How To Pinch Pennies After a Life of Plenty

How To Pinch Pennies After a Life of Plenty

HOW TO PINCH PENNIES AFTER A LIFE OF PLENTY
An edited version appeared in the New York Times, Money & Business, May 7, 1995
By Elaine Soloway

One recent spring day, after tossing my winter jacket into the washing machine, vacuuming the area rug and mopping my wood floors, I walked to the library to read Money magazine. While none of these activities may seem startling, for me, at 56, they were milestones.

Just a few years ago I had been married and enjoyed a combined income from my husband’s medical practice and my own public relations business that permitted unlimited dry cleaning, weekly maid service and any new magazine or book I wanted.

Then, after 30 years of marriage, I got divorced. And with the split came an immediate need to overhaul my spending habits.

Unfortunately, the changeover took five years, $35,000 worth of debt and the realization that if I didn’t do something, I could wind up unable to pay for groceries.

This is not a diatribe against my ex-husband or my divorce settlement. I received a healthy retirement fund, appropriate alimony, the house and extra cash.

But I did not receive a new understanding of money, and I soon lost control of my finances: I paid income and property taxes with credit-card access checks. I charged trips to Los Angeles and Boston to visit my two daughters. I used plastic for groceries and for goodies to salve the pain of divorce.

Live many women of my generation, I guess I expected to be rescued – by a second husband, successful children, a rich uncle. I figured that if I could hang on until age 59-1/2 for my retirement funds (I was 52 when we separated), I could make it. But at the rate my debt was climbing, I would need bailing out much sooner.

Much as I hated to face it, I realized I would have to sell my house. I couldn’t imagine life anywhere else, but in truth, the house in the Lincoln Park neighborhood of Chicago was too big for just me and my dog, and the $9,000 annual real estate taxes were an impossible burden. With the sale, I paid off the $35,000 debt I had accumulated and rented a trendy loft apartment not far from downtown.

That, however, did nothing to alter my spending. Instead of credit cards, I now used the house profits to finance my life style.

Six months into my lease, I decided I wanted to own a house again – a small one. But at the rate I was tapping my savings – more than $30,000 was already spent on a trip to France with my daughters, new furniture, doodads to ease the loss of my home – I would not have enough for a down payment.

I found a row house under construction in a neighborhood north of downtown. I had six months to save for a down payment and prove I could live on my income.

I headed for a bookstore, and came away with four treasures:

“From Paycheck to Power: TheWorking Woman’s Guide to Reducing Debt, Building Assets and Getting What you Want Out of Life”
by Linda Bessette and Anne Owings Wilson
August House, 1992

“The Tightwad Gazette”
by Amy Dacyczyn
Villard Books, 1993

“1001 Ways to Cut Your Expenses”
by Jonathan D. Pond
Dell, 1992

“Making the Most of Your Money”
by Jane Bryant Quinn
Simon & Schuster, 1991

I also read business and money sections in the newspapers and gathered information from CompuServe and America Online.

I figured I was spending roughly $1,000 more each month than I was earning. So I dived expenses into two categories: “Can’t Get Away From” (rent, insurance, gas and electricity) and “Can Live Without” (health club, maid service, dog walker, ordering out and eating out).

During the first 30 days of my transformation, I canceled my health club membership and magazine subscriptions (substituting 40-minute walks to the library). I also switched to health insurance with a larger deductible, cut out a phone line and vowed not to buy any clothes or toys.

One of the experts’ best suggestions was to divide my rent payment into weekly amounts. I write one-fourth of the amount each week, deduct it from my check register and hold it until the first. My landlord hasn’t complained about the four checks.

Another tip: Save first. Each week, once my deposit is in the bank, the first check is to my money market account – 20 percent for taxes, 10 percent for savings.

Bessette & Wilson also let me off the hook on two formerly benevolent expenses: charity and children.

My practice had been to donate money to my favorite charity to commemorate happy occasions and good fortune. But this was costing me more than $1,000a year. So instead of writing checks, I began making regular visits and telephone calls to the elderly mothers of my three best friends.

I had also been paying the health insurance, car insurance, accounting and legal bills generated by my children, whose jobs, as a writer and musician, had erratic incomes. After tallying how much this cost me, I gave them enough time to find other solutions, then cut the cord.

In the first 30 days of my new life style, I put away $800 for taxes and $400 for the house down payment, and interest began growing on these amounts. At this rate, in one year I will have my taxes paid for and nearly $5,000 in savings. But even better than a growing bank account is the increased confidence in my ability to take charge of my life – a gift no measure of luxuries could have provided.
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