Following up on the two articles about cutting your big expenses: cutting your insurance costs back and refinancing your home to drastically reduce your monthly cost; today we are going to focus on little things that pay big, long-term dividend. One of the easiest ways to save money over a long period of time is to cut your recurring expenses. Sure, cutting out going to three concerts per year would technically save you money. But you’d probably miss those concerts and the money you saved wouldn’t be consistent.
Photo by Tony Crider via Flickr
Of course insurance and mortgage aren’t the only two costs you have to pay each and every month. What else could you cut back on or eliminate entirely?
Here are a few ideas:
This is by no means a complete list. Everyone has a different spending profile based on what is important to them. But often we build up recurring monthly expenses without realizing how much of those costs we actually use during a given month. Trimming back on them can save you a lot of money over a given year.
Reminder: don’t just cut expenses without having a plan for the saved money. Automate the cost into a savings account. For example, if you dropped a $30 gym membership you will find yourself spending $30 doing something else throughout the month. Instead, set up a $30 automatic withdrawal to your bank account. It’s like your savings account is the gym and you have a 2 year contract to save money rather than spend it!
An important note: cutting back is a prudent, healthy thing to do. We tend to pile things up and sign up for services we won’t use simply because we can pay for it monthly rather than all at once.
Do force yourself to cut the things that aren’t meaningful and useful to you. It can be easy to think “well I love everything and it is truly valuable to me!” while still never going to the gym. Get brutal with yourself and cut things that don’t matter. If you cut too much you’ll realize it in a few months and add it back.
Be careful: don’t cut back on everything. It’s like trying to stop smoking cold turkey or lifting 300 pounds in your first workout in six years. It just won’t work and you’ll probably slingshot headfirst into overspending.
Got an expensive hobby the fulfills you and you truly enjoy? By all means, keep it. Live with a roommate so you can enjoy nice dinners out four nights per week? Fine by me.
Cut what doesn’t matter and divert what you were spending into something fruitful like an emergency fund, debt payoff plan, or vacation fund. I’ll show you the importance of tracking some of these useful categories in my next article.