How to Reduce Expenses

How to reduce expenses

An important way to save money is to reduce expenses. There are a lot of ways you can stretch your dollars and help avoid that “Not enough Money Monthly” feeling. Some of these top money tips will take a bit of planning and investigation but they will be well worth the effort, and will also let you know how to save money monthly. Other money tips you will be able to implement immediately. Some money tips will require a small up-front investment but have a substantial long-term payoff and help you reduce expenses and save money. Your ability to implement these money tips will depend on your available cash and your budget.


What you’ll need first, is a clear idea of where your money is going each month; then you can look at ways to reduce expenses and lower the cost of your required living expenses. Remember that it’s not always about cheaper; it’s about efficiency. Work out your needs by looking at your bank statements. Most importantly, however, is to understand that to reduce expenses requires a lifestyle change and a change in your thinking patterns. Never let yourself believe that cents don’t count; as the saying goes “Look after the cents and the dollars will look after themselves”.

 

Determine where you spend your money

If you don’t know where your money is going each month, you are most likely spending too much. You can get an idea in as little as one month by recording exactly what you spent your money on, and as you continue, each month you’ll see patterns develop that you can address. Write down everything you buy down to the last dollar. Don’t stop at the obvious things like the rent or mortgage, utilities, petrol and food – make sure you include the ancillary items like drinks and snacks as well as gum and tobacco.

What about happy hour at the end of the day, after work with colleagues? Did you rent a movie? Use a Row-by-Column spreadsheet to keep track every month. If you exclusively use a debit card for your purchases, the bank will do this for you with their statement.

 

Immediately eliminate unnecessary routine purchases

While this won’t be the largest savings area, it’s important and easy. Is that coffee on your way to work really necessary? How critical are the drinks and snacks you buy at work each day from the office vending machine at $1.50 each or more? A cup of coffee that you made at home is only 20 cents, and if you took a can of drink from home you bought in a supermarket as part of a 12 pack, you will start to reduce your expenses and save money immediately. Do you seriously have to rent all those DVDs (and pay those late fees) each month? Have you checked to see whether your library has DVDs or swap with friends? More than one lottery ticket? each week?. These money saving tips are quick and most of it is changing habits. There will be some psychological pain at first but when you add up the dollars you save each month, you’ll see a big difference instantly. Make a shopping list before you go to the supermarket and stick to it. This is especially helpful to impulse buyers. Did you ever go in for a carton of milk and come back with a basket of 15 items, saying they were on special? Did you really need 2 for 1 bags of crisps or the chocolate biscuits just because it was on sale? No. You probably didn’t need half of those extra things but ended up buying them anyway. A shopping list gives you a clear idea of what you truly need and eliminates unnecessary purchases.

 

1. Address your Utility Bills

 

Heating and cooling (gas or electric)

When you leave the house, set your thermostat to an “away” setting (a note of caution here: don’t set it so far from comfortable that it takes an inordinate amount of time to return to comfort when you get home on a hot day: 22°C should be enough or if you are going away for hours, set the timer so the air conditioner comes on say an hour before you plan to come home. Consider investing in ceiling fans – you can get these for as little as $20 and they dramatically reduce cost of heating and cooling by circulating the air more efficiently around the house, unless you have ducted air conditioning; but then do you need all the rooms in the house cooled, or heated?

 

Electricity

Lighting is expensive. When you leave a room, turn off the light. The idea that it takes more energy to turn on a light than to keep it on is completely false, as turning on a light only burns as much electricity as burning it for fractions of a second. Energy efficient bulbs really do work. This is an investment that will pay off over time but there are significant savings to be made and a great way to reduce expenses. Turn off your computer/laptop when you’re not using it – let’s face it, the only reason you leave it on is you don’t want to wait to jump on the Internet; and visit Money Monthly while the computer to ‘boots up’. Any voltage adapters (including the ones for mobile phones, and stereo equipment) still use electricity even if they’re not charging or plugged in to the device. Of the total energy used to run home electronics, 40% is consumed when the appliances are turned off. Either pull the plug on the devices when not in use or buy a device to do it for you, such as a Smart Power Board ($31 to $44). For stereo components, plug them all into a power board that can easily be switched off when not in use. Open the curtains and blinds during the day for light instead of burning electricity. Only use electricity when you absolutely need it.

 

Water

Save water, save money, and with water restrictions effecting much of Australia, the Government is forcing us to save money here. Invest in a shower-reduction kit – they cost nearly nothing and will start saving you money immediately. They work by reducing the flow to the shower head and the change is barely noticeable.
You can also reduce expenses in this area by learning to take quicker showers; an inexpensive egg timer is a good way to help. Repair dripping taps, which is a huge waste of water and easy to fix. Reduce your outside watering to a bare minimum. If you have a pool or outdoor spa, keep it covered when it’s not in use to reduce evaporation, and if it’s heated that will dramatically increase evaporation as well (only heat your pool if you are using it regularly in Winter, and invest in a thermal blanket).
If you’re not using the tap turn it off, for example when brushing teeth do not leave the tap running.

