How are you adjusting?
With energy and food prices both climbing, one of my regular readers suggested that I ask all of you all what adjustments you’re making. Are you reducing your driving? Cutting coupons? Reducing meals out? Saving less? And how much are these adjustments hurting? Do you feel like it’s a big sacrifice, or something you hardly notice?
In our household, I’d say we’re making relatively minor adjustments:
- Trying to consolidate errands, do fewer grocery runs.
- Doing more shopping at the less expensive grocery stores, and buying less convenience foods
- Really paying attention to turning out lights, unplugging appliances when not in use.
- Taking the bus to NYC instead of driving (the parking costs in NYC were killing us)
- Generally asking "do we really need this" before buying stuff — especially in the $20 to $50 range, which doesn’t feel like big spending, but adds up fast.
I can’t say we’ve really cut back on our day to day driving — I was already driving to the metro, rather than downtown, and the bus is really more of a hassle than the additional savings justify. (It’s a bit slower than driving, but real problem is that the low frequency makes missing the bus a disaster, so you have to build in huge margins for error.) I’m actually sort of dubious about these stories about how so many people are shifting from cars to buses. I’m not disputing the fact that public transit systems are seeing big percentage increases in ridership — but we’re starting from such a low base that if only a few percent of drivers shift to buses, that can be a 30 or 40 percent increase in bus ridership.
I just put in a low-flow showerhead, but that was really an environmental choice rather than a frugal one. Overall, we’ve done a lot to improve the efficiency of our house — new windows, new boiler (we have baseboard heating), high efficiency washer and dryer, high
efficiency kitchen appliances. Over the long run, these will save money, but for now, we’ve been writing a lot of big checks for them.
In the short run, things will be better for the next few months, as we won’t have to pay for N’s preschool, and have already paid for camp for the boys. But then he’s going 5 days a week instead of 3 next year, so that will cost about an extra $200 a month. But then
after next year we’ll be done with preschool and will feel rich.
Several years ago, I read an article on Money.com called the "60 percent solution" in which they argue that you should keep your fixed expenses down to 60 percent of your take-home income. (I see I wrote about Warren and Tyagi’s version of this plan two years ago). If you were doing that before the recent run-up in prices, you’re probably giving up some of your extras, but you don’t have to do anything drastic. If 80 or 90 percent of your paycheck was already allocated to fixed expenses, there’s not a lot of room to adjust.
The reason I thought the 60 percent solution article was interesting was that it recognized that it’s really hard to save significant amount of money by shaving your grocery bill. Some of us never spent $5 a day on fancy coffees in the first place, and so can’t find savings by giving them up. Instead of squeezing at the margin, it may be better to bite the bullet and look for big changes to make — a smaller house or apartment, taking in a roommate, finding a second job.
May 28th, 2008 at 9:21 am
The biggest thing that I think we’re looking for in terms of savings is that later this year, we will finally stop paying for daycare, and only have after-care as an expensive. We’re also going on a relatively cheap driving vacation, instead of a much-more-expensive flying vacation. But I realize that most people are making much bigger sacrifices than that, and ours don’t seem like much.
May 28th, 2008 at 9:25 am
The first thing to go was any weekend plans involving lots of driving. Seldom-seen cousin’s engagement party? In the past we would have been much more concerned about “trapped in the car with the kids” aspect of the 4-hour drive, but we would have gone. Now we are bowing out. On the grocery side, we are being more concerted about eating all the leftovers. Considering that we were often throwing out leftovers and then ordering a pizza, this is double savings. Finally, we have stopped cooking multiple dishes for dinner to accommodate our 7YO vegetarian. Instead we’re *all* eating vegetarian with her. This has turned out to be a big money-saver.
With all of these things, they’re easy decisions because they’re so clearly the right thing to do environmentally. After some initial minor adjustment we hardly notice it all. It hasn’t really caused us much pain.
I have seen people making bigger changes, though. For example we are currently hiring for a couple of positions at work, and we are getting candidates who are on the job market because they need to cut their commutes down. Also, my neighbor a few doors down has taken on a boarder (!!!). These are big, big changes. My stuff is a drop in the bucket comparatively.
May 28th, 2008 at 10:03 am
We haven’t changed much yet, we are squirrelling away a little less for retirement/college tuition. We’re trying to burn wood for some of our heat, and to postpone starting the air conditioner by running an exhaust fan at night. It was a big plus coupla years ago when our youngest went to first grade and the day care expense went away.
We’re actually going to go to France and Switzerland this summer with all 3 kids. It’s going to be breathtakingly expensive.
