12 Ways to Reduce Your Monthly Expenses
Aug 24, 2021
Household debt in the U.S. was a record $14.6 trillion for the first quarter of 2021, which seems like a lot of debt and it is. If you stacked that amount of debt in one-dollar bills, it would reach all the way to the moon.
The easiest way is to cut expenses and use the money to pay off debt. That’s also the hardest way.
We believe that reducing expenses and paying off debt to achieve your financial goals shouldn't seem like a sacrifice. It's about taking control of the controllable and creating new money habits.
Let's look at some practical ways to reduce your monthly expenses.
- Start by tracking your spending. The first step in reducing expenses is to figure out where the money is going. Tracking spending over a month or two will probably be an eye-opener. You might be surprised by how much you're spending on certain items, but this gives you a good chance to see just where adjustments are needed going forward.
- Create a Cash Flow Plan. Creating a plan for where your money is going to go doesn't need to be complicated. Simply start by listing your income. Then list all of your monthly expenses like food, rent or mortgage, utilities, transportation, clothes, etc. Then put the list of expenses in priority order. This will help you see expenses that you might be able to reduce or remove. Check out the New Money Habits Basic Budget tool HERE to help you get started.
- Re-evaluate Your Subscriptions. Most people have monthly subscriptions for cable TV or streaming services, internet, cell phones, publications, weight loss programs, you name it. Once you set one up, you likely don’t think about it much, yet the money comes out of your account every month.
Now’s the time to take a close look. Ask yourself:
- How much do I use this?
- Do I really need this?
- Can I live without this?
When you cancel the subscription, go through your email and unsubscribe to newsletters or regular advertisements that come from that source.
- Reduce Your Insurance Premiums. Adjustments to home and car insurance are another way to reduce monthly expenses. If you pay both, shop around for companies that will bundle them for a cheaper rate. You may also be able to lower your rates based on what kind of homeowner or driver you are. To save on homeowners insurance, check out your policy and see if your company offers reduced rates for making improvements. Installing smoke and carbon monoxide detectors and burglar alarms can mean discounts. So can upgrading electrical or heating systems. Also, consider raising your deductible from $500 to $1,000, which can save 25% on your premium. We recommend reviewing your insurance about once a year.
- Eat at Home. Preparing and eating meals at home can save a lot of money. Weekly meal planning can make it easy. Figure out what you will eat for the week, plan it, then stick to it. There is an endless variety of cooking and recipe tips, even for people who don’t consider themselves cooks, available online.If you don’t have time to prepare meals during the work week, make something on the weekend – a casserole, chili, a chicken dish – that will provide several meals. Portion it out into daily meal contains and all you have to do is grab and go. For longer-term convenience, make a hardy soup, chili or casserole, portion it into one-meal containers and freeze it, providing quick meals for busy days in the future. The investment in half a dozen one-portion containers will pay off fast when you’re not going through the drive-through every night.
- Shop with a List. There are a lot of ways to save money at the grocery store, but it all starts with a shopping list. This simple habit can end up cutting food expenses, help with meal planning and, if you stick to the list, cuts down on impulse buying. It can be as simple or as complicated as you want to make it, and there are even apps that help you make lists and find bargains.
- Use Only Cash - At Least for Some Things. Switching to cash spending will bring a big dose of reality to your spending habits. Start by picking one or two catagories from your budget and use only cash for these purchases. Consider starting with the food budget and the gas budget. This will help you really see what your spending habits are and adjust if necessary.
- Auto-pay Your Bills. Setting up auto-pay for things like rent, mortgage, utilities, etc, will help make it easier to handle the monthly expenses, and prevent late fees.
- Pay off Unwanted Debt. The faster you get rid of unwanted debt the more money you'll have available in your monthly cash flow plan. Credit card interest can be more than the minimum payment for some accounts. Start by shifitng away from using credit where you can and pay down the credit card ballances. Part of your cash flow plan should include higher-than-minimum paymebnts on your credit cards. Adding extra principal payments to your mortgage or car loan will also reduce them faster.
- Wait a Day Before Making a Purchase. When it comes to making a purchase — particularly a big purchase — be patient before rushing to the register. Give yourself time to shop around for something similar or wait for your target purchase to go on sale. If you know you’ve found a great deal on something you need, give yourself at least a day to think through the decision. If you’re shopping online, you may be able to get a discount sent to your email after a few days by logging in, adding the item to your online shopping cart and then simply closing the tab. Lastly, if you don’t need it, just don’t buy it! This is one of the best ways to prevent buyer’s remorse.
- Brew Your Own Coffee. If you’re a regular coffee drinker, you might be surprised to know how much you’re actually spending. By buying a coffee every morning before work, you’re missing a huge opportunity to save. Assuming you have a five-day workweek and buy one coffee every morning at $2.75, you’re spending $55 each month. Instead, consider buying an inexpensive coffee maker yourself and brew your own before work. You could save over $600 throughout the year with this tip!
- Look for Free Entertainment. You can save a lot of money throughout the month simply by cutting down on entertainment costs. While going out is limited right now because of the pandemic, there are still ways to have fun for free at home. The Library is a great source of free entertainment. Libraries provide access to thousands of free books, DVDs and music. Many libraries are also offering curbside service right now.
While it’s easy to eliminate some expenses immediately, many of these tips will save you just pennies at a time. So keep in mind that it may take some time before you start seeing major savings. You're creating new money habits. Be patient and keep your financial success in mind.
Instead of trying to tackle all of these tips at once, start by making sure you have a solid financial foundation. Check out these resources for more information on effective budgeting:
Free Budget Worksheet: Start your cash flow plan today!
Housing Calculator: How much should you be spending on rent or mortgage?
Food Number Calculator: How much should you be spending to keep food on the table?
Transportation Calculator: How much should you budget for fuel and maintenance?
Budget Bootcamp: Learnhow to establish peace of mind with your money by taking control of your income, paying your bills on time or early, and kicking debt to the curb.
Create a Better Plan for Your Money
If you like these tips and really want to take control of your money, check out the New Money Habits Budget Bootcamp.
Budget Bootcamp teaches you how to establish peace of mind with your money by taking control of your income, paying your bills on time or early, and kicking debt to the curb.