 

Gas and Miscellaneous

Do laundry as often as necessary but as little as possible; which for a lot of people is a pleasant way to reduce expenses. Reduce the temperature of your shower by a couple of degrees; the less work your water heater does the more money you’ll save. Use the microwave instead of the oven whenever possible as the cost just to preheat an oven is more than the cost to cook a meal in the microwave. Open the windows when it’s nice outside to reduce heating (and cooling) costs. If you live where natural gas is used only in the winter months, arrange with your local utility to do a seasonal shutoff so that you are not saddled with fixed monthly service charges for the “privilege” of being connected to the gas service even though you are not using it. With one supplier, it is $17/month. In the 8 months that you don’t need the service, you’re charged $17 X 8 = $136, but the season shutoff and turn on costs $54.

 

Cable and Telephone

Seriously, do you really, really need a thousand channels and every single premium channel available including the high definition packages? You can save the full $100+ on your cable bill every month by watching TV for free and with the new ‘Free to Air’ stations you really can save money and reduce expenses with that. If you want to save money take a close look at your priorities. For your telephone, shop around based on your use. If you make a lot of long-distance calls to family and friends, perhaps one of the unlimited plans would save money. If all your calls are local you probably can get by with a bare-bones option. Can you reduce expenses by eliminating your home phone all together?
Consider that your mobile phone may have free long distance; therefore, removing the necessity of having long distance on a land line. Look into the Voice-Over-IP (phone over the Internet) for your telephone solutions. Some services, such as Skype, gChat (from Google), and Windows Live! allow you to make free video calls to other users as well as make low cost calls to cell phones and land lines from your computer – including international calls.

 

Mobile Phone

Text messages cost money. “Oh no, I have unlimited text!” Oh? How much does that option cost you? Do you actually even need a mobile phone? Does everyone in your family actually need a mobile phone? Parents must lay down the law on mobile phone usage; is your twelve-year-old sitting around the house texting, or racking up a huge mobile phone bill, that’s in your name? Another thing to consider is if you really require a mobile phone then do you really need a land line at home? Consider consolidating. If your mobile phone use is occasional only, consider a pre-paid option instead of a lock-in plan.

 

Mobile Phone Saving Plans

Some mobile phone plans are genuinely good and money-saving; but make sure that you shop around first for the deal that best suits you. Many carriers offer either contract or pre-paid options based on the cellphone habits of the user, for example, someone who texts an awful lot or someone who prefers to call. For example, some carriers reward you for topping up for a little bit per month with hundreds of free texts which can prove very handy and can be much cheaper than calls. Remember, calls to networks other than yours, and landlines, are often considerably more pricey.

 

2. Reconsider Petrol and Miscellaneous Auto Expenses

When petrol was rationed during World War II, a popular slogan was “Is this trip really necessary?” Ask yourself that every time you get in your car. Make a list before you go to the supermarket so you don’t have to make additional trips. Don’t go for a drive for pleasure; walk instead or choose other forms of entertainment (gardening, reading, exercising for example). Check the pressure in your tires. Convertibles get better mileage with the top up. An out of tuned engine is a huge waste of money, and even a spark plug change can make a big difference, as can clean oil. Also, the less you drive the less frequently you’ll change tires, oil, require maintenance, etc. That’s a way to reduce expenses over time of course, but it will mount up and you will notice how much it will save money. Another way to save petrol (and save money) is to change your driving habits. By simply driving slower, and/or less aggressively, you can save significant amounts of money. Use cruise control when ever possible, and you will find that the car accelerates smother.

 

3. Cut Down on Entertainment Expenses

It’s amazing just how many people complain about their lack of money then describe the latest release of a movie along with the cost of theater popcorn. Also, professional sports event, a music concert or tickets to a play can run up hundreds of dollars for a couple on a date. Seriously, can you really tell the difference (blindfolded) between a $30 bottle of wine and a $10 bottle of wine? When you do dine out, actually think about the prices on the menu first. Consider a meal share if the restaurant offers that option, or order an entree size for the main meal. Look for holiday bargains, and consider taking the kids camping instead of one of the super expensive theme parks.

 

