Recent data shows that a shocking 74% of employees making less than $50,000 per year are living paycheck to paycheck. And the numbers are only slightly better for families in higher income brackets. When you’re living paycheck to paycheck, finding anything to cut from your budget makes a huge difference. But when you’re just getting started, you might struggle to find places to cut back. In this article, you’ll learn about the benefits of cutting your budget, as well as 23 effective ways to do it.
How cutting the budget helps you focus on your financial goals
It might seem like making minor cuts to your budget won’t make a significant difference in your finances. But you might be surprised by just how many benefits there are. First, reducing your spending can help you put more money toward paying off debt. And if you’ve been struggling to make a dent in your debt balance, you know how important this is. And the faster you pay off your debt, the less you’ll pay in interest.
Cutting your budget can also help reach your other financial goals faster. Whether you’re saving for a vacation, funding the down payment on a house, or starting investing for the first time, extra money in your budget makes a huge difference. In addition, if you earn a low income, every little saving you can find counts.
23 tips to cut your expenses
Ready to cut your budget and save money each month? We’re going to talk about 23 ways you can easily cut back on your spending.
1. Track your spending
The most important first step to cutting your budget is actually tracking where your money is going. After all, if you aren’t tracking your spending, how do you know if you’ve actually been successful in cutting your budget?
Tracking your spending can also open your eyes to areas where you may want to reduce your spending. Often there are spending categories where we don’t think we’re overspending. But when we finally start tracking where our money is going, we realize we’re spending a lot more than we thought. To track your spending, you can use a free or paid budgeting app, a spreadsheet, or even just a pen and paper.
2. Cook at home more often
Food eats up a large portion of many people’s discretionary spending, and eating out is a huge culprit. There’s nothing inherently wrong with eating out. But often people do it out of convenience or don’t actually realize how much they’re spending.
If you find yourself going through the drive-thru or ordering takeout because you simply don’t have time to cook, stock your kitchen with a few easy meals you can pull out when cooking isn’t an option. If you eat out often because you love trying new meals, challenge yourself to make some of your favorite restaurant meals at home. You’ll save money, while also picking up a new hobby.
3. Meal plan
Cooking at home is a great first step in cutting your food spending, but there’s more you can do. Meal planning is one of the best ways to reduce your grocery budget. First, you’ll ensure that you’re buying only what you need at the store without grabbing things that will go to waste. Another perk of meal planning is that you can estimate ahead of time what your grocery bill will be.
4. Use cash-back and coupon apps
Cash-back and coupon apps make it easy to save money on purchases you’re making anyway. Apps like Fetch Rewards and Ibotta have you scan your receipt, and then you get cash back on certain items. The cash-back amounts are typically well under $1 per item, but it adds up. And since it’s almost no work on your part, it’s worth it!
5. Cut cable
With the huge variety of streaming services available, people are spending less time watching cable. And yet many people still may that cable bill every month. One really easy way to cut your budget is to get rid of cable. You can choose one or two streaming services to pay for instead, which will cost significantly less. Or, if you don’t watch much TV or have been thinking of cutting back, you might get rid of television altogether and find other hobbies to fill that time with.
6. Switch cell phone plans
Most of us sign up with a convenient cell phone provider and then never shop around for a cheaper plan. But these days, there are plenty of options out there for low-cost cell phone providers. If you’re still using one of the big cell phone companies like Verizon or AT&T, shop around for some of the alternative providers and you’re almost certain to save money.
7. Cancel unused subscriptions
I think we can all admit that we’ve signed up for a paid subscription and then never really used it. Or maybe there was a time where we used it, but now it’s just another monthly bill coming out of our checking accounts. Go through your bank and credit card statement for the past month and see if you’re paying for any monthly subscriptions that you no longer use. These can really add up, and you may find that you can save a lot of money.
8. Stick with used cars
Cars lose their value quickly. And when you buy a new car, it’s lost a significant amount of its value by the time you drive home from the dealership. Since many people finance their vehicles, this presents an even greater problem. It creates a situation where you owe the bank more on the vehicle than it’s actually worth due to depreciation. Buying used cars comes with multiple benefits. First, they tend to lose value more slowly (since they’ve already lost a good chunk of their value). They’re also lower in price, meaning you can buy in cash or finances a smaller amount.
9. Implement a 24-hour rule for spending
This tip is for you if you struggle with impulse spending! Try creating a rule for yourself where after you find something you want to buy, you must wait 24 hours to pull the trigger. If spending is a huge problem for you, you can increase it to 72 hours, a week, or even a month. Once your waiting period ends, you might realize that it was just an impulse purchase and you really don’t want it. If you do still want the item, you can buy it guilt-free.
10. Shop second-hand
Shopping second-hand is a great way to save money. Thrift stores and Facebook marketplaces are a great way to find used furniture, clothing, home decor, workout equipment, and much more. Another benefit of shopping second-hand is that it helps to reduce your carbon footprint. The average American throws away roughly 65 pounds of clothing each year. By buying second-hand instead of new, you’re helping to reduce the number of clothes that end up in landfills.
