Friday, September 18, 2009

Budgeting 101 - Part 5, Shelter

We have two walls of our budget perimeter in place, God and Food, so now we turn our attention to the East boundary, which we call, 'shelter'.

Again, without trying to become too repititve, the walls of our perimeter come before ANYTHING ELSE.  We budget and pay these things first, regardless of who screams, calls, threatens or postures.  We're going to pay ALL our debts, to be sure, but one of the fundamental behavior modifications in Recession Proof Living, is correcting our priorities and sticking to them.  It will be hard, sometimes, especially if others are hounding us for payments, but if we do the right things, and do the right things right, everything will turn out right. 

Ok, back to the East boundary.  We want to keep a roof over our heads, we want to keep the lights, on, stay warm and dry, etc. so our third priority is, shelter.  Under shelter, I include, electricity, heat, house payment and basic phone service.

Let's take them one at a time:

Electricity:  We are fairly dependent on Ben Franklin's discovery these days, so paying the light bill is high up our priority list.  We use electricity for light, running appliances, powering our telephones (in most cases) and sometimes even for heating our residences.  Therefore, I recommend staying current on the electric bill.

I also recommend doing all we can, to keep the electricity bill as low as is reasonable.  There are many things we can do to save on electricity:

  • as light bulbs burn out, replace them with the new energy saving flourescent kind.  They are more expensive to buy, but consume only a fraction of the power and last for years.  You will start saving the very first year
  • turn lights off when you leave a room
  • use window air conditioners rather than central air (where practical) and only cool the rooms you're in.
  • set air conditioning at something like 78 rather than 68.
  • open windows and use electric fans when weather permits.  It's much cheaper.  Besides, I'm sure you're mother told you, "Fresh air is good for you!"
  • lower the thermostat on your water heater
  • run dishwashers and clothes washers and dryers only with full loads.  Better still, air dry (when possible and practical)
  • unplug computers, televisions, printers and other non essential appliances when not in use, to save on 'electricity leak'.  I don't recommend unplugging the refrigerator.  I'm just sayin'.....
Hopefully, these tips will get your creativity cranking and you'll think of other ways to save.

Now, let's look at heat.  The best way to save on heat is to set your thermostat lower.  Brittan and I are famous now, for setting ours at 62 degrees in the winter.  People think we're crazy.  We think we're crazy like a couple of foxes, when our heat bill is a fraction of those of family and friends.  We do turn it up when we have guests, because not everyone is acclimated to our world.

We stay warm with layers.  It's a little trick I learned living in Scotland, where frugality has reigned for centuries.  Americans want to be able to run around the house in our gym shorts in January and be comfortable.  And that's ok, if you have piles of cash somewhere, but most of us don't, so we shouldn't act like we do. 

I like to wear sweat pants, or similar, on winter evenings.  I complement those with comfortable slippers and a nice ankle length house coat that Brittan bought me some years ago.  And I promise you, I am never cold.  Brittan, dresses similarly.  She accessorizes with some nice throw blankets that we have on our sofa and chairs.  She usually has a dog or two sitting in her lap as well, which helps. 

The point is, we are comfortable and save a bunch of money.  Anyone can do it.  It's all about common sense and behavior change.

If you have a wood burning fire place, use it.  But don't buy wood.  Go out to the woods and pick up your own.  Spend some time in the summer splitting logs and letting them season.  You need the exercise, anyway.  You know you do.

We close the vents and doors in rooms we don't use, to avoid wasting heat on empty spaces.  Again, there are lots of ways to save on heat costs. 

House payments.  Really, the only way to save on these is to make sure you don't have 'too much house'.  If you're a home owner, your payment should not exceed 25% of your take home pay.  I know that some lending institutions will loan higher, but that's because they have their own best interests, rather than yours, at heart.  You should have a fixed rate mortgage.  Any other kind will do you more harm that good in the long run.  If you're renting, make sure you look around and get the best deal possible. 

Keep in mind, that being a home owner also means things like, property taxes, water bills and etc. that must also be budgeted.  I recommend using the same formula that we do for everything else.  Using property taxes, take the annual tax bill and divide it by your number of pay days.  In my case, that's 26.  By doing so, you'll know how much to set aside in each pay period.  Use a simple money market account or savings account for this.  It's not an investment.  It's merely a place to set the money aside to pay it when it's due.  I don't recommend wrapping your insurance into your mortgage payment.  All that does is loan the money to the mortgage company.  I'd rather pay......ME.  I don't get much interest from my little savings account, but at least I'm in control of it.

Next is, basic phone service.  We need to be able to stay in contact with family, friends and emergency services.  These days, most companies offer unlimited long distance in the basic service for a pretty low price.  In fact, telephone service is cheaper now than it was when I first got out of college many years ago.

Don't go crazy with a bunch of add on services that you don't need.  And you'll notice I said nothing about cell phones, unlimited text messaging or premium cable.  You don't NEED any of those while you're trying to save money.  That is poor stewardship of your resources.  The key word is BASIC.  Sometimes, often, in fact, cable companies have some great deals on 'all in one' serivces for phone, cable and internet.  Shop around.  Do the math.  Make good choices.  The best financial choice may be basic phone, no cable and dial up internet..... for a while.  When you need high speed, go the the public library.  It's only for a while.  I'm not talking forever.

In our case, we were able to maintain a great rate on an all in one package the whole time we were in our 'get out of debt' phase.  So you might not have to go too spartan.  But we were, and are, prepared to go that route to win.

We also got rid of some cell phones.  While you are trying to gain control of your finances, some cell phones and certainly premium services, need to go.  If you're on the road and need a phone, get a phone.  Not a hand held computer/social networking connectivity recepticle, a PHONE.  Consider a pay as you go phone.  Remember, you're trying to win.  Cool can come later.  Besides, I think winning is cool.

Shelter is important.  Be wise about it.  Establish your perimeter.  Victory is in sight.