Lowering the Cost of “The American Dream” Part I

AmericanDreamA recent USA Today article caught my eye. They said that the “American Dream” now costs $130,000 a year. Wow! Even as someone who works with people on their money, I was astounded. For those wanting to focus on creative endeavors that can feel like an impossible amount.

….then I began reading.

Let’s take a look at their list of expenses and consider how we might be able to make the dream more affordable (for a complete list of expenses and how they arrived at each portion, here’s a link to the actual USA Today story). Today we’ll tackle just the essential expenses, and then in my next blog post I’ll break down the rest of the budget.

These expenses assume a family of four living in a $275,000 home.

Housing: $17,062

Groceries: 12,659

Car Expenses: $11,039

Medical Expenses: $9,144

Education Expenses: $4,000

Apparel: $2,631

Utilities: $1,956

Essentials Total: $58,491

Before I tear into these numbers, it’s important to note that most people don’t know what they spend, so all of these numbers look high. When I work with people on their budget they nearly always find that they’re spending more in each of these areas than they thought. Those little one-time expenses really begin adding up.

Housing: The bigger the expense, the more potential savings….and this is the biggest on the list:

  • Consider finding roommates/tenants.
  • Be sure you can afford all of the expenses that come with a house before you buy. Renting may be cheaper.
  • While safety is important, alarm monitoring rarely prevents a crime or catches the thief. Keep the alarm so you shock the thief or intruder (and you make them think the alarm may be monitored) but consider turning off the monitoring.
  • Have an extra bed? You may be able to make a few dollars offering AirBnB services. Some people don’t like strangers in their house, but you can prequalify your guests and turn down anyone who seems suspicious. Many success stories start with only approving people who’ve stayed in many houses and have exceptional reviews.

Groceries: You have to eat, and healthy eating “in” means less money spent eating “out” in restaurants AND better productivity toward your job or craft.

  • Don’t shop hungry.
  • Even if you don’t get the newspaper, purchase the Sunday edition before heading to the store. Big brands still use the Sunday newspaper as a way to share coupons.
  • Start your grocery shopping with a meal plan. That’ll cut down on leftovers and unused food.
  • Many apps and websites now offer plans that will work around items you already have. That leftover chicken and little bit of ketchup? Check out RecipeMatcher.com among others for easy ways to cut down on leftovers.

Car Expenses: Wow! Over $11,000? That’s easily cut.

  • When buying a car think “price tag” and then “gas mileage.” I heard a story yesterday about someone who purchased an $80,000 car because it used zero gas. Yeah…probably not the best strategy.
  • Carpool or take public transportation if possible. Use the time you aren’t driving to accomplish other tasks, like reading tips about your craft (or this blog!).
  • Sure, used cars “nickel and dime” you, but do those nickels end up equaling a car payment? Usually, the answer is, “Heck no!” Find a reliable used car instead of the new model.

Medical Expenses: This is undoubtedly a difficult area, but here are a few thoughts:

  • If you’re healthy, check out HSA accounts and high deductible policies. You may save money by setting up a tax deferred account and insuring less.
  • Work out. Seriously. If you’re going to be great at your craft, you have to be healthy enough to perform on a whim. Your medical bills will also thank you.
  • Self insuring? Many medical centers charge more for individuals than they do insurance companies that have negotiated group discounts. Negotiate your own discounts with your provider.
  • Does your craft make money? Join the Chamber of Commerce or other affinity group and check out their group medical policies for group members.

Education Expenses: I’d never question the value of a good education!

Apparel: This is a difficult area to cut, because so much of society and success with your craft may be wrapped up in how you look. But, there are ways we can save some money.

  • Shop out of season. Buying a bathing suit in April means full price. September? You’ll easily find a sale.
  • Thrift stores. You’ll have to be comfortable spending time instead of money (which isn’t always a great tradeoff), but you can find lots of designer clothing at thrift stores in or bordering high-income communities.
  • Read. Bloggers and Pintrest fans have created many fashion shortcuts that make it easy to cut expenses and still look great.

Utilities: I have a few thoughts here that’ll save you some money.

  • Invest in a home energy audit. For a small fee, the local utility company may be able to provide an expert to come to your house and show you how to save on your energy bills. People report saving more than that fee within a short time.
  • Technology can be your friend. New thermostats like The Nest can control temperatures to save on bills for a small upfront investment.
  • Make saving money on energy a game. In my house we had big electrical bills as my children would leave rooms and not turn off the television or lights. Once we created a chart and started playing “how low can you go?” with the electric bill, everyone pitched in to cut expenses by nearly a third!
  • Ask about even-payment plans. Utility companies can estimate your energy bills and even out your bills so there aren’t big surprises each month. While this doesn’t save you money upfront, it makes it easier to budget for other items.

Those are a few tips. Have some of your own? Feel free to add them in the comments below. I’ll be back in two weeks with more tips to lower the cost of USA Today’s estimate of

“The American Dream!”