I want to teach you a cool game. The winners of this game get huge cash prizes; I won a paid-for house.
The game is called, “How low can you go?”
To play, we need to create a low or no-income budget.
I hear some of you saying, “Wait, what, another budget? I haven’t done the first one.” Well, since this one is easier than your real budget – get going.
In some instances this really is a worst-case budget – as in you have unexpectedly and unhappily lost your source of income. In other cases this is a best-case budget – as in you have joyfully taken the leap to a new venture or retirement. Either way, let’s play the game.
If you lost your income, how little could you live on?
With no income, entertainment becomes a walk, a bike ride, a trip to the library. So scratch the movies, the bars, and the vacations.
Eating on as little as possible does not involve fast food or restaurants or steaks. E-Mealz (a really cool menu planning system) can provide menus and shopping lists that will feed a family of two for as little as $30 a week.
If you had no income would that AC be set to 68? Would you be jumping in the car and motoring across town 4 times a week; or might you consider exploring the use of the city bus?
Really get radical here – consider what you spend on clothes and nails and hair color; how can you look presentable for less?
Itunes, Netflix, Redbox ? Not with zero income.
Take a look at that cell plan; you have no income. You don’t know when you will have some again. Can you get it lower? Do you really need it?
Do you have an extra room? What if you got a roommate? No, not forever, could you do it for a while if you needed to?
Things you can’t give up:
Insurance: you need health coverage. If you have dependents you need term life. If you drive, you need auto and if you own a home you need homeowners.
Taxes: you must pay you property taxes, auto tags and renew your license etc.
If I stayed in our home (paid for), kept both cars (paid for) and the cell phones I could go as low as $2,100 a month.
Fully half of my as-low-as-I-can-go expenses are insurance (home, car, health and life) and taxes (property, tags). If I needed to go lower we could easily live with one car (saving insurance, tag and maybe some gas) and ditch the cell phones. But to go any lower than that would require a housing change.
Ok here’s the fun part.
It’s just a game (hopefully you haven’t lost your income or if you have you had already worked out a plan) but what if you played for real? What is the monthly difference between your as-low-as-I-can-go expenses and you normal expenses?
What if you went only half way to as-low-as-I-can-go and applied the rest of the money to reducing debt or increasing savings? If you played for 6 months what would your financial picture look like? How about a year?
This is how we paid off our house. We played the: “How Low can You Go?” game for two years. It really wasn’t about huge sacrifices because it was just a game; we knew we didn’t have to live that way but we wanted to win.
Riding the bus or your bike, going to the library, carrying your lunch, having friends over for dinner and a board game instead of going out is not a drag. After you do it for a while, you may find parts of your low income life that you actually enjoy more than your old free-spending ways.
Can you beat me? What’s your as-low-as-I-can-go number?