Last week, we discussed the benefits of preparing for unemployment by creating an emergency fund. Many people have specific financial goals (e.g., filling a rainy-day fund, buying a house, paying down debt, or starting to invest), and most of these goals involve saving money. If you are struggling to put money away for your financial plans, reducing your spending may be necessary. Consider these tips to help you cut expenses and build your savings to facilitate your future financial plans.
Keep an Honest Account of Your Average Spending Habits
Before you can cut expenses, you need to determine where all of your money goes each month. Keeping a detailed record of where you spend each penny can help you figure out where to cut back. You might be spending more than you thought on hobbies each month, or perhaps you’re paying for subscription services that you never use. Once you have a record of your spending over a month or two, you can see the big picture and figure out how much money you can realistically save.
Cut Expenses in Entertainment, Clothing, and Other Optional Areas
For many individuals, small purchases can add up fast. Take stock of your optional expenditures and one-off purchases. These can include things like subscription services, games, clothes, and hobbies. Consider canceling any subscriptions that you can do without, and look into renting games, books, and movies from the local library or borrowing them from friends. Scale back any unnecessary shopping by keeping yourself to a strict (yet manageable) budget for areas in which you tend to overspend. Hobbies can suck up money fast — try to cut expenses by sticking to a budget and swapping in less expensive hobbies like hiking or drawing.
Look at the “Big Three”
When it comes to monthly spending, many Americans use most of their income on three main expenses: housing, food, and transportation. If you find that you need to cut expenses further after curbing unnecessary spending on entertainment and recreation, take a hard look at your rent, eating habits, and vehicle costs. Negotiating rent, getting a roommate or tenant, or moving to an area with a lower cost of living can be one way to make a significant difference in the amount of extra cash you have each month. Cutting back on dining out can help you slash your food costs, and paying a bit of attention to the coupons and sales for your local grocery store can allow you to stretch your dollars. Finally, get serious about your transportation costs. Some individuals calculate the per-mile cost of driving, cycling, and public transportation. It may be worthwhile to use public transport for your commute, and trading in your gas guzzler for a more economical vehicle can help you cut expenses and save in the long run.
Take Control of Your Finances with EveryIncome
EveryIncome is dedicated to providing our clients with career and finance management tools to help them create a stable financial future. Regardless of where you are in life, our system of tools and guided learning is tailored to fit your specific needs. Take control of your financial health today. Contact the team at EveryIncome online or give us a call at (571)370-5400. For more tips and tricks to foster financial wellness, follow EveryIncome on Facebook, Twitter, and LinkedIn.