Is your household bleeding money?  Ours is, to the tune of $500 a month. To think, we were actually contemplating trying to get pregnant again!

Ticking fertility clock aside, the harsh realization of an unsustainable lifestyle has us scrambling to account for every dollar and halt the rapid depletion of our savings and emergency fund.

Right now, I’m the sole earner and my wife cares for our son and manages the household.  We’re in an odd sort of Catch 22 whereas my wife’s possible salary (assuming she could find a full time job in her chosen field in this economy) would be exactly equal to the cost of sending two children to full time day care.  If we were lucky enough to find a childcare provider we could barter with, (and who wants to wheel and deal with a child’s quality of care on the line???) we might be positive $200 on her paycheck.  Maybe.  I could go on about the cost of lost quality time with the kids but I digress . . .

For many young professionals like us, the past 3-5 years probably looked like this:

Committed to a mortgage based on two incomes . . .

had a kid or two . . .

lost one job . . .

BLAMMO! Plummeting into the red.

We’ve taken the first important step and eliminated all credit card use.  We are paying down debt, and paying more than the minimum on the items that are close to paid off.  We cancelled cable and only have one car payment.

On the flip side, here are 3 frivolous spending mistakes we’ve made in the last three months:

1. Continuing an expensive cell phone plan for my wife when she and junior spend most days at home.  Helloooo, Skype.
2. Buying too many packaged foods.  I admit it, I clung to the convenience of pre-portioned, grab-and-go servings.  Granola Bars, Pudding or Yogurt Cups, “Fridge Packs” of Soda, even Tortilla Chips . . .  All can be bought in bulk and portioned into containers OR made at home, often in a more healthful way.
3. Underestimating the costs of nights out with friends.  The birthday girl orders the featured drink and pretty soon everyone at the table feels like they need that drink to celebrate with her or that they deserve dessert.

How we’ll never make the same mistakes twice:

1. Starting in August, Junior and the Wife will communicate the 6 days a month they are on the road with no Data Plan, fewer minutes, less texting, and the freebie phone.
2. We consider soda a treat and drink water 90% of the time.  We buy the largest containers of generic brand plain yogurt and tortillas we can find and multitask with them.  REAL fruit and REAL nuts are now the “portable” foods of choice.  There’s a reason there are so many “fruit and nut” granola bars out there – ours are now minus the chemicals and additives.
3. Slashing the costs of entertainment sometimes hurts.  We’ve started dropping hints to friends about our need to save money.  Now we only accept invites if the locale is budget friendly.  We drink water, split entrees, and decline extras.

I hope the next two or three months of simplified media, food and entertainment will solve this glaring $500 problem.  After all, it is only Phase One of our resolution.  Phase Two involves finding enough cash for a SECOND set of diapers and wipes, which may require something a little more drastic.

Ever since a friend showcased a plethora of channels she was receiving in her home via a sample rabbit ear setup, I started to consider giving up my cable bill.

We pay around $120 for TV (basic cable) + Internet (8 Mbit) + digital phone.  We use the phone very rarely because we also have the AT&T cell phone plan.  The Internet we use a lot, but we can cut the speed in half and not even notice.  The TV — we watch Jon Stuart, Burn Notice, and Saturday Night Live, but I’m hearing all 3 can be gotten on the Internet.

So it makes more and more sense to give up Time Warner — after all, for the price of 2 months of TW, one could buy an XBox 360 and unlimited streaming movies and shows …

I’ll give it a shot and will let y’all know …

UPDATE: Cancelled Time Warner phone and cable, left only the 8Mbit Internet service.  Got a $20 Philips antenna (UHF/VHF), and receiving all network TV channels in both analog and HD !!! It’s a little weird that the antenna is a little touchy, i.e. if you touch it, the TV signal breaks up.  It makes total sense because analog signal creates “snow” if interrupted, while digital signal is either “there” or “not there”.

Anyway … so far so good … I do miss the DVR though :)

UPDATE: Lame!  The digital reception is starting to break up … so I bought a beefier $50 Philips powered antenna, but the result was even WORSE — some channels (ABC) completely disappeared, although the remaining ones seemed to improve a tad.  Next steps: either mount the antenna outside on a mast, or get some other solution.

Really, you shoud be buying gold.  But since I’m assuming an average Joe don’t got a G to throw around on gizzold … Silver is the next best thing.

You really have a couple of options.  Buy US Mint precious metals if you’re not afraid for G.I. Joe confiscating them at the point of his gun.  Buy some other form of silver if you are afraid of G.I. Joe slash Uncle Sam confiscating it when the time is ripe.

I’m taking my chances amd buying rolls of 10 US Mint Silver Dollar Eagles every paycheck.  Sometimes, when the website advertisement paychecks rolls in, I buy a bar of Swiss Gold.

You’re asking, “why?”

Couple of reasons.  First, I’ve been though currency devaluation before in the USSR.  Not very fun.  I’m talking, “run out and buy up whatever tangible durable goods you can because the paper money ain’t gonna be worth much in a day”.

Second … With the massive amounts (trillions) of dollars of money Federal Reserve is printing to cover the bailouts, I’m predicting massive inflation.

Oince Gold Bar Fine 999.9 Credit Suisse

Seriously … If I’m wrong, you’ll jack the gold and still be allright.  But if I’m right … I hope I’m not right.

