Bouncing Back When Your Income Drops 4: Spending Priorities

A loss of income forces a family to evaluate its spending.
Bouncing Back When Your Income Drops 4: Spending Priorities - Articles


Your family must plan on new spending priorities as soon as possible, and all family members should be involved in the process.The fourth in a series of publications about rebounding from unemployment, this publication offers helpful tips to set spending priorities and avoid waste.

A loss of income forces a family to evaluate its spending. There will be shifts in spending. Some expenses will be reduced, while others might be eliminated entirely. Some families can cut expenses without lowering their standard of living or quality of life. Other families may have to use their financial assets or have another family member enter the workforce to balance income and expenses.

When dollars are scarce, their value grows. A family can no longer afford to waste money on frivolous or unnecessary items. The "opportunity costs" in terms of necessary goods the family should purchase is simply too high. Your family must plan on new spending priorities as soon as possible, and all family members should be involved in the process.

The first task is to decide which goods and services have the highest priority, which are less important, and which can be postponed or eliminated. A shared approach to these decisions helps keep communications open within the family. It fosters greater understanding of your financial situation and increases cooperation among family members. Older children can take an active role in helping the family through this stressful time.

Start a "Dollar Watch." Discuss ways the family can significantly reduce expenses, especially variable or flexible expenses. Target any expense your family controls. Expenses for food, utilities, household supplies, telephone calls, recreation and entertainment, clothing care, and even transportation should be put on the Dollar Watch.

Cut costs to the lowest possible amount and practice smart spending. Have family members make a list of ways to economize and discuss where to start immediately. Also, assign each family member to oversee several Dollar Watch expenses. For example, one family member may be responsible for checking on lights, investigating no-cost recreation, and learning to do at-home haircuts. If your family has lost a major source of income, you may need to contact creditors to make adjustments in payments. Refer to the fifth publication in this series, Paying Creditors and Maintaining Your Financial Reputation, for additional information.


Use some or all of the following strategies to keep your family's plan to reduce expenses on track. Most of these techniques can help you set spending priorities and reduce expenses to balance a lower family income.

Practice smart shopping

Use a list any time shopping is necessary--not just in the grocery store but for all your consumer needs. A list helps keep everyone from making unnecessary purchases on impulse. Keep a notebook available to write down things that need to be purchased or replaced. Practice buying only items on the list. Do not shop when you are tired or hungry.

Go on fewer shopping trips

Reduce the number of times you visit stores. With fewer shopping trips, you may have additional time for more do-it-yourself projects. Spending less time shopping also limits your chance to buy on impulse. Eliminate shopping as recreation, which includes window shopping or going to a mall to check on "sales." Food preparation, mending, family entertainment, and family walks are ideal activities for time you might otherwise spend shopping.

Buy generic or store brands

Substitute store brands and/or generics for national brands of many items sold at discount and grocery stores or pharmacies. Many store brands are produced by major manufacturers whose own brands are made with the same ingredients in the same plant or factory. Always buy store brands for certain food staples such as sugar, flour, salt, vinegar, and household supplies like bleach or ammonia.

Avoid waste

Your family probably has many opportunities to eliminate waste of any kind, especially when it comes to food, housing, transportation, and energy. For example, are the dishwasher, washer, and dryer used only for full loads? Are dirty furnace or air conditioning filters replaced regularly? Are drapes and blinds closed at night to keep heat in? Is the heat turned down at night or while the family is away? Are lights and appliances turned off when not in use? Is food stored properly? Is laundry detergent measured to avoid excess suds? There are literally hundreds of ways to reduce waste.

Get information

Many sources of information can help you make better choices in the marketplace for food, clothing, entertainment, telephone calling, personal care, and other expenses. A public library has not only books but also videocassettes, audiotapes, magazines, newspapers, and reference information that you can use for free or at very low costs.

Adopt a do-it-yourself philosophy

Increase the number of things you make or do at home, and buy fewer conveniences and services. Time pressures can encourage us to buy convenience products. However, convenience foods that are precooked, presweetened, spiced, or instant are more expensive than foods you make yourself. The more removed from the original ingredients and the more effort needed to prepare a food product, the more expensive it is. For example, waffles made at home from basic ingredients are cheaper than buying waffle mix, which in turn is less expensive than frozen waffles. Avoid convenience that is only a matter of smart packaging, such as a package of frozen vegetables with added sauce or a pouch of seasoning. This kind of packaging provides little convenience at a high price. Finally, convenience in small packages is the most expensive, so avoid buying individual servings of pudding, fruit, or other desserts. If preparing food has not been a high priority in your family, invest in a basic cookbook that features simple meals with a shorter preparation time. The dollars you save at the grocery store will be significant.

Similarly, cleaning products you buy at supermarkets or discount stores are expensive because they have been premixed, perfumed, and packaged. Generic or store brand vinegar, baking soda, salt, bleach, and ammonia are common household products that can be used for most cleaning tasks at a lower cost. For example, you can make do-it-yourself cleaner by mixing ΒΌ cup of household ammonia with one quart of water. Keep it in a spray bottle and label it. This homemade cleaner can be used to clean the oven and bathrooms and even to remove wax from floors. Adding a drop of blue food coloring will give it a "commercial" look. A word of caution: never mix chlorine bleach with any product containing ammonia.

Find it for free

Goods and services you can get for free really help stretch income. Tax dollars buy things for the community that everyone can use. You can find free recreational and entertainment opportunities at local parks, playgrounds, and community concerts. Community health services may offer vaccinations or other medical services. Free or low-cost educational programs may be available through the library, community colleges, or schools. Check with other local agencies and organizations for more free educational and recreational opportunities.

Back to Basics

Another essential financial tool for your family is a budget. If your family does not already plan or keep spending records, now is the time to start. Find a plan that your family is comfortable with and will follow. A budget is like a diet: there are plenty of options, but they all require discipline to take action and stay on course. The plan should meet your family's needs and priorities and can be adjusted regularly as the family's situation changes. No other family is exactly like yours, and no other family will have exactly the same needs, expenses, or resources.

There are many ways to design a budget plan, but basic steps are:

  1. Review records
  2. Estimate income
  3. Decide on categories
  4. Plan expenses
  5. Match income and expenses
  6. Put your spending plan into action
  7. Keep track of spending

There also are several books about personal finance that have detailed steps to develop a workable plan on paper or on a computer. The trick is to put the plan into action and then to follow it.

Make the budget the "scapegoat," not family members. Use it as a guide to provide the necessities at this point. When your family has made the transition to a new beginning, a spending plan will help your current and future family and financial goals. Basic financial tools, spending plans, and net worth statements, as well as your financial skills, are critical to managing your financial resources.


Holm, J. Set Priorities for Spending: When Your Income Drops #4. North Carolina Cooperative Extension, 1999.

Mintzer, R. and Mintzer, K. The Everything Money Book. Holbrook, Mass.: Adams Media Corporation, 1999.

The Beardstown Ladies. Guide to Smart Spending for Big Savings. New York: Hypercon, 1997.

Prepared by Marilyn Mancini Furry, associate professor of agricultural and extension education.