How To Cut Your Expenses

by mike on November 4, 2010

You may hear me say over and over again that you need to cut your expenses.  You may often think to yourself: “how are we supposed to do that?”  You may even be asking “why do we need to do that?”  Unfortunately, many people are often faced with a choice: either cut expenses or face financial disaster.  Hopefully, you are not in that position, but there are always ways you can cut expenses to maximize the use of your money.  Let’s look at some of the areas where you can take the hatchet to your expenses.

1.     Groceries. Don’t worry, I’m not just talking about only eating Ramen noodles and bread to cut your grocery budget.  If you want to do that for a short period of time to pay off debt or reach some savings goal, then more power to you.  But, simpler than that, just plan your meals.  Plan to go to the grocery store weekly and plan the meals for the upcoming week before you go.  This will keep you from impulse buying stuff you don’t need if you only buy items you plan for.  Also, lay off the soda, beer, chips, and other junk food.  These items are extremely expensive, do them in moderation if you need to buy them at all.

2.     Eating out. Eat out less often.  I know that sounds simple, but it really is a good way to save money.  Take your lunch with you to work.  I have had clients who spend well over a hundred dollars a month just on eating out for lunch.  Brown bagging it is much cheaper.  For dinners, plan out your meals for the week as I suggested above and you will be much less likely to go out to a restaurant.

3.     Cable. Do you really need the most deluxe cable package?  I don’t know the answer to that, only you do.  I can speak from experience and say that we cut our cable all together over seven years ago and haven’t missed it a bit.  It’s amazing that once it is gone for awhile, you can’t even imagine spending the money on it that you did before.  With services like Hulu available now, you can find most of your favorite shows online for free now!

4.     Cell phone(s). Please don’t tell me you just don’t know where to cut expenses and you are paying $150 or more per month on cell phones.  I realize cell phones are important, but you do not have to have the latest smart phone with internet access.  A basic phone is enough, especially if you are looking to cut expenses.  If you really want to control your cell phone expense, use a pay-as-you-go type service where you buy minutes.  That way, if you use up all of your minutes then you have to wait until you have the money to buy more.  One final note on cell phones, your child does not DESERVE or NEED the best cell phone in the world.  If you think they must have one to be able to get a hold of you easily for rides, then the most basic plan is sufficient.  If your son or daughter wants to upgrade service for texting or internet, they can pay for it.

5. Health Insurance. If you have an emergency fund and are fairly healthy, it might be wise to raise your deductible for your health insurance.  If you get a plan with a $5,000 deductible ($10,000 family) for example, your premiums will be much lower per month.  Do the math on this first, especially if you foresee major medical expenses in your near future.

6. Clothing. For some of you, your spending on clothing is out of control.  For adults, you rarely need to do major updates to your wardrobe.  For kids, don’t be afraid to use hand-me-downs.  There is also nothing wrong with buying clothes at consignment shops!

7. Life Insurance. In almost all cases, if you are paying for any kind of universal or whole life insurance, you are wasting your money.  I recommend a 15 to 20 year level term policy for 10 times your annual income.  For example, if you make $40,000 per year, you should have a $400,000 level term policy.  Most other forms of life insurance are a rip-off.

8. Gifts. Spending on gifts can also get out of control.  I wrote a whole article on how to get creative with your gifts in order to save money.  Check out Creative Gifts.

These are just a few example of ways to cut your expenses.  There are many more and I encourage you to always be on the look out for ways to save. The important thing is to separate your self-worth from your possessions.  How much stuff you own is not an indication of how good or successful of a person you are.  Plus, cutting expenses together as a husband and wife can kind of be adventurous and fun.  Some of Mandy and I’s favorite memories and stories revolve around the time we cut our expenses to almost nothing.  It can be a bonding time and something to look back on as an accomplishment.  Maybe it’s time to begin your adventure and start cutting those expenses!

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