Are you struggling to get a handle on your monthly expenses?
Do you have nothing at the end of the month and wonder where all your money went?
Has the thought of cutting monthly expenses ever crossed your mind?
Cutting monthly household expenses is one part of the wealth building equation and this is what we are going to focus on in this post.
By reducing or even eliminating some of your monthly bills, you will free up money to pay off debt or save.
And by the end of this post, you will have an action plan that will allow you to cut your monthly bills by thousands and start saving money today.
There are a lot of ways to reduce your monthly expenses. Some people just dive in and cut everyday expenses while others cut household expenses.
Most people try to tackle small expenses first. I like to attack the big expenses first.
The reason I do it is this way is because with large expenses, you tend to get a better return for the time you spend.
For example, if you choose to cut coffee from your budget, you are saving $3 the day you don’t buy coffee. In order to save more money, you need to choose to skip coffee again and again.
While you might be strong and skip coffee a handful of times during the month, eventually your motivation will fade and you will start buying coffee again.
The end result is you saved $30, assuming you skipped buying coffee Monday through Friday for two weeks.
That’s a lot of work and willpower to save $30!
On the other hand, say you call to compare insurance quotes. This call lasts 30 minutes and you end up saving $150 for the year, which is highly possible.
You spent 30 minutes, one time, and saved $150 for an entire year.
That is 50 days without coffee or 10 workweeks of no coffee.
Which option sounds better to you?
This is why I like to focus on the large expenses in your life first. By tackling these first, you will drastically cut expenses easily.
This doesn’t mean we won’t tackle the small expenses. We will look to cut everyday expenses too.
By the end of the post, you will have an outline of things to do in order to start cutting monthly expenses from your budget, freeing up more money than you thought possible.
In fact, many of you should be able to save over $1,000 just by following the tips I outline in this post.
Your Complete Guide To Cutting Monthly Expenses To The Bone
The Big Expenses
Most of us have just a few large expenses in our monthly budget. These are the expenses to cut from your budget first.
They include the following:
We want to spend our time working to reduce these monthly expenses first since we will achieve a higher level of savings with very little work.
Let’s get started.
Cutting monthly household expenses when it comes to your mortgage isn’t too difficult of a task. One common option is to refinance for a lower interest rate than you are currently paying.
But, there are traps with refinancing. You could pay an absurd amount in fees, negating the savings.
Or you could even get tricked into extending the length of the loan, causing you to spend more money in the long run.
Make certain you understand your goal when it comes to refinancing before talking with anyone.
Do you want to save money on interest over the course of the loan or are you more interested in cutting the monthly payment so you can free up some cash?
Once you answer this question, then you will be able to sit down with someone and figure out the best route for your situation.
With interest rates still relatively low, you could save a few hundred dollars per month by refinancing.
For example, if you have a mortgage of $200,000 at 4.75%, refinancing to a loan with a 4.00% interest rate will reduce your monthly payment by close to $100.
You just saved yourself $1,200 a year and nearly $32,000 interest!
You just have to be smart about the refinance process and take your time to make sure you understand everything.
If you are in the market for a refinance, here is an interactive calculator to help you get an idea of how much money you can save.
What if it turns out that refinancing isn’t an option for you? Are you stuck with your current payment? Yes and no.
While you won’t be able to easily reduce your currently monthly payment, you can take steps to greatly reduce your mortgage balance.
By lowering your overall balance, you could then refinance and save a boatload of money.
For example, let’s again say you have a loan of $200,000 at 4.75%. You opt to pay extra on this loan and quickly drop it to $125,000.
You then refinance at 4.00%. Because you are financing a much lower amount, you end up lowering your monthly expense by close to $500!
When it comes to rent, there isn’t much you can do today to cut your monthly expenses associated with the cost and see a difference.
The one thing you can do today is bring in a roommate. By having a roommate you will instantly slash all of your monthly bills in half.
Before you shut the door on this idea because you enjoy living alone, I encourage you to at least consider it.
