Financial Education Center

Before you review your expenses, we want you to consider becoming more thrifty. The thought of skimping on things is unattractive to many of us. Who wants to go without or give less to others? Generosity is something we value highly. The problem that arises during your career transition is that your resources are limited. If you can learn to live on less, you may reduce your fears about making ends meet. Losing your job doesn't have to mean you'll be out on the street.

Ideas to Consider for Reducing Expenses

During your career transition, you'll need to develop a spending plan. Here are a few questions you might want to ask yourself:

• How much of my money do I spend on convenience foods and eating out?
• Am I willing to buy food in bulk, shop the sales, shop at outlet stores, use coupons, or stick to store brands?
• Could I buy some of my clothes on sale, at outlets, garage sales, or used clothing stores?
• Do I really need all the clothes I buy?
• Can I save money on vacations by going someplace near home or swapping houses with another family?
• Can I handle the routine maintenance on my home or automobile instead of paying professionals to do it for me?
• Can I make do with a lower-price cellular plan?
• Can I save money by changing my Internet service provider? Can I save money by getting my phone service via the Internet?
• Is it possible for me to pursue recreational activities at off-peak times?
• Is it possible for me to make some of the gifts I give, or to place a spending limit on the gifts I buy?
• Can I find a less expensive medical plan option? Would an HMO or PPO (preferred provider organization) cost less than paying for every doctor visit?
• Review your electricity, heat, air conditioning, and water usage.

Here are some other suggestions to help you save money:

• Refinance your mortgage to a lower interest rate. This may be easier to do if you are still working (see the Refinancing Your Mortgage section).
• Reduce your rent by moving into a smaller home or apartment. You can even look for house-sitting jobs that may pay you or allow you to live rent free.
• Increase your insurance deductibles. You will have to be willing to pay out-of-pocket for expenses that would have been previously included in the lower deductible, but your premium payments will be lower. If you don't have very many medical bills, you'll save a lot of money in the long run.
• Cut or defer college costs. If you're paying for yourself, consider state schools, community colleges, or waiting until you are back to work.
• Do not blow your budget on gifts. Family and friends will know your career transition is impacting your finances and will not expect you to spend. Instead, give your time, a certificate to be redeemed for babysitting or mowing a lawn.
• Brown-bag your lunch.
• Avoid buying prepared foods. Make things from scratch. Prepare large quantities and freeze.
• Read the grocery flyers and shop accordingly. Only buy meat on sale. Use coupons, but only for necessary purchases.
• You may have more time than money. Think of all the things you have been paying others to do that you can do yourself. Also, while you have the time, gather up all your unwanted items and clothing around the house and have a yard sale.
• Try not to charge anything. If you need it and can afford it, you should be able to pay for it with cash.
• Maintain your car scrupulously, and drive it for at least 100,000 miles.
• Carpool.
• Consider selling a second car, if it is not an absolute necessity. Not only will it increase your liquid assets but it will also save you operating costs, including insurance.
• Run all your errands at once; save on gasoline and time. Use public transportation if it is available.
• Use your local library instead of a bookstore or magazine stand.
• Swap goods and services. Remember, some swaps are taxable.
• Network. If you need something, let your friends know. They may have what you need or know someone who does.
• Consider restructuring your debt at lower interest rates or over longer periods of time, both of which will lower your monthly payments. Paying back over long periods of time will probably cost you more, but will help you out during the short-term.

Cutting Expenses

Review all of your ideas. Go back and see where you can trim out some of the fat in your cash flow statement. But remember, all you have done so far is to put down ideas—make sure you take action.

Now review each item in the outflow section of your cash flow statement and categorize each type of expense as either fixed (f) or discretionary (d), and can be reduced (r). A fixed expense is an expense that you are committed to pay, such as rent or mortgage payments, that generally remains the same from month to month. A variable expense is a flexible, changeable expense, for example the amount you spend on clothes.