The week before we closed on our house, LaLa was laid off from our company cutting our total income by about 40%. A year later the company folded leaving me without a job. LaLa had been unable to find web design work in that market all year and had taken a $12/hr halftime job (which was a horrible job, but it helped make ends meet). Suddenly we were faced with having to get by on my unemployment and LaLa's meager salary.
So within two years we went from earning a total of $140k (with no mortgage and cheap rent) to a total income of about $36k (and a mortgage). We had no emergency funds having spent all of our savings during our house purchase. We weren't able to save or reduce our debt during that time, but we came out about even which felt like an accomplishment.
With more tips like Nicole's and slightly different priorities I might be able to shave even more off if I had to do it all over again, but here are some of the ways we minimized expenses:
- "Refinanced" my auto loan: my car loan was at 7% and had a balance of about 5k. I "moved" that to my home equity line of credit (HELOC) that was an interest only loan at just over 4%. My payments had been over $400/mo until then.
- Reduced HELOC payment: Interest was running me about $150/mo give or take, so I paid $200/mo to make sure I was paying down the principal a little. It made me feel better.
- Less expensive health plan: since I had no access to COBRA, we had to purchase two individual plans. The least expensive plan had higher deductibles and copays but the monthly cost was quite a bit lower.
- Dropped unecessary telecomm expenses: we changed our bundle to a more a la carte one and added back only what we really used, dropping things like call waiting, voicemail (we used an old answering machine instead), and all premium channels.
- Moved credit card balances: I took advantage of low promotional rates to consolidate existing credit card balances and minimize finance charges.
- Movies on the cheap: we dropped to the least expensive Netflix subscription and only went to occasional matinees that were about two thirds the cost of normal tickets.
- Learned to love the library: I stopped buying my books at Amazon and was able to find a lot of great things at my library, including graphic novels. The online interface and request feature made this very easy and the only "cost" was having to sometimes wait a few days to start a new book. I also started borrowing books a lot from friends.
- Bartered for services: LaLa bartered her web design services in exchange for our haircuts over the course of several months.
- Deferred income taxes: I opted to not have taxes witheld from my unemployment. The first April, I owed a small amount of taxes. By the second April, I was gainfully employed and had been paying catch up taxes for a few months. I believe I owed a few dollars in penalties because I didn't realize I should have paid quarterly, but this was much cheaper than paying credit card interest.
- BYOB and "the new austerity": in our close circle of 8 friends, 4 of us were un- or under-employed at the time but we got together a lot that year and shared the burden of feeding the crowd. Dinners were always bring your own (usually alcoholic) beverage, and no one was ashamed or offended when we all took our beverage leftovers home. One friend nicknamed this "the new austerity".
- Vacation with family and friends nearby: Since we didn't have money for airfares and the usual vacation expenses, we used this time to visit with relatives that were within driving distance. In our case, we fell in love with Vermont and became closer to some of my relatives. We also swapped vacation pet-care with our other unemployed friends.
Now I simply have to try Nicole's tip about asking for the promo rate from my cable company....
What other things have you done to get by in a tight financial crunch? Bring it!