You don’t have to do this, but at least give it some thought. Run the numbers to see how much money you can potentially save.
If you decide to not have a roommate, there are some things you can do that will save you money in the coming months.
First, you can start the process of looking for another place to live that is cheaper. This might mean moving to another area of the city.
Next, you can try to negotiate with your current landlord.
While there is no guarantee they will agree to negotiating, you never know unless you ask.
To improve your chances of a yes, be sure to highlight all of the great things you bring to the table.
- You pay on time
- You don’t complain/are a great tenant
- You keep the unit well maintained
- You plan to continue renting for a few more years
These are just a couple of examples you could argue as to why you deserve a lower rent payment.
The reason this works is because at the end of the day some landlords would rather have a great tenant that is paying a little less than market rate instead of having a horrible tenant that doesn’t pay at all.
You’ll never know which landlord you have unless you ask.
For me, I didn’t raise the rent on my tenant because she was so amazing. I never had any issues from her and the rent was always on time.
I would rather forego an extra $50 a month, or $600 a year, and have zero stress than have an extra $600 and have some level of stress.
In addition to this, if she leaves, then I have zero rental income while I am looking for new tenants.
And I have to spend my time and money trying to find new tenants. Finally, there is the risk that the new tenants trash the place, don’t pay on time, or don’t pay at all.
It wasn’t worth it to me. I’ll take $600 less and have zero worries.
When going this route, just be open and honest with your landlord and see what happens.
Insurance is another area where cutting your monthly household expenses will let you realize a nice amount of savings.
In fact, I would argue that saving money on insurance is 100 times easier than with your mortgage.
Most companies offer free quotes on insurance. Just spend 10 minutes filling out the information and you’ll have a free, no obligation quote.
You should be shopping around and getting car and homeowners insurance quotes every other year at a minimum.
Just because you are a great customer doesn’t mean you are getting a great rate.
It all has to do with how the company is doing overall.
Also, new studies have found that people who stay with the same insurance company actually pay more over time than they should.
These people basically pay for the others who shop around and get offered lower rates.
I used an insurance company that I thought was offering me the best price. Then one year, my premiums jumped 10% without warning.
I did nothing to cause this spike.
It turned out that the insurance company suffered huge losses after a major hurricane and needed to replenish its balance sheet.
This meant rate increases for everyone, regardless if they were affected by the storm or not.
I refused to pay more, so I shopped around and found a great insurance company that ended up charging me $250 less per year.
I stayed with them for 2 years and then shopped around and found another company that charged me $150 less than what I was paying at the time.
The bottom line is that you need to shop around for insurance coverage. It takes 10 minutes and is completely free.
By not doing anything, you could potentially be paying hundreds more each year than you should be.
So take 20 minutes and compare your current premiums to those at Liberty Mutual to see if you can save money. My guess is that you will.
And if you don’t drive a lot, skip the traditional insurers and look at Metromile. They offer massively discounted rates for drivers who don’t put a lot of miles on their car.
Click here to see how much money you will save!
And it doesn’t end with car insurance either.
If your employer doesn’t offer you health insurance and you are buying your own coverage, you need to shop around for a fair price.
You can easily get a free health insurance quote. Again, it takes 10 minutes and there is no obligation to buy.
In either case, just knowing that you aren’t being overcharged for coverage should be reason enough to get a free quote.
Most of us don’t think about taxes when it comes to trying to cut monthly expenses. But taxes are a big deal. When you add them up, more of your money than you think is going towards taxes.
For example, you pay federal income tax. Chances are you are paying a state income tax.
You are also paying a property tax if you own a house. You pay sales tax.
You pay a gas tax when you fill up your car.
And don’t get me started with the taxes on cell phone services.
When you add these all up, chances are you are paying close to 50% of your income in taxes!
While you cannot legally avoid all taxes, there are a handful of simple ways you can reduce your taxes and save money in the process.
- Contribute To Your 401k: The money you contribute to your 401k comes out of your paycheck pre-tax. This means that you are paying less money in taxes on the amount you actually have deposited into your checking account.
