How one woman and her reluctant family slashed their spending - and shrunk their credit card debt
By Ginny Graves
Graves familyThe conversation took place while we were driving to the mountains for a short ski trip over the kids' February break two years ago. A part of me knew it was coming - knew it, and dreaded it. For the holidays, my husband, Gordon, and I had surprised our 14-year-old with a fancy (read: expensive) mountain bike and our 12-year old with a long-coveted video game system - plus the usual hoodies, books, and stocking stuffers. We were both struggling with our annual post-indulgence hangover, only this time the feeling was more acute. We had four years to save for college, 20 or so years to add to our meager retirement accounts. So I wasn't surprised when Gordon glanced at me glumly and said, "We have to stop spending so much money."
Our money conversations usually fall somewhere on the spectrum between awkward and acrimonious, which is why we discuss finances about as often as we hash over his prostate health. But that day I knew Gordon's comment wasn't an accusation; it was an attempt to reach an amicable accord. "Yeah, you're right; we've been a little out of control lately," I agreed.
We'd always kept our money completely separate, on the theory that our erratic incomes and inherent disorganization would doom any attempt at joint banking. Besides, I'd never wanted him scrutinizing my spending habits any more than he wanted me poking around in his. Our arrangement had helped us avoid big money battles, but with no spousal oversight, we'd both been guilty of spending too much and saving too little. "Maybe we should each make a budget," I said tentatively, a part of me secretly hoping he'd say no.
He already looked more cheerful. "Let's do it when we get home."
When we got home from our trip, there was a copy of a book in our mailbox, sent by my editor at Good Housekeeping. Called Wealth Watchers: A Simple Program to Help You Spend Less and Save More, it applies the principles of Weight Watchers to finances. The premise is simple: Set a daily spending goal, just like you'd set a daily calorie goal, by determining how much cash you actually have available to spend every day; track your daily spending; and watch the debt (like the pounds) melt away and the savings pile up. Alice Wood, the book's author, says she and her husband spent $12,000 less the first year they followed the program than they had the year before. I couldn't imagine cutting even a tenth of that, but I was willing to try.
We resolved to put ourselves on a financial diet. We broke the news to the boys over dinner one night. Will, the older and more emotionally savvy of the two, said it sounded like a good idea, while Griffin moaned, "Awwwwww, nooooo! Why? We won't ever be able to do anything!" We assured him that we intended to trim the budget, not machete it - that we just wanted the whole family to become more aware of the difference between wants and needs.
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Pen and paperHOW TO START
The first step in the program sounds simple: Fill out a monthly budget worksheet. All I have to do is subtract my fixed and semi-fixed monthly expenses - things like the family phone bill, health and car insurance, gas and electric, and debt financing - from my monthly net income (after taxes) to determine the amount I can spend every month without going into more debt, then divide that number by 30 (the average number of days per month) to arrive at my daily spending allowance.
"Make a conservative estimate of your monthly income. Think negatively. People always believe they're going to make more and spend less than they do. That sort of optimism can be ruinous," Wood says.
Embracing my inner pessimist, I jot down a low-ish monthly income, then subtract my fixed monthly expenses. By the time I reach the bottom line, I'm a little nauseated: I have $90.73 to spend per day. But I often spend $200 or more in a single trip to the grocery store! When I mention this to Wood, she says it's fine to blow past your per diem one day, so long as you make up for it by spending less over the next few days.
It turns out my daily allotment is just $5 more than that of Charlie and Susan, who've been unemployed for a year - and it's all because I need to put so much toward my credit card debt. I have four cards with balances; Wood says you should never have more than two cards and they should be paid off monthly. I use all but one card infrequently, and always make more than the minimum monthly payments, but even so it will take nearly five years of abstemious scrimping to pay them all off. I'm starting to understand the consequences of that mini Everest of debt - and the necessity of digging out.
I should count my blessings, though. Plenty of people who do Wood's calculations find that their fixed expenses exceed their income, a situation that makes the next step in the Wealth Watchers program - finding ways to minimize your fixed and semi-fixed expenses - not just helpful, but critical. Wood says she saved $7,000 a year just by finding lower-cost car, health, and life insurance.
