Fixed and varying monthly expenses make up the majority of my budget. They are so big that I even have two columns devoted to expenses on my budget sheet. You can see my full budget sheet here.
Expenses greatly affect your bottom number. You know, that important number at the bottom that tells you if you’re going to have money leftover at the end of the month or not.
Having a surplus of money at the end of the month is a very good thing. The bigger the number, the better it is for you. The more extra money you have, the more you can save or invest or use for fun things. And if you don’t have extra money leftover, it’s time to reevaluate your spending.
There are some tips and tricks to cut down various expenses to help build that end of the month surplus, either to be a positive number or to just be a larger number. And I want to share with you some of our favorite money saving tricks.
HOW TO REDUCE EXPENSES:
- Know your expenses: If you don’t know your expenses, there’s no way you can cut them down. It just won’t happen. You can’t fix a problem you don’t know you have. There’s a reason they say the first step to knowing you have a problem is admitting it, and this is basically the same thing. You don’t know it until you can see it.
- If you need to, take a week or two or even a month and track all of your spending. Every last dime, nickel, penny, and credit card purchase. Categorize them all and see how much you are spending on everything.
- Do you really need these expenses?: No, really. Look at what you spend your money on. How many of these things do you actually need? Is there anything you can live without or find a cheaper way to get it? (i.e. do you need to have Starbucks coffee every morning or can you invest in a coffee maker and make your own for a while) Really think about it. I bet you can find things you don’t have to spend on right now, things you can put off for a while until you take care of some of your other expenses.
- Do you actually use your cable or can you survive on Netflix and Hulu services? Do you need an expensive cell plan or can you move over to a low rate pay as you go plan? Stop eating out. You don’t need it. Can’t cook? Find a friend to teach you, browse the internet, reddit has some great forums dedicated to some easy cooking recipes.
- Do you pay for trash service? Is there a dump nearby? If you don’t produce an exorbitant amount of trash, consider dumping the trash service in favor of taking the trash to the dump yourself. Yes, you’ll have to invest in a couple of trash cans, but in the long run you’ll save yourself several bucks by doing it yourself instead.
- Are there any cheaper alternatives?: Shop around for things like your car insurance, phone/cable/internet. Any monthly expense you have that you can possibly get from another company for cheaper, do it. You may even be able to talk your current company into a lower rate by sharing what another company is offering. Lots of companies don’t like losing business and will offer you a deal to keep your business. But you don’t know until you ask. So start digging, start asking. Shave a few bucks here and there.
- I don’t generally like to touch on the option of shopping around for childcare, but it may be worth the effort. Maybe you didn’t have time to look around for childcare and settled for the first place that you could find and would take your kids. Well, don’t settle anymore. Look around, ask for opinions from other local moms. Maybe you can find a cheaper solution that will still offer quality care of your children. It really doesn’t hurt to look around. After all, your children are your most precious asset and their care should be a priority. But it doesn’t meant this priority has to break your bank either.
- I also don’t generally like to suggest anything about moving, but I feel a special note should be made here for it. If your rent/mortgage is really eating up majority of your budget, it may be time to consider moving. You will have to factor in gas costs to rent savings if you’re moving further out of the city you live in. My general feelings and advice for amount of rent should be no more than 1/3 of your monthly income or one paycheck (2 if you’re paid weekly.) I feel this keeps you at a comfortable level of expense in relation to your income.
- Groceries. One of my favorite tricks is the cash method. Determine how much you can afford to spend on groceries and take that amount in cash. You can only buy what the cash allows you to buy. It will take some adjusting, but it really helps keep your grocery spending under control. What stores are around you? Are there cheaper places to go? Aldi is one of my favorites to shop using the cash method. See how much food just $50 can get you here.
- Cutting costs by changing use: There are ways to cut down costs on things that are more fixed, like your electric and water bills. Make sure all light fixtures are using energy saving bulbs. Turn off lights in rooms that are not being used. Turn off all computers, game systems, and televisions before going to bed at night. Turn off the water heater until 30 minutes before needing a shower or bath. Bathing children? Share the bath! They can entertain each other and you save on water usage. Or do a quick in and out wash only without emptying the tub, they can still share the water without it getting too cold for those who don’t go first. Can you afford to suffer it being a little hotter in the summer and colder in the winter? Yes, wear shorts, use ceiling/box fans in summer. It’s ok to be a little on the warm side. Kids can run around naked or in very light summery clothes. They won’t mind. In winter, curl up in blankets, wear sweat pants and sweat shirts. You’ll save tons on your electricity by not having to use the ac/heat as much. (One month, I cut our entire house electric bill down to $45 by not using the ac so much.)
Those are my simple tips for reducing expenses and helping build up your excess cash at the end of the month. They have helped us a lot, especially when Mr. H was unemployed for a short while several years ago. It wasn’t always easy and it definitely wasn’t always fun, but we made it work and it helped us tremendously. I hope it helps you on your journey to financial success.