Cut the Crap and Check Your Monthly Budget Commitments

by Kevin on January 29, 2009

When I work with people on getting out of debt I get a lot of push back about how much they can conceivably cut from their monthly budget. That is if they even have a budget in the first place. Most do not. (Seriously, folks. Learn how to budget.)

I’m baffled by this behavior, especially by those with budgets. And it occurs whether I am helping someone I know and we are sitting at a table staring at each other or if I am exchanging multiple e-mails. When it comes to really cutting some meat from monthly spending the inevitable “I can’t cut that!” comes out.

If you feel the same way, you are lying to yourself. It’s time to cut the crap, take a hard look at your spending, and cut the unnecessary stuff. You can go back to enjoying your spending when you can actually afford it.

Why Cutting Spending is Difficult

I’m not a psychologist or certified financial planner. I couldn’t tell you exactly why people push back on cutting things out of their budget. I do have a few ideas…

We Believe in Hard Work

Perhaps, deep down, we all believe we can truly climb out of the hole we have dug for ourselves. That sounds all well and good. It resonates with the American ideal of pulling yourself up by the bootstraps and forging your way ahead. Hard work and perseverance pay off, right?

I completely agree. Hard work does pay off. I’ve worked hard at blogging and am now enjoying some income from it. It continues to grow; it seems this month will be my best in the short time I’ve been blogging.

The problem with believing in hard work is most people have no idea how deep of a hole they have dug for themselves.

The people who push back against cutting their budget costs think the hole is X deep and will require Y effort to get out of. They later discover the hole is twice as deep as they first thought, and they’ve only been able to muster half of the effort they thought they needed in the first place. This results in disaster; the problem continues to grow.

The drastic underestimation of how deep the problem truly is leads to increased confidence that we are capable, at minimum effort, of getting out on our own. When reality sets in at minimum time has been lost and the problem remains.

Back to my blogging example. I am earning a side income from my writing here. But if I had a serious debt problem it would be foolish for me to think that blogging and blogging alone would end my problem. I would need to get out the scissors and go to town on my regular spending.

Budget Cutting Hurts

Another admittedly obvious reason people push back from cutting from their budget is it hurts. As consumers we are comfortable. Pampered. Happy to spend our hard earned money on a monthly basis. That spending weighs us down. It also gives us the perception that our spending makes us happy because we are surrounded by stuff.

Why would you want to cut your happiness?

…because it isn’t really making you happy.

…because it is costing you money.

…because it is keeping you in debt.

Listing Our Debt Hurts, Too

Remember how we underestimate the size of the hole we’re in? I would argue many people don’t know exactly how much they owe or what interest rate they are being charged. It turns out that listing all of those debts hurts, too! Financial ignorance reigns.

If you have debt, create a simple spreadsheet (or write it down on a piece of paper).

List these things:

  • all of your debts individually
  • note the interest rate you are being charged on the debt
  • note the amount you owe for the debt
  • list the minimum payment that is required of you

This simple task can really be an eye opener. Debt seems to spread out over time — on various credit cards and other loan options — to where we have a hard time tracking it. If we don’t track it, we can’t attack it.

What Budget Items Should Hit the Chopping Block?

The easy answer to this question is anything that keeps you from getting out of debt. Everything should be considered.

But that may not be clear for your specific situation. Some examples:

  • Cutting or reducing your cable TV bill
  • Reducing the speed of your high speed internet (as a blogger I wouldn’t dare suggest cutting it completely!)
  • Drop your gym membership and slowly build up your own home gym
  • Reducing insurance costs by switching providers
  • Cutting your cell phone or reducing your minutes and additional features (cut text messaging, ring back tones, etc.)
  • Better yet, cut off your land line. Seriously, who uses a land line these days?
  • Stop or reduce your eating out expense — it is ridiculously expensive
  • Switch apartments when your lease is up — find a place that isn’t as expensive

You should constantly remind yourself that you are in debt until it is paid off. What if an alarm went off every time you tried to swipe your credit card? Perhaps, for a moment, you might stop to think, “This $4 latte could go towards my credit card bill.” Find ways to consistently remind yourself of your situation.

There are likely hundreds of other examples. Some of these may not work for you. You might not be able to live without a cell phone. You may have shopped your insurance costs around so much that you simply can’t go anywhere less expensive. Moving apartments may seem a bit outrageous.

