January 1st is over, so unfortunately it’s right back to reality. While the celebrating was fun and well deserved after a long year, it is back to basics at our house. What is most basic for us, and for that matter anyone else, is budgeting.
We hashed out our budget plan for 2017 in December, and we are set now to dig in and make this year a winner in what really is a war. Why do I say that? Just look at some of the stats and you’ll quickly see that for a huge number of us, our finances and economic wellbeing has suffered from a lack of personal income growth and increases in many of the basic costs of living.
It’s a fact that every year there are “ups and downs” when it comes to your budget. That’s because situations and priorities change and so do your finances. That leads me to once again indulge myself and yes, wait for it!…another 60‘s classic that nails these words to a T. The much overlooked and dissed version by Paul Revere and the Raiders (featuring Mark Lindsay) of Ups and Downs. Just apply it to your personal finances and enjoy the next 3 minutes!
Now back to budgeting…
Income Growth (or lack thereof)
The federal government released the U.S. median household income statistics last September and it showed that the trend of the past 10 years has continued to stagnate. In 2015 (the most recent numbers available), household income was $56,516 per year. Compare that with the year 2005 when that number was $56,224! That’s ten years of no growth. The numbers for individuals (per capita) are not any better. That makes making ends meet and dealing with price increases in things like medical care, food, and housing really difficult. Throw in something like the cost of college and the debt repayment that has to be made afterwards and those 10 years can be crushing to an entire generation and in fact, it is. So whether you are 25 or 65, dealing with your budget is a big deal.
Our Budget Plan and Goal
It is not a whole lot better for the rest of us. Being a senior citizen, retired and with a disabled wife, means that we have to be super-efficient in our budget control. Our goal is being frugal without sacrificing every comfort in our lives. It’s a huge challenge. This year we have made a total commitment to not only live within our means, but to live below it. We have set up a self-challenge to help us save 5% of our expenses and pass that to our savings this year. That translates to $50 a week, or saving $2,600 this year. In addition to not drawing our customary monies from my retirement fund (which I’ve been doing since my retirement in 2013), this means we will actually be shooting to reduce our spending and increase our savings by over $7,000 this year! Here are some facts we had to consider.
Roadblocks to Success
Some parts of our budget, what I like to call fixed expenses, are pretty much out of our control. But, there is an irony here. These expenses are only fixed for the year. They seem to go up every year no matter what and we have to deal with it whether we like it or not.
- Our real estate taxes, which seem to go up every year (New Jersey has the highest real estate taxes in the country), went up annually another 4% this year which is $14 a month.
- Our condo homeowner’s association fees went up for the 4th straight year, another $5 a month or 4.2%.
- One of the biggies, health insurance premiums have increased this year for both our Medicare coverages and our private advantage plans to the tune of a total of $32 a month or 8.25%, and we’re among the luckier ones.
- Utility costs have risen and our monthly costs for natural gas, electricity, water and sewer have risen by 4% or $8 a month despite our lowering our thermostat and conserving energy and water. Remember, we bought a new front door and storm door last year specifically to save energy and help keep warmer in winter and cooler in summer.
- The cost of our gym membership went up this year as we were forced to give up our great plan when our gym closed down and we had to find the next best deal. I say “had to” because it is an essential part of our health plan to use the gym for us both (there’s not enough room in the condo for exercise, and not enough temperature tolerance for exercising outside). We will pay $15 a month more this year for our memberships, a whopping 50% increase!
- The price of gasoline is definitely going to be higher here in NJ this year after a November 1st state tax increase of $0.23 a gallon! Despite our fairly low driving expenses, even if the price per gallon remains the same in 2017 as it was in 2016, the tax increase alone will add $60 a year or $5 a month. And we expect the prices to rise on top of that!
These six “fixed expenses” alone add up to a total of $73 a month or $876 per year. It may not sound like a whole lot, but it is when your income is not growing and there are still so many factors outside of these that can throw a monkey wrench into your finances. We learned that the hard way with medical expenses, such as my 3 hospital stays over the past 6 years, which added thousands to our annual expenses.
Cutting Our Expenses
There are just two ways to achieve your financial budget goals. One is to increase your income. That is easier said than done, for sure. The second way, and our plan of attack on this “war” of the budget, is to cut expenses. That’s our plan and that includes reaching a goal of saving $50 per week. There are a number of ways we plan to do so. In fact, we have already set the wheels in motion to make sure we hit the mark.
- The first challenge was and is to exercise some “preventive health measures” like taking better care of our health to avoid as many surprises as possible, like the emergencies that have hindered us in our recent past. Regular testing to monitor my heart and blood sugar plus regular doctor visits, as well as the previously mentioned gym exercise. Savings are yet to be determined.
- Switched providers for both our condo and auto insurances which will save us over $300 in 2017.
- Enrolled in a new Medicare advantage plan that has a “zero” monthly premium saving almost $1,000 for the year (it also saves on co-pays for doctor visits).
- Eliminate one restaurant dining visit per month (savings will be about $500 per year).
You will notice that we haven’t mentioned increasing our income anyplace here. I have set that as a goal for my work here on the blog, but I am deliberately not including it in my overt planning. Realistically speaking, I’m not going to be setting any records here, although I do expect to outperform last year. I am purposely focusing on saving money from the expense lines rather than looking for the additional income which could lead me to actually spend more than we should or want to do. My overall goal is to make sure I don’t outlive my retirement funds and by taking action plans like the one we are using for 2017, I truly believe we can make that a reality.
Frugality is not a four-letter word. It’s not only is a good idea, but for many it is a requirement. It comes as no surprise that as you get a bit older, you may not have the same kind of family obligations that a family imposes on you and you can more easily adjust to living comfortably, yet frugally. The surprising thing to me is that so many younger people have come to that conclusion as their lifestyles have unfolded and a newer non-traditional lifestyle has taken root.
I am passing on our self-challenge to you now. Can you find a way to not only live within your means but actually live below it? Have you been dealing with budget issues and decisions that will impact your 2017 lifestyle? Is it a subject that you are comfortable with as we enter the New Year? What are your budget plans right now?