Lowering expenses

After you have done your budget, you are going to get the urge to make the amounts on it lower. Even if you are making enough to live on, it makes little sense to pay out money you don't need to.

Where to start? Begin with what I call "vapor bills," money you pay out and don't receive anything for. Figure out how to get out of paying for bank fees (look for no or low minimum balance), credit card fees (look for a credit card company that isn't a crook. I know, not easy), telephone fees and charges for services you aren't using, and anything else in that budget that goes out but doesn't bring anything back.

Next is to look carefully at your single largest expense. And what is that? Housing? Food? Oh no. Your big expense is taxes. Income taxes, payroll taxes, property taxes, sales taxes, gasoline taxes, utility taxes. You are up to your eyeballs in taxes, and you might not be aware of it. But look at your gross pay and take home pay on your paycheck, remembering that this doesn't include property taxes, sales taxes, gasoline taxes, and utility taxes. This is so totally screwed up that you pay income and payroll taxes on the money that you then pay for property, sales, gasoline, and utility taxes.

Ah, but nothing you can do about it, right? Wrong. You can drastically, and totally legally, cut the amount of taxes you spend. The secret is this: with the exception of property taxes, every tax is based on your making a transaction. With income taxes and payroll taxes, you earned money. With sales, gasoline, and utility taxes, you paid out money. How much of your life can you run without making a transaction? If you live in a way that requires less money, you can afford to earn less, or at least sock part of it away in a retirement account that is tax-deferred. It will, however, take some long-term green living measures to be able to live on significantly less.


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Lower your taxes

Look at the tomato. When you buy one at the store for a dollar, you have also paid 48 cents in income and payroll taxes to get the dollar you paid for the tomato. This is based on 15% federal income tax rate, 9.7% average state/local income tax rate, 6.2% social security tax rate, and 1.45% medicare tax rate. This totals 32.35%, which I then subtracted from 100%.

$1.48 (earned) x 67.65% (amount after taxes) = $1.00

On top of that, you pay a sales tax on the tomato, and a bit of gasoline tax for the transportation to go get the tomato. Even more invisible, and hard to measure, is that the base price the store is charging for the tomato includes the income taxes, payroll taxes, property taxes, fuel taxes, and utility taxes that the store is paying, and needs to make up for by charging you for them.

One expensive tomato.

But if you grow the tomato, presuming you do it organically, start from seed indoors, etc. for little or no cost, there is no transaction. No income taxes, no payroll taxes, no property taxes, no fuel taxes, no utility taxes.

Now look around. How much of your life can you run like this? It might not seem fair that Green Folks pay much less in taxes than other people do, but consider that they also require much less of the government. They don't need welfare for the poor nor welfare for the rich (most of government). Green folk use roads less, parking lots less, airports less, everything less, except maybe libraries and parks, which are covered by property taxes that green folk do pay.

Say, for instance, you wanted to learn how to finish furniture and the woman down the block knows how to finish furniture but needs help with babysitting. As a good neighbor, you might babysit, and she might show you furniture finishing, as an informal neighborly thing, not as a barter (bartering may be taxable). Or you decide you need to buy an object of some kind. Ask yourself, do you really need it? If so, can you borrow it if you don't need it often? Can you make it, grow it, or repair an existing one? Can you get it on freecycle or Free Stuff on craigslist? Can you buy it used on Craigslist or from a yard sale (much lower taxes involved with a lower purchase price, plus no sales tax)? Only if that object passes all that screening do you hop over to Target and buy the stupid thing. This may seem tedious, but you'll find a pattern emerges in what you are buying, and those answers will get much easier over time.

If your family is going somewhere for the day, bringing food and drink leads to fewer, and less expensive, transactions. If you drive less, you not only save on gas and gas taxes, you buy fewer cars over your lifetime, cutting the large sales tax on cars and the higher property tax on a newer car. There is much more. You just need to look at your daily life to find it.

You'll find that simply keeping track of transactions leads to having less of them, because you are aware of what is going on.

