Frugality

These days it is possible to get 5% cash back on a lot of your purchases. One of the ways I get 5% cashback on my purchases is by buying things in the rotating 5% cash back categories offered by my Chase Freedom and Discover it® card. Right now the Discover it® card is offering 5% cashback on home improvement purchases and the Chase Freedom card is offering 5% cash on restaurants, movies, and Lowes until the end of June. Both of them have a $1500 limit on purchases that will earn the cash back but since I’m not a big spender that is more than I would normally spend. It is still possible to get the full advantage of the 5% cash back offered though.

The methods to stretch your available cash back are fairly obvious but they didn’t actually occur to me until I read about them in a forum. The first method to stretch your cash back is to buy a gift card at a store in the current 5% cash back category. For example, since restaurants are in the 5% cash back category I could buy some $50 gift cards at McDonalds, Burger King, etc. for however much I think I’d spend at restaurants in the next few months. I’d want to make sure I didn’t spend over $1500 so I’d get the 5% on all my purchases. I don’t spend nearly that much at restaurants in a year so I wouldn’t have a problem with staying under the $1500 amount. I do use this strategy, but I usually just pick up a couple of gift cards before the end of the quarter and don’t worry about getting the absolute maximum amount of cash back.

Another method also involves buying gift cards. The difference here is that you are buying gift cards for stores that are outside the current category. For example, the Discover it® card is currently offering 5% cashback at home improvement stores. This isn’t beneficial to me since I don’t own a home and don’t really need anything from a home improvement store. To still earn a little cash back I’ve been buying $50 gas cards at Lowes. Even though I’m buying a gas card the purchase is still categorized as a home improvement purchase I still earn the bonus cash back. I’m only saving $2.50 with each purchase but it only takes 5 minutes and Lowes is on my way home from work so I think it is a good use of my time.

If you are shopping online you should go through a online cash back shopping portal like Mr. Rebates. Depending on the merchant you can earn even more than 5% cash back.

These are only some of the strategies to stretch your 5% cash back. These are the simplest strategies but if people are interested in reading about more strategies I will write about them.

It seemed like I paid taxes since I had to debit $1500 for taxes from my checking account. I’m actually still in the approximately 46% of Americans that did not pay federal income tax last year though. My tax bill was $1300 for self-employment tax and $200 for state income tax but $0 for federal income tax so I’m still in the 46%.

I would have owed federal income tax but I contributed over $4000 to a deductible traditional IRA, took the student loan interest deduction, and the saver’s credit. I plan to take similar deductions and credits on my federal income taxes next year. I don’t feel bad about taking deductions and credits to reduce my federal income tax owed to $0. The following Learned Hand quote pretty much sums up my feelings on the subject.

“Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.”

One of the most popular posts on this site is the “Sample $1000 Monthly Budget.” That post is over five years old now so I’ve decided to do a new $1000 budget for 2013. There has been some inflation in the last five years but I’m still easily able to live on a $1000 monthly budget.

A common criticism of the budget is that it isn’t realistic. This budget is based on my actual expenses and I’m real (I’m not the Easter Bunny) so the budget is realistic. Not everyone can live on this budget but many people can. If you’re single, in good health, live in a low cost of living area, and don’t have any debt payments this should be an achievable budget. I currently live in Kansas City, MO but have also lived on a similar budget in Reno, Las Vegas, Dallas, Austin and rural Virginia.

The rent, health insurance, car insurance, and phone are all my actual, fixed monthly totals.

My rent, utilities, phone, and health insurance are lower than they were five years ago.  The rent is cheaper because I found a really good deal in a small apartment complex. The utilities are cheaper because I have an all electric apartment and no longer have to pay a gas bill.  My actual electric bills have always been smaller than $20 so far since I live in a third floor apartment with south facing windows that rarely requires me to use heat.  I probably will have to use the A/C this summer but based on my past electric bills a $20 average monthly electric bill is realistic.  My health insurance is slightly cheaper than it was five years ago but only because I raised my deductible from $5000 to $10,000.  I purchase my health insurance through eHealthInsurance which has lots of relatively low cost plans available. My phone is with Virgin Mobile and I get 300 anytime minutes, unlimited texts, and unlimited data. That is plenty for me.

