Do you make pretty good money but find yourself struggling to make it to the next paycheck? To make matters worse, you have friends who make less than you but seem to be doing OK financially? Or, do you just not have enough money to take care of your monthly bills? Older generations know it doesn’t matter what you make; it’s what you spend. Have you ever asked yourself, “How can I cut my expenses drastically?”
When you spend less than you earn, you can start making tremendous strides in improving your finances. We are going to look at some tried-and-true methods our parents and grandparents used.
How can I cut my expenses drastically?
A Gallup study showed around one-third of Americans followed a budget. It will be difficult to cut expenses drastically if you do not have a budget. Without a budget, how will you ever know what you are truly spending? When you know where your money is going — and how much of it is going there — then you can cut expenses logically (and drastically, if necessary).
You need to track your spending
Before you can start to cut your expenses, you need to figure out where your money is going. You know me: I like to organize everything, and I love seeing things visually. This is why I created so many resources you can purchase in my online shop. But, if you are saying, “Miko, I don’t have money for my bills, let alone your products,” there’s no need to worry. You have a lot of choices in my free resources library.
When you track your spending (I do it every day), you will be able to look at your chart to see where your money is going. Then you can determine what spending is absolutely necessary, what is needed but can be negotiated or reduced, and what expenses can be cut completely.
Let’s get real
You know my life is an open book. I have shared not only my successes but my failures, too. If you want to cut expenses, then you have to get real with what you are spending and establish some priorities.
● Housing costs: The U.S. government has been recommending since 1981 Americans not spend more than 30% of their gross income on housing. When the number goes above 30%, housing is considered a “cost burden.” If you are renting, see if your rent and utilities are more than 30%. If so, then you might want to look at downsizing.
If you own your home, are you spending more than 30% on your mortgage, insurance, and taxes? If so, you might consider selling and moving into something more affordable. However, keep in mind how much it will cost to move.
● Transportation costs: It has been drilled into our heads. Every person in the family needs a vehicle. Really? Couples seem to be moving away from two vehicles (that’s a lot of repairs, tires, insurance, and gasoline). When they downsize to a single vehicle, they might use a bike, public transportation or rent a car for a day, if one is needed. It costs about $2,400 a year to keep gas in your car and to have it maintained over and above your loan and insurance payments (based on AAA estimates when driving 12,000 miles a year).
An online comparison tool found the average cost to insure a vehicle was about $1,500 a year (or $125 a month). Your rate will vary based on where you live. You can check Gabi, an online auto and home insurance comparison site, to see if you can find lower premiums.
● Food costs: Do you have single friends who think it is cheaper to go out to eat or order take-out than it is to cook at home. Well, a One Visa study a few years concluded the average cost to bring a prepared lunch to work was $6.30, and the average meal eaten out was $11. I think the $6.30 is a little high.
The study must not have read any of my meal plan posts. Also, the Bureau of Labor Statistics, around the same time, said the average household paid about $3,000 a year to dine out. Clearly, preparing food at home instead of eating in a restaurant or having pizza delivered will save money.
So, are you ready to take some scissors to cut your expenses and cut them down to size?
What bills can I cut to save money?
● Consider cutting the cord and getting rid of cable/satellite TV.
● Do you need the internet at home? Can you do OK with your cell phone and use it as a Hotspot?
● Monitor how much data you consume on your cell phone each month and see if you can move to a smaller plan.
● Are you really using all of your subscription/streaming services like Netflix, Hulu, CBS All Access, Disney+, Spotify, Audible, or Pandora?
If you were to implement some of these suggestions, then you could realistically cut out $200 a month, or $2,400 a year. You need to determine what your priorities are. It seems more people are relying on free Wi-Fi services at local libraries, coffee shops, and eateries.
How can I cut household bills?
Have you ever heard this saying: “If you always do what you’ve always done, you’ll always get what you always got.” Are you ready to change your finances and change your life? Are you prepared to think and act differently?
● Read: 30+ Ways to Help You Save More Money.
