A new series here at NeoSurvivalist, we’re going to talk about a set of strategies regular Americans like you and me can implement that can help us get our families to a point where we are better prepared for uncertain times and volatility in the financial market, the job market and the overall way of life in this country.
For the first in this series, we’re going to look at a financial strategy. A strategy to cut our expenses in half.
Objectives
- By cutting your expenses in half, you will be able to allocate a much larger chunk of money into savings, paying down debt, purchasing supplies, etc.
- By cutting your lifestyle, you better prepare you and your family for uncertain times. Getting used to living on less might be one of the best survival strategies out there!
How To Do It
There’s no easy answer to cutting your expenses in half. For some of you who are barely living on any sort of income, 50% might not be possible. Find a realistic but aggressive target and use that. For the rest of us working decent jobs, there is plenty of room to cut and likely many of us (including myself) can cut expenses in half.
Let’s start with the easiest area to cut. Automobile expenses. It’s crazy how much money Americans spend on cars. Interestingly, almost every family in America, no matter how well off or how broke they are, have two cars. You can easily cut your expenses hugely by simply getting rid of one car. While many object to this as impossible, just think of a scenario where you were forced to live with only one car for a couple months. You’d get creative in how you schedule errands, you would car pool and you would maybe ride with friends and neighbors to various places. In other words, you could make it happen. There you go. Think of how much money you’d save in auto loans, maintenance, insurance, gas, etc. Getting rid of one car is low hanging fruit.
If you’re unwilling to ditch a car completely, consider downsizing dramatically. If you have any auto loans then this is a no brainer. Auto loans are a huge burden to your financial picture. You’re essentially borrowing money to own a rapidly depreciating asset. Get the cheapest, most reliable cars you can own and have no debt on them.
Let’s turn to housing. This isn’t as easy, but can yield even more results. If you own a house, selling your house and moving isn’t a quick and easy task. If you own your house outright, then you’re in good shape. If you are like most Americans and you’re paying a heavy mortgage (over 20% of your take home income) and maybe even owe more than the house is worth, then you might consider getting out from the burden. Find a reasonable, modest apartment or house to rent in a safe part of town. By moving further out, you can likely lower your housing expenses dramatically.
Most of this exercise can be accomplished by looking at the big ticket items like housing and automobiles. You can also make headway by looking at your discretionary items or your lifestyle spending. Going out to eat, spending money on high end brand name clothes, and paying for lots of entertainment can really eat into your income and add up the expenses of every day life. Here are some tips to help you:
- Get rid of cable television – it can be a huge waste of time and most of the programming can be retrieved via the internet.
- Go out to eat once a month – Don’t eliminate this completely as you want to have special times with your friends and family, but limit it. Eat at home and cook large portions that you can eat for multiple meals.
- Borrow books from neighbors and friends rather than purchase the latest hardcover book when it comes out.
- Buy used clothing and shoes from online auction sites or other sites. I know several people who have purchased $200 brand name work shoes off of sites like eBay for a mere $30 in great condition. There are deals out there for everything, you just have to find them.
What To Do With The Extra Money
It’s amazing what options will open up if you implement this strategy and reduce your expenses by 50%. What should you then do with the extra cash?
Clean up your finances – First, clean up your financial picture. Pay off your debt. Work on paying down your mortgage. Have enough cash in the bank to live off of for at least a year. Have enough cash hidden in your home to live off of for at least 3 months. Cash liquidity is a huge asset. Don’t overlook this in light of all the “dollar is dead” talk.
Beef up your investments – Now, there are issues with the dollar, but it’s not going away overnight. I’m very bullish on gold and once you accomplish the tasks above, you should start acquiring some precious metals. I’m much more bullish on gold, but physical silver is good to own as well. Once you have a sufficient stash of precious metals – maybe the equivalent of value of metals as you have cash liquidity (described above), consider building up a stock portfolio. For further suggestions in this area, read the other articles on this site.
Beef up your supplies – Now you can also beef up your supplies as you beef up your investments. Food storage, tools, water storage, etc are great places to allocate money. Consider also investing in some alternative energy sources, but this is a very expensive area that may or may not yield huge returns. Do plenty of research on this first.