Wednesday, January 28, 2009

Reduce Spending without Sacrificing Lifestyle #1 - Eliminate Waste

We've started tightening our belts in the My Wealth Builder household. Our target is to reduce our annual expenditures by 5%. However, we've decided to be creative in how we do it. Our goal is to save the money without any reduction in our current lifestyle. Our initial approach is to immediately reduce waste, i.e. money that's spent on goods and services but not effectively used. Here are some of our areas of focus:

  • Food. We seem to throw away a lot of food for a few reasons. First, we buy fresh vegetables and fruit in bulk to reduce grocery trips. Often we don't finish the entire amount before it goes bad. Second, we cook in bulk, resulting in leftovers that sometimes get lost in our refrigerator. Third, we have child who consistently doesn't finish her meals, resulting in more food saved. Finally, I wasn't very diligent at checking the leftovers before making something new to eat.

    Our solutions: I will eat leftovers and fresh fruit/vegetables first before anything else. This should cut down significantly on food going bad. Second, we will reduce the amount of fresh foods purchased until there is only a minimal amount thrown away. Finally, we will only give our daughter portions she can finish in one sitting.

    I expect these changes to save 10% of our food cost with no change in quality or quantity.

  • Energy. We were routinely leaving lights on in rooms that weren't occupied. In addition, I put the exterior lights on a timer that kept them on about 4 hours per night. Being an engineer, I could easily calculate the cost of a light being on. Based on our electric bill, we were being charged about 10 cents per kilowatt hour. Specifically, a 100 watt light bulb left on for 10 hours would cost 10 cents. Since our outdoor lights are 500 watts, four hours of being on is equal to 2 kilowatt hours and is costing 20 cents a night or $6 per month.

    Our solution: Turn off lights when leaving a room and leave outdoor lights off. We decided not to address phantom energy usage (e.g. electronics on stand-by) since the amount saved was much lower.

    Since we regularly use 1000 kilowatts of electricity a month (about $100), I expect to save about $15 per month just by turning off lights when not needed.

  • Gasoline. In the past, I would routinely drive my car as needed to do errands. This resulted in a lot of trips for a single reason. However, since taking early retirement, I had already significantly reduced gas usages since the daily commute was eliminated.

    My solution: I now group my errands by location and try to accomplish at least two to three tasks with each trip.

  • This will be in addition to cost saving measures we have already done such as electronic bill paying, and a new energy efficient furnace and air conditioning unit that we installed in 2008. Our plan is to reduce waste for a couple months to determine if the impact is sufficient. We'll know by March if it is working.

    For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    No comments: