How to Cut Down on Living Expenses
Living can be expensive, but it's better than the alternative. Decreasing your expenses allows you to build up an investment portfolio, pay off debt, put your children through college or save for retirement. It also allows you to make significant lifestyle changes that wouldn't be possible otherwise. For example, you may want to go back to school, start teaching yoga classes or pursue a writing dream.
- Difficulty:
- Moderate
Instructions
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Preparation
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1
Know what you spend and where. Drag out the checkbooks, bank statements and credit card statements. If you don't know where the money is going, it's difficult to cut down on expenses.
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2
Track the expenses you pay for in cash. Carry a small notebook or use your calendar or an app on a smartphone. It doesn't seem like much to pay $2.50 every day for a coffee and muffin on break at work. However, that adds up to over $50 per month.
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3
Make a list of all the expenses and organize them by priority. You must pay your mortgage and car payment or you won't have a place to live or transportation. However, a cable bill with 100 channels you never watch may not be a necessity.
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4
Subtract your expenses from your income. Hopefully there will be some income left over. If not, your first priority is to get your spending under control. Consistently spending more than you earn usually means racking up credit card bills to cover the shortage. That's expensive, given that credit card interest can be 25 percent or more.
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5
Set a goal of reducing expenses by a set percentage of your income every month. Even a modest 10 percent results in a savings of $300 per month if your monthly income is $3,000.
Implementation
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1
Stop spending money on those lower priority items such as the cable TV service. Stop using your credit cards. Interest charges add up. A sofa that costs $1,000 at the store will cost you $1,250 at the end of the year if you don't pay the card off. Some credit card companies will close an account that's inactive, so use each card for a minor purchase every month or so to keep it open. If the account is closed it may affect your credit scores, negatively. A drop in your credit score may prompt your other card companies to adjust their interest rates upward.
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2
Check with your utility company to see if it offers a savings program if you use less electricity during high usage periods. In any event, lower the thermostat by at least 5 degrees when it's cold out and raise it by 5 degrees when it's hot out. In other words, don't keep the house a toasty 78 degrees during the winter. Keep it at 68 degrees and wear a sweater.
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3
Make meal menus for the week. Develop a grocery list from the menus and don't deviate it when you shop. Impulse purchases add up. Choose generic brands instead of national brands. The quality will most likely be just as good. Prepare as much of the food as possible yourself. A chicken and pasta dish for four people costs about $3.00 when you make it yourself or nearly $3.00 per person when you buy frozen entrees.
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4
Eat at home. Avoid restaurant and fast food for lunches and breakfasts, as well as dinners. It's convenient but costly. It's also healthier to eat at home when you look at the calories, salt and fat in a fast food burger, for example.
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5
Avoid designer clothing and shoe brands, especially for children. Youngsters, tweens and teens are easily influenced and want what their friends have. A pair of designer sneakers costs double to triple what nondesigner labels cost. Show the child that for the cost of one designer shirt they can have three regular shirts and you may be able to convince him.
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1
Tips & Warnings
Consider trading in your more expensive big car for a less expensive, smaller car. You'll save on gas and insurance. Take public transportation when possible and safe. Batch your errands so you take the car out only once rather than several times.
When you're cutting spending, don't cut out all the fun. Reward yourself occasionally with a movie or pizza.
