircuts in cash. Each category has a labeled envelope and the money goes in there. When I make a clothing purchase I pull the money out of the clothing envelope. Paying in cash guarantees that you don’t overspend. If the money isn’t there, it isn’t there. You can’t make a purchase. The key is to never jump envelopes and borrow money from another one. That is just another form of debt.
4. Cook From Scratch
My favorite strategy is to cook as much as we can from scratch. I have saved so much money buying whole ingredients instead of pre-packaged items. If I maintain a basic inventory in my pantry and refrigerator at all times there is an enormous amount of food I can make right there in my kitchen. It is almost like grocery shopping in my own house. Not only is the food bill way down the food is also far more delicious and nutritious. There is no going back once you start cooking from scratch.
5. Buy Used Whenever Possible
Just about everything in our house was bought used. We keep our eyes open for deals at yard sales, thrift stores, and on line. We buy used but we don’t buy junk. We make sure it is high quality and a good deal. The one thing I generally buy new each season is my son’s shoes. We get him one pair of shoes twice a year and he wears through them rather quickly. I would rather do that than have to keep buying shoes. So much money has been saved by buying used. It gives us the opportunity to have more even on our small income.
6. Be Strategic in Using the Car
We do have two cars. My husband needs a car for his commute each day and I need a car for errands and my part-time job. I’m sure we could figure out a way to have only one car if I didn’t currently work my part-time job. But, right now that income justifies the extra car. With that in mind I am strategic in my use of the car. I make a point to plan all my errands on one particular day. I also only grocery shop on one day every week. That way I am not running to town for a gallon of milk. It does take some planning but it isn’t that hard once you get the hang of it. I also try to have at least two days a week when I don’t use the car at all. We love our stay at home days because we get so much done at home while being relaxed.
7. Rarely Eat Out
We rarely eat out. We never eat out during the work week and my husband carries his lunch to work everyday. Eating out is saved for the weekend. Sometimes we use our date money to get little things like a coffee here and there and maybe an ice cream and sometimes we save the money for a bigger dinner. Whatever we decide we always use what we call our “Fun Money Bag” to pay for it in cash. We try to be strategic here too because it is no fun when the money in the Fun Money Bag runs out.
8. No Cable or Satellite
We gave up cable a long time ago when we could not longer include it with our Internet. It was an adjustment at first but we got used to it. The biggest thing we do for home entertainment is we subscribe to Netflix. We pay way below what we would pay for cable or satellite and we have enough TV and movies for our tastes. And now that Netflix offers “Watch Instantly” streaming with most of their packages it makes it an even better value. We also sometimes watch TV episodes on Hulu. Having no cable just takes a little patience in waiting to see TV shows and movies but the money saved makes it worth it.
9. Sell Items on eBay or Craigslist
Every few months or so I go through the house and find items we don’t use anymore and I sell them on line. We either use eBay or Craigslist. There is no real system to this. I just do it when I feel like I am drowning in clutter. We get rid of the clutter and we get cash in the hand. It is a win-win situation. Whatever doesn’t sell goes to our local thrift store.
10. Maintain an Emergency Fund
Maintaining an emergency fund may be the hardest strategy but it is one of the most important. Everyone needs to have at least three to six months of income saved in the bank. It is hard getting there and it takes sacrifices but it is so very important. The point to maintaining an emergency fun is for those times when something unexpected happens. What happens when your clothes washer breaks or you need a major car repair? What happens if thee is a long illness that is not covered by sick pay? You make withdraws from your emergency fund as needed instead of a credit card. And then you repay the money you used as soon as you can to build the emergency back up. The emergency fun is like having a little pillow to fall on when you need it. It provides security and a bit of relief.
Bonus Tip: Contentment
The biggest strategy that my husband and I learned for living debt-free on a small income is learning to be content and grateful for what we have. It is true that we have far less than the majority of America but we have far more than the majority of the world. Once we took a more global perspective we realized how blessed we really are. We have a beautiful house, two cars, clothing, food, entertainment, and medical care. We are blessed and overflowing. It is easier to live with what seems like a little when you realize it is in fact much.