Lifestyle sacrifices are necessary if you want to lower your spending. Of course, this is easier said than done. We all understand that at some point in our life, we need to save on household expenses. There are financial needs that change over time as we age. This is because our priorities and lifestyles have to evolve as we reach milestones in life.
There are times, however, that require us to make these sacrifices even when we are not yet ready for them. The need to free the finances in our budget is there – but our lifestyles are not open to the changes that has to happen in order to get the extra money that we need. This is the reason why some people opt to earn more money just to satisfy the new financial requirement. Although your physical and mental states are more tired, you do not mind. That is because you cannot make the sacrifices needed to lower your spending.
According to the Economist.com, Americans spend the most when it comes to health-related costs. This is the result of a comparison between various countries. The site gathered data from different countries to analyze their spending – specifically who spends the most on common expenses. Apparently, Americans spend the least when it comes to food but spends the most on health care expenses.
We all know that the cost to get medical care in this country is really high. But when it comes to our health, it is hard not to make the lifestyle sacrifices that will help us get the finances to pay for it. You do not have a choice but to make way for this expense in your budget. In this case, you know that you can only do so much when it comes to earning money. You only have so much time or physical and mental strength to give to your work.
This is where lifestyle sacrifices are needed to help you lower your spending.
Tips to cut back on spending without changing your standard of living
The truth is, you really need to change something if you want to improve your finances. Obviously, there is something wrong with how you are managing your money. Otherwise, you would not be in a position that will require you to decrease your monthly spending. Although there are times when an unexpected event causes your financial situation to require more budget, you need to understand that there are ways to prepare for these. It is called, an emergency fund. But if you failed to save up for this or the situation calls for a financial need that is greater than what you have saved up for, then there is no question about it – you need to lower your spending.
Looking for ways to cut spending is dreadful for some people because of the sacrifices that they are forced to make. The need to lower it may be caused by a sudden illness, a debt situation or an unexpected income decrease. If you really cannot boost your income further, you need to start by looking at where your money is going in the first place.
Fool.com published an article in May that revealed the average daily spending of Americans. Apparently, we spend $140 a day. The expenses are divided into the house ($47), transportation ($25), food ($18), SS or retirement ($14), healthcare ($10), entertainment ($7), apparel ($4), and other expenses ($15). This budget adds up to $51,100 a year in expenses. That is a lot of money. If you have to make room in your budget for another expense, which one would you give up?
Make sure that you detail your list of expenses to identify the fixed and variable expenses. The fixed expenses are those that you cannot change. The amount is constant each month. When it comes to variable expenses, these change depending on your spending behavior. This is where you should concentrate if you really want to lower your spending.
You don’t really have to downsize your house or something similar. You just have to make sure that you can find a cheaper alternative to some of your spending. Here are a couple of areas in your budget that you can probably cut back and still keep your lifestyle as it was before.
- Cable. You can watch practically any show over the Internet. This makes cable subscriptions really unnecessary. A lot of websites will allow you to watch both movies and TV programs. Most of the networks have live streaming anyway. You can let go of your cable subscription and still get to watch what you want as long as your Internet is fast.
- Food and groceries. According to the data from the Fool website, we spend an average of $18 a day on food. That adds up to $6,570 a year! Although we do not want you to sacrifice the nutrition of your family, there are many ways that you can save money in this area. For one, you can plan to do your groceries once or twice a month. That way, you can buy in bulk and save more. This will take a bit of planning especially when it comes to your meals. However, it will help you plan your meals around your leftovers too. That way, you minimize waste and maximize your savings at the same time.
- Cellphones. We do not mean the actual device. What we are referring to is your mobile subscription. Some cellphone plans are becoming more optimized for specific needs of the users (e.g. more calls or more SMS). You need to ask your current service provider so you can take advantage of the plans that will cater to your specific requirements.
- Entertainment. Lastly, you can save a lot on entertainment. The Fool data revealed that $7 is spent on entertainment on a daily basis. That adds up to $2,555 a year. There are cost efficient ways to enjoy fun activities and some of them might not even cost you anything. For instance, if you love watching a movie, you can probably do it before 5 o’clock in the afternoon so you can get a discount. If you watch before noon, the price in some movie theaters are even lower.
The truth is, you can lower your spending as long as you understand your budget and expenses.
How can lowering your expenses improve your financial position
Probably one of the best things about lowering your expenses is the fact that you will get used to spending only what is essential. When crunch time comes, you do not have to change much about your lifestyle because you are already being smart about how you spend your money.
But beyond that, there are many ways that cutting back on expenses can help improve your financial position. Here are a couple of them.
- You can pay off your debts. According to an article from BusinessWire.com, the current household debt in the US is $13.5 trillion at the end of 2014. Credit cards accounted for $881.5 billion. This data was based on the finding of a Nilson Report. This is said to be less than 7% of the total debt in the country. While this is the lowest level since the 1990s, it is still a huge amount to deal with. Add to that the fact that these cards are notorious for their high interest rates. If you have huge credit card balances, you need to lower your spending so you can pay them off – fast. The longer it takes for you to finish paying this off, the more money you will waste on interest. So cut back on your spending so you can pay more towards your debts.
- You can increase your savings. There are so many things to save up for. Like your emergency fund. If you have plans to buy a home or a car, you may want to save up for it too so you can avoid debt. When you lower your spending, you can really help your personal finances if you use the freed money and put it in your savings.
- You can invest your money. This is the best way for you to improve your personal wealth. You need to know how compound interest can grow your money significantly. Even if you pay off your debts and you build up your emergency fund, investing is the best way for you to really bring your finances to the next level. Make sure to research about the accounts that you can invest in like stocks, bonds, and mutual funds. There are so many areas that can help you increase your money. Of course, you need to lower your spending first so you have the money to invest. Here is a video that will teach you the most basic information about investing.