The other day I posted about the importance of creating a budget, especially after a major financial melt down. I organized the methods to do so and included worksheets to help a person get started. The next logical step after forming a budget is to figure out how to reduce some of your expenses and/or increase your income.
Most often when I hear someone complaining about not having enough money, they immediately blame their income for their financial woes. Usually they say something to the effect of, “If only I made X amount more, things would be easier.” But most people can live on their income comfortably, they just need to make some adjustments to their expenses.
Ways to Reduce Your Expenses
The first thing to look at in a budget is your fixed expenses, such as rent or mortgage payments, utilities, insurance, and groceries. Is there any way to reduce those? I’ve listed some strategies below which may or not be effective depending on your current carriers and where you live, but it’s a good place to start:
- Land line telephones - Do you still have a land line? Do you need one? If you find you do need a land land for business purposes or your cell phone reception isn’t great, call your phone company and ask them if they have any special rates they can apply to your current plan. I do this a couple of times a year and save about $10 – $20 monthly on my bill.
- Utilities (gas/water/electricity) – Minimize your utility bill by reducing your usage, it’s as simple as that. Some people like to use Kill a Watt to figure out how many watts they’re using and then reduce as needed. I currently have a battery back-up connected to my computers and printer and recently found out my laser printer is an energy hog. Now, I keep the printer off until I need to print.
- Insurance – Can you increase your deductible comfortably to reduce your premium? If you have a savings account that could cover the deductible, you might save enough money by increasing your deductible on your auto insurance or home owners insurance and save hundreds of dollars annually. I was able to save $150 annually on my auto insurance by increasing my deductible to $1,000 and by switching carriers.
- Groceries – Coupons aren’t what they used to be, you don’t need to clip and cut as much as your mom used to. Today, you can print out coupons for items you need. Penny from the Saved Quarter also just wrote a fantastic post over at Money Cone about how to Never Pay Full Price. Also, by just purchasing items when they’re on sale, you can save 10% or more off your grocery bill.
- Rent/Mortgage – It never hurts to ask your landlord if they could reduce your rent. If this doesn’t work, you could always begin looking into less expensive areas or cheaper neighborhoods. Another option for both renters and homeowners is to rent out a spare room or an area of your home (however, be aware that subletting is usually not allowed in a rental agreement.) As for mortgage expenses, there are many refinancing options out there. Refinancing isn’t an entirely free option, but it may work for you if you intend on living in your home for a while.
Once you’ve given your “fixed” expense the once over, it’s time to tackle all of the other, more flexible expenses. Flexible expenses can be anything from eating out and everyday habits to cable television and vacations.
- Eating Out – This is a category that is easily reduced. Depending on how much money you need to reign in, you can reduce your take-out expenses as easily as just ordering water at a meal (saving anywhere between $3 – $15 or more) to sharing a dinner with your spouse or significant other. This year I’ve limited my budget to a fixed amount which allows me to still enjoy eating out occasionally.
- Everyday Habits – Habits can add up quickly, especially if they are highly addictive. Obviously the best advice is to quit a highly addictive habit. But if you just aren’t ready yet, find the cheapest items possible in your neighborhood. Another option is to set a limit. I’ve recently given myself a $50 monthly budget for my Starbucks habit. Once that money runs out, I have to wait until the next month.
- Cable Television – Many people say that this is a luxury item and I’d have to agree. But if you must have cable, sign up for a bundled package, which is usually offered at a lower price, or reduce your subscription. Of course if your budget just can’t afford this luxury, then ditch it.
- Vacations – Everyone needs some time off and some adventure. Vacations offer this escape, but not at the expense of going into debt. Some alternatives include staying closer to home, reducing the amount of time from a week or more down to a few days or a weekend, camping or choosing a less expensive option, or planning a vacation far enough in advance allowing you to save for that trip.
These are some possible options for living comfortably within a budget. Next, I’ll cover increasing your income to pad your budget.
Have you reduced your expenses this year? Which expenses do you find easiest to reduce?