11. Have a no-spend month
If you find that you’ve been spending a lot of money lately, you might consider a no-spend month. A no-spend month is when you go a full month without spending money on any non-necessities. Of course, you’ll still pay your bills and buy groceries. You can also replace items as necessary, such as if you run out of shampoo or your only pair of jeans gets a hole in them. But the goal is not to spend money on new items. Not only does a no-spend month help you to save money, but it can also help eliminate a shopping habit so you’ll continue to spend less each month.
12. Sell unused items
The average American household has about 300,000 items in it! That’s a pretty startling number, and I think most of us can agree that we don’t use nearly that many items. If you’ve got items taking up space in your home that you aren’t using, consider selling them. Not only will you clear up clutter, but you’ll also put money back into your budget.
13. Get a library card
If you love to read, then the cost of new books can really add up. One of the best ways to save money each month is to get a library card rather than buying books. When you get a card for your local library, you can read all of those books for free. And it’s not just physical books you can rent. You can also use your library card to borrow e-books and audiobooks.
14. Reduce your utility use
Thanks to the pandemic, we’re all spending a lot more time at home. And many of us are saving money on restaurants and entertainment, our electricity use has skyrocketed. It might seem like reducing your utility use isn’t an option. But even steps as simple as turning off lights when you leave the room or unplugging things you aren’t using can make a difference.
15. Unsubscribe from marketing emails
There’s nothing more tempting than an email from your favorite store letting you know about a huge sale. And now that your favorite brands can reach you any time, it seems like there’s constantly a deal that you just can’t miss. If you find that you’re susceptible to these marketing emails, it’s time to hit that unsubscribe button. Chances are you’ll still be able to find a sale or coupon when there’s an item you genuinely need. And you won’t be tempted to shop when you really don’t need to.
16. Unfollow social media influencers
Social media can also make it difficult to cut your spending. If you follow influencers on Instagram or home decor sites on Pinterest, the temptation can be strong. If you feel that you simply can’t overcome the urge to spend when you see an item you love on social media, unfollow those accounts that cause you to pull out your wallet. A great start is to do a social media detox.
17. Create a capsule wardrobe
For many families, clothing takes up a surprising chunk of the budget. The average American family spends about $1,700 on clothing per year. And unfortunately, many of those items end up unworn in our closets. One effective way to cut down your clothing spending is to use a capsule wardrobe. You cut your clothing collection down to a much smaller number of classic, quality, versatile pieces that you can easily mix and match. You end up with a surprising number of outfits with a much smaller wardrobe.
18. Refinance high-interest loans
There’s never been a better time to refinance loans, thanks to the historically low-interest rates during the pandemic. If you took out a loan for a home, vehicle, college, or anything else and have an interest rate that’s above-average, consider refinancing. You can the potential to save hundreds, thousands, or even tens of thousands of dollars over the life of your loan.
19. Negotiate your credit card interest rate
The average interest rate on a new credit card is 16.05%. If you’re working on paying down credit card debt, all that money going to interest can seriously slow down your progress. Many credit card providers are willing to negotiate on interest rates if you ask. They don’t want to lose your business, so they may be willing to lower your rate rather than have you transfer your balance to a different company.
20. Shop around for insurance
So many people shop around for insurance once and then pay premiums to the same company for years without shopping again. Prices between different insurance providers can vary widely. And as your life circumstances change, your insurance rate can change too. If it’s been a while since you’ve shopped around for car or home insurance, get a quote from a handful of companies.
21. Increase your insurance deductibles
Another way to reduce your monthly insurance premiums is to increase your deductible. In general, as your deductible goes up, your premium goes down. Before you do this, it’s important to remember not to increase your deductible to more than you could afford to pay out of pocket. If you know you can’t afford to pay $1,000 out of pocket tomorrow, don’t increase your car insurance deductible to $1,000.
22. Downgrade your house or apartment
Housing is the single largest line item in many people’s budgets. And while it might seem like an expense you don’t have a lot of control over, you can reduce your housing spending. Depending on where you live, you could reduce your costs significantly by downgrading your house or apartment. Do you really need as much home as you’re paying for? If you have more space than you need, considering saving money on a smaller space.
23. Switch banks to avoid fees
You might be surprised to know how much you’re spending on banking fees. From monthly maintenance fees to overdraft fees to ATM fees, banks bring in billions of dollars each year. And the average American spends hundreds of dollars per year in banking fees. Look through your bank statements for the past year. If you find that you’re spending a lot of money on fees, consider switching to a no-fee online bank.
The bottom line
When you’re just getting started cutting your spending, it can feel impossible. Everything in your budget truly feels like a necessity. But once you get started, it’s a lot easier to identify and reduce non-essential spending. And by cutting back the amount of money you put toward those little expenses that you don’t really value, you can devote more money to your true priorities.