4. How to Reduce Expenses with Food

The only real difference between a $2.99 can of beans and a $0.99 can of beans is $2.00 (sure there are exceptions; people on special diets will definitely have to pay more). The supermarket is a place you can save big.
Look for foods that are marked “Special” and compare the generic or home-brand alternatives, the major supermarket chains carry. Those brands are often made by a leading supplier, without the fancy packaging; which doesn’t taste very nice, by the way (the packaging that is) Seafood can be quite expensive compared to a nice grilled chicken breast with green beans and rice? Make dining in an experience instead of just a convenience. It’s quite possible to spend as much on home food as you would by eating out if you are wasteful.
Invest $10 in a coffee pot. Making your coffee at home instead of purchasing your $1, $3, or $7 custom latte at the coffee shop will save you money.
Consider taking your lunch to work instead of buying lunch each day. Even an inexpensive lunch out is several dollars a day more than taking food from home; you do the math.
Use supermarket coupons whenever possible, and use the petrol discounts, usually at the bottom of the docket. Look into joining a warehouse group with friends, buying in volume the items that you consume a lot of can save money each week. By not having to shop as often, you will save money on petrol etc. and spend less money by not being in the supermarket as often, or for as long risking impulse purchases.
When purchasing meat items, aim for pieces where you can identify the body part from which it came. Ground beef, although cheap, is processed which increases its price. Tougher cuts of meat are cheaper can be slow-cooked and made incredibly tender in casseroles and stews. Consider cooking larger amounts at once and then freeze for additional meals later in the month. You could cook one large piece of meat; like a roast, and cut it up for use in sandwiches, stews or soups, etc. Simply store in individual portions, labeled with the type of meat and date, for later use. Organ meat (chicken hearts and gizzards, beef hearts, tripe) are often far cheaper than normal cuts, and can be used to make tasty and filling stews.
Avoid large packages of fresh produce to avoid spoilage if your consumption is not high; frozen produce will extend the shelf life of all your fruit and vegetables.
Measure product use carefully; don’t be wasteful with the products just because it comes in a large container.
Buy products you will actually use instead of substituting just because it’s on your list and the only item available. Are you really going to enjoy that box of cereal that’s not your regular brand, or is it going to sit on your shelf?
Be aware of the influence that name brand promotions have on your purchase habits and do your best to stick to what is cheapest.

 

5 Address your insurance costs

The fastest way for some people to reduce monthly expenses will be in the area of home and car insurance. Insurance Companies that sell these products are incredibly competitive. Get some quotes from different insurance companies, and / or Insurance Brokers. When you do this, bear in mind that lower initial premiums may not always be the most cost efficient, and make sure you are comparing “apples with apples”. Cheaper may mean, and often does mean less protection.

 

Car Insurance

Take a look at your car insurance and at your excess. Don’t jump to increase your excess, to reduce the premium, look at the whole policy based on your needs and expectations; do a risk analysis your self first. If you have an inexperienced driver in your house and you don’t have savings, having a high excess might not be the best choice and if your car is financed you may have minimum insurance requirements. However if you have a long history of good driving and you own your car, outright, you might consider a high excess to save on premiums.

 

Home and Contents Insurance

This can be a large expense, and a way for you to reduce expenses each month, as many home owners have no idea how much they’re paying because it comes out of their savings account each month; and as the saying goes “Out of sight, out of mind”. Review your plan with your insurance company. Are your personal possessions really and truly worth the $250,000 you have on the policy? Also look for areas that are lacking. Is water damage covered; and hail damage? Think whether or not you’ll need those.
Is anything important excluded? Is anything irrelevant included? A rocking chair may have sentimental value but do you really need a special valuables inclusion to cover it?

 

6 Consider Second Hand Items to Reduce Expenses

This is a great way to save money while recycling! If you absolutely must buy something, there are options other than a brand name store to buy from. There are large thrift stores (e.g. Goodwill) and smaller church-run stores that have some incredible bargains on everything from home knick-knacks to appliances to clothing. It’s amazing how fast a 4-year old will outgrow shoes (when that happens, re-donate them so somebody else can benefit).
Look for garage sales; your neighbors will definitely not think less of you because you bought the winter jacket they are trying to sell, and hold your own garage sale and they just might want what you no longer need.

 

7. Pay Bills Ontime

A poor credit rating can cost tens of thousands over the years in increased interest rates and insurance costs. You may even lose your job or lose out on a job application. You will pay more for loans with a bad credit rating, and will have more trouble getting one, so pay all bills on time, and check what’s on your credit file before you apply for a loan. Pay off those credit cards as soon as possible and put those cards away.

 

8. Look out for Bank Fees

Banks are for ever changing the ways they charge you for their services. Make sure you are using your debit card effectively and don’t use other Bank’s atm machines. Take out a fixed amount of cash when you shop and stick to that for the week.
Reduce expenses by using a debit card, not the credit card. The good thing about debit cards is that you are not using money that you don’t have, like a credit card, so you don’t have a big bill each month, and there are fewer fees.

 

Summary on How To Reduce Expenses

Do not only consider the least expensive option as a way to save money. That is certainly not always the best option. Many, many times, an initial savings will cost you more later, and this will not reduce expenses in the long term, and carefully consider life cycle cost in addition to the acquisition cost.
If you buy second hand, check carefully, this is especially true of cars, and buy from a respectable used car dealer. It’s worth the investment to have a mechanic check the car (unless you’re perfectly competent in that area – are you sure?).
Don’t go completely overboard. It’s great to be frugal and want to save money and reduce expenses but it’s not great to be a mean-spirited miser. If your child for example must have new shoes or new glasses then look for value for money but keep your priorities straight.