Spend less than you earn.
That is the mantra of success in personal finance. Each week, month, and year that you spend less than you earn, the more you will save and the better your future financial situation.
A big part of that strategy involves starting to cut back spending, and for many people the idea of cutting back seems off putting. Feeling like you are “losing” the things that bring you pleasure in life seems like a pretty high price to pay for some financial success.
The secret is to intentionally target reducing spending on things that you don’t care about and that you rarely use while sticking to the things that do matter to you.
Why should I start cutting back?
Before we look at how to start cutting back, let’s consider why you should reduce your monthly spending. What is the benefit of doing so?
The benefit is that the money you save by spending less can be applied to other financial goals in your life. You can get rid of debt faster, eliminating a monthly bill that soaks up your money. You can create an emergency fund, save for a down payment on a house, or start saving for retirement.
If you intentionally cut out things that are of little importance to you while holding on to the things that really matter to you, cutting back doesn’t really have any negative impact on your life.
- Reduce energy consumption
- Reduce the cost of entertainment
- Reduce the cost of food
Reducing Energy Consumption
Spending more time at home doesn’t have to mean more expenses, check out the following tips for cutting back at home.
Seal drafts in your home
Whenever you feel cold drafts in your home in winter or hot air in summer, it is a draft. It’s the outside air that leaks into your home, and that means paying additional energy costs to keep your home at an acceptable temperature. Finding and sealing most streams is pretty easy. Just follow the hot / cold air, then seal the leak.
Use your ceiling fans
In winter, a ceiling fan can redistribute hot air that collects near the ceiling down into the room, making it warmer where you are. In summer, a ceiling fan can create a gentle breeze in a room. Use your ceiling fans and set them to the correct mode for the season, as a ceiling fan is much less expensive to operate than an air conditioner.
Adjust the thermostat
Once you seal in the drafts and set up your ceiling fan, you will find that the temperatures in your home are more consistent and that you can run your thermostat a few degrees cooler in the winter and warmer in the summer while still being perfect. For some of you investing in a SMART thermostat could also be a solution. This particular one learns from your behavior and adjusts automatically, taking out the effort aspect of saving money in this way.
Use cold water for your clothes. Unless your clothing is exceptionally stained or dirty or your clothing instructions call for warm or hot water, most manufacturers recommend using cold water for your clothing (the cold-cold setting on many washers). This saves the cost of heating the water and still results in clean laundry. (So smart)
Cutting back on entertainment
The ways we choose to distract ourselves can also dig a hole in our pockets.
Cut the cord!
These days, streaming services and free-to-air television provide more content than anyone could watch. Take advantage of variety by eliminating cable or satellite service.
Focus your interests on completion rather than collecting
Instead of collecting something, focus on finishing those things or enjoying them to the end. For example, instead of buying even more books that are not read, try creating a long list of books that you have read. Focus on engaging in the essence of your hobby, not just shopping for it. After all, isn’t doing the hobby what you really love?
Don’t treat shopping as entertainment
It’s okay to go out into town to entertain yourself, but follow a simple rule: don’t go to a store unless it’s for the purpose of buying something you’ve already decided you need before entering. Don’t go to stores just for entertainment, as they are designed to convince you to buy things you don’t really want nor need, but instead react on impulse. Find other places to entertain yourself.
Reducing the cost of food
Necessary expenses can be disguised as excessive expenses without realizing it, because in the end they are things that we must always buy. Check that you are not overspending on food and try to cut back.
Use an eating plan and make a shopping list
Instead of going to the grocery store every time you feel like you need food, get into the routine of making an eating plan once a week, and then create a shopping list from that plan. The time invested in making that plan is vastly saved by spending less time in the store and having a list to stick to saves a lot of money on impulse grocery purchases that just sit in your pantry.
Learn how to cook
Ordering food every day can come at quite the cost. I’m certain if you added up the monthly expenses in ordering food I’m sure the sheer shock would shove you into savings mode. Instead you could channel much less money, into having the same foods at home. Cooking for yourself doesn’t have to involve three-course meals or professional chef skills. Start by identifying the things you like to eat, then find out how to easily prepare them from scratch and with basic ingredients. If this is too much work, get an easy cookbook pick 6 -10 recipes (around 2-3 for each – breakfast, lunch and dinner) and put them on a rotation.
Buy store brand items
Store-brand items generally cost much less and are often functionally the same or even better than brand-name items. Try to buy everything in store brand form and judge for yourself. Even if you decide that a few well-known brands are better, swapping most of your staples for store brands is a huge money saver.
Buy in bulk
It may seem like buying in bulk comes at a high price, but it’s usually quite a bit cheaper per use, which means you get more value for your money. If you buy something frequently in the store, check if they sell in large quantities. You will save in the long run.
In the end remember this savings can turn into greater wealth long term as you redirected the saved money into your financial goals — build, grow, invest.
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