May 28th, 2008 at 12:50 pm
We’ve been lucky because Calder had several grants/consulting projects emerge this spring, which in combination with his remarkably great salary has allowed us to keep doing pretty much what we want. I feel pretty rotten about that, in some ways: we have less money at the end of the month because of gas and groceries, but we just don’t impulsively eat out or buy that extra book and it’s not really noticeable. I’ve been trying to drive less for a long time already, because of global climate change.
I know lots and lots of people are stressed and hurting. Tenure is great, but also totally unfair when you think about it.
We have all our savings plans (529s, 401k, money-market account) automated, and I haven’t needed to change the amounts. I would normally up them when the fiscal year ends and Calder’s salary goes up, but we won’t do that this year, just in case.
May 28th, 2008 at 1:00 pm
We spend a lot of of our money on food. Surely too much. For savings, though, we’re eating more vegetarian meals, and definitely trying to eat most of our food from home and pack snacks everywhere.
We just signed up for a CSA for the first time, which I think will be both cheaper than regular shopping, and kind of fun.
We also try to drive less, and my husband insisted we sign up for a closer-to-home preschool/co-op (also just 3 days/week) for next year rather than a great preschool (5 days/week)that required a drive–few carpools possible. Between saving gas and sparing our daughter all that riding around in the car taking her brother places, I thought this made sense.
May 28th, 2008 at 2:22 pm
OK, so when Diana says “we surely spend too much on food” I am right there with her. We eat vegetarian and yet seem to spend SO MUCH on food!! I can’t even track it all.
One issue with understanding our food budget is that it’s so variable. If I find things on sale, or if things are in season, I will stock WAY up — sometimes to the tune of $150-200. But if we happen to be eating out of the pantry and freezer for a month, we have a miniscule food budget. I really don’t want to wait for a full year to pass before I have an accurate idea of our food budget!! But I’m not sure what else to do.
So true confessions time: according to my calculations, we are spending somewhere between $400 – 700 a month for groceries. This includes cleaning products, cat food, the occasional bottle of wine, etc., for a family of two adults and two children ages 5 & 7. Is this a lot?
May 28th, 2008 at 4:40 pm
For me the variables are price, convenience & whether the grocery good is environmentally-sound & healthy. For about a year now I’ve been playing with these factors. I’ve found that certain grocery stores are cheap but the food is all from California, for example… So when grocery prices spiked, I knew what I had to do to get my grocery bill down from the new high of $200/wk (!!) to $125-150/wk, where it was last summer. Mostly that has meant cutting out convenience foods & making more from scratch. I make chicken broth, for example, from the remains of our whole-chicken dinners. Also I’m growing my own herbs.
As for driving, this summer (when the kids are not in school) I’ll have to make some hard decisions. In previous years the kids & I went on all kinds of adventures, driving here there and everywhere; this summer I think we’ll have to limit our range to within a few miles of our house.
In other words, rising prices are definitely a concern, but we’re not panicking. No big changes on the horizon.
May 28th, 2008 at 6:50 pm
I can’t really tell if rising fuel and food costs are making a difference, since this detailed budgeting thing is pretty new to us. It does seem, though, that summer is when the chickens come home to roost. We virtuously saved up for a trip later in the summer, so I I was surprised how horridly June has been shaping up in spite of that. The problem is all those big expensive projects that pile up when you put them off until summer. I won’t know until Saturday’s budget meeting exactly what the damage is, but we scrapped our plans to have one-time landscaping help (edging, bush trimming, gutters) for the start of the summer and my husband spent a hot morning doing gutters on Memorial Day. It was either that or not have help with the windows, so I chose windows. Last summer we had a $400 electric bill for several months due to AC expenses, so we’re being very aggressive about managing our cooling, using outside air in morning and evening, and keeping fans running a lot. My birthday is going to be a very modest affair (as will my daughter’s, if I can get away with it). The other big expense is that I will (hopefully) be learning to drive over the summer, so that’s another $400 over the course of the summer. I’ve really got to do it this summer, since my younger child goes off to preschool soon, and we’ll have staggered drop-offs and pick-ups that would be a big time-suck for my husband if he were doing it. None of these things fill me with much joy (except maybe the window washing–there’s this scary black stuff starting to grow on the windows thanks to our high humidity).
