Since I'm self-employed and we have two young kids, it's not always easy to find ways to earn extra income. Instead, it's often easier to look for ways to cut costs and save in various aspects of our lives, continuing to make a significant impact upon our personal finances while not having to take on a second job or in many cases even having to put forth much in the way of extra effort. In fact, we make the equivalent of a $50,000 a year income just by doing certain things that help keep our costs low.
By downsizing one of our vehicles, we're saving ourselves thousands of dollars. We ditched our second car over five years ago, selling it to CarMax, and in the process ridding ourselves of costs relating to parking (over $500 a year), insurance (about $450 a year), maintenance, repairs, gas, and similar expenses that can add up to about $2,000 a year.
We were averaging about $16,000 a year in mortgage payments and close to $2,000 a year in maintenance and repairs on our previous home. Add this to property taxes and homeowners insurance of nearly $5,500 a year and our annual home-related costs were over $23,000 a year.
Now that we've downsized to a small condo that we could afford outright, our monthly association fees, repair costs, and property taxes come in at about $600 a month or $7,200 a year, saving us nearly $16,000 a year in home expenses.
According to the US Energy Information Association, the monthly electric bill in Illinois averaged just over $84 a month in 2009. Through having downsized our home, and our various energy saving techniques such as opening/closing window blinds and vents in certain rooms, gauging energy costs, and monitoring usage, we're able to keep our average cost at about $46 a month. This saves us about $450 compared to the Illinois average. Add this amount to our natural gas savings in our new location compared to our previous home -- which is about $30 a month -- and we're over $800 a year in savings.
Having just had another baby, I'm able to handle our childcare costs by working from home. Otherwise, we'd more than likely be on the hook for about $13,000 a year in additional childcare expenses. Add in half-day care for our five-year-old, and we could be looking at upwards of $18,000 a year or more in childcare costs.
We just bought four lightly used GAP Kids long-sleeved shirts (retail price of about $20 each) for our five-year-old for $5.25 at our local resale shop. By making power-buy purchases such as these for the entire family, we typically keep our annual clothing costs under $500 a year. According to the April 2, 2012 IRS National Standards for use in calculating delinquent taxes for "apparel and services" this amount for a family of four would be $244 a month or about $2,900 a year. Compared to that number, we're saving around $2,400 a year.
We do really well keeping our grocery costs low. We typically keep our costs under $300 a month when it comes to our at-home food spending. When we compare this to the USDA's "Cost of food at home" numbers for September 2012, which average $545 a month for a "thrifty plan" for a family of four, we're still about $250 a month, or $3,000 a year under the national average.
So when I look at our savings in the aforementioned cost categories, I can begin to get an idea of how much extra we would have to earn to make up the difference in what we save on a regular basis due to the adjustments in lifestyle that we've made.
- · Vehicles -- $2,000
- · Home -- $16,000
- · Utilities -- $800
- · Kids -- $18,000
- · Clothing -- $2,400
- · Groceries -- $3,000
Total -- $42,200
Factor in an extra 20 percent for taxes into this amount and the income number balloons to $50,640 a year.
*Note: This was written by a Yahoo! contributor. Do you have a personal finance story that you'd like to share? Sign up with the Yahoo! Contributor Network to start publishing your own finance articles.
More From This Contributor:
USDA. "Official USDA Food Plans: Cost of Food at Home at Four Levels,
U.S. Average, September 2012." Issued October 2012. http://www.cnpp.usda.gov/Publications/FoodPlans/2012/CostofFoodSep2012.pdf. November 6, 2012
U.S. EIA. http://www.eia.gov/cneaf/electricity/esr/table5.html. 2009. November 6, 2012.
IRS. "National Standards: Food, Clothing and Other Items." April 2, 2012. http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/National-Standards:-Food,-Clothing-and-Other-Items. November 6, 2012.
The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute legal or financial advice. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.
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