Cash Flow Review - Other Expenses

While food was and is a major expense, I started to think about our other expenses.  There were still other major parts of the budget, mainly related to housing and other general expenses.  While I will get to what we did about our housing expense (mortgage), I wanted to focus on the variable expenses.

Did our expenses go down?

I think that this is a natural consequence to the loss of income, but I no longer felt the desire to go shopping or buy things.  I was no longer tempted by the emails promoting sales/discounts/incentives.  I was never much of a mall rat and now I had no desire to troll the mall. 

There was a change in mindset.  I was more focused on buying things that were "needs" as opposed to "wants".  Before, I was either so stressed or bored at my job that I engaged in a bit of retail therapy.  At the time, I got a lot of "wants".  I "deserved" it because I was working so hard or I bought some things for the kids to alleviate the mommy guilt.  As if material things could replace the time that I wasn't spending with them.  I just got what I/we "wanted" and occasionally a "want" purchase became a "need" purchase.  Somehow I just justified the purchase.  I tend to be pretty frugal and I usually buy things because we either needed something or I was anticipating a need, but now, I only buy what we actually need and it had to be an immediate need.  It turns out we don't actually "need" much.  Other than a new pair shoes for some growing feet, I haven't had to buy much.

What else went down?

• Commuting expenses- since I wasn't commuting everyday, our gas expenses went down significantly and didn't incur any more bridge toll charges, which were infrequent but necessary sometimes.

• Extended care charges - now that I could pick up the children right after school, we didn't have to incur any extended care charges.

• Food/Restaurants - we just didn't eat out as often and if we did choose to go out, we went for low cost options.  

• Clothing - I didn't have to buy any more clothing to match the style of my office. 

 Did any expense go up?

Surprisingly, some expenses actually went up (wrong direction), but these expenses were not significant and did not undercut some of the savings above too much.

• Telecom/Phone -  Since I was mainly using my work phone, I now had to get a new plan.  Luckily, I didn't have to buy a new phone and I could use an old phone that I had lying around. Also, if I found a job sooner rather than later, I knew that I would likely get another work phone and so I didn't want to commit to a long service plan.  I settled on a monthly pre-paid plan.  There are limitations, but I was willing to live with them.  The data limit was a joke, but at least I could still use Wi-Fi.    I mainly wanted to use this phone for emergencies and this fit the bill.  The minutes limit was quite high and I knew that I'd never hit this limit.

• Gym -  They say that after a layoff, once should create a routine.   I decided to join the gym.  No better time than the present to get back into shape.  I was still being a bit picky though. I wanted certain amenities - pool, newer equipment and more importantly, a low monthly fee.  I wanted to be able to de-commit at any time.  Luckily, I found a place.

Post Restructuring Cash Flow Review - Expenses (Food)

Now that I did a review of the expected income, I now had to do a review of the expenses, fixed and variable so that I can see if there is a gap.

I had listed some fixed and variable expenses. 

Fixed:

• Mortgage 
•  Daycare/Preschool
• Gas/Utilities
• Taxes (property and income)
• Food
• Insurance

Variable:

• Credit Card bills for daily and other expenses such as clothes, dining out, services (TV), and entertainment
• Savings - retirement, college and other

There were some expenses that were not going to go away or change, such as the mortgage, but I knew that even if some expenses were essential, that I could possibly make some changes to lessen the expense.

Target: Food Expenses

One area that I targeted was food.  While food was an essential expense, it was an area where I felt I could control the extent of the expense.   I did a comparison of food expenses before I found out that I was affected to my run rate afterwards.  The results were quite eye-opening. 

 

	Before	After
Groceries	$580	$340
Eating out	$350	$100

I didn't realize that I was spending close to $1,000 per month on food!  The groceries came from a variety of stores depending on what we needed.  I shopped at Whole Foods for some basic organic items like fruits, vegetables and meat, Trader Joe's for some specialty items that we enjoy and can't find anywhere else, Safeway for some basic things, 99 Ranch for the ethnic items and the local farmer's market.  Since I worked full-time, I was so tired at the end of the day that it was hard to think about cooking, so I think we ate out instead.   While I tried to plan a menu each week, we ended up not eating a lot of the food that I bought and we wasted so much food.  I felt so guilty about this, but I always had good intentions.

To buy or not to buy organic

After the restructuring, while I had to take a hard look at expenses, I still felt that some areas were not worth the compromise.  Since we had small children, buying organic was a must, such as with milk and meat products.  I was willing to make do without or do with less if it meant buying organic milk, for instance.   The Environmental Working Group (EWG) puts out a list of the fruits and vegetables with the most pesticides (and should be bought organic) and those that are the lowest in pesticides.  I generally use this as a guide to figure out what I should buy organic.

One way to control food expenses

Some use the envelope method to allocate how much should be spent on food each month, but I chose to get a gift card that I could reload. That way, I could put down how much I wanted to spend per month at that particular store.  This was one way to control the expense and also keep track of my run rate for that particular store for the month.   It was too hard to keep track of the overall food expense when everything went on the credit card and I wasn't disciplined enough each month to do an analysis at the end of each month and break out and calculate all of the food expenses. 

Eating out costs went down

One other thing that I noticed was the amount spent eating out went down significantly.  This was not surprising.  I had more time now.  I had more energy now.  While some healthy meals could be found at restaurants, it's not the same as cooking at home.  I could control how much oil, salt and fat was put into the food.   Not only that, but cooking was always an enjoyable experience for me.  It was almost like therapy.   Cooking is a creative process from picking all of the elements, putting them all together so that it all tastes good.   

While we still ate out a bit, it wasn't a regular occurrence anymore.  My kids seemed to miss it a bit, but when we eat in, we have more time.  We now have time to go to the local park or go out for some treat like frozen yogurt. 

Unemployed - Cash Flow Review

Even though I got severance and wouldn't have to worry about health benefits for a few months, I still had to review my cash flow.  I wanted to see how much was coming in and how much was going out.

I used an excel spreadsheet to look at my past expenses and compared it to what I thought should be coming in. Luckily, my husband was still working, but would his income be enough to cover all of our expenses?

We currently live in an area with one of the highest costs of living in the country.  The median price of a house is well over $500,000 and the cost of basics such as fuel, food and transportation is also high.

I used an excel spreadsheet to list our run rate of fixed and variable expenses.

Fixed:

• Mortgage 
•  Daycare/Preschool
• Gas/Utilities
• Taxes (property and income)
• Food
• Insurance

Variable:

• Credit Card bills for daily and other expenses such as clothes, dining out, services (TV), and entertainment
• Savings - retirement, college and other

Then I did a review to see what, if anything, I could cut.  It made me think of what was a "need" versus what was a "want".  I knew that I couldn't take out basics such as shelter (mortgage) and food, but even within the category of "food" I knew that there were choices.  Would I continue to buy organic?  Would I change which supermarket I go to so that I can minimize this expense?  I had to take a hard look at everything and nothing was off the table.   All of these "choices" was really dependent on what our cash flow looked like and whether our income could cover our expenses. Where could I cut the "fat"?  Was there any "fat"? 

Losing my income was a blow, but when I took a closer look, I realized that if we made a few adjustments, we would be OK.  There had been a change in my mindset.