Are you interested in cutting spending? It’s a great way to free up money to save, invest or to pay off debts. There are fairly easy ways to cut spending and then ways that are seriously radical. First, there are categories often called “low hanging fruit,” because they are categories where it’s usually easiest for people to reduce their spending. Here are some of them.
• Utilities
• Vehicle operating costs (fuel, repairs)
• Credit card and other debt payments
• Extracurricular activities
• Dining out
• Food
• Expenses related to school
• Recreational spending
• Clothing
• Gifts
Make it a challenge
How much could you cut your spending in any or all of these categories? That’s up to you. Most people find that with a little hard work and self-discipline, they can cut these costs by at least 20%. For the sake of an example, let’s assume you earn $4,100 a month and you’ve been spending all of this every month. In other words, you’ve been living from paycheck to paycheck. If you were able to reduce that $4000 in spending by 20% or $800, that’s $800 you could or use to pay down your debts and you wouldnt really sacrificing much.
Now comes the hard part
If you really want to reduce your spending – for whatever reason – you’ll now have to do some very radical things because you’ve done the easier stuff.
Living austere
There are just no two ways about it. If you want to make radical cuts in your spending, you will have to be prepared for frugal living In fact, a good start is to design your own austerity plan. The first thing you could do is move to a smaller house. Contrary to what you may have been told, no child ever become sick due to sharing a room with a sibling. If you have a four-bedroom home, there’s no reason why you couldn’t downsize to a three-bedroom model.
Move to a small town
You’ll have to do the math but commuting to your job(s) from a smaller town might make more sense than living where you work. It would be even better if you can find a way to earn a living in that small town but that can be tough. Smaller towns simply don’t offer as many job opportunities as the big metropolitan areas. But if you have a fuel-efficient car and one that was built to high safety standards, it might make sense for you to do the commute. We know of one couple that commuted from a small mining town to a large metro area. This was 45 miles each way and a 51-minute drive under the best of conditions. But they had done the math and felt that the lower cost of living in that small town exceeded their increased transportation costs enough that it made good sense.
Stop using credit cards
You should never use credit cards unless you are sure you will be able to pay off your balance or balances at the end of the month. Living frugally means paying cash for just about everything. The last thing you want to do is begin accumulating debt, which is what will happen if you start carrying your balances over to the next month. The best way to use a credit card is to pay for an emergency where there is no choice but to use it. In fact, the best thing you could do is shred all of your credit cards but one and keep it out of your wallet.
Use the envelope method for budgeting
This is an old school and sort of harsh way to budget but it can make a difference. The way this works is that you create a budget for each of your different spending categories. The next time you are paid, you put the money you budgeted for each of the categories into the appropriate envelope. For instance, if you budgeted $500 for groceries, put $500 in the envelope labeled groceries. Then whenever you buy groceries, you pay out of the envelope. When the envelope is empty, you’re through. You cannot spend any more money in that category. This will not only help keep you on your budget, it can aid in developing more self-discipline.
Sell one of your cars
If you’re a two-car family, sell one of them. And make sure you keep the one that’s most economical to operate. This will definitely force a large amount of self-discipline initially. But after a few weeks or months, it’ll start to feel very natural. The fact is that very few of us actually need two cars. This is more of a luxury than a necessity – whether you want to admit it or not.
Some other radical ways to reduce spending
• When you shop use the stockpile method – look for good sales and then buy as many of the items as possible – especially stuff you can store away.
• Get rid of any late model vehicles – Get a decent used car instead where you can pay cash
• Never eat out
• Look for other places where you can cut your spending such as home phones, tanning solons and health club memberships.
• Look for low-cost or free entertainment. If there is a community center or YMCA near you, think about buying a family membership. This will be much cheaper than paying for gymnastics training or tennis lessons. If you’re looking for activities for your kids, go hiking, explore parks, have picnics, and visit the library where you’ll find a lot of free resources.
• Study and enjoy hobbies such as canning, carving and needlework
• Stay home more – whether it’s eating out or going to a movie, it’s a lot more expensive than staying home. You could rent a movie, get a pizza and have a fun family night of entertainment for less than $25. In comparison, eating out and going to a movie could easily cost $50 or more.
For more tips on saving money through frugal living, check out this video.