The food, car insurance, gasoline, and miscellaneous expenses all went up. Although I think I should still be able to eat for $100 a month I usually spend about $120 a month so I’m using the higher amount.  Food prices have definitely been affected by inflation over the past five years.  My car insurance is quite a bit higher.  Most of that is probably because I had an at-fault accident a couple of years ago. Otherwise, I think there would have only been a modest increase in my insurance premium.  Gasoline costs about the same now as it did in  May 2008 but I drive a little more and increased the expense amount to reflect that.  I also increased the miscellaneous expense a little to account for other small items that may have been affected by inflation.

I’ve kept the budget amount for irregular expense savings and entertainment the same. The savings for irregular expenses covers car registration, maintenance, and any other predictable but irregular expenses.  I’ve yet to spend $100 on entertainment this year and generally spend much less than that. I’m keeping the entertainment amount at $100 since I’ll probably take a couple of trips this year that will be covered by the entertainment budget.

My monthly expenses so far this year have ranged from a low of $822.34 to a high of $1075.78. That shows that a $1000 monthly budget is realistic for me.  I think it is an easily achievable budget for people in similar circumstances as me.

Below is my daily menu for the Live Below the Line Challenge.  I’ll be having the same thing every day except Friday. That day I will have my breakfast meal twice and a burrito for dinner.

It looks like I didn’t do a very good job with my shopping.  My daily calorie count is too low. In order to get enough calories I needed to buy food that was higher in fat and/or sugar. I will have a little bit of cereal and milk left over so I could add in a couple bowls of cereal somewhere.

Since I’m about 40-50 pounds overweight and the challenge is only for 5 days it wouldn’t be impossible to get by on this level of calories.  That being said,  I have full day continuing legal education classes on Wednesday and Friday.  There will be free food provided there and I most likely will eat some of that free food.  Doing so will mean I fail the challenge but I’m ok with that. If I can go Monday through Friday without spending anything on food I’ll feel like I accomplished something. For me the challenge is more about exerting a little self control over what I eat more than it is about seeing how little I can spend on food each day.

This menu may seem unhealthy to many of you, but it is actually healthier than what I usually eat.  Compared to my usual diet of fast food, soda, chips and other junk food this menu isn’t that bad.  Also, I will be having at least a little bit of fruit and vegetable each day which is not usually the case. This challenge does show that it is very difficult to eat healthy on such a low budget.  Healthy foods such as vegetables just don’t have enough calories per dollar to make up much of a super low budget diet. I might use the knowledge gained from this challenge to do the challenge again next month and see if I can come up with a healthier menu that provides a higher number of calories.

I’m going to be doing my version of the Live Below the Line Challenge for the next 5 days. After reading about the Live Below the Line Challenge in a post at My Money Blog, I decided to to do the challenge myself.  The basic idea of the challenge is that you eat for $1.50 a day for five days.  The $1.50 a day represents the U.S. equivalent of the extreme poverty line.  The purpose of the challenge is to raise money to fight poverty.  I’ll be making a donation when I complete the challenge and if you want you can visit the challenge site and donate as well.

The official challenge is April 29-May 3, but I’m starting my challenge today.  This works out better for me since I’m impatient and want to start now.  Also I have CLEs next Wednesday and Friday with free food and since I these CLEs are expensive I want to get my full value out of them. My April Food Challenge was a failure but I think I can do this challenge since it is only 5 days.  According to the rules of the challenge the full cost of all items consumed must be included in the budget. This means I can’t buy a jumbo bag of rice and only count the cost of what I eat. That would make the challenge too easy.  The challenge does allow spices to be prorated or sharing food costs between people.  Too keep things simple though I just did one $7.50 shopping trip and that will be the only food I eat for the next five days.  I’ve listed the food I bought and the cost below.  I’m going to post every day of the challenge sharing what I ate for the day.

The total came out to less than $7.50 but I’m not including sales tax.  I’ll probably add a little salsa to my burrito and that prorated cost would use up the remaining money.  It isn’t the healthiest menu although it is probably better than what I normally eat. I’ll be having cereal with a banana for breakfast and a hot dog and beans with carrots on the side for lunch and dinner four days. The last day I’ll be eating cereal twice and have the burrito for dinner. I have ten bananas so I can also have a banana as a snack sometime during the day.  I got chocolate milk because it was on sale for less than skim milk and I needed to stretch my money as much as possible.  I could have done this even cheaper by buying dry beans instead of pork and beans or just buying oatmeal instead of cereal and milk.  I’m lazy though and wanted stuff that was easy to make and I know I’d get tired of oatmeal after a couple of days.  I haven’t figured out the calories and nutrition yet.  I’ll share that information when I post my daily meals.