The big financial goal these days is to pay off our car (about $7k now, I think). Given our stimulus check and occasional software royalty checks, that was not unrealistic. The problem with all these expenses is not that they will put us on the street, but that we’ll wind up not being able to pay off the car by Christmas, which means our house downpayment savings will be off-track, which will mean that we won’t be able to buy a house before our rental gets bulldozed. Of course, once it’s fall again, we won’t have any big expensive projects, and the heating and cooling budget will go back to zero again.
May 28th, 2008 at 9:37 pm
Jen, here’s the link for the latest official “cost of food” plans:
http://www.cnpp.usda.gov/Publications/FoodPlans/2008/CostofFoodApr08.pdf
For a family of 4 with young children, they estimate $501 a month on the “thrifty” plan and $780 on the “moderate” plan. Costs are higher for older children. So it sounds like your food budget isn’t out of line.
(When we tried staying under the thrifty food plan for a month, we found that we could do without too much pain, although it did require being aware of what we were doing. Although this was 3 years ago — the thrifty plan has gone up by $70 a month since then. And it would cost us more in gas now to drive around in search of food bargains.)
May 28th, 2008 at 9:41 pm
By the way, my in-laws gave us a neat gadget that’s proving to be very important for our cooling program. It’s an indoor thermometer with an outdoor sensor. The thermometer displays both the indoor and the outdoor temperature, so in the morning if you notice that it’s hotter outside than inside, you can open windows and turn on fans. Once the outside temperature warms up, you can shut windows and flick on the AC. Then, when temperatures go down in the evening, you can flick off the AC. It’s somewhat labor-intensive, but it’s nice to have more “real” air rather than AC air. In a few weeks, we’ll have to bow to necessity and keep the AC going a lot more, but more active management will help us limit AC use.
May 29th, 2008 at 9:57 pm
Jen, our food budget is right there with yours. We are also a family of four – the kids are 8 and 5. Our grocery bills have gone up substantially over the last 6 months.
June 4th, 2008 at 10:26 am
Casual-dining chains are adjusting by going bankrupt:
http://online.wsj.com/article/SB121254220633643563.html
“..The problems at Metromedia show just how difficult life has become for casual-dining chains. Consumers are cutting back on discretionary spending. That comes as food prices for everything from corn to steak are on the rise. Many of the companies are also highly leveraged, which is pushing them to seek protection from creditors.
Earlier this year, the parent companies of the Bakers Square, Village Inn and Old Country Buffet filed for Chapter 11 bankruptcy protection, citing fall sales and rising food costs. A host of other chains — from Outback Steakhouse to Ruby Tuesday’s — are also struggling…”
June 15th, 2008 at 8:06 am
I had a very interesting conversation with an old friend who has moved to NZ with his family, back for a visit. We talked about USA as the paradise of cheap prices – he is paying $8/gallon for gas now, NZ houses are routinely taken off their foundations and moved to new sites if a new building is intended for their former site (and he and his wife bought one of these moved houses, and have been putting it back together, 2×4 lumber costs $3/meter, instead of $2.15 for 8 feet at Home Depot. Price level is generally higher, and the relative prices differ, which drives different behavior. They work a lot harder to avoid waste of building materials in construction. They do drive, but they think about it, and kilometers per liter matters a lot in their choice of vehicles.
My guess is that we are looking at some changes in relative prices, and an increase in price level overall relative to income, in the next few years.
June 15th, 2008 at 1:28 pm
NZ is way the heck out. I’ve seen speculation that Hawaii (which is in a similar situation as an island) is going to be very hard hit by high fuel prices.
It looks like when we buy a house in a couple years, it would be a good idea to buy very close to my husband’s work. The school district is apparently dismal, but we were planning on going private anyway, at least PK-8. We may have to rethink this come high school, but that’s eight years away. I wonder if energy costs might lead to major shifts in neighborhood demographics and school population.
June 16th, 2008 at 1:56 pm
http://www.ft.com/cms/s/0/14ff330c-3994-11dd-90d7-0000779fd2ac.html?nclick_check=1
Pawnbrokers! This SO doesn’t make sense…
June 17th, 2008 at 9:36 am
I have been worried about my church. Very old, inefficient building (albeit beautiful). Large monthly gas bills to keep it heated. A congregation that may quite rightfully decide to cut back on offerings when grocery costs go up. This is not a situation that will end well.
June 22nd, 2008 at 8:03 am
One of the ways people have been ‘adjusting’ is by running up the balances on their credit cards. The Times says this is going to work less well in future: http://www.nytimes.com/2008/06/21/business/21credit.html?_r=2&adxnnl=1&oref=slogin&partner=rssnyt&emc=rss&adxnnlx=1214135988-nxwegKeg4CpGZBrIrBWXwg
“..After fostering the explosive growth of consumer debt in recent years, financial companies are reducing the credit limits on cards held by millions of Americans, often without warning.
