What Do You Spend Each Month?

You can’t determine what affordable housing means for you until you know how much money you have, and how much money you spend. We’ve previously looked at the first; now let’s figure out the second.

Whether you use an expenses app on your phone, or write down every dollar you spend in a small notebook, get in the habit of tracking your expenses. Do this for three months straight. This will give you a pretty good idea of what you spend, and where you spend it.

You’ll need to group your expenses into categories. I use my own categories when I do this (I’ve done it for almost my entire adult life). They include:

  • House payment or rent
  • Utilities
  • Property tax
  • Charity
  • Health-sharing ministry
  • Food
  • Car Insurance
  • Car expenses
  • Car gas
  • Medical/dental
  • Disability insurance
  • Life insurance
  • House insurance
  • Miscellaneous
  • Entertainment (includes dining out)
  • Gifts/cards
  • Yard/house
  • Clothes
  • Cell phone
  • His hobbies
  • Her hobbies

Many of these expenses are the same every month, so it’s not that hard to do this on a monthly basis. Just total these expenses, and any others you might have that I don’t have on this list; that total is an important number.

The big question is: how big is that number compared to your total monthly take-home pay? Do you spend more than you earn each month? If you do, something must be done. You need to be financially solvent going into your later years if you don’t want to end up living in your car someday.

If you’re spending more than you earn, I assume you have credit card debt. You’re going to need to get rid of that. If you have a spending addiction, you’re going to have to get help for that. If you live like someone who earns far more than you actually do, you need counseling to find out why you do that.

In addition to those issues, look at the individual categories to see where you can pare down. The largest categories are ripe for that, but the smaller categories add up, too. Be honest with yourself; where can you cut back so you can start spending less than you earn?

If you already spend less than you earn, congratulations! You’re one big step ahead of many people. Now you need to look at where you want to live before and in retirement, and whether you can afford it.


Figuring Out What Affordable Housing Means for You

Last time I touched on how to figure out what affordable housing in your middle and old age will look like for you. The first step is determining what you have and what you spend.

So how much money do you have? If you don’t know, you should. Go through all your paperwork and make a list of your bank accounts and balances, PayPal accounts and balances, rental income (if you’re a landlord), current value of stocks and bonds you own, money in your IRA or other retirement accounts, cash in your wallet and cash stashed in your sock drawer.

That’s a start. Now let’s look at your net worth. If you own your house, add its value to the total from the previous paragraph. If you own your car(s), include their approximate values (Kelley Blue Book online is a good source for that). The same goes for campers, boats, motorcycles and ATVs.

Total those items, then subtract from them what you owe on them, if anything. Use your current mortgage balance, current car loan balance, etc.

So, are you still in the black, or does your calculator show a negative number?

If it’s negative, you need to become debt-free before you think about retiring. But if it’s positive, pat yourself on the back.

Now that you have a rough idea of what you’re worth, next time we’ll take a look at what you spend.


How to Avoid Living in Your Car

Over the past ten years or so, our country has seen an increase in homeless families. Some now live in their cars, even in traditionally affluent areas like Seattle. Avoiding this by being proactive is especially important if you’re not young anymore; younger people will (hopefully) have opportunities to bounce back in the future.

The only way to NOT end up living in your car (or worse, in a homeless shelter) is to secure affordable housing as soon as possible.

The first step is finding an affordable place to live (see last week’s post). There are many options for affordable housing. Renting may be OK if you can find a place where you’re pretty certain the rent won’t go up a lot. Living with someone else, like a friend or relative, with whom you can split costs is an excellent idea if you currently live alone.

The ideal is buying a small house with cash, something all on one level that can take you from your current age into old age without forcing you to move. Small houses have smaller-than-average utility bills, maintenance bills and property tax bills, so buying a small house is a good way to invest in your future retirement, helping you stay financially solvent even though you may not have a lot of retirement income coming in.

If you’re middle-age or approaching retirement age, dealing with long-term underemployment, or all of the above, you need to know how much money you have and how much money you spend each month so you can determine how much you can afford for housing. See the next post for details.


It’s OK to Give Up Birthday and Christmas Gifts

Often, after a birthday, or the holidays, we’re left with more goodies than we really need. That’s why we need to go through the gifts we received, deciding which are keepers and which need to be moved along, so we can remain clutter-free, or at least somewhat clutter-free.

Of course, some gifts are absolute keepers: the scarf your daughter knitted for you, a book you’ve been wanting to read, a bottle of your favorite wine. But what of those gifts of a more generic variety? Items like:

  • A shower kit with a cheap plastic “loofa” and bubble-gum scented shower gel,
  • A box of cheese and sausage snacks from someone who isn’t close enough to you to know you’re vegetarian, or
  • A sweater (with no gift receipt or tags) in a color combo that hasn’t been popular since the 1980s.

These gifts are easy to pass along to someone who you know will want them, or to simply donate to a thrift store or charity that takes items to resell. Make the time to do that now, rather than move them around for the next few months before you finally become fed up and do something with them.

Then there are the wonderful gifts which replace something you already owned. For instance, someone once gave me a lovely pair of woolen slippers. They were sturdy, practical and quite expensive, I later learned. So why did it take me months to start wearing them and to throw out my old, ratty slippers? Emotional attachment is the best explanation, I suppose. But I tripped over the box containing the new pair for ages before I finally made myself do the trade and pitch the old pair.

Duplicate gifts are a bit easier to deal with. If you received two of something, and it’s not consumable, share one with someone else you know who might need it, or pass it along. Why try to make space for it when you already have one?

As you go through your gifts and decide which are keepers and which need to go, let the momentum that builds up carry you along so that you take anything else you happen to see that’s no longer useful to you and move it along, too. You’ll be surprised how that momentum works.

If you need help making the tough decisions about which gifts to keep and which gifts to get rid of, see my book, The Sentimental Person’s Guide to Decluttering for tips on moving along a variety of gifts, including heirlooms and expensive gifts.