The other part of lowering taxes is being aware of how they work. For many of the taxes—sales, gas, utility, payroll—there is not much to know or to do other than cutting back on the transactions leading to the tax. With property taxes, you need to check, each year, how much houses similar to yours in your neighborhood sold for and make sure that your assessment is not too high. This can easily happen with housing prices sinking quickly. You should be able to file an appeal, but there is probably a deadline.

And then there's income taxes. You really need to understand how these work. You don't need advice at the last minute when you do your tax forms. You need to understand the whole thing, and plan around the tax code the whole year round. There is a lot of money at stake here. You don't need an expert. You need to be the expert, at least when it comes to your household situation.

Find the most recent 1040 instruction book and state income tax instruction book, even if they are from last year (the next year's won't change too much). Take a highlighter pen and highlight all parts that pertain to you. That way you don't waste time with irrelevant information. Then read the highlighted text and understand it. You'll know what receipts to stash carefully and how to make decisions on earning and spending money throughout the year.

When tax time comes, look through every blank on those forms to see if it applies to you. You won't believe the odd little things Congress dreams up. The outrageously complicated tax code is not a good thing, but we live here. We must deal with it.

Another way to save a lot on income and payroll taxes is by using a "tax-favored health plan," such as a health savings account, medical savings account, health flexible spending arrangement, health reimbursement arrangement, or flexible spending account. I know it is a pain to figure these plans out, but it is worth it. One year we saved $1400 by using a flexible spending arrangement through an employer. Toward the end of the year, you are asked to declare how much you will need for healthcare expenses the next year. Do this carefully because you might lose anything you don't need, but remember that you can use up money with a safety valve such as eyeglasses or an ongoing arrangement with an orthodontist. This money, divided by the number of paychecks for the year, is subtracted from your paycheck. Taxes are taken out after this money is out. You then submit medical receipts and the money is returned to the paycheck, tax-free.

A (fairly) easy way to do this is to find out from your payroll office what the deadline for submitting receipts is for each paycheck, and set yourself a reminder on the calendar, for instance. Put receipts as you get them in the "medical receipts" pocket in your binder (see Tracking transactions). You'll also need to submit a form. If you want to, you can scan the form from the employer and bring it into a word processing or illustration program. Add the information that is the same every time and save this as a template. Then, before each deadline, scan or photograph the receipts. Check off each medical expense on your transaction register to make sure you're not missing a receipt. Fill in the needed information on the form. Export the form as a PDF (portable document format) or JPG (photo) file, and send all files attached to an email to the payroll department. You can also, of course, do this all on paper with xeroxes. But you will need to allow time for the documents to go through internal or regular mail.

If you use Schedule A, make sure you are fully using the charitable donations deduction, keeping receipts for any payment to nonprofits that you make. Donate household items that you don't need, after making a list of the items with their "fair market" (used) values.

Carefully hold onto receipts for tax-deductible purchases. You can pay a lot more in taxes just because you did not keep track of these vital little pieces of paper.


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Step 1. Ditch all the fast food. There is no plus to fast food. It is very bad for your health, bad for the environment, and it wastes your money. You think it saves you time. That it only because you haven't added up the time it takes to earn the money to pay for it, earn the money to pay for the taxes associated with it, earn the money to pay for the transportation costs associated with that trip, and the money not earned because you are instead wasting time in a fast food line. The fast food industry is poisoning children with food that causes obesity, diabetes, cancer, stroke, heart disease, and possibly infectious diseases caused by the animal prison camps the meat comes from. The sprawl it generates pollutes the environment and wipes out forests. The disposable paper and plastic waste resources and clog landfills.

Not that I am anti-fast food or anything.

Eat at home or at an independent restaurant or cafe without disposables. Manage your time better so you are not running around like a chicken. Speaking of chickens . . .

Step 2. Consider going veggie, or close to it.

