The Underwear Index: Tips for Living Within Your Means
Men’s underwear sales actually fell during the recession. Economists call it the underwear index. The theory goes that during economic hard times, people buy only what they absolutely need. That’s not bad advice if you’re in the midst of your own economic crisis. But if holding back on this year’s skivvies won’t quite put you in the black, here are a few basic steps.
Know your income. Paychecks, pensions, you get the idea. This is the easy part.
Track and budget your expenses. Start with your fixed expenses: rent, car payments, insurance premiums….these are the bills you have to pay, although you might be able to save money on some of them. Can you have a higher deductible on your insurance? How about renting a less expensive house? What is left are your discretionary expenses. We all have them, and we could all save money by cutting some of them out. Write everything down, from lattes to smart phone plans.
Separate wants from needs. Take a look at those purchases. What can you do without? (Yes, this is where the underwear index comes in.) Remove the wants, like dinner out and weekend vacations. According to the Borgen Project, a nonprofit organization that fights global poverty, the average cost of ordering “a cheap steak dinner” at a restaurant in the United States is $28. Surely, you could grill it yourself cheaper.
Stop relying on credit cards. That’s money you won’t have next month either, and the interest rates add up quickly. Yahoo! Finance reports that the average credit card interest rate is 15.05 percent this month. At that rate, if you accrue $1,000 in credit card debt and make the minimum monthly payments on it, you’ll eventually pay the credit card company $2,640, and it will take you almost six years to do it!
Stop “keeping up with the Joneses.” The Joneses are probably keeping up with you! Who knows how your neighbor paid for that new kitchen makeover? Maybe he paid for it on credit at 15.05 percent.
Build an emergency fund. Your goal is to save three to six months’ worth of fixed expenses. That gives you some breathing room if you lose your job or spend a night at the hospital. Even a few dollars a month is a step in the right direction.
Don't deprive yourself. If you really want something you don’t absolutely need, give yourself 48 hours to think about it. If you still want to buy it, do so. Life is meant to be enjoyed. Go buy that underwear, for goodness sake!