As a newspaper columnist in Detroit, Brian J. O'Connor didn't feel
like he had much job security. "My paper had been sold, which
automatically makes everybody nervous, and clearly Detroit was not doing
well," O'Connor says of the bleak period in October 2009 when he
launched his money-saving experiment.
That experiment involved
cutting $1,000 a month from his budget, largely by focusing on recurring
expenses. "Partly I wanted to fail as much as succeed because I wanted
to illustrate how tough it can be if you really have to make big cuts in
a family budget," O'Connor, 53, says. If parents went to work in the
morning and came home unemployed, or suddenly lost overtime pay - as
many workers did in Detroit during the recession - then they similarly
needed to immediately transform their spending in order to stay afloat,
he says.
His series of humorous columns on the experiment were so
popular that he turned them into a book, "The $1,000 Challenge: How One
Family Slashed Its Budget Without Moving Under a Bridge or Living on
Government Cheese," which will be released this week.
Trimming
$1,000 a month, which he managed to do, might sound overly ambitious,
but O'Connor says that's the point. "It had to be a high-wire act, or
there'd be nothing at stake," he says, adding that even cutting a grand
each month wouldn't be enough for him, his wife and his son to survive
if he suddenly lost his job. Still, it would be a start.
Ready to replicate O'Connor's strategy? Here are five categories where you're most likely to gin up some serious savings.
1. Phone, cable and Internet
"The
easiest savings I got was cutting the utilities," O'Connor says. After
spending an afternoon making a handful of calls to his cable, phone and
Internet provider, he slimmed down his bundle of charges by about $140
per month. Part of that was removing services he didn't need, such as a
$15 monthly charge that allowed him to use his cellphone as a modem (he
forgot to cancel that service after a vacation), and a third-party voice
messaging service on his home phone.
He trimmed down his cable
service to a 200 channel package, which generated about $30 in savings.
When he similarly downgraded his Internet service based on the amount of
data his family actually used, the provider rebated him for the
previous two months, since he had been paying for a more expensive data
plan than he needed.
The total savings came to $140 a month plus
$653.80 in refunds, temporary discounts and a $200 gift card. "That's
more than a month's worth of groceries plus ongoing savings for just a
couple hours on the phone," O'Connor says.
"Some of it was just
dumb, which is a recurring theme in the book," O'Connor says. In other
words, if he had paid attention to his bills, he would have had the
charges removed long ago. But it's easy to never get around to it, or to
overlook those superfluous expenses. That's why O'Connor recommends
taking a close look at every household bill once a month, so you can
eliminate the services you don't even realize you're paying for.
2. Unusual expenses
Do
you have an oddball expense that's eating away at your bank account
each month? For some people, it might be an expensive hobby; for
O'Connor, it was his 30-year-old boat. It was costing him several
hundred dollars in repairs some months. He saved almost $100 a month by
creating a separate annual fund that served as a cushion for
boat-related expenses, instead of scrambling to come up with the money
whenever something broke.
3. Child care
If
your employer offers flexible spending accounts, you can set aside
pre-tax dollars to pay for health care, child care and commuting costs,
up to certain limits. O'Connor saved more than $100 a month by paying
for his son's speech therapy through a flexible health spending account.
He points out that for two working parents, taking advantage of child
care flexible spending accounts can also make a big dent in monthly
expenses.
4. Home
Refinancing when
interest rates are low can help reduce monthly mortgage payments. When
O'Connor refinanced, he opted to slightly increase his monthly payment
so he could switch to a 15-year mortgage and make sure his home was paid
off prior to retirement. For monthly savings, O'Connor drilled into his
home maintenance spending. He cut $60 a month by stopping maid service
and an extra $10 from regular home maintenance.
5. Groceries
Food
shopping is an area ripe for savings, since it's easy to overspend on
name-brand pasta sauce, organic apples and prepared meals. O'Connor
invested some time into comparison shopping and coupon hunting - on his
first trip under his new regime, he spent 2.5 hours at the grocery store
-- but it paid off. "You spend 10 minutes walking up and down the
frozen meat aisle looking for the special on frozen turkey breast," he
says.
Subsequent trips, though, did not take nearly as long
because he developed his system (and gained familiarity with the store's
placements). He saved about $40 for the month, and he didn't feel like
he was sacrificing much. "Store-brand tomatoes don't feel any different
to me than premium," he says.
Still, it's hard to spend the time
to maximize deals every week, O'Connor acknowledges, especially with two
working parents. He and his wife have to skip their coupon-maximizing
efforts some weeks, especially when one of them is traveling for work.
The
biggest takeaway from O'Connor's $1,000 challenge is to focus on
recurring expenses, because when you cut them once, you keep them off
the books the following months, too. So if you do nothing else this
month, make a few calls to your cable, Internet and phone provider.