According to the American Dietitic Association, "appropriately planned vegetarian diets, including total vegetarian or vegan diets, are healthful, nutritionally adequate, and may provide health benefits in the prevention and treatment of certain diseases" for people in all life stages, including children and pregnant women. Their research looked at key nutrients for vegetarians, including protein, n-3 fatty acids, iron, zinc, iodine, calcium, and vitamins D and B-12. "A vegetarian diet can meet current recommendations for all of these nutrients." A vegetarian diet lowers the risk of heart disease, the number one killer in this country. Vegetarians also have lower bad cholesterol, lower blood pressure, and lower rates of hypertension and type 2 diabetes. They have a lower body mass index and less chance of getting cancer.

They also spend less, because, in general, plants cost less than meat, since it takes far more resources to produce a cow than it does to produce the same weight in beans, and a healthier person pays less in medical bills.

If you eat meat, look closely at where it comes from. Don't pretend that it appears magically in the supermarket nicely wrapped. Animals, and the humans hired to slaughter and "process" them, endure horrible conditions. For more on this, read Fast Food Nation, a great inside look at the meat and fast food industries.

Step 3. Eat less.

It is no big secret that Americans eat way too much. And it is just a habit, one that you can decide to change. This is better on all fronts.

Step 4. Buy nonperishable food on a regular schedule.

We do this four times a year, carefully checking prices. This eliminates the "grab from the shelf at the last minute" phenomenon, which leads to paying double or more for food and consumable items. Warehouse stores might or might not be a good deal, since they charge a yearly fee and you might have access to a low priced store without a yearly fee. Not an exciting way to spend an afternoon, but you need to do a cost comparison.

Step 5. Find the best deal on perishable food.

No doubt homegrown wins on this, but if you are not doing that yet, you need to do a cost- and quality-comparison at your local stores. Look at other factors besides price, such as whether the food is healthy, organic, and tastes good.

Step 6. Planning ahead.

If it fits your thinking, planning the week's food can save money because it cuts down on waste and impulse buying.

Step 7. Go seriously green by growing at least part of your own food, and making some of it, such as bread, granola, and jelly.


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It is probably time to shop around to make sure you are getting the best deal on car, home, and life insurance. The best deal does not necessarily mean the lowest price. If the insurance company treats you like dirt if you file a claim, you did not get a deal. Claims service is what is important with insurance companies. You can find out about insurance companies by checking your state's web site to see if they have posted a complaint rate for insurance companies licensed in that state. You can also google, for instance, "car insurance reviews" or "car insurance ratings." You can google a certain company's name and the word "problems" or "complaints." (When the heck did "google" become a verb?) Our local consumer magazine, Washington Consumer Checkbook, did a survey on service at insurance companies.

Once you have made a list of reliable companies, call or email for quotes, making sure that you are giving each company the same and accurate information. There can be some big savings in doing a cost comparison.


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Supposedly, to encourage great service and low prices, there is now competition in the utilities industry. Let me know if you find it, because I can't. For internet and local phone, we have two choices, and they are both bad. But it does pay off to look at what choices you have, find the best plan, and negotiate a rate if the utility company is offering a deal to new customers that they aren't publicly offering to old customers.

For electric and natural gas, this great competition has also eluded me. There are other companies offering to send the natural gas to our house, but for more money than we are paying now. All this could change quickly, however, if a utility company gets its act together.

Rethink—now you are not going to like this—cell phones. I know this is a shock to many of you, but here it is:


How did something that did not exist a few years ago suddenly become a "necessity." I understand how people in some professions (those on the road) find them very useful. I also understand a cell phone for emergencies, but this can be taken care of by a prepaid phone. I do not understand why someone who has a landline at home, a landline at work, and is by law not allowed to use the phone while driving finds a cell phone all that necessary. I see people in the grocery store calling to ask someone at home what to buy. Can't they ask before they leave the house? Do reconsider this, and also consider the savings.

Also look at dumping the cable TV. You can get anything you want from Netflix for way less money. Late breaking news is on the internet. There is also another form of entertainment that you can get for free. They do not accidentally delete, nor do they require a certain operating system. They are rectangular objects made of cardboard and paper. These are called books, and you will find them at your neighborhood library. (Incidentally, you will probably find free videos there too.) You can also find them for very low prices at book sales, yard sales, eBay, and flea markets.

