FCHD 1010 - Income Expenses – Assignment Example

THE STEP DOWN PRINCIPLE According to the step-down principle, spending can be reduced in gradual stages as opposed to eliminating spending on an itemcompletely. The step-down concept for household budgeting was developed by Professor Alena Johnson at Utah State University. In order to visualize the step-down principle, she says,” imagine a staircase with four steps. On the top step is the most expensive way to purchase an item, and on the floor below the bottom step is the least expensive purchasing method. Again, note that you’re not completely eliminating the item. You’re just trying to purchase it at a lower cost to free up money to save or reduce debt.” (http://www.extension.org/faq/29072)
On attempting to use the step down principle in my life I found it very surprisingly easy to implement. In order to make it easy to ensure that I followed the principle for exactly a week, I started using it on Monday morning. Instead of buying my coffee from star bucks on the way to work, I set my alarm for 15 minutes earlier than usual and made my coffee at home. Finding myself with more time at hand than I had expected, I decided to ride the subway instead of driving to work. That evening, I visited the factory outlet of a local clothes store for a dress to wear at a friends party the next day. I decided to take home baked cup cakes to the party rather than the chocolate confection I had initially selected at the bakery. Three days that week I took the subway to work, driving the other two. Instaed of eating out twice or thrice a week, I dined out only once at my favorite restaurant and didn’t order dessert. When I wanted to buy some books to read, I decided to go to the local used book store and ended up finding some very interesting reads. By the end of the week I was convinced that I had stumbled onto a goldmine. In one week I saved 200 dollars with minimal effort on my part. I think the step down principle is an easy way to save money. By paying attention to how much your spending, not only do you downregulate your expenditures but you also become more aware of everyday unnecessary expenditure.
In case of the Millers’, the expenditure overshoots the income by 512 dollars. The fixed expenditure on their budget can obviously not be altered. The two most glaring expenditures on their variable expenditure list that can easily be reduced are the money spent on eating out and the gasoline costs. They are currently spending around 500 dollars on eating out. Using the step down principle would imply reducing the number of times that eat out and also what they order. Cutting down on appetizers, drinks and desserts can make a big difference to the bill. Often the things youre craving can easily be made at home at significantly lower costs. They are also spending 240 dollars on lunches. Packed lunches several times a week could make a significant difference. The gasoline expenditure can also be easily minimized by commuting to work a few times each week. With minimal changes in their life style, the Millers can by taking these steps maximize their budgetary efficiency and cut down on superfluous expenditure.