Are your finances (or the lack of them) holding you back from accomplishing your goal of becoming debt-free, building a savings fund, buying new furniture, or saving for retirement? If so, there’s no time like the present to look at your spending habits to figure out how you can reduce your expenses.
Budgeting is a significant step to successfully managing your finances. A budget is a blueprint for how you plan to spend your money. It consists of your income, fixed expenses, and variable expenses. Fixed expenses typically remain the same each month, such as loans, mortgages, and insurance premiums. Variable expenses are those expenses that change from month to month, such as food, entertainment, gas, and utilities. One way to spend less and save more is to examine your budget to find ways to reduce or eliminate expenses.
When it comes to trimming expenses, most people automatically look at their variable expenses first to see where they can cut back. They rarely consider the potential savings that could result from reducing fixed expenses. Fixed expenses are easy to budget and they typically stay consistent throughout the year. However, it’s possible to reduce these costs with a little effort, patience, and research that could save your hundreds, if not, thousands of dollars a year.
Below are a few tips to help you reduce your fixed expenses.
In most cases, a mortgage or rent is usually the highest monthly expense in your budget. It may be a challenge to reduce this expense, but it’s possible. If you have a mortgage, you could research to find out if refinancing would help lower your monthly mortgage payment. Do you have an extra room you’re not using? If so, you could consider renting your space to someone you trust. Their rent payment would help cover your mortgage payments.
If you’re renting an apartment from a leasing office, you may not have the option to negotiate your rent. However, if you have a landlord, there might be ways you can get a discount on your rent. You may be able to help with lawn care or do minor home improvement projects, such as painting, pressure washing, etc.
A car payment (not including gas, maintenance, insurance, and taxes) could easily cost you several hundred dollars a month. This could put a huge dent in your budget. Look for ways to pay off your car loan sooner rather than later. If your budget allows, pay more towards your monthly payments to pay down your car loan. You could also consider refinancing your loan for a better interest rate.
When was the last time you looked at your cell phone monthly statement or evaluated your calling plan? If you’re like most of us, you never look at the monthly statements or periodically evaluate your plan after buying the new phone. You just pay the bill every month. Take a look at your most recent statement to see what’s included in your bill. You may not need unlimited text messages or an extended data plan. You can also research other cell phone providers for a better rate. If you find a better rate, contact your current provider to see they will be willing to match the competitor’s offer.
Do you really watch all the channels offered in your cable package? Most likely, you don’t. You probably only watch three to five cable channels out of the 75 or more offered in your cable package. Cutting the cable cord could save you $500 or more a year. There are so many less expensive options available that you can easily cut the cord and get your favorite TV shows and other entertainment online.
If you’re not ready to cut the cord entirely, you could call the cable company to negotiate your plan. Tell them you’re considering switching to another cable company or a streaming service. They may offer a special discount for a certain period.
At least once a year, evaluate your insurance plans (auto, home, life, etc.) to see how much you're paying and to see if you have adequate coverage for your needs. Once you've evaluated your plans, consider shopping around for a better rate or contact your current insurance provider to see what special discounts may apply to your situation. For example, some insurance companies may offer discounts if you insure both your home and vehicle from the same provider.
Spending a few dollars every month on subscriptions or memberships you rarely or never use could add up to hundreds of dollars in a year. Make a list of all subscriptions and memberships you currently have and immediately cancel the ones you don’t use. Even if there are services you use, such as a gym membership, you can still cut this cost by exploring other options such as streaming fitness classes.
Eliminating or reducing fixed expenses may seem like a challenge, or you may have never considered making adjustments to this type of expense. However, by evaluating your fixed expenses and making an effort to trim them, you could potentially save thousands of dollars a year that could go towards your financial goal.
Want more information for reducing your everyday expenses? Stay tuned for "Trimming Your Expenses Part Two: Variable Expenses."