Then again maybe that is just the comfortable, happy consumer in your brain. Keeping you in debt. Keeping you from success.

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Canadian Personal Finance Blog » Blog Archive » Random Thoughts on Budgetary Week
January 30, 2009 at 12:55 am


Michael_W January 29, 2009 at 7:21 am

I’ve been using the percentage system to keep my budget in check. In my spreadsheet I have 2 cells for 2 different income ratios. One is monthly expenses to income ratio. I don’t want that to go over 60%. The other is my debt payoff to income ratio. The higher I get that above 40% the better off I am.

The reason this works for me is that it makes it easier for me to make decisions when it comes to extra income or extra expenses. For example, my electric bill came in high versus my budgeted amount for February (rate increase). Once I plugged the new number in my budget, my monthly expenses ratio went up and my debt payoff ratio went down. So, I now have to figure out a way to get the rations going the other way. Maybe that means a little extra income (selling something, OT, etc) or I have to cutback on one of my other monthly expenses.

I make it a game and the push back isn’t as difficult!

Michael_W January 29, 2009 at 7:22 am

Adding another comment because I forgot to check the notify me box. LOL

Steve in Denmark January 29, 2009 at 9:00 am

It could be that some people think that the ‘hard work’ is just identifying that they have a problem? Once someone like yourself has gone through their budget with them, they might thing that’s it. ‘Phew! That was hard work, eh?’, bet you’ve heard that a few times. It’s hard enough owning up and having a look at the shocking news. Maybe they think you have the magic wand you pull out at the end for all your clients. You wave it and everything’s ok. They may have to go without a couple of things for a couple of months, they may have to stay in a few weekends, then that’s it. Back to normality.

My wife and I realised things were getting bad and took kind of pre-emptive action and got ourselves an extra job. A cleaning job in the late afternoon/evening. We realised we needed to do something and now! We hate doing it, I’m not looking forward to go off doing it now, and I sure as hell ain’t looking forward to doing it (and another one) on Sunday…but it’s getting us out of trouble and we’re nearly out the tunnel. I also – when I’m not at Tekniske Skole getting the qualification which, next year, will take me up several wage levels – do as many extra shifts, work as many ‘free days’ and weekends (here and there) as possible. We reckon this time next year, we can wave ‘two’s at the cleaning company and survive just nicely on our regular wages. But we realise we need to work damn hard for 2009 to get there.

Ashley @ Wide Open Wallet January 29, 2009 at 10:50 am

When someone says they “can’t” have them switch it to “don’t want to”. I takes the victim mentality away. If they say “I can’t cut my cell phone plan.” Then just have them say “I don’t want to cut my cell phone plan.” They may still not cut it, but at least they are making a choice in the matter rather than playing victim with their hands tied.

It really works.

Ken January 29, 2009 at 7:45 pm

So many consumers just do what feels good. They operate without a written budget and still wonder why they keep running out of money. I agree with the earlier post by changing “I can’t” to “I don’t want to”…they are just like kids in a candy store. They prefer now thinking over future thinking. It’s too bad they won’t face their true debt and see the need for change. Saying no to the future has consequences.

Kevin January 29, 2009 at 8:11 pm

@Michael: I’m all about what works for you. If your system works and you are paying off debt than who am I to tell you is doesn’t work? I wouldn’t do that anyways — but congrats on your progress thus far.

@Steve: Sounds like a solid plan. You’re right, sometimes it is a lot of work just to identify the issues at hand. But you can’t stop there. Good job on recognizing you’ve got to keep pressing forward, and forward, and forward.

@Ashley: Good idea! Now what if we did that with everything we “can’t” do from personal to work to spiritual…

@Ken: I am continually shocked at how many people I know that don’t have a budget. That live paycheck to paycheck. That can’t fathom having the savings we have. The consequences are deep and long for ignoring small problems today.

TIPS March 11, 2009 at 1:31 pm

Interesting read.. well done .. Thanks for the post. July 13, 2009 at 1:05 am

good one… but, before cutting on budget one should have a budget. A lot of people today, don’t have budget … they just have their credit cards and credit card bills…

David Wilson August 26, 2010 at 8:56 am

Thanks for the post, great information. People forget that making small changes can make a huge difference in their overall financial status.

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