Banks that issue cards like Visa and MasterCard, as well as the American Express Company, are cutting the limits for customers who have run up big debts, live in areas that have been hit hard by the housing crisis or work for themselves in troubled industries.
The reductions come as consumers, squeezed by a slack economy, a weak housing market and rising unemployment, are falling behind on monthly credit card payments in growing numbers. ..”
June 25th, 2008 at 8:54 pm
Amex says more of their customers are paying late: http://www.nakedcapitalism.com/2008/06/american-express-more-customers-paying.html
June 26th, 2008 at 10:27 am
Truckers are adjusting by taking fewer side trips…
http://www.thetruthaboutcars.com/nevada-prostitutes-hurt-by-high-diesel-prices/
June 30th, 2008 at 9:29 pm
Chicken Rustlers! http://www.telegraph.co.uk/news/newstopics/howaboutthat/2222198/Chicken-thefts-soar-after-chefs%27-free-range-campaigns.html
July 2nd, 2008 at 10:18 pm
Gas trades!
http://www.thesmokinggun.com/archive/years/2008/0702081gas1.html
August 1st, 2008 at 6:07 am
I get a mail-order tool catalog, and there is a little section at the front of each issue where they offer specials on high-selling items. Catches your interest, you order one of these bargains, you have the catalog open, probably you buy something else… good strategy.
This month: one of the items on sale is a gasoline siphon, marked down from $9 to $3.
August 4th, 2008 at 8:29 pm
from Felix Salmon: Gasoline Datapoint of the Day
Comes from Edmunds.com:
The median household is spending 11.5% of its income on gasoline, up from 4.6% of its income five years ago.
It’s a pretty basic calculation, which assumes that both miles driven per year and fuel economy have remained constant over time (at 30,000 and 22 miles per gallon, respectively). But to a first order of approximation, it’s probably reasonably reliable. And at 11.5% of income, pain at the pump is certainly more than just psychological: it’s equivalent to a seven-point spike in income tax rates, with the brunt of the tax hike borne by those least well off.
So, that siphon is looking kinda tempting, yes?
August 19th, 2008 at 3:01 pm
people are buying cheap wine: http://www.nytimes.com/2008/08/13/dining/13waverly.html?pagewanted=2
August 25th, 2008 at 11:10 am
letting the repo man take back the toys
http://www.signonsandiego.com/news/metro/20080824-9999-1n24repo.html
October 20th, 2008 at 8:57 am
Economist Mom is still spending huge money at the vet, but now she is agonizing about it: http://economistmom.com/2008/10/living-within-our-means-home-edition/
October 20th, 2008 at 11:00 am
I’m not really doing much different, beyond spending a little extra to do maintenance while I know there’s still money. The one thing I dither about is the health insurance — I currently spend about $400/mo on gorgeous health insurance, and could get crappy health insurance for about $90/mo. At 40, though, and having been through serious health problems, I know that $4K/yr difference could be wiped out in a single hospital visit, and then down the rabbit hole we’d go. Upside small, downside bottomless…so I keep paying for the good insurance.
I’ve also considered paying off the rental property, just in case, so that there’s a solid fallback position if the economy really goes to hell. The more I think about it, though, the less sense it makes.
Beyond that…we really live pretty low to the ground here. The kid’s wardrobe is almost entirely hand-me-down, we’re awash in toys and books, and even now I don’t think we’re spending $350/mo on groceries. Those CFLs really do make a difference to the electric bill, by the way, but we’re almost entirely switched over on those. All the comm bills are for basic packages. Probably my biggest daily extravagances are diet Coke and the $1.83 coffees at the coffeehouse (I keep looking at the fancy drinks but in the end I want a cup of coffee, adulterated with Sweet n Low).
The biggest change will probably be travel — I’ve occasionally taken the kid on trips here and there, and last summer we went to a beautiful swank resort and stayed there while visiting my mom & grandma. I think that now, unless someone else is paying, that’ll be it for travel for a while.
February 1st, 2009 at 8:37 am
Tyler Cowen says: Board Games!
http://www.nytimes.com/2009/02/01/business/01view.html?_r=1&partner=permalink&exprod=permalink
I’m very interested in his statement that changes in behavior are durable. Certainly my depression-era parents were, ah, thrifty. My father, when he spent a dollar, you could hear George Washington squeal…