Feeling Nickel and Dimed? Put a Cap on Monthly Expenses

twentydollarbill0604082.jpgDo you ever sit down with your monthly budget and just feel “nickel and dimed” to death. $6.50 for the Sunday paper, $16.95 for TiVo, $35 for the gym membership, $7.50 for travel club insurance. None of these expenses are going to necessarily make or break your financial plan, but when added together they likely represent a sizable portion of your monthly budget. They do for me.

But I Can Afford the Payments

One of the reasons our society finds itself so deep in debt is we have a collective “monthly payment” mentality. Few people stop to think about the true costs of things these days; it’s all about whether or not they can afford the monthly payment. Same is true with our discretionary spending habits. If I asked you if you could afford $960 for cell phone service your response would probably be, “A month?!” When told that number is a yearly figure you would probably justify the expense by telling yourself it is only $80 a month. I made the same rationalization for many years. The problem is that over time $80 here and $20 there eventually start to add up, and in much the same way debt minimum payments eat away at your income, discretionary spending items begin to weigh down your financial plan. Each new membership, subscription or entertainment expense you take on requires a couple more hours of work to pay for each month. Pretty soon you are working an entire day or two out of the month just to pay for these optional expenses.

Offsetting New Expenses

One way to keep a lid on your discretionary spending is to draw a line in the sand representing your current total monthly outgo on non-housing, non-utility expenses. Once you’ve totaled up all expenses in this category make a note of this amount, and agree to never exceed it. Let’s say your discretionary recurring charges currently total $300 a month. You would really like to sign up for an online membership at $13.99 per month, but you can’t add to your $300 budget. Something has to give. You can either cancel an existing membership or subscription, or choose to skip the online membership for now. Whatever you decide, you can’t cross that established $300 a month budget.

A Real World Example

We have been mostly disappointed in cable television viewing options here lately. Few things seem appropriate for my kids, and even less are things I personally find entertaining. We agreed as a family to cut the expanded cable service down to a basic package, and use the $35 a month saved towards other discretionary expenses – things we’ve been interested in, but unable to do because our budget was maxed out. We decided to sign up for a basic Netflix membership for $8.99 per month. This way we can request the movies we want to see (the kids get to pick every other selection). With the remaining $25 we enjoy a once-a-month dinner out at our kids favorite pizza place. The $25 covers dinner for all of us (including a few leftovers) and a few dollars worth of tokens for games. By offsetting expenses we’ve managed to enjoy a pizza night out once a month and a few movies all with no net increase to our monthly budget.

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  1. We did that exact same thing. We were paying for television that we didn’t have time to watch. I know it hurt that first month without it, but we made the switch to a basic family package, which saved us thirty bucks a month. We got a cheap Netflix package and have plans to upgrade our internet (a far wiser investment than sitting in front of the tube).

  2. Breaking an expense down into the monthly “investment” is a tried-and-true sales tactic. I know. I’ve been to sales training seminars. Most people can’t get their heads around a large sum of money, but $29.95 is within our grasp. $29.95 is within the impulse buy red zone.

  3. we do not have any cable, so all we get are some fuzzy channels. We do netflix, but will be cancelling for summer. The library has free dvds to rent every day, some are not even due back for a week, and my brother has about 200 dvds, so we are going to borrow some every week from him. I do not have ant other monthly charges except Netflix and gas $100 a month, electric $100 a month, phone, & online $70 a month with all taxes and such for both phone & online.
    But occasionally we will drop a few bucks at Dunkin Doughnuts or McDonalds and those can add up real quick, so I have made it goal to avoid these places altogether. Thanks for the reminder that it all adds up. -Becky

  4. Great post! I did this same thing. I cut $40 from my cell phone (cut the data plan), cut $20 from my cable bill, and cut 30 from my Car/Home Insurance. It all adds up!

  5. Thats a very good idea. I’m sure you all are much happier going out to eat once a month and getting the movies from netflix than you were with premium cable.

  6. I don’t have cable at all – or even local stations. If you turn on my tv all you get is static. However, I do have the basic $4.99 Netflix subscription. This way twice a month I can sit and watch a movie and relax. It has worked out exceptionally well for me. I haven’t had tv in years, but I do like to watch an occasional film.

