As people strengthen their finances, one of the most useful strategies to use is to lower expenses. The problem with this is that people expect a smooth journey. The truth is that this step is easier said than done. Although it is an important part of your financial journey, you need to put in a lot of effort to make it a success.
Dive into your household budget
As you try and lower expenses, the very first step you need to take is to look into your household budget. This is a critical first step if you want to be effective in shaving of your expenses. The reason behind this is that your expenses are all listed down in your budget. Taking a look at it and studying line by line will show you all the items you pay for in any given month.
How can you lower down your expenses if you do not have an idea of what they are in the first place? You must not be content with knowing just a part of your overall expenses. It is important to know every single payment you make every month. This is is crucial in helping you identify areas you can down on and how you will do it.
Record your expenses
If your budget does not list down all your expenses, you need to sit down and create a comprehensive budget. When it comes to your expenses, you can write down and record all your spending for a specific period of time. You can do it for a week, two weeks, or even a month. Apart from big-ticket payments like the house, car, or even student loans, you have to include the small ones as well.
List down everything from the coffee you buy every morning to the small items you purchase at the convenience store. If you eat out or order delivery, write it down. You also have to include what you pay for transportation from gas, parking, insurance, or what you pay to take the bus or train. The list needs to be as comprehensive as possible
Separate the “needs” from your “wants”
Now that you have the list, you have to separate your “wants” from your “needs.” This will help lower expenses because you will now have the chance to identify areas you can work on. The idea is that your “needs” are non-negotiable but there are ways to lower them down. However, your “wants” section is where you can save a lot of money.
Go over your “wants” list and identify specific expenses you can do away with or reduce drastically. Take for example your clothes, you can space out the times when you have to buy a new one and work with what you have. How about your cable subscription at home? It is being maximized or will cutting the cord and paying for streaming services be better? Go over your “wants” list and identify the expenses you can lower down.
Stop trying to keep up with people around you
One of the best tips to help lower expenses is to stop trying to compare yourself with other people. It does not mean that you will stop aspiring to be better – just not trying to live the life of other people. You see your neighbor drive a new SUV up their driveway, you suddenly go and buy a new one yourself. One officemate has the newest smartphone and you quickly go buy one for yourself.
You always need to look at your own goals and timelines when making a purchase decision. It should never be based on what people around you have. You do not know how long they planned for what they have or what their goals are. If you need to compare, compare your progress over time. Make a timeline and move forward based on that and not with the progress of people around you.
Specific financial move
Now that you have an idea on the general tips you can look into to help you lower expenses, here are a few specific financial moves you can do now.
Consider public transportation
One of the areas in your budget which might have some wiggle room is your transportation cost. It is a need but there are steps you can take to lower down this cost. If you bring your car every single day, why not consider using public transportation? It can save you on gas, parking, and even maintenance on the car.
You can take the bus, train, or even car pool your way to work. If you can, try riding your bike to and from work. Not only will you get a good exercise out of it, you will also save a lot of money. You can use your car for long rides or weekends with the whole family. This will help lower expenses and give your heart a good workout.
Look into mortgage refinancing
Earlier in the article, it stated that there are “needs” which are not that flexible. You have to remember that there are usually exceptions to the rule and your house is one of them. If your credit score has drastically improved over the years, that can help you lower your house payment. This is because a higher credit score can help lower down your interest rate. Mortgage refinancing can lower down your monthly payments specifically with your mortgage payment.
Credit card debt consolidation
The same idea can be used with your credit card debt where you look at using debt consolidation to your advantage. The goal is to lower down your interest rate ot the point that you get to use a 0% rate. There are credit card companies which gives out promo cards with a 0% rate. You can combine most, if not all your credit card debt under a 0% rate card and pay it off monthly. This can lower expenses in your card payments. This is helpful since Valuepenguin shares that over 40% of American households have some form of credit card debt
Sign up for automatic debt repayment
Another tip you can look at to lower some of your payments is to sign up for automatic debt payment. The savings will come from the lenders themselves. This is because some lenders, when you apply for automatic payment will agree to reduce your rates. One of the reasons behind this is that your lender is assured of an on-time payment every month. This is why some would agree to a reduction on your interest rate.
Start a garden
Have you looked over your food budget and found that it has been increasing every month? It might be a host of factors such as the kids growing up and consumption is also going up. The prices of good and other commodities might be on the increase as well. To help you lower expenses specifically with your food budget, why not try growing your own garden? This can help give you some vegetables and ever fruits to bring down your food expenses. It can also assure you of a safe and clean food source for the whole family.
If you are looking to lower expenses in your household budget, you need to be smart with the way you spend and even earn money. These two in tandem can help you manage your expenses and redirect your funds to areas that matters most.