Page 564 - Introduction to Business

538 PART 5 Finance

The average family of four spends about $800 per month on food. There are
several ways this amount can be reduced without sacrificing nutritional quality,
variety, or dining pleasure. The first step is to identify the places that provide the most
economical prices for basic food items. Check out the warehouse stores and farmers’
markets, as well as supermarkets in your locale. The second step is to prepare meals
at home. Typically, the cost of home-prepared meals is one-fourth or less of the
expense of convenience or prepared foods. If you think your time is too valuable
to spend cooking, consider that many simple meals require only ten minutes of
hands-on preparation. The third step is to consider planting a small garden. A gar-
den and a chest freezer can help cut your food bill by several hundred dollars per
year. For many people, gardening also serves as an enjoyable and relaxing hobby.
Have you purchased any exercise equipment? Do you use it? Millions of people
have stored their exercise bikes, step machines, and treadmills in the closet or
garage. Likewise, health club memberships typically go unused. Walking and biking
are two good examples of cheap but effective exercise.
Americans spend small fortunes on recreational items and activities, which
usually involve sitting, listening, and watching. Entertainment is generally an
expensive, indolent activity. Instead of paying to sit through a movie or a sports
event, you might visit a free or inexpensive attraction in your area. Go to early
movies or rent the movie. Take a Frisbee to the park. Visit a historical site. Go to the
lake or beach. You may want to begin a productive hobby such as painting, sewing,
woodworking, writing, or baking. Recreation does not have to be passive or
unproductive.
The biggest single expenditure for most people is their house. To become a one-
income family, you may consider moving to a smaller house with a lower mortgage
payment. Before buying a house, you should examine as many houses as possible.
If you can visit 25 to 50 houses, not only will you be more likely to get a bargain, but
you’ll be more likely to get the ideal home with the features you want. When financ-
ing a home mortgage, you are usually better off with the shortest possible term,
such as 15 years, instead of the traditional 30 years.
At home, you should minimize your utility bills. Some utility companies offer
free energy audits. Air conditioning and heating bills can be reduced by ensuring
that doors and windows are properly sealed. Natural gas is the most economical
energy source for heat-generating devices such as stoves, ovens, and hot water
heaters. You can reduce your water bill by installing specially-designed shower
heads and toilets that minimize water use. These items usually pay for themselves
in less than a year.
See how much a second income brings in after all its costs are deducted; then
ask yourself if a second income is really necessary. Do you want to live on one
income? If it is financially feasible and you are willing to make the required lifestyle
changes, you can do it.
reality Would you want to live on one income if you were married? Why or
CH ECK why not?

Investing

LEARNING OBJECTIVE 5
Describe how to make wise investments, including an evaluation of risk and return.
Setting aside money on a monthly basis is the best way to accumulate wealth. Sav-
ing money and investing it should become a habit. When you consider any invest-

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