This is part three of my series showing how we’ll pay off our second mortgage in the next year. Part one is here.

We live on our credit card.

Everything we purchase goes on it – even our utility bills — and we pay it off in full when we receive the bill each month. We’ve done this for years, and will all travel for free to Ft. Myers this winter as a result of the miles we’ve racked up.

But over the years, the monthly credit card bill has continued to grow. Just like everything in our budget, gradual increases have sneaked up on us – partly because of the cost of living and our growing family, but partly because we’ve gotten lax about our budget. I’m embarrassed to say that the monthly statement that would never reach $1500 per month with our young family rarely stayed under $2500 per month in the past few years.

I dissected the past year’s statements to figure out where the money was really going, and found that gas took up a large chunk (my husband commutes a distance to work) and utilities and groceries were another large chunk. The rest seemed to be a scattered array of whatever we decided to buy that month. Vacation and summer months were especially heavy on “whatever”. While there wasn’t much we could do about the gas and utilities, we developed a plan for the rest.

SHOP AT ALDI AND TRADER JOE’S
While I’ve always been a frugal shopper and created a weekly menu based on what’s on sale that week, nothing could prepare me for the incredible savings offered by Aldi. I easily save 25% off my groceries every time I shop there. If I do this even twice per month (the nearest Aldi is about 20 minutes from home) I figure I save about $60 per month -$720 per year.

My sister-in-law told me about Trader Joe’s too, which offers a more interesting variety, and discount prices on high quality food with no preservatives – often organic. I probably pay the same as I would at my local store, but I feel good about the product I’m buying, and I save at least 50% on wine if I buy any Three-Buck-Chuck:) I still buy meat at our local grocer, and fill in all the blanks at Aldi and Trader Joe’s.

EAT ALL OUR FOOD
Perhaps this goal became easier once our kids were older and regularly emptying the fridge, but I know now we make a point of using up our food before buying more. There were years when we never ate leftovers – the containers would grow mold behind the pickles until somebody threw them out. Now we consider leftovers a luxury – a freebie meal that we didn’t have to pay for or prepare. We also skip the weekly grocery run about once every two months, to force ourselves to eat what we have. This is rarely difficult – in an emergency we’ll stop at the gas station for milk.

Approximate savings – $100 every-other month ($600 per year).

SHOP LESS
I know it sounds ridiculously over-simplified, but the mere fact we’ve stayed home a lot has saved us untold hundreds. We don’t go to a store unless there’s something specific we need – and we try to put off that purchase until there are a few things on our list. We combine that with other errand-running we’ve postponed for a few weeks and voila – three shopping trips avoided. I figure we easily save $25 each time we don’t go into a store. Lets say $50 per month – $600 per year.

POSTPONE THE PURCHASE
Depression-era folks will say, “Duh!” But those of us who’ve raised families on credit have moved away from the notion of putting off a purchase until you have the cash. We’ve convinced ourselves that since we pay off the credit card bill every month, it’s like having the cash to buy the things we want. But it really isn’t the same. What we’ve discovered is that putting off a purchase until we have the cash gives us time to realize whether or not we truly still want it.

This is a critical lesson for our kids. My daughter made an impulse-buy of a Nintendo DS (she had the cash) because her friends had them. Now she doesn’t use it at all and knows it was a waste of money. How many times have we done this?

Another phenomenon I’ve noticed is that sometimes the item we crave will miraculously land in our lap and cost next-to-nothing, because we’ve mentioned we’re looking for one. This happens a LOT. I wonder how many times I bought something I wouldn’t have needed to buy – just because I was in a hurry?

Last month I was thinking we should take advantage of fall sales on patio chairs. But I decided to wait. And guess what? A neighbor put a set of six out next to the road for free.

Likewise, I didn’t rush out to buy a laptop after mine started to fail. It turned out my awesome computer tech guys fixed it by replacing a missing screw. (I am not making this up!!)

And the hotel room we didn’t book on Lake Superior we didn’t have to book, when my in-laws discovered they had an extra pull-out couch in their suite. We pitched in with steaks on the grill.

Hmmm. Makes you wonder, doesn’t it?

I would say this is easily a $50-100 savings per month in our household – $1000 per year.

TAKE A HIATUS ON IMPROVEMENTS
During the “upgrade years” it made sense that we spend a good chunk of cash on nicer things than we had. The now-threadbare couch we bought as newlyweds wasn’t high quality when we bought it, so you can imagine what it looked like after 10 years. And the 1970’s bathroom was, well, gross. Now, however we don’t really have that excuse. We have a comfortable home, newer cars and decent furniture. Could we find nicer? Of course. Is it necessary? Not at all.

Sometimes projects have to be done. But sometimes they don’t. Our current project hiatus includes putting off landscaping our house. The cedar bark around the perimeter will have to do for now – although we may plant a few bushes. Expense postponed – $3000.

SAY “NO” TO CRAIGSLIST
My husband’s favorite site offers a wealth of goodies. But just because the thing’s a great deal, doesn’t mean we should buy it. There are lots of them these days, and we can’t possibly pay for all the great stuff people are dumping. He loves to look, so that’s what he does. I’ve discovered my role is to just say, “No.” Unnecessary purchases avoided – $1000 per year.

SKIP A TRIP
I consider this a major sacrifice – far more than the material items – because I love traveling with my family. But since we are very focused on paying off this second mortgage, I know it’s just a short-term sacrifice. We’ve committed to continue with our annual winter pilgrimage to Florida, but have tightened the vacation budget, cut weeks to short weekends and skipped summer travel completely. Our school won’t have a scheduled spring break next spring, so that helps to focus our goal too. After we pay off this loan we can reconsider the travel budget.

Annual savings – $3,000.

The value of setting a credit card budget and living within it? about $10,000 per year.

What’s your secret to cutting the credit card bill?

MORTGAGE PAYOFF 101 SERIES:
Getting Started
Monthly Charges
The Credit Card
Sell Your Stuff
Lessons Learned