The best approach on heating/cooling/electricity is eliminating wasteful use. The Alliance to Save Energy offers many good suggestions, as do other organizations. Also check out Home Energy Saver. H2ouse will help you save on water. Something I have not yet found, however, is research showing how much specific energy-saving tips save in an average household. It would be best to put the effort into the most cost-effective methods first. If you have found such research, please send an email.

According to the Energy Information Administration, 41% of energy in a home is used for space heating, 26% for lighting and appliances, 20% for water heating, 8% for air conditioning, and 5% for refrigeration. Are you heating your home more than you need, and at times no one is home? Are lights and appliances on when not used? Your hot water heater may be set higher than you need, and that level will vary by time of year.

It is time to rethink air conditioning. In the recent past, no one used it. Most of the population of the world still doesn't. But currently in the United States, rooms at home and work are constantly kept cooled by air conditioning during much of the year. Why? Sometimes it is not even hot. Sometimes no one is even there. Open windows and fans cool very well most of the year. Air conditioning is only really necessary when the outside temperature is over 90 degrees. Cutting down on the use of air conditioning saves money and is very earth-friendly.

Low- and no-cost tips on saving energy are available elsewhere, but since this site is a one-stop source on Green Living, I will include some here:

Regularly clean refrigerator coils.

Use a clothesline. Works just fine, and takes little more time than a clothes dryer.

Use a programmable thermostat.

Caulk and weatherstrip, but make sure you have good air circulation to prevent the build-up of indoor pollutants.

Insulate behind outlet and switch plates.

Wash full loads of clothes and dishes.

Check the energy ratings of new appliances that you buy.

Add an insulating blanket to your hot water heater.

Insulate hot water pipes.

Use lowflow shower heads.

Have your heating and cooling system inspected yearly to ensure that your system is working efficiently and safely.

See if replacing doors to the outside will save energy. They often have thin areas that leak heat and AC.

Turn off the famed "vampire" appliances, electronic devices that suck power all the time even when not in use. (But do they turn into bats?)

Use"unheated air drying" for your dishwasher if it is an option.

Look at what tax credits are available for energy improvements to your home.


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Car expenses

A lot of care in choosing a car will save you much money and hassle in the long run. Of course you need to check Consumer Reports for information on features and long-term reliability. Compare the mileage ratings. If you are looking at extra features, keep in mind something a garage manager told me: "everything breaks, sooner or later." Those special features will need repair, so make sure they are necessary (how often are you going to use a sunroof?). Toyota and Honda have a much better reputation for reliability than other brands. It is well earned. If you are taking out a car loan, compare several reliable financing companies with good service, and see how much you will pay out in interest over the life of the loan. Don't just sign. If you are shopping at car dealerships, email them first and have them email firm total prices back (like a reverse eBay auction). The prices keep going down farther and farther. When you go into a car dealership, get tough, and be ready to walk.

Once you have the car, find a great garage that will watch out for you. Use consumer ratings, if available, and recommendations from neighbors. Understand everything that happens with your car. Of course, do the oil change every three thousand miles thing and the properly inflated tire thing.

And then use that car as little as you can. Cars are used for three purposes: work, errands, and fun stuff. How can you handle these with less use of a car? Work can be telecommuting (at least part-time), a home-based business, at a location within walking distance, or available by mass transit. Errands can sometimes be eliminated (no dry clean only clothes and postage stamps ordered by mail) or combined. Find entertaining things to do that use only feet, bikes, or mass transit. If you are moving, consider a historic town or a new urbanism project that will require much less use of a car.


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If you have a child under six, you have no easy answers on how to handle money and time most efficiently. If your child is in daycare full time, you endure a very high expense and are not around your child very much. Your net income, after paying childcare (even with the federal tax credit), taxes, and transportation expenses, can be depressingly low. If one parent stays with the child or children, your income is significantly lower and that much childcare is a bit much for one person. Two part-time jobs seems better, but the workplace is not family-friendly, and few employers offering professional jobs are open to part-time arrangements, unless the job skills are so hot that they have little choice. Two part-time jobs also make for a very juggled schedule. Home-based businesses sometimes work, but aren't easy either. Telecommuting is not as great as it seems, since you can't work and watch children at the same time. You should, however, carefully work this issue out, and find the best of these options. You might be blindly handling childcare in a way that is not best for your family. And all the other elements of Green Living are vital to families with young children, especially money management.


