Tuesday, March 28, 2006

More budget cutting

When we set aside our budget cutting yesterday, we had looked at gym membership and house cleaning service. We quit the gym and cut back on the cleaning service for a total monthly savings of $87.98 and an annual savings of $1,055.70. Today, we'll look at a few more line items and see how much we can save.

The next one I'd like to look at is not new to most personal finance bloggers, but it's an easy one. Dave Ramsey's budget form lists it simply as hair care. A few months ago, I started cutting my own hair with a set of clippers. Monthly savings: $20, counting debt retirement: $21.40, annual savings: $256.80.

There are a couple of reasons why this works better for me than some. First of all, I have a receding hairline. Because of this, I simply put a #3 attachment on the clippers and cut my hair by myself. My wife usually has to spend a few seconds on the spots I missed, but it doesn't take much. Second, the really nice girl who was cutting my hair got married and moved out of town so no one's feelings had to get hurt. When she left a few months ago, I took that opportunity to become my own barber.

Unsurprisingly, I am not the first person to come up with this idea. In fact, my mom cut my hair (and the hair of my two brothers) while we were at home. Personal finance bloggers have also picked up on this opportunity to save money. The author of MyMoneyBlog started letting his wife cut his hair a year ago and he's saved $250. Contrary to what you might think, this is not limited to men. Mapgirl cuts her own hair and saves $35 per time. (Somehow I don't think I'm going to get my wife to go for this one). If personal finance bloggers are representative of the broader public, I would avoid investing in hair salons and start investing in hair clippers.

Next, I looked into potential savings on my automobile insurance. While talking to our insurance agent, the only option available to us was to increase our deductible. We can save $20 per month by increasing our deductible from $100/$250 to $500/$1,000. I'm thinking that's probably not worth it because one accident would wipe out more than one year's worth of savings. In addition, we're probably going to have to buy at least one new car in the near future so I'll sit on this one for now.

As for other insurance, one of our largest costs are health insurance premiums, which are taken directly out of my paycheck. Nothing we can do to decrease that cost, but this year we did start taking advantage of a flex spending program available through work. We put $30 per week of pre-tax income into a flex spending account that totals $1,560 for the year. In the 15 percent bracket, that is a tax savings of $234 for the year, $250.38 when accounting for debt retirement. Total monthly savings: $20.87.

While we're on the topic of healthcare, let me tell you another way we have saved money in the past. When we had our last baby, we were given the opportunity to get a 15 percent discount on our total bill if we paid before we left the hospital. Most hospitals will probably be open to this because collections are such a pain for them.

We have $500,000 in life insurance on my wife and I that we got a few years ago at a good rate, so there's no room to cut there.

So, add the savings from cutting my own hair to the flex spending account and you have a monthly savings of $42.27. Add that to yesterday's monthly savings of $87.98 and you have a total monthly savings of $130.24. My total annual, savings after looking through a few line items in my budget, is $1,562.88.

Tomorrow, I will be terrorizing my phone/internet/cable provider. I've done my research, taken some advice from a fellow blogger, and will be going for some discounts. I'll let you know how it goes.

On another note, I went to AnnualCreditReport and pulled my credit report using experian. Good news. experian found 0 potentially negative items in my report and I didn't have to contest anything. I decided not to pull all three like MyMoneyBlog, electing to save the other two for later in the year. That's enough for today. I've got a Dave Ramsey podcast to listen to.