Control excess spending

When the family faces reduced income, take immediate action to stop all excess spending.

When the family faces reduced income, take immediate action to stop all excess spending. Whether your situation is temporary or extended, you need to get the most for your money.

Studies have found that many families do not adjust their lifestyle for about six months after their income is reduced. Those six months of ignoring the situation can bring disaster. When you take charge of your financial situation immediately, you are making a positive contribution to your family’s well-being now and in the future.

Following basic money management principles can reduce stress and help you adjust to living on less income. Here is a list of research-tested principles:

  • Make a list of the family’s most important expenses while you have less income. (This means things you must have or do.)
  • Make a family spending plan to determine where your money will go.
  • Refer to Sizing up Your Financial Situation to develop a family budget you can use to cope with your income situation.
  • Decide where you will spend your money. Stick to your spending plan. With less income, each spending decision is critical.

Most give high priority to fixed expenses such as rent or mortgage payments, insurance premiums, car payments, and installment debt. Flexible expenses such as food, utilities, clothing, and household expenses can be more easily adjusted to fit your income. Most people find it easier to cut back on flexible expenses.

All family members need to work together to reduce spending. When everyone pulls together, you are more likely to succeed in living on less.

Together, the family should go through the following list under each of the flexible expense categories. Check the ideas you think would help your family reduce spending. Add your family’s ideas to each list.

As you go through the list, ask how spending can be reduced:

  • Can we substitute a less costly item?
  • How can we conserve resources and avoid waste?
  • Are there opportunities to cooperate with others by trading or sharing resources? Can we save if we do it ourselves?
  • What can we do without?

Go to Deciding Which Bills to Pay First. This site has many tools to assist when income is decreased or when new expenses arise.

During challenging financial times, it’s very important to control spending. Restrict purchases to “needed items” and go without items that are just “wants.” Before buying an item, ask yourself the following questions:

  • Do we already own one?
  • Can we do without it?
  • Can we postpone its purchase?
  • Can we substitute something else that costs less?
  • Can we use our skills to make it?

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