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How I make every spending opportunity a decision-making process

March 20th, 2011 at 10:42 am

When I was surviving on unemployment (not too long ago), I only allowed myself to spend money on five essential things:

1. My mortgage
2. Utilities (heat, electric, water, sewer, phone/Internet
3. Taxes (property, homeowners, car)
4. Food
5. Gas

Now that I am working full-time again (albeit, at about 25% less salary than I'm used to and without affordable employer-paid health insurance), I've decided I can "loosen the purse strings" to add a few key items to my list of allowable expenses:

6. Health care for me, even though having a high deductible means I'll be paying 100% of costs for all health care. If I remain a contract worker and on COBRA for most of the year, the saving grace will be that I'll be able to deduct my medical expenses.

I've already scheduled routine gynecological and a physical; I already saw my neurologist and plan to get an eye exam as the co-pay is just $10 and it's not subject to the deductible.

7. Selected home improvements (I had 2 closets redone and still have to decide what to do about my exterior siding: paint again or vinyl? Vinyl would be a huge cost, 1 quote so far at $17K.

8. Eating lunch out with friend once a month. I view this as a kind of release valve; you do need to enjoy life once in a while, after all.

9. Savings and Mortgage prepayments: I should be earning enough money to return to saving modestly as well as resuming prepayments on the mortgage, both of which are very high priorities for me. I plan to save and/or mortgage prepay at least $1,000 a month, possibly more, but will have to see what's left over after making quarterly tax payments.

So that's it. I'm still allowing NO spending on the following:

* Eating out (more than once a month)
* Clothes-shopping
* Netflix
* Jewelery (a weakness)
* Subscriptions
* Entertainment (I still have free kayaking, bike-riding and walking, and there are the library DVDs)
* Anything else not considered essential!

The good thing is, every spending opportunity is a conscious decision-making process. For instance, yesterday I decided I would renew my $88 annual AAA membership, mainly because:

1. My car is 13 years old.
2. I gave up my cell phone last week.
3. Having AAA gives me a 10% discount on all car repairs at my dealer.

However, I did give up my prepaid cell phone, mainly because:

1. I have never had good reception at my house, and I'm not sure whether it's a dead zone or just this carrier. The sound quality was bad enough that people remarked on it and and I had to sit in the bathroom to make a call, or go outside, and i didn't much care to go outside this winter.

2. I may try another brand phone, prepaid again, but probably not right away as I'm still extremely cost-conscious. Besides, I'm only driving in to work 1 day a week, so less chance of a breakdown somewhere.


12 Responses to “How I make every spending opportunity a decision-making process”

  1. ThriftoRama Says:

    I think this is a very solid and well thought out approach.

  2. Joan.of.the.Arch Says:

    You are a smart cookie, no doubt about it. Smile

  3. Ima saver Says:

    I don't have a cell phone, but my husband does. He can not make calls or receive calls at our house either. He has to go outside. I don't think it is just his phone either. When we play bridge here, my friends cannot use their cell phones.
    I feel like I don't need a cell phone. If my car breaks down, everyone else in the world has a cell phone and they can call for me.

  4. wowitsawonderfullife Says:

    I'm really impressed with your solid, well thought out plan. Thanks for the motivation!

  5. MonkeyMama Says:

    Just to clarify - in case you didn't know - the self-employed health insurance is deductible. Not other expenses.

    As high as our income now, I think few people appreciate how much we have made these same decisions in the past. (So often, frugal-ness is just written off to easier circumstances). All through college, and definitely the first few years after having children, we had to approach our budgets in this manner. I think this is why we have a firm grasp on wants versus needs. Anyway, I just had to say, times like these only make us smarter and stronger. Wink

  6. patientsaver Says:

    MM, I can deduct out of pocket health expenses, cant I?

  7. MonkeyMama Says:

    You can itemize those if they are more than 7.5% AGI. The self employed deduction is only for the insurance.

  8. Thrifty Ray Says:

    I hope you are enjoying the new job!

  9. patientsaver Says:

    MM, so you're saying the health insurance premiums are automatically deductible for the self-employed. So you can't group the out of pocket costs together with the premiums for the purposes of exceeding the 7.5% of AGI? They have to be kept separate?

  10. Dido Says:

    Actually if you are paying COBRA, that is still through an employer-subsidized plan....so would that be eligible for the self-employed health insurance deduction on Schedule C (ends up on line 29 on the front of the 1040)??? I've been taking COBRA premiums and counted them towards the 7.5% over AGI on Schedule A, along with all the non-reimbursed out-of-pocket costs.

  11. Dido Says:

    see http://www.businesstaxrecovery.com/Self_Employed_Health_Insurance_Deduction_and_Cobra

  12. patientsaver Says:

    Thanks, Dido. MM may not have realized i have the health insurance through COBRA. That's what I'd been planning on, counting all out of pocket medical expenses and the monthly COBRA premiums toward the 7.5% over AGI.

    I got confused becus i'm not really familiar with the self-employed health insurance deduction.

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