Though earning a raise would certainly be nice, cutting expenses can also help you achieve financial freedom –- or at the very least, save money for a rainy day. Though it may seem difficult, particularly if you’re on a fixed income and feel all of your current expenses are justified, it is doable.
You may even be paying for things you don’t need to. Take a closer look at your monthly expenses and see if there are any obvious ways to save money.
If you’re at a loss, here are six common spending habits that you should consider slashing from your monthly routine –- it could reap dividends down the line!
1. Eating Out
Eating out certainly has its benefits. It saves you from having to prepare a meal of your own, of course, and there are the social aspects of eating out that many find appealing.
And let’s not forget the food is likely to be far better than anything you could cook up (depending on the restaurant and your culinary skills, of course). But it’s undeniable that eating out is also expensive and wasteful.
According to recent studies, the average American household spends $3,000 per year on eating out.
If you’re young, successful, and single, you may in fact spend more than this.
Consider cutting back on this habit. Though you can’t eliminate these expenses altogether (after all, you have to purchase food -– from a restaurant, farmers’ market, or grocery store), you can reduce them. Then put this money elsewhere: a savings account, investment account, or other more important, immediate expenses.
2. Reckless Shopping Sprees
Eating out can be incredibly expensive, but at least you can somewhat justify the expense by saying you have to eat. This isn’t true for reckless and wasteful shopping sprees!
Though investing a portion of your paycheck to clothing and transportation is reasonable (and to be expected), mindlessly purchasing consumer goods that have no real value is a surefire way to burn through your monthly income.
Consider setting a monthly spending cap for items like clothing, accessories, and travel while itemizing purchases that are actually necessary (like groceries), unsubscribing from promotional emails, and reserving bigger ticket items (tablets, smartphones, video game consoles, etc.) for special occasions, such as a birthday celebration.
These items add up, and in nearly all cases, have no inherent value once purchased. A smartphone that is worth $500 today may only be worth $100 a year from now; a blouse or pair of shoes may be worth next to nothing.
3. Paying For Needless Subscription Services
Recurring subscription services –- affordable ones like Netflix and hidden ones such as credit card fees –- add up over the course of a year. Yet in many cases, people fail to take them into account when budgeting. Why?
Because the monthly fees are so small people simply don’t worry about them. But they are an easy way to save money.
While it’s true that one subscription at $8.99 a month certainly seems affordable, what if you have multiple subscriptions? What if some of these subscriptions cost $50 or $60 a month? Suddenly, you could be spending hundreds of dollars a month -– an amount equal to a lease on a compact car – without even realizing it.
To cut down on subscription services, prioritize those that are important to you, and figure out which services you use most frequently.
Is there a subscription that you haven’t used in at least three months? If so, get rid of it immediately. Like that item of clothing that has been sitting in your closet for the last year, that relationship is never going to be rekindled!
Once you decide which services to cut, commit to setting aside this money for savings, rather than spending it on useless items. At the end of a year, you could have $1,000 or more sitting in your account.
4. Overspending On Your Wireless Plan
Many people spend way more than they have to on their monthly phone bill. Whether they’re paying more each month for a plan that subsidizes their phone cost -– even though the subsidy has long been paid for –- or data overages that are easily avoided with unlimited data plans, it’s a common mistake.
Thankfully, it’s also a quick remedy. And it could save you hundreds of dollars per year.
If you have a plan with data limits, and you routinely go over these limits, consider opting for an unlimited data plan instead. Many wireless carriers now offer these, and it could help you avoid having to pay expensive overage fees each month.
It’s also a good idea to call your wireless carrier to renegotiate your plan, particularly if you have been locked in for some time. There’s a good chance you can walk away with a lower monthly fee.
5. Taking On A Large Car Payment
Paying for a new car can easily cost upwards of $500 per month or more, particularly when ancillary costs like insurance are accounted for. Reducing that amount by half could put $3,000 into your pocket each year, while eliminating the cost altogether could help you save up to $6,000 per year.
Obviously, even a car that is paid for still costs money to own and operate –- maintenance, gas, and insurance costs, for example – but the general principle is sound.
What can you do to save money while still enjoying a comfortable, safe, and reliable means of transportation?
Well, there are several options. You could lease instead of buy. You could buy pre-owned rather than new. Or you could simply purchase a less expensive car (say, the mid-size instead of the full-size). You could also keep your car after it has been paid off, and pocket the savings.
All are viable options, and all will help you save money over the course of a year.
6. Failing To Budget
One of the most common mistakes people make when it comes to money, and one that is easily rectified, is simply failing to budget in the first place. If you are on a fixed income (or relatively fixed income), then budgeting is very easy. Simply account for known income and expenses, and see how they align.
If your expenses are a potential problem, determine which are mandatory and which are optional. You can then figure out the best way to cut your expenses.
To find potential savings, consider using a budgeting calculator, or a personal finance tool, like Mint. These will help you outline and achieve savings goals by making your monthly finances transparent and easy to understand.
It’s easy to lose track of what is owed, and when, if you don’t make an effort to put these expenses down on paper. Personal finance tools and budgeting calculators will make it easy for you to budget –- and save money!