Here are some quick-hit ideas to cut household bills:
● Do you have a mortgage? See if it would be better to refinance it. (Check out Credible for mortgage refinancing options.)
● Do you rent? Is it possible to get a roommate and share the cost of rent and utilities?
● Talk to your insurance agent to see if there are any ways to reduce your insurance.
● If your insurance agent cannot get you lower premiums, visit Gabi, an online home and auto insurance comparison site or check out Lemonade (not the drink, but the insurance company).
● Can you carpool and lower your vehicle costs?
● Can you work from home and lower vehicle, food, and clothing expenses?
● Reserve eating out for special occasions, not because you don’t feel like cooking.
● Use coupons, shopping lists, and apps like Ibotta to lower your grocery bills.
● See if you qualify for lower electricity bills through Arcadia Power.
● See if you can negotiate lower rates for your landline, cell phone, internet, and TV.
● Cancel all your subscriptions and streaming services.
How can I negotiate lower rates?
When you are looking for ways to cut your expenses, and you run down your tracking spending sheet, you will find some necessary expenses, but there might be an opportunity to lower the amount you pay. So, how can you negotiate your rates for things like phone service, cable/satellite TV, or other services?
Look at your cell phone bill. Do you need the current plan you are paying for? Can you switch to a different phone provider and get a better deal? Sometimes companies offer nice incentives to bring in new customers. Maybe this will be the case when you look to lower your rates.
If you cannot find a lower rate from a competitor or do not want to switch, here are some techniques you can use to get a lower rate from your existing provider. As you prepare to speak with someone from customer service, keep in mind every company knows it is more expensive to find a new customer than to keep an existing one. So, they will want to keep you as a paying customer. Try these techniques:
● Check for special pricing: If you are trying to lower your cell phone bill, check with the company to see if your employer is a partner that will open up special pricing to you.
● Ask for any available discounts: Call up customer service and tell them you are having difficulty paying all your bills each month. Ask them if there is any way the company can offer you any kind of discount to help you.
● Hint at possible cancellation: If you speak to a customer service rep and there is no way the company can offer a discount or a reduced rate, then be polite and thank them for looking into it for you. Then as calmly and confidently as possible, say, “I was hoping I could get a better deal. How do I cancel this account?” They will want to keep you as a customer, so a “supervisor” might be able to find a one-time discount. If not, you can either cancel the service. If you are not ready to cancel, tell them you want to talk it over with your husband or partner first.
How can I cancel my subscriptions?
If you cannot afford to pay your bills each month, then you need to get rid of those expenses that are discretionary. You know they will try every possible trick to keep you from canceling. However, you owe them nothing. You need to do what is best for you and your family. Do not let them guilt you into paying them every month if you want to cancel.
The easiest way is if you can go online, like with Netflix, Spotify, or Hulu, and just cancel. But, every company and service has different cancellation requirements.
Some gym memberships make you cancel in person. Some services allow you to cancel online or with an email. It seems good companies make it easy for you to cancel, while others make you jump through all sorts of hoops to cancel.
Because of this, sometimes it is best to call. Let them know you cannot afford the service any longer, and you need to cancel. Be firm, and be polite. These people usually handle dozens, if not hundreds, of calls a day. They have been trained on what to say, and they have scripts to read. Be persistent and let them know there is no way you can pay for the service and thank them.
If you are allowed to cancel with an email, feel free to copy and paste this template:
Subject: Cancellation of [service or subscription]
Dear Customer Service,
I am sending you this email as my notice to request cancellation of my [service or subscription] account; the account number is [account number]. I am requesting the effective be [date of cancellation].
Please send me an email within 30 days to confirm that the cancellation has been put into effect. Please refund any unused portion of my payments, and cease charging my [bank account or credit card] for payments related to my [service or subscription] account.
I appreciate you doing this. Please confirm you have received this cancellation request.
I hope you begin to see there are many choices for you to lower your expenses. Some of my suggestions above will mean real sacrifices. If you constantly feel like there is not enough income to go around, the first place to look and make changes is your current bills and expenses.