When 55-year old Donna Taylor, of Fayetteville, TN, left behind a lucrative six-figure job in advertising to pursue her lifelong dream of starting her own company, she knew she was going to have to cut her costs. Significantly.
That meant working out -- and sticking to -- a serious budget. "It's not like I was living lavishly, but like everyone else, I wasn't giving too much thought as to where my money was going."
Her plan: to cut her expenses -- everything from insurance to vacations to dry cleaning costs -- by 50% a year. After all, she was going to be investing a significant portion of her savings -- thus far, over $100,000 -- to launch Lucky Bucky, an online retail company for horse enthusiasts.
How'd she do it?
Taylor shares some of her cost-cutting tips:
Use A Personal Finance Software Program. Taylor uses Quicken to track and manage every aspect of her finances. And it's been an eye-opening experience. "You see all the money you're spending in all the different categories; when I saw how much money was going toward entertainment, that had to stop," she says."My husband and I used to go out 2-3 times a week; now we have barbecues or potlucks in the backyard with our neighbors, and we drink wine at home." Smart choice: did you know that wine sold at restaurants could be marked up more than 300% per glass?
Barter. Given the weak economy, many consumers are finding creative ways to swap for the stuff they need or want. And while a site like barterquest.com -- which offers swaps on everything from sporting goods to musical instruments -- is one way to go, Taylor prefers to barter the old fashioned way: in person. She has worked out trade arrangements with everyone from her neighbor to her lawn service company.
Go Generic. If you're still embarrassed about the quality of no frills, store brands, or generics, you're in the minority. Join Taylor (and the masses!) by jumping on the generic bandwagon. Taylor estimates she saves about 50% a year by buying generic, which is about what the average family saves (and about what I saved on an independent experiment I conducted for CBS News' The Early Show). For additional savings, Taylor plans her meals a week in advance, and freezes leftovers. "It makes meal time not only cheaper, but easier and tastier."
Play Your Cards Right. If you have good credit (score of 730 or above) and don't carry a balance, you're the perfect candidate for a rewards card, says credit card expert, Curtis Arnold, founder of cardratings.com. "It's the no-brainer way to get money back for purchase you're going to make anyway." Taylor uses an Amex/Costco cash rebate card for all her purchases, both inside Costco (where she buys in bulk, and actively shops in the produce department) and out. "The points add up very quickly; we got about $1,500 back last year." To find a card that suits your spending habits, go to one of my new favorite sites: Nerdwallet, which just launched in March.
The Buddy System Works! Taylor and her husband, John, work as a team, meeting weekly to discuss their finances. "We are constantly discussing where we are, where we'd like to be, and how we're going to get there." Good idea: you're not only more inclined to save if you have goals, and a plan to reach them, but sharing those goals with a buddy make you more accountable and ultimately helps you stay on track.
Live your dream by cutting costs, like Donna Taylor did