Medical care

The main threat to the health of Americans, and a major source of high medical care costs, is preventable diseases and conditions. According to the AARP, "more than half of all people 50+ have diabetes, high blood pressure, heart disease, or some other chronic condition. 66 percent of Americans were overweight or obese in 2004. . . . Diabetes is on the rise, with an estimated 14.6 million Americans already diagnosed and another 6.2 million unaware they have the disease . . . The CDC expects one in three 5-year-olds in this country to become diabetic because they are overweight or obese." Taking care of yourself not only saves on medical bills, but can keep you alive.

You have little control over doctor, hospital, and lab costs. However, you can stay on top of the situation, and only get the healthcare you really need. Do thorough research on the internet. Also, watch those bills coming in and make sure they are accurate. Often they are not. And it is never in your favor.

You have more options with pharmaceutical costs. Make sure you really need the medicine, and that there are no possible drug interaction issues that doctors are not keeping up with. Then see if you can get a generic form, a better deal for a 90-day supply, or a better deal at stores such as Walmart that are offering discounted pharmaceuticals. Look at Canadian mail order pharmacies, but make sure they are legitimate. And use a tax-favored health plan to pay for it if you can.

If your insurance company covers items, such as medical equipment, that you have to pay for up front but will be reimbursed, don't forget to send in the claim.

Get regular medical and dental exams, especially if they are included in your insurance.


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Household allowance

This category is for items such as gasoline, haircuts, and occasional household items. See what you can save here, such as switching to compact fluorescents to cut down on replacing light bulbs.

One item in this category is inkjet cartridges. Inkjet cartridges are one of the greatest scams of modern times. Printer manufacturers get $18 on up for a small plastic container with water and a bit of colorant mixed in. For a way better deal, you can get refill kits from companies such as Printer Filling Station. You need to carefully read, and maybe adapt, the instructions. Remember that such companies are having to outsmart the printer manufacturers, who take precautions to prevent people from refilling cartridges. Of course, any smart printer manufacturer would create a printer with refillable cartridges, and dominate the market, since the public is well aware of the high maintenance costs of these printers, but they just haven't figured it out yet.

Fewer car trips lower your gasoline cost. So does paying less for gas. Web sites such as www.automotive.com/gas-prices/ will show you prices at gas stations in or near your zip code. These prices change constantly, so you might not be able to keep up with them, but you can see if there is a pattern of, for instance, lower prices near your job than
near your home. Differences in prices are probably not worth driving out of your way.

Keeping tires properly inflated also saves on gas. And using car shades inside your car in warm weather saves gas because a less overheated car uses less air conditioning, which comes from the energy source in your car—gasoline. Use the right kind of gas. Check your car's manual to make sure you are using the right octane. Your car probably gets no benefit from higher octane gas.

Save on stamps and the cost of checks by paying bills online or by phone, but be wary of automated withdrawals from your bank account (use your credit card online), and make sure there are no extra charges.

Get mulch for free for your yard by shredding leaves with your lawnmower (hopefully an electric or manual one) or by calling tree service firms, who may prefer delivering mulch to you over paying dump fees.

Compare the cost of getting bank checks from your bank versus mail order sources, but be cautious who you give your bank account number to.

Find household items free or cheap from FreeCycle, craigslist, your neighbors, flea markets, and yard sales.

If something from a store doesn't work, return it, but combine the trip with other trips so you are not losing gas and time. Products are often poorly made or otherwise unusable.

Shop around for a long distance calling card. Calls on a card cause less problems with budgeting because they don't produce large unexpected bills. Be wary of customer service issues, and look at time increments and connect fees.

Use internet/mail order when appropriate to find exactly what you want with no driving. But be careful. Any schmuck can make a web site.

For kid's clothes and toys, swap around from family and neighbors.

