Do you know what could really help you reach your financial goals? Answer: If you had more money to work with! Cutting your spending is an integral part of your finances.
I’m not saying you need to cut out the things you love (insert Starbucks coffee, avocado toast, etc.). I’m saying you need to splurge on those things wisely, either by reducing their frequency or cutting out something else.
Let’s figure out ways we can cut our spending.
How are you supposed to know what to cut spending on if you don’t know where your money is going?
Go back a few months and look for a “pattern.” Where is all of your money going? Bills, housing, transportation, debt payments, etc. are in their own category. Everything else that’s not considered necessary spending (minus groceries) goes in the discretionary spending category. Everything else that’s not considered necessary spending (minus groceries) goes in the discretionary spending category. Keep in mind, things will change if you’re living in an affordable city like Columbus, Ohio, rather than an expensive place like New York City.
This discretionary spending is what you need to pay attention to.
Grocery spending is necessary, but the amount can vary. Figure out what you typically spend, each month, on groceries and determine if that amount can be lowered. More often than not, it can. Just don’t go hungry.
Budget (and budget alternative)
The classic budget lists the necessary expenses (housing, groceries, debt, utilities, savings, and other bills). You then assign dollar amounts for other “unnecessary” expenses (take-out, clothes, etc.).
The dollar amount is what you’d like to spend on that item/category, and not go over. The purpose of a budget is to come to a total expenditure that’s less than your monthly income.
My approach is similar. I list the necessary expenses (excluding debt payments and savings). Just the things I need to pay (housing, streaming, utilities, insurance, and transportation).
Next is my grocery budget. This is a necessary expense, but I try to keep it relatively low. Between my son and I, the limit is $300 per month. Then I list debt payments and savings.
I calculated how much I needed to pay per month to pay off my debt by a certain date. My savings is automated and partitioned.
I have one savings account for emergencies, one for car repairs, one for holiday spending, and one for vacations. Once a week, money is automatically transferred from my checking to each savings account.
The amount of each transfer is less mathematical and is more about comfort. My retirement savings is done right away at the beginning of the month so I don’t have the chance to spend it away.
Whatever remains is mine to do with as I please.
No spend days
Have one day per week or a few days per month where you don’t spend any money.
I’ve seen some people go as far as having a no spend week! Implement these days at your discretion because obviously, you’ll still want to pay your bills and such.
Another cool idea is to restrict paying for certain items during particular times of the year. For example, you don’t buy any clothes during the month of September, or you don’t have any take-out/restaurant food in April.
With smartphones, applying coupons to your purchases has never been easier. I use coupons.com. You can save which coupons apply to you and they can be scanned at checkout. From your smartphone!
Also, wherever you do your shopping, make sure you are a member/rewards member. There’s usually a sale for members. Excluding paid memberships (like Costco), being a rewards member is free and can save you money.
By the way, it costs money to shop at Costco, but their goods are very reasonably priced. They make their money on the memberships, and they sell all of their goods at cost. That means they sell a product at whatever price they paid to get it in the store.
Use price per unit/item
When you are making a decision about how much of something you need to buy, always use price per unit as your factor. The overall price of something may look less expensive than the bulk item, and it is at the time of purchase, but more often than not, the price per unit is lower for the bulk item.
It’ll cost you more when you check out, but through time, you’ll spend less money.
Quick hacks to cut expenses
- Negotiate a lower interest rate on your credit cards
- Balance transfer to 0% introductory APR
- Personal loan to lower average credit card APR
- Unplug unused electrical devices
- Cancel unused subscriptions
- Reduce entertainment expenses
- Carpool to work
- Keep tires properly inflated (better gas mileage)
- Use LED light bulbs
- Use a programmable thermostat
- Lower the temperature on your hot water heater
- Eat at home more/eat out less
- Buy generic
Achieving financial success doesn’t have to be difficult and boring, though it does take some discipline. Small rewards are important. Without them, you’ll go crazy!
Cut the fat off of your budget, and you’ll see how much better it feels to make significant progress in your financial life.