    • @Dawn: I like your plan! Now if I could just convince the wife and kids to cut it out entirely. The basic service is only $12, so it is low on the totem pole of things we could eliminate.

  7. Frugal Dad,
    You must have a cheap gym! I know some are up to $50 per month.

    Good article as I would love to implement a budget that would help cut out expenses that were not needed. The question though is that while I don’t watch much TV, the choice is between regular cable and basic cable (Which is terrible). I am going to just continue to try to find deals in order to get my cable bill but but it definitely is tough.

    • @Luke: Yes, it is a good deal on the gym. I paid in full for one year to get a bit of a break on the monthly fee, and it is up in September. The jury is still out on whether or not I will renew. Unfortunately, I lack the space for a home gym or I would use the membership money towards investing in some used equipment.

      You are on the right track regarding looking for ways to trim the budget. I used cable tv as a personal example, but others may have golf club dues, or other “optional” monthly expenses they could reduce.

  8. I too cut down cable, basic is $10.20 a month.
    And we haven’t rented in a movie in over 5 years. The public library has all the new movies and it is even better for kids (they want to watch the same movies over and over)you can even place movies, cd’s, audiobooks, magazines and of course books on reserve and keep a queu going.
    I contacted our insurance agent and raised all of our deductibles to save us money.

  9. Got a flyer the other day for furniture and there wasn’t any prices listed only payments.

    My number one budgeting mistake was budgeting for payments not for savings. when we bought our place I carefully budgeted out the payments but having no savings meant the renovations nearly sank us!

  10. Frugal Dad,
    I luckily have the room for a home gym (It helps not having kids and we are running out of space) and I would definitely recommend it. You can’t make workout excuses when it is downstairs. I assume the money that my wife and I have saved on gym expenses (Say $60 per month for 24 months = $1,440) equals what we have spent on a treadmill, stairstepper, and a good deal of weights. It may not be for everyone and as mentioned, luckily we have the room.

  11. I have to be frugal with my time as well as my money… so I don’t have TV at all. I miss the weather reports/news, but can log on the internet when I want that info.

    Our library has free DVD’s and VHS tapes for a week long check out, and most are newable for an additional 7 days if there are no holds on them.

    The cool thing is that our Library belongs to a coastal network – anything within 4 coastal counties in a library can be requested and will show up at my local library with an email notifying me that it is in. How cool is that!

    I also buy videos for $1 at garage sales… watch them, then share or resell at my next garage sale. Zero expense that way 🙂

    My resolve for this month is to stay entirely out of the grocery store – except for the truly great coupon items that it would be wasteful to pass buy. No impulse buying – no coupon, not buying. Seems to be working so far. Paper comes out once a week…last month the coupons only enticed me in two weeks of the 4.

    Best of luck with the little stuff! It all adds up!

  12. Like Becky and Marci, I take advantage of renting DVDs from the local library which is part of a network with about 20 other libraries. I tend to take 3-4 videos out at a time, renew them once or twice, and then exchange them for other ones.

    Libraries have music, too. I just submitted an interlibrary request for a 3-CD set that would cost $30 in a store but through the library is free. I haven’t bought a CD in about a year, and only started downloading songs off iTunes lately, a song here, a song there, thereby saving the cost of a full CD.

    Monthly expenses can really be shaved down with food. Bring a list of essential items the next time you go to the grocery and stick to the list. Eat out less and cook more for a fraction of the cost.

  13. One of my biggest “nickel and dime” expenses is the phone bill. I had to get a land-line in order to get a business listing in the phone book for my consulting business (VOIP doesn’t do biz listings I guess). They quoted me $45/month but it ended up being $70/month with taxes and fees for additional services I realized that I needed to tack on. I wish I could get rid of it and just use Skype but some clients are old-school…

  14. Gretchen: The inflated cost of a business telephone book listing versus a residential telephone listing is just crazy.

    I get it, though, as I spend $99 a month (before taxes) for a Comcast bundle that includes Internet, basic cable, and a VOIP landline phone. I don’t need the phone as I have a cell but somehow it’s more expensive to have just the Internet and Cable than all three bundled. Go figure.