Now that you’re an adult, it’s time to dig into the ways to cut costs and stop spending your money like there’s a never-ending supply. The issue is that the moment you get paid, you feel like it’s time for another vacation or another new item at the store. But if you want to save money and have more cash in your pocket when it comes time to pay off those debts or make next month’s rent check (or both), then tracking exactly where those funds go can help.
While it may have seemed that you had all of the money in the world when it was handed to you by your parents, the money train has quickly stopped. Living on your own is vastly different than taking up residence in your parents’ house, and you’ve got to learn how to live on a budget. Here are five ways to cut costs and reduce your expenses:
1. Know Your Wants Versus Your Needs
Knowing your needs is one of the ways to cut costs, as It’s a simple lesson in life. However, one that many don’t learn until they are in debt is the thin line between wants and needs. Knowing that there are some differences between these two things is the key to any good budget. We need food, shelter, and clothing; we want designer jeans, Starbucks coffee, and flat-screen televisions. Before you make any purchase, determine which category it fits into. If the item of your desire is a need, go ahead and make the purchase. However, if the items are wants, take some time to decide if you can fit them into your budget.
Stop and consider how necessary it is to spend money on anything. If the expense is really necessary, such as purchasing a new laptop for work or school, go ahead and make the purchase (but hunt for the best deal). Consider whether your money might be better spent elsewhere (or saved) if it’s a want, such as a new shirt. Avoid excessive purchases, such as purchasing a fashionable pair of shoes when you already have a very identical pair at home!
2. Reduce Your Expenses
Another way to cut costs is to reduce your expenses. If you have a cable package with 300 channels, cut it back to only 100 channels. Get online and compare rates if you haven’t shopped for auto insurance since you signed up for your policy. Look for ways to cut the other expenses in your life:
- Pack your lunch.
- Dump your expensive cell phone.
- Make your own coffee, or even grow a garden.
If you look hard enough, you’ll discover dozens of ways that you can reduce your monthly expenses.
On a side note, you can use a notebook, spreadsheet, or app to track your spending. For example, you can keep track of all of your expenses in an Excel document with categories for each category (e.g., groceries and bills). If you have an Android device/phone or an iPhone, there are apps that will help organize and manage your budgeted finances—but they’re not free!
You might also want to try using a budgeting tool like Mint or Personal Capital (which offer both PC and mobile versions). These services will allow users to input their income/expenses right into their accounts so that they can see how much money is coming in versus going out each month without having any outside help at all!
There are multiple ways to cut costs and work on the weight of your wallet. For example, you can save a lot of money on gas by taking public transport or carpooling with friends or coworkers.
Taking public transportation can be beneficial for the environment and, in most cases, your budget. Add up how much you spend each month on gas, parking, and car maintenance, then compare it to the cost of public transit. In almost all circumstances, choosing the second choice will save you significant money. The savings may be substantial if you travel to work or school in a heavily populated location.
Another ways to cut costs and reduce your expenses is by carpooling, which is frequently more practical than driving yourself to work (or school) every day. Inquire with employees who live nearby about establishing a carpool arrangement. Taking turns driving to work could save you up to 50% on your gasoline, parking, and car maintenance costs. When it comes to carpooling, there are a few things you’ll want to keep in mind:
- Make sure everyone has access to a vehicle to take advantage of lower gas prices for drivers. This means if one person doesn’t have their own car but wants out of the house more often than others do, they should try taking public transportation instead until they get one of their own. If someone has access to multiple vehicles (e.g., two cars), then each person should contribute an equal amount toward gas costs.
If none of these options are effective for your situation at all times (e.g., if one person lives far away from another), then perhaps discussing alternate forms of transportation, like biking together, might still be beneficial!
3. Set Goals
It isn’t easy to save if you don’t have goals. Whether you want to save a certain amount of money in a set period or you want to buy your first house, establishing concrete goals will give you something to work towards and make it easier to save. You can set weekly, monthly, or even yearly goals, but the key to saving is making a plan and sticking to it.
Three major factors are involved in determining your credit score: your total amount of debt (including any mortgages), how long it takes you to pay off this debt, and whether or not it’s been paid on time. The higher the number gets, the more likely you are going to be able to borrow money from lenders such as banks and credit unions.
If a month has passed since you started keeping track of what you spend each day or week—or even just every few days—then write down everything: The date of purchase; how much it cost; if there was an extra charge like tax or tip added on top; who gave it to me (do people buy things for me?); why did I buy this item? Why does my husband insist on buying things for me? What am I thankful for today?
Once you’ve collated a list of your monthly costs, consider what you’re really spending your earnings on and where the ways to cut costs may be applicable.
4. Pay Cash
You’d be wowed and amazed to find out why this is one of the ways to cut costs and how much money you can save if you leave the credit cards at home and start using cash. Not only will you skip the expensive interest charges, but you may just think twice about the purchases you are considering. If you consider that a $200 television can cost you double that amount if you pay only the minimum monthly amount due on your credit cards each month, you’ll quickly see how using cash can save you money.
Avoid unnecessary bank fees by choosing a bank that offers no-cost checking accounts, uses ATMs that are part of an ATM network, and offers online account management options instead of requiring customers to appear in a branch to conduct their business.
Once you start keeping track of your spending, try not to let any bills go unpaid until they’re paid in full. This will help ensure you’re not paying interest on credit cards and other loans that could otherwise be avoided with better management of your finances.
It’s more difficult to leave with cash than to swipe a credit card. When you take that cash out of your wallet and examine it, you become more conscious of its worth and what you’re giving up to make a purchase. Using cards, smartphone apps, or even a physical check does not have the same psychological effect. Shopping with cash also makes it easy to keep to a budget—if your wallet is empty, you’re done shopping.
5. Work More
This remains one of the best ways to cut costs. You spend more time working; you spend more time earning and less time spending. No one likes the thought of taking on extra work, but if you can live on your first salary alone, your entire second paycheck can be put into your savings account. If you are quite talented, consider working at home and making a few extra bucks a week. You can design websites, write articles, or even sell items on eBay for extra money. If you make $100 a month, that’s an extra $1,200 in your savings account each year.
Keeping more money in your wallet at the end of each week doesn’t have to be difficult. If you set goals for yourself, reduce your expenses, and even take on a part-time job, you can eventually have more money than you know what to do with. These ways to cut costs work fine, and I strongly advise you to try them out.
Frugal living isn’t always easy, but it’s something everyone should consider doing from time to time—especially if you want to pay off that debt faster than expected or have extra funds available for retirement! If you’re smart with your money, you’ll quickly start to see it add up.