When you REALLY NEED to cut expenses, where do you start?

It doesn't look so bleak!!!

But to answer the question, "where do you start to make cuts"  .  .  .

My thinking -- look everywhere. There are a couple of exceptions, but for the most part, no budget category is sacred.

I have to qualify that statement, there are a couple of categories that I do feel are sacred, for both faith and humanitarian reasons. Our tithing is non-negotiable, in our minds. It's just something we do, right off the top. Giving to charitable causes also remains in our budget. For example, we sponsor a little boy in Columbia. I could never put my happiness ahead of his need. He has so little, compared to us here in such a wealthy country. We also support our local food bank. Again, because some folks have so little, when we have so much. No one in my house is in danger of missing a meal. That can't be said for many households in our area. And taxes. Ya gotta give to Caesar what is Caesar's. Tax evasion, even when you don't agree with what your government does with your taxes, is wrong and unscriptural. But a citizen always has the right to protest with their vote, by writing to their leaders, and by organizing peaceful coalitions for change.

So, back to the budget? Where to make cuts?

I prefer to cut across the board, rather than eliminating one category altogether. First of all, I think we free up more money this way. But second, we tend to feel less deprived if all categories remain active, to some extent, rather than an arbitrary decision of say, "vacation is cancelled! Prepare for a life of misery!"

Utilities and services

• Electricity -- my goal is to reduce our electric consumption by 20%. We've already been implementing some changes around here.
• Natural gas (heat and water) -- reduce by 20%
• Water and sewer -- reduce by 5% (we're already fairly conservative with water use, but one can always try harder)
• Garbage/recycling collection -- one of those categories that I'm not sure we could improve on. We pay $13 to put out 1 can a month. The cost to drive/dump this trash to the landfill would cost about the same. As we consume less, however, we may find that we have less to dump at all. So maybe in the long-run that will be a charge we can reduce.     I collect our aluminum cans separately from the rest of the recyclables. I take them to a nearby center for money. I will look into taking our glass recyclables in with our aluminum, to see if they pay for them, as well -- that could gain us a tiny bit of money.
• Internet and phone -- no cable and have no interest in cable. But the internet is great, and we're in luck. My son pays for the internet. It's a bundled plan, both internet and phone. Our part of the bill, the phone, is $30/month. I will scour that bill, though, and check for charges that could be dropped.

Totally necessary, and not terribly flexible, but we will try, as we can, to reduce

• Medical/dental copays -- this will automatically go down when the braces come off my daughters' teeth. $20 every 8 weeks -- gone! We still have a payment for the retainers. But if they take care of them, and don't lose or break one, then the retainer fee will be a one-time thing.   My husband will have good medical coverage at his job, but we still need to find new insurance for my daughters and myself. My husband doesn't want to add us, as his dependents, to his work insurance. Depending on what we find, our copays/co-insurance could go up considerably and we'll need to put aside more for this category.
• Auto/Home insurance, licensing and registrations -- we will delay our daughters taking their learner's permit test for a few more months, until the Christmas holidays, when they would have time to actually practice driving. And we'll delay the actual license until either they can pay for their part in the insurance or we have the resources to pay for it.  We are thinking of selling our second car. Our insurance is up in October and registration in November. We'll time dumping that car, to avoid those fees. And I'll be shopping around for better insurance rates for both auto and home.
• Savings for retirement and future plans (in addition to 401K contributions) -- if we have to we'll cut this back by 25%

