Spending Less than You Earn

My parent’s recently asked me if our graphic and web design business was doing alright in this down-turned economy. I told them that we were pretty much making about the same, or a little less, but spending less; so overall we were doing okay. They tend to worry a little bit about us because we are self-employed, even though they know that I also substitute teach to bring in additional income and provide us with health insurance coverage. Due to their questions,  I decided to pull a couple of QuickBooks reports to verify my answer and make sure I was correct.

Sometimes, it’s easy to say, “Oh, we’re fine,” but I didn’t really have any substantiating evidence. Throughout this year I have been comparing our total income to our total expenses through QuickBooks, and my answer to my parents was pretty much on the mark. We have made a little less this year, so far we’ve brought in about $11,000 less than this time last year. However, we’ve also spent an equal amount less, about $10,000 less.

So far this year, we've earned less than last year, but managed to also spend less.

When I thought about how we did this, it all boiled down to really thinking about what we needed versus what we wanted. Last year, we had a few additional business expenses because we decided to upgrade our computer network. So, right there we saved money this year in comparison to last year on business expenses. We also made a point of eating at home more often and becoming more aware shoppers. We also spent less on things we needed and have put off a couple of other items that are not necessities. In addition, I reduced my travel this year. Usually I plan a trip back east to visit my family, this year I decided I could wait an additional 6-12 months and intend to focus on saving up that money instead. You can see in my comparison image that we have significantly reduced business expenses, eating out, and household items.

With the holiday’s approaching, my husband and I will need to get creative with gifts for his family. His family seems to go bonkers during the holiday season and shop mindlessly for ‘things’ instead of thoughtful items that someone might need. My husband and I have always felt good about the gifts we’ve purchased for them and we try to get creative and stick to a budget. This year, I think we will redefine that budget and see if we can reduce our overall amount. This amount usually tends to fall somewhere between $700 – $900 (there are a total of 8 people we shop for.) I’d like to reduce this amount to $500. If we can continue reducing our overall expenses, and live below our means (basically spending less than we earn), we will be on our way to financial freedom, our ultimate goal!