How To Find Extra Money Within Your Existing Budget
When a major expense comes up, I often try to move through the steps of what I call “hacking my budget” to basically find money that I don’t need to be paying out in one category, and use it to cover the new expense. For example, last fall, when I knew I was going to have to purchase a new car, I decided to try to “find” the money within my existing budget, and I wanted to apply the same logic to my health insurance payment. Was I able to find the money when hacking my budget for the car payments? For the most part, yes. The largest line item in the budget that I “hacked” was my monthly spending on graphics, videos etc. for my blog, but now that the blog acts as a large part of my current business model, I budget for that out of my business expenses.
One of the most groan-inducing parts of working for yourself is having to come up with your own health insurance. Even though Obamacare and the Healthcare.gov marketplace have, in my opinion, made it much easier, it can still be a pain to accommodate a hefty premium payment in your budget when you’re used to an employer taking care of that for you. And I’ve always been used to an employer picking up my health insurance tab. For health insurance, I ended up selecting a plan on the Healthcare.gov marketplace that costs me $262 each month. Tack on my dental coverage that I was still, unfortunately, getting through COBRA ($35 per month) from my old employer, and my total health insurance bill came to $297 per month.
Hacking my budget for health insurance was quite a bit different from the car payment hacking, mainly since I had recently become a freelancer, and there were less discretionary money and categories to pull from when I need something. Here are some smart ways to hack your budget (and the results of hacking for the sake of paying for my health insurance out of pocket):
I “audited” myself.
Many certified financial planners I know recommend doing a quarterly or bi-annual audit of your utility bills and other fixed expenses to identify areas of savings. I hadn’t done this in over a year, so when I left my previous full-time job in April, I started taking every Tuesday morning for a month to call up these companies and talk to them about lowering my bills. Here’s where I was able to nab additional savings:
- Mortgage: I got it lowered from $904/month to $853/month, saving $51/month
- Cable: I finally cut cable and my bill went from $117/month to $84/month, saving $33/month
- Security System: From $48/month to $38/month, saving $10/month
- Car Insurance: I previously had both home and car insurance with one company, thinking they were giving me the best deal. I was wrong, and after lots of homework, decided to keep my homeowner’s insurance with the same company, but move my car insurance to another, lowering my car insurance from $163/month to $116/month, saving $47/month
Total money saved = $141
I didn’t even get around to my cell phone and power bill, which is on my to-do list this fall. Auditing your utility bills is good money management, although fair warning, it is a huge endeavor and time suck. You definitely have to allocate time on the calendar to it and create a plan of attack, otherwise you’ll go crazy in a circle of hell where they play automated customer service messages on loop. I think that’s why a lot of people don’t ever get around to doing it, even if it involves saving money.
I tapped into my savings as a solopreneur.
I was at $141, which means I still needed to find approximately another $150 in order to cover my health insurance costs without adding extra money to the budget. At some point, for the new year, I will likely hack my health insurance bill (especially now that open enrollment has started up again). But when I was enrolling for health insurance in 2015, I was stuck paying $297 and I came very close to finding all the money in my budget.
Once I quit my job and monitored my new solopreneur spending habits for two months, I was able to allocate $100 less to my gas budget every month. Since I was no longer commuting for an hour and a half each day, I didn’t need that money in my gas budget. Because I had transitioned to working from home, I also spent less on dry cleaning, car maintenance, and lunches out, but because those were not regular, recurring monthly expenses, I averaged out that I was saving around $25 per month on those.
Was the budget hacking successful?
By hacking my budget I was able to get close to my goal. I found $239 from the existing budget, with me having to pony up $58 out of my fun fund each month to cover it. This article reports that more medical debts are in collections than credit cards. So, it is definitely worth it to have even the bare minimum of coverage to protect yourself financially, in my opinion. And in my case, taking out $58 instead of nearly $300 is much better way to go. It only cost me a few hours of time and a little bit of my sanity.
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