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Starbucks cupWEEK ONE
Scrutinizing My Spending
The Wealth Watchers plan requires you to write down every single thing you spend every single day. Will wants $5 for lunch? I dig through my purse, find the notebook included with the book, and write it down. I've spent $9.74 for a new razor, or $3.26 for a latte? Down it goes in the notebook.
I know enough to stay away from Nordstrom and Anthropologie when I'm trying to save money, but one afternoon I stroll into my favorite consignment store - used equals cheap, right? - where I find racks of trendy summer shirts. I already own enough shirts to clothe a small village, but I pull a few out and try them on anyway. They all fit perfectly. Together they come to $72, not much below my daily spending allowance. With regret, I start to put them back. Then the saleswoman says, "Did I mention that today only, all shirts are 15 percent off?" My credit card is out of my wallet and on the counter before I can think, What would Wealth Watchers say? The total, including our 9 percent sales tax, is $66.70. "What a great deal!" the saleswoman chirps.
But when I log the purchase in my notebook, I can hear my own lecturing-the-kids voice ask, Now, Ginny, tell me: Was that a want or a need?
What I need - far more than another top - is help getting my several-hundred-dollars-a-month clothing habit under control, so I call Sally Palaian, Ph.D., a psychologist and money coach in Detroit. When I describe my dizzyingly fast splurge, she says, "There are certain words, like 'sale,' that can trigger spending. You need to build in a buffer period - time to think about every purchase before you buy it. Next time you want something, wait a day, or call a friend and run it by her. Another thing that's helpful is to tape a note to your credit card that says, 'Do I really need this?'" The note strategy works well, I find, when it comes to sweet treats. When I ask myself, Do you really need a coffee drink or a cupcake -- expensive and caloric? the answer is always no. But clothing is harder for me to resist.
Clearly I need all the help I can get, so I also decide to try a wacky strategy I heard a friend mention not long ago: I put my credit cards in the freezer - a symbolic move that will, hopefully, put a chill on my shopping.
WEEK ONE REALITY CHECK
$3.47 under budget. Time to buckle down and get serious.
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Gallon of milkWEEK TWO
At more than $1,000 a month, food is the single biggest discretionary expense in my budget. We eat out just once or twice a week. The bigger problem is the grocery store, where I shop aisle by aisle, loading up the cart with random items - a sure way to overspend, according to Wood.
I try to become a list-maker. After just two attempts I realize why it doesn't work for me: a) our tastes and schedules are unpredictable, so the chicken I buy for Tuesday sits till Friday, when I end up throwing it out; b) I forget to put things on the list, so I'm forever running back to the store for, say, eggs or apples; c) I hate shopping with a list - it's too regimented, too restrictive, too un-fun. I like to let whim and taste guide me.
The question is, can they guide me to less expensive items? Turns out, they can - sort of. I buy less meat and more fresh veggies. In place of the mango, papaya, and pomegranate juice the boys glug down by the jugful, I buy frozen OJ and powdered lemonade -- not as healthy, but a significant savings. The boys agree to take sandwiches from home rather than buy their lunch at school every day, and when they hear the price of a surf camp they wanted to go to in the coming summer, Griff says, "That's stupid. We don't have to go."
An obvious way to cut our expenses would be to buy conventionally grown food instead of organic, but I'm torn. For years I've shelled out for organic because I believe it's healthier and better for the environment - and in northern California, where I live, it's considered practically negligent not to buy organic. But the price! I dither for a full five minutes in front of the milk: Should I continue forking over $6.99 for a gallon of organic or save $3 by switching to regular?
For help, I employ an eye-opening calculation Wood calls The Power of 365. "Multiply any potential savings - even $1 - by 365 days a year, and you'll get a graphic sense of its value," she says. "A $4 latte every day costs $1,460. That's a pricey habit."
After much agonized mulling, I fall back on my own mathematical equation: Guilt Calculus. The guilt I feel over spending the extra money is less than the guilt I would feel over watching my kids chug down glass after glass of potentially chemical-laden milk every day. I buy the organic.
In the produce department, I'm paralyzed again by the organic-versus-conventional impasse. Brain sputtering from decision deadlock, I leave with just one bag of organic grapes ($3.99 a pound, versus $2.49 for conventional).
WEEK TWO REALITY CHECK
$80.08 under budget. I rock!
Learn how the Graves family scrimped in weeks three, four, and more than a year after their savings project began!
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