It’s always a good time to start new financial habits! A great way to start is by taking a look at your monthly expenses to see where your money goes every month. Even if you haven’t started the habit of tracking your expenses on a consistent basis, you can still take a look at some of the bigger expenses that you pay every month and determine how to cut monthly expenses out of your budget.
There are obviously certain expenses that can’t be completely avoided like mortgage or rent, taxes, utilities, and food, and there are also a lot of discretionary expenses. Both groups of expenses can potentially be reduced, and some of the discretionary expenses you may be able to cut entirely out of your monthly budget.
Here are my suggestions for how to cut monthly expenses.
- Mortgage / Rent – look at refinancing or downsizing. But also beware of the additional costs associated with both of these such as closing costs and moving costs. Make sure the savings outweigh the extra cost of refinancing or moving!
- Taxes – make sure you are taking advantage of tax deferred retirement accounts. If your employer has a 401(k) available, contribute as much as you can. Also, look at an IRA, Roth IRA, or an HSA. These are all powerful tax saving strategies to take advantage of if you can.
- Cable TV – call your provider and negotiate a lower fee, or cancel your cable altogether (like I recently did).
- Electric / Gas – pay attention to how much you are using and take advantage of programmable thermostats and ceiling fans, as well as unplugging electronics and appliances when you aren’t using them.
- Groceries – follow grocery store sales ads and start to meal plan. Additionally, use your freezer and pantry for cheap staples, and go (mostly) vegetarian.
- Gym membership – evaluate the cost of your membership and how often you are using it. It may make sense if you are self-motivated to stick to home and outdoor workouts. (Although if you are using it to stay motivated to exercise, start a habit of going more often this year.)
- Entertainment, Eating Out and Travel – most people don’t know how much they are really spending on these expenses. Add them up for a few months and you may be surprised at how much money goes out the door every month and hopefully it will entice you to cut back.
- Child care – granted this may not be one you want to scrimp on because quality care is worth paying for, but you can look at ways to get discounts or multi-use deals.
Once you cut some of your expenses, your saving will start growing! You can pay off high interest debt like credit cards, auto loans, or student loans. You can also start an emergency fund and invest the rest. If you create savings goals, you will be more apt to get excited as your savings grows and you reach your goals. Small steps create new financial habits that benefit you down the road, and can help provide a future of financial independence.
Healthy financial habits help you gain control of your spending and saving, and reduce the stress money has on your life. As you start looking at all of your expenses, you can begin to determine how to cut monthly expenses. It’s easy to start with something small, like groceries, eating out, or entertainment. After you cut a few expenses, you can start looking at ways to reduce bigger ones – like your housing, transportation, or child care.
Soon the savings will really start to accumulate! Saving money helps you prepare for your financial future, as well as emergencies that take us by surprise all the time. Start today and think about one item you can cut from your monthly budget!