Normally, I would wait for the day after Thanksgiving to purchase the big ticket items.  For example, 2 years ago I snagged a Panasonic 42″ plasma TV for around $800 AND they threw in the $300 Tweeter gift card.  Last year, I grabbed some parts for my computer dirt cheap, and some nice jewelry items for my wife.  I’d wake up early, load some tunes on my Sansa, browse through the paper ads, and chill with other thrill-seekers outside some store.

Not this year.

Even though I’ve just read about people being pronounced dead after being trampled at some Wal-Mart, or pregnant women being hospitalized under similar conditions (which tells me that people are still shopping it up regardless of the economic situation), I decided to skip the shopping extravaganzas.

First of, we have everything we need — and the stuff we thought we needed, well, we don’t.  As Peter Schiff said in one of the many YouTube clips (paraphrasing), nothing bad would happen if people didn’t buy a new car and made do with the old one, or didn’t charge that new television set and just watched their 32″ RCA for another year.  We still have nice, fairly new things, and I can’t think of anything we need.

Second, I am stockpiling cash to 1) expand the safety net 2) pay down debt 3) convert cash into silver.  I’ll elaborate — basically, after food/utilities/bills, each dollar we make gets divided into those 3 categories.  We need more cash in case both of us lose our jobs.  We need to aggressively attack our remaining debts.  We need to set aside a portion of our budget that we won’t immediately need so it can be converted into tokens with intrinsic value, i.e. precious metals.

A quick note on precious metals — there’s evidence of big players shorting gold and silver to keep the price down … I believe gold will surpass $2,000/oz within 12 months.  I’ve been incrementally buying Silver Dollar bullion coin from the US Mint, although it takes longer and longer to order and receive (crazy demand).

And finally, this Black Friday bonanza makes me feel like I’ve felt right before quitting smoking — the realization of pointlessness, harm to my body, and waste of money finally helped me quit for good … not only that, I now cringe every time I catch a whiff of someone’s cigarette and run away from it :) Same with shopping — because shopping for the sake of shopping is … sickening in its decadence.

If you’re out shopping, just be careful.  Both with your money, and with not being trampled.

There’s nothing wrong with being frugal.  I believe when one needs something, (s)he should do the research and make the purchase based not only on the price alone, but also on the combination of reliability, aesthetics, ergonomics, appeal, etc.  When one doesn’t need anything now or in the future, one should not buy an item just because that item is cheap. 

Case and point – a friend of mine.  He runs a mediums-size hospitality business with a fairy constant demand for reliable IT solutions.  There are around 10 people performing administrative tasks, along with 10-15 more performing day-to-day tasks on IT-related equipment (scales, keypads, scanners, digital copiers, etc.)

Yesterday I stopped by to see how he was doing.  As we were conversing, he was standing in the pile of printers, cables, Nortel phones, computer parts, monitors, towers, power supplies, and other random crap.

- What’s with all this? – I asked.
- Oh, this … I got a really good deal on all this.  There’s some inkjets here, one little laserjet, about 6-7 telephones and 2 telephone switchboard systems.
- What about those? – I asked and pointed to the misshapen heap of computer towers.
- Those are computers I picked up at the same auction.  The company that sold them went belly up.

Knowing my friend, I recognized that he got excited about picking up “all those computers” for just a couple of hundred bucks.  However, I knew for a fact that his computer network a) was not going to expand b) was up-to-par with the tasks at hand.  I knew that because I set it up for him.  All machines were at least 1GHz Athlons with 256Mb of RAM.  The all ran Terminal Services, so it really didn’t matter how fast they were – the server did all the stepping.

- So what are you going to do with all this?
- Upgrade! – was his answer.

I tore into the first tower.  AMD chip, 512Mb of RAM, everything small profile, the tower was actually a little cube.  I plugged it in – not a peep.  I measured output voltage from the power supply – steady 5.03V.  Voltage from the motherboard – anywhere from 3V to 6 V.

- Your motherboard is shot, – I said authoritatively. – I’d pull out the memory and the drives, and throw the unit away.
- No, I can’t throw it away.  They’ve only used this computer for a year.
- Well, you can hire a repair guy at $50 per hour to take a look at this, but there goes your “good deal”.
- I’ll look at it later. – he said.  The tower started a new pile.

After examining 4 towers, 3 inkjets, 6 phones, and a box of keyboards and mice, I recovered 2 decent computers, 2 phones, 1.5 printers, 2 sticks of 256Mb RAM, 2 CD-RW drives, 4 optical mice, and 4 keyboards.  The rest was junk – though probably fixable, it was not worth anyone’s time.  His total bill was around $700.

Would I do something like that?  Hell no. 

I would never in a million years buy more crap while my systems are perfectly operational and do not need any upgrades.  I revel in the fact that all of my machines would be identical, with identical settings, peripherals, wallpapers, and screensavers.  They would be easy to upgrade and maintain.  I will never have to remember which machine has what type of RAM and hard drive because, that’s right, they would all be the same.

You will not “always get a good deal” because “you just know how to shop”.  If you go for a misshapen pile of computer crap, you are going to end up with a smaller pile of computer crap.  Even if “this one thing alone is worth, like, seven hundred when bought new”.  Wanna guess why it’s not worth that much NOW when you bought it from the back of a truck? 

The big picture is always this – you get what you pay for.  Exceptions don’t count – they are like winning a lottery.