Flexible, but necessary

• Groceries -- reduce by $40 per month (this will be tough, but it's just the kind of challenge that I like and that I have almost complete control over as I am the only one who ever grocery shops)
• Non-food household supplies (this includes cleaning supplies, hygiene items, bath tissue, postage and paper supplies, etc) -- not sure we can reduce here much, but after the braces come off my daughters next month, we won't be going through as many toothbrushes. Braces eat up toothbrushes rapidly. And I'll try to become a better shopper for the rest of the items. My goal is to shave about $5/month from this budget.
• Clothing/hair and grooming -- reduce by $10 per month. For the most part, we've maintained a low budget for these areas, but my husband and I have had the occasional professional hair care visit. We'll reduce those to the bare minimum, or if needed, those can become holiday gifts to each other, or from kids to us. My son pays for his own barber visits, and my daughters' long hair is maintained by me. I am in need of really good, supportive and attractive shoes for possible work for myself. I have nothing in my closet that I could be on my feet all day in, and still look nice. Sneakers just wouldn't cut it for most of the jobs I'm considering.
• Home and car repairs -- some repairs just should not be put off or ignored. But I do think we can do much of the stuff we have hired out in the past. My husband rented a chain saw and took out 3 overgrown trees/shrubs back in the spring, for a huge savings over what the tree guy wanted. The improvements we do hire out/save for will likely be things that we consider capital improvements or investments which will pay for themselves (such as a fireplace insert or wood-burning stove for the living room).   One expense we will continue to hire out is pest control. We live in an area littered with carpenter ants. Our house had a problem with them a while back. We go with a minimal treatment program (once a quarter), and feel this is worth the money.   Car repairs we need to continue saving for, as they come up unexpectedly and almost always need attention right away. The budget will remain the same in this category.
• Gas for the cars -- this will automatically go down as I am no longer driving daughters 20 miles to and from school each day, and the once/month orthodontist visits, 20 miles to the north of us, are almost a thing of the past (2 more to go, then just check-ups from time to time). My two daughters now hitch a ride with their father to the bus stop, for work and school. The reduction in this category is planned for $50/month.
• Contributions to daughters' education -- reduce by $1000 per year/girl (they each will contribute additional amounts, now that they both are employed with well-paying first jobs -- $12/hour, that's almost $3/hr over minimum wage here). I'll be updating FAFSA, as well, and hopefully we'll qualify for additional amounts in grants.

Unnecessary and totally flexible, but make life enjoyable

• Gifts -- reduce by 50% (this doesn't mean we won't give gifts. It just means we'll have to be more creative, thoughtful and resourceful.) Already to a good start in this area.
• Eating out, entertainment, excursions -- reduce by 50% (I'm very disappointed in restaurant meals in the budget category. Mostly, it's just filler junk, with little nutritional value, and often makes me sick. But excursions can be a lot of fun and cheap, such as visiting the pumpkin farms, or going to the Bavarian village to the east, or an early morning at the beach.)
• Landscape/Design/Home -- reduce by 20%. I had wanted a new chair for the family room, but I think I will re-upholster one we have instead. I had saved several hundred dollars towards buying a new chair. After the cost of supplies to re-upholster the chair, I could re-allocate that saved money towards something else in the house. And I'll have to discipline myself not to buy any more ornamental plants!
• Savings for vacations -- we have a family vacation planned for the end of summer, beginning of fall. We've been planning this for years, literally. This is a just-before-university-begins family vacation. Some elements are already paid-for and non-refundable/non-transferable. So, do we cut our losses and cancel the trip? Or do we go on the trip anyways, but make it as budget (but fun) as possible? This is a Disney vacation. Everyone knows that those can be spendy. But they don't need to be terribly so. We've decided to go anyways. I've cut that budget by 10%. Not much, but it's something. This vacation, even as a Disney one, has been planned as a budget-version Disneyland trip. The area we'll be able to save the most, over what we had planned, is on meals. We had already planned for cheap accommodations and travel to/from. Vacations are important to us, so even under tight finances, we'll continue to save for time away, just maybe not so much. Even shaving one day off of a trip can mean a huge savings, but we still get a fun time away. And if ever there was ever a time to use rewards points, now is it! Overall savings for vacations category -- reduce by 20%.

As you can see, most categories are more flexible than you'd think. I haven't even really slashed many categories. I'll cut more as we need. Fortunately, we have had a 30-day advance notice of a reduction (at first we thought it was 2 weeks, but later discovered it was 30 days) giving us time to think and prioritize.

These cuts look do-able. And they get us about half-way to making up the income loss. Now to find ways to meet these goals. Can you tell that I'm a goal-setter?

Our situation will require a two-pronged approach, both cuts to spending and increasing income. We're both seeking ways to boost our income. We are looking to find a balance between spending less and earning more. There are times when just earning more comes at the expense of quality family life. Or cutting back to a bare bones budget makes us too miserable. I'll continue to post the ways we implement ways that both cut spending and increase income.

I just keep repeating, "we can do this! We CAN do this!"