Having been a personal finance writer for several years now, I find it interesting that I’ve never done a total family cost outline before now. I’m mean sure, I’ve don’t some general estimating and have a good idea of what we were spending, but my wife and I have an agreement — since we’re both financially responsible adults — that her spending is her spending and mine is mine, so I often left her side of the family finances alone.
As we grow older though, and begin to more seriously consider things like college for the kids and retirement planning for ourselves, I figured it was time to get down to the nitty-gritty of all our family costs. Therefore, I did a complete cost tally, and I was somewhat surprised at what I found.
Excessive Fixed Costs
While maybe I shouldn’t have been, I was somewhat surprised by the total amount of our fixed costs. It made up a much larger portion of our budget than I initially realized. I say I shouldn’t have been surprised since we’re relatively good at keeping discretionary spending to a minimum.
Things like taxes, health insurance premiums, car and home insurance, medical costs, our condo association fee, and parking are expenses that we really can’t do much about and comprise about 66 percent of our annual expenditures.
We’ve Cut Almost all there is to Cut
As I said, we’re pretty darn good at keeping our discretionary spending low. The downside to this is that there is little room left for further cutting. Costs like food have already been reduced through doing things like shopping at Aldi, cutting food waste to almost zero, and making use of leftovers. Areas like our entertainment budget line have been maximized through taking advantage of low cost and outdoor activities, keeping dinners out to a minimum, and not doing things like ordering costly drinks, appetizers, and desserts when we do go out to eat. And our utilities have been cut by about a third compared to when we lived in our previous single-family home by downsizing to a small condo with more energy efficient appliances and heating and cooling system.
We Need to Increase Income
Outlining these costs brought me to an important realization. Knowing that we’ve cut most of our costs to the bone, it’s time to focus our attention somewhere else. While it’s important to maintain the cuts to our budget we’ve already made, I think our personal finance focus needs to expand to other areas.
The main area upon which I think we must focus now is increasing income. While cutting costs certainly has advantages, we can only take it so far. There is a 0 sum that we’ll never be able to go get our costs lower than. With income however, the number to achieve is really infinite. Our income number right now is too close to our expense number, and with little room left to cut in costs, it’s time to start looking for ways to push our income number higher. In so doing, certain costs will increase (like those pertaining to taxes and possibly transportation, clothing work, etc.), but overall, hopefully so will things like savings and contributions toward retirement, Social Security, and savings. And this was probably one of the most important revelations of my total family cost outline.
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The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute legal or financial advice. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.