FINANCE
ADJUST CUTTING BUDGETS… WITHOUT BLEEDING TO DEATH EMOTIONALLY! WRITER: ELLEN B. WILCOX, GEPC // PHOTO ILLUSTRATOR: ANTHONY CASTO
A
s our nation deals with fiscal policies ranging from the “fiscal cliff” to hotly contested spending cuts, we can be certain that most of us will be affected in one way or another. Somewhat higher tax rates for the high income set and other tax law changes finally agreed to in last-minute meetings back in January averted the so-called “fiscal cliff,” but more is on the horizon as budget debates move on to equally serious issues such as raising the national debt ceiling and corresponding cutbacks in virtually all areas of federally supported programs. From local schools and fire departments to federal welfare costs, tightening the belt to reach a balanced budget has become top priority for our elected officials. Any increase in taxes means less disposable income and it is disposable income that drives consumer spending, which, in turn, drives our economy, including employment and conversely, unemployment. Manufacturing is affected by inventories, and inventories are determined by consumer demand. Ultimately, it all comes down to individuals having a stable job, which provides disposable income to drive consumer demand. (Yes, it’s a cycle!) The inception of both higher taxes and several new taxes coupled with proposed spending cuts mandated by Washington, D.C. prompted me to ask my clients and friends how they plan to keep their own family budgets in line while dealing with
68 // HL // MARCH 2013
greater tax burdens and potentially less take-home pay. With more than thirty years’ experience in helping my clients meet their financial goals, I have witnessed both increases and decreases in family budgets. A new baby, a new car, or a new roof definitely increases the budget and often requires financial adjustments within the family. Reaching “empty nest” status, paying off the mortgage, or receiving an inheritance generally relieves budget stress. As I queried several of my clients and a few of my friends, several things quickly became evident. Whether you live on Pennsylvania Avenue or on Main Street, recognize that cutting spending is not pleasant, nor is it easy. We all have a “lifestyle” that we typically want to enhance, not diminish. Nevertheless, when push comes to shove, we are likely to step up to the reality of doing what is needed at least to maintain the items, events, and practices that are most important to us. The second car, the symphony tickets, and the weekend restaurant dinner with friends generally retain status quo. So then, what does the average family elect to delete or modify to rein in spending when it is crunch time for the monthly budget? In talking to folks of all ages, I recognized a few consistent replies, but generally speaking, folks of different ages and in different stages of the life cycle had varying answers to my question.
Nevertheless, topping the list for all age groups and both sexes was item number one below! Nearly everyone also mentioned item number two. Here is a list of items and habits that may most often be eliminated, or at least reduced, to shave the household budget quickly and noticeably without creating a feeling of deprivation. Your own budget and circumstances may require more or less drastic measures.
1. Frequent dining out, especially for the sake of convenience. When socializing with friends, opt for fewer gatherings and choose lunch instead of dinner as menu items are often less expensive at lunch. (Author’s note: This was the single item mentioned by every person interviewed, though eating out for “special occasions” was not likely to be curtailed!)
2. Drinking out, especially the second round of drinks. Choose to have that glass of wine with the meal instead of before the meal. Then there may be no need for another when the entrée is served.
3. Indulging the kids or grandkids (skateboard park membership, namebrand sneakers, elaborate birthday parties for toddlers). Some older adults I talked to mentioned continuing to support their adult children, a blessing for the kids and maybe