Use yard sales well ahead of time to find birthday party prizes, Halloween costumes, snow boots, and more. Many items at yard sales are new and in the package.

Eliminate gifts of obligation. Americans waste thousands of dollars buying birthday presents, Christmas presents, and presents at workplaces that they don't want to buy and the person doesn't want to receive (yard sale—here it comes). Talk to people ahead of time and either eliminate presents or make a plan so the gift-giving doesn't get stupid. This approach is especially important to combat overpriced, over-indulgent kid's birthday parties.

Watch prices as they are rung up at the cash register. Of course, you can't remember exactly what the prices were, but you will spot something way off. Cash register prices are often wrong, and almost never in your favor. Fishy, isn't it?

Avoid disposable towels, cups, dishes, etc. Use the real and permanent form.

Cut down on buying things in containers that you then throw away. Use canvas bags at the cash register, even if the cashier gives you a dirty look. Avoid overprocessed, overpackaged, overpriced food. Vegetables don't need to be in a clear bag. They're not all that clean anyway.

When buying computer hardware and software, look carefully at your options. Much good software is free, and totally legal. OpenOffice is a free package, better than MSWord (though that's not saying much), that provides word processing, simpler publication layout, database, spreadsheets, and slide shows. NeoOffice is the version for Mac. Gimp is a great photo editing package, and totally free. You can install the Ubuntu Linux operating system on a new or older PC, and get a better-than-Windows, easy-to-use graphic interface. Once again, your favorite price, free. But don't just download anything free from the internet. Find out about the software first. Unknown software can have viruses and spyware. Almost as good as free is hardware that is more reliable and efficient, with better tech support. Macs beat PCs by a very long shot.

Look at using a cash-back credit card, which returns a percentage of your purchases to you one or more times per year. But be wary of large credit card companies offering such plans that have lousy customer service records on the internet. Google the name of the company and the word "problems" or "complaints." An eye-opener in this industry. We have used a great community bank, National Capital Bank in Washington, DC, for our credit card for years, and they offer a cash back card. Not only have we never had a problem, they have helped us with issues with credit card merchants, and are very easy to deal with.

This brings me to a more general point. When you are choosing who to do business with, always make customer service the first priority. The companies that do this well are generally smaller rather than larger. The hassles of dealing with companies that make mistakes and won't answer their phone promptly are just not worth saving a few pennies. Your time is as important as money.

I call it my Lemonade Test. A five-year-old running a lemonade stand knows to smile at a potential customer and speak to him or her politely. The child knows to offer a great-tasting lemonade at a reasonable price. He or she knows to serve the lemonade quickly and thank the customer.

Compare that to the service you are getting. If the manager of the company lacks the reasoning ability of a five-year-old, take your business elsewhere. Never thrust money down anyone's throat.

In general, look through the items you buy with your household allowance, and think imaginatively about how you can do it cheaper without sacrificing anything important.


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What's important is what you do when you sign a contract to buy or rent somewhere to live. After that you are pretty much stuck with it. Shop around and do not blindly sign anything. Think long term. You might like those high ceilings in that luxurious new house, but remember that you have to pay to heat and cool all that space. Arrange a home inspection. If you can't get a good old-fashioned fixed rate mortgage with a reputable company, you are not ready to buy a house. Make a plan so that in the future you will be. Always consider transportation time and expense when you choose where to live. The U.S. Department of Housing and Urban Development offers home-buying advice. Renters need to look at not only the monthly rent, but also the reputation of the landlord, among residents there now, for good maintenance, and also what the utility costs are if not included in rent.

One of the great ideas in Green Living is that of buying a house, then paying it off early. Many financial analysts advise that this is a bad idea, that your money is better off in the stock market. Maybe. Always look at all options when investing money, but do look at the advantages of paying a mortgage early—not just the saved interest but the piece of mind from never again having to pay for housing. The saved interest is guaranteed savings with no increase in taxes, unlike the risky stock market or any other income, which is taxed sooner or later. With a paid off house, you are required to work less, and need less emergency savings, less use of a car, and less life insurance, lots of "lesses."