A 10-Week Plan to Cut $1,000 a Month from Your Budget: Ready for the Challenge?

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If you've made a New Year's resolution to get your finances in shape, you're not alone. A survey from Fidelity Investments finds a record number of consumers -- 54 percent -- resolved to save more or spend less during 2014.

Unfortunately, if you go about it in the usual way, you're likely to fail.

That's because most people don't put any more effort into their resolutions other than dreaming about what they wanted to be when they grew up. And let's face it: You didn't grow up to be an astronaut or a princess, did you?

But you can't afford to just dream when it comes to your money. According to the Economic Policy Institute, between 2002 and 2012 wages were stagnant or declined for 70 percent of wage earners. Your savings account (assuming you've got one) is paying zilch for interest, your house may still be worth less than you paid for it, college tuitions are rising ever higher, your health care premiums went up and, since 2000, the stocks in your retirement investments have returned a whopping 1.6 percent a year. Worse, you might be one of the 10.9 million workers who were out of a job during November, including more than 4 million who've gone without a paycheck for more than six months.

And that collection of Beanie Babies Aunt Ethel left you isn't going to cover any of it.

Your first inclination is to doom yourself by trying to create the perfect budget, and track down every nickel you spent last year with the fervor of a Kardashian searching for a husband. Or you'll go on the financial equivalent of a crash diet, pinching every penny until you eventually snap and find yourself in Vegas binging on a Kobe cheeseburger topped with Beluga caviar and a stripper.

Instead, let's use the process from my new book, "The $1,000 Challenge: How One Family Slashed Its Budget Without Moving Under a Bridge or Living on Government Cheese." Every Tuesday for the next 10 weeks, we'll comb through your biggest monthly bills, carve out ways to save right now, and make your resolution a reality.

UPDATE, 3:20 p.m. Sunday: Based on the reaction from some of our commenters, many of you just can't wait until Tuesday to get started. So just this once, we're going to go off schedule and publish Brian's first real column ... now. If you'd like to skip the end of his introduction, click here and go straight to "The $1,000 Challenge, Part 1: Find $100 a Month in Your Financial 'Junk Drawer.'" We'll still feature it on DailyFinance on Tuesday, of course.)


The book is based on my Funny Money columns in The Detroit News, where I cut $1,000 from my family's monthly spending, trimming $100 from each of our top 10 spending categories. I didn't create a perfectly color-coded spreadsheet. I didn't plow through a mountain of bills and credit card statements. I just cut our spending so we could keep more of our money.

That's $1,000 a month, $12,000 a year. Counting taxes, that was like giving myself a $17,000-a-year-raise, something I haven't seen in more than five years, not to mention that pay cut.

I'll admit that Mrs. Funny Money and I make a good, middle-class living, but it's not like we were driving twin Bentleys. Your goal probably won't -- and shouldn't -- be $1,000.
I chose that number because it made a good headline. But whether your goal is $500 a month, $200 a month or $50, the idea is the same: Cut your current spending as deep as you want or need to go. Focus on your biggest recurring monthly expenses. Finally, redirect that cash at your financial goals.

A word about goals: "Saving money" sounds like a good one, but it isn't. Money is just a means to an end. A real goal needs a dollar sign and a deadline, but it also needs to be about more than the money. So whether it's paying off the Visa bill or collecting all the "Duck Dynasty" Chia Pets, chose a worthy target, estimate the cost and set a time frame.

Let's say you have $5,000 on a credit card at 18.9 percent interest, and you want it paid off in two years so you can buy a car. That's $208 in principal for 24 months, plus about $79 in current interest. Aim to cut $300 from your spending and it'll be like your credit card payment is free. You won't have to give up anything else, you won't have to get a second job, and you can get your card balance to $0 on time.

Saving like that won't hurt. Most of my cuts were on things I don't miss or don't care about. I don't notice canceling the subscription to a magazine I never read, I don't notice any difference in long-distance service, and my chili tastes just fine with generic pinto beans, thank you.

A word about willpower: It's easy to think you can goad yourself into living on 59 cent generic potpies and getting your entire wardrobe at the flea market. But willpower is a finite resource and, when you eventually run out of it, your grand penny-pinching plans will come crashing down. But cut your auto insurance bill once, and that savings is repeated -- automatically -- month after month after month, whether or not you manage to get up your gumption.

By the end of 10 weeks, you'll have the basics of a good, realistic budget started, too. Share your savings strategies, questions and tips here in the comments so we can all mark our progress together. By the time we're done, you still won't be an astronaut or a princess, but you can be flying high and living like royalty.



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127 Comments

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lashonbenj

This is a good idea if you can do this. dont be rude and put this person down for the advice. Either take it or dont

March 23 2014 at 1:48 PM Report abuse rate up rate down Reply
tfarnon

I don't need the advice. I saved $14,500 last year. I only make about twice that. I live small. I don't spend much on things I don't really need.

January 12 2014 at 3:47 AM Report abuse rate up rate down Reply
kunte.kinte1863

This article has nothing to do with congress. How about a little personal responsibility?? Freakin' crybabies.

January 11 2014 at 7:37 PM Report abuse rate up rate down Reply
lindapromom

I would like to unsubscribe from this email, never did ask for it . there was no place to submit unsubscribe

January 09 2014 at 5:01 PM Report abuse rate up rate down Reply
ands_s

There are a lot of ignorant comments here. Seems many people didn't read the article, didn't understand it, or are just whiners. Regardless of the crap state of the economy and our congress, instead of just whining, we can do things (most of us) to help our situation. Anyways...
In regards to the first week, I don't have anything in my financial junk drawer (no recurring payments that I"m not using or won't miss). Those were the first to go when I stopped getting raises. Will check what the next week offers (utilities).
Thanks,

January 08 2014 at 1:43 PM Report abuse +1 rate up rate down Reply
scottee

why save?

when people are rewarded for spending and debt?
when The Fed is printing and diluting our dollar?

savers are chumps.

January 07 2014 at 7:51 AM Report abuse -5 rate up rate down Reply
1 reply to scottee's comment
kunte.kinte1863

and you are an idiot!

January 11 2014 at 7:35 PM Report abuse rate up rate down Reply
Tom Harrell

I'd like to ask my Oconner-----------How much do YOU make a Year, Mr Oconner ? ? ? ------------did YOU lose your House or Job or Savings account ? ? ----------Have YOU had a Major Illness in the last 5 years that Sucked your Savings DRY ? ? ? -----------I"m sure you make a very nice 6 figure salary writing for the HUFPO or AOL or whatever News Agency you Write for and I'm sure life is PEACHY and Pleasent and you've got the World by the Yeng-Yang, just like a LOT of us had before that Little RECESSION kicked us in the BUT a few years ago ? ? ----------------NOW if you could tell us how to get our Jobs BACK that were sold to the Chinese and Mexicans and how we can recover all the Hundreds of THOUSANDS of dollars that was Cheated away from us by Maddoff and Wall Street and GM, we'd ALLbe happy as HEL to take your advice on how to manage our Money.

January 06 2014 at 2:41 AM Report abuse +2 rate up rate down Reply
1 reply to Tom Harrell's comment
j_saintlaurent

T.Harrel, interesting comment. I'm a journalist, find me: at JeanMarcSaint. What is your story?

January 07 2014 at 12:28 PM Report abuse rate up rate down Reply
ectullis

My SS was increased 1.5% for 2014 what percentage was inflation?

January 06 2014 at 12:50 AM Report abuse +6 rate up rate down Reply
2 replies to ectullis's comment
betty_brock

10%

January 06 2014 at 1:23 AM Report abuse +2 rate up rate down Reply
Tom Harrell

I'm getting about $20.00 MORE each Month on My COLA----------WHOOPIEEEE------------I'm gonna go out and buy a YACHT ! ! ! --------------That's what we get for paying for grandpas Sun city retirement the last 57 YEARS.

January 06 2014 at 2:47 AM Report abuse +3 rate up rate down Reply
debimraz

My husband and I have been doing most of what I have read in the article. We got a Libor Loan a few years ago at 3%, instead of the 7% we had been paying. Instead of paying the lower amount that we were required to pay, My husband kept paying what we had been paying all along, thereby reducing the amount we owed to a very manageable amount. He was forced into retirement early, and we are still able to manage our home, rather than having to sell our home or lose it like most of the young families that have been living high on the hog. He also has saved us 100's of thousands of dollars by doing most of our car repairs over the years, while purchasing great used cars. I reduce our living expenses by cooking from scratch and learning to garden, shop wisely and live more simply. I was a stay at home mom, learning to live frugally, but also teaching my children to make wise choices. Soon, I will be getting social security, having more than I have had in a long time to spend on healthy living choices, while avoiding the medical industry, some of the best savings that I have contributed to our family live style. The older I get (62yrs), the more fun I am having, sharing the wisdom I have gained with my younger co-workers!

January 06 2014 at 12:48 AM Report abuse +4 rate up rate down Reply
davidtfull

I love it when people comment on an article but do not bother to read it. The author stated that the $1000 figure was just a number: "I chose that number because it made a good headline." The point being that you and I both spend money needlessly on frivolous things and reducing that kind of spending is the goal. Whether it be $5 dollars or a $1000 a month is irrelevant. In the same breath there are some of us who have cut it to the bone and their is nothing left to cut. Even $5 would be an impossibiity when you are running a negative balance each month on the neccessities of life.

January 05 2014 at 11:13 PM Report abuse +2 rate up rate down Reply
2 replies to davidtfull's comment
joehennes

A) Telling me in the article, "I lied in the headline to make you click." is not endearing yourself to me. B) Any frivolous stuff was that ever in my budget was cut long ago.

January 06 2014 at 9:02 AM Report abuse rate up rate down Reply
amyliving

Well, I did read the article, and my reaction was the same as joehennes's: It's misleading to say in the headline that you can save us $1,000 a month and then say in the article itself, "Just kidding, I meant maybe $500, or $100, or $50, or maybe just $5 a month--it all depends on you." In other words, you can actually save $1,000 a month with this plan only if you're as irresponsible with money as the author used to be. Sorry, but someone who was wasting $12,000 a year on unnecessary expenses isn't someone I think I should be taking financial advice from.

September 30 2014 at 11:01 AM Report abuse rate up rate down Reply