In other words, if you get paid $1,000 and don’t make any 401k contributions, you will pay $150 in taxes, assuming you are in the 15% tax bracket and other factors aren’t taken into account.
But if you contribute $100 to your 401k, you will only be taxed on the remaining $900, which is $135 (15% x $900). You just saved yourself $15 in taxes.
Over the course of a year, this turns into potentially thousands of dollars you will save on taxes.
- Appeal Your Property Taxes. If your property taxes have gone up every year, maybe it is time to appeal them. In many cases, a real estate attorney will do all of the work for a small fee.
When we did this, we knocked $1,100 off our annual property tax bill. We plan on living here for a while so over the next 20 years, we will save over $20,000!
The attorney got $500 for doing all of the work. This was the most we would have had to pay, as his fee was capped. If he didn’t get us a reduction, there was no fee.
Of course there is the chance that your taxes will go up. But a good attorney will look at things and give you an idea of what to expect before you agree to challenge the amount you pay.
- Put Money Into An HSA or FSA: These are accounts you put money into to help pay for medical expenses. The main difference between the two is that with an FSA, you have to use the money you save in the account during the calendar year.
With an HSA, you don’t have to do this. You can save and invest your contributions and pay for medical expenses years later, tax free. Below is a 60 second video that explains the differences really well.
The advantage of saving money in either account is the same as the 401k option above. Your savings are pre-tax, helping you to pay less in taxes.
- Change Your Withholding: If you get a large tax refund each year, look into changing your withholdings.
Most people don’t do this because they are scared that they will not get a refund at tax time and have to pay in.
The reality is that if you are getting a large refund (over $3,000) you can easily change your withholdings and get a fatter paycheck and still get a small refund each year. You can use this free tool from the IRS to help you do the math.
- Invest Wisely: Make sure you have a tax efficient strategy when it comes to investing your money. By simply placing certain assets in your retirement accounts and others in your taxable account, you will save yourself thousands in taxes every year.
By simply following a few of these tips, you will reduce the amount of money you pay in taxes and save a lot of money.
Chances are you have some debt.
Regardless if it is credit card debt, student loan debt, a car loan or a personal loan, these monthly payments add up.
By taking action to reduce these monthly bills, you will free up a lot of money. And the good news is it isn’t hard at all.
Here are some cost cutting actions to help you save money by eliminating your monthly debt bills.
Have A Plan
When it comes to your credit cards, set up a payoff plan. When you have a plan in place, you will get excited and motivated to pay off the debt.
By following a detailed plan, you will see faster progress in getting out of debt than you would if you just randomly pay your bills.
But simply having a plan isn’t your only option to cutting these expenses. There is still more you can do.
Another option for credit cards is to transfer your balances to another card. Many times you can find a credit card with a 0% balance transfer offer.
If you move your balance over to this new card, you can avoid paying any interest for a set amount of time.
There are two catches here. The first is that there is a fee you will be charged. Try to keep it to 3% or less of the amount you transfer.
Second, you have to make sure you don’t start spending on your first card again.
Just be sure you are disciplined with your spending before you choose this option. If you are not, you can get yourself into a lot more debt.
Consolidate or Refinance
Another option, and a better one than balance transfers is to consolidate or refinance your debt.
There are two great ways this works in your favor.
For credit card debt, you can consolidate all of your monthly bills from credit cards into one personal loan.
By doing this, you only have to worry about one bill a month and you will have a lower interest rate.
For student loans, you can refinance your debt into one loan. Again, you make life easier by only have one student loan payment to make every month.
And you save money by having a lower interest rate.
In both cases, Credible will help you accomplish this goal.
Simply click here to get a free quote on what your monthly payment and interest rate would be.
The free quote has no requirements that you move forward.
For example, let’s say you have $50,000 in student loan debt at 6.8% interest. Over 20 years you are going to pay $380 a month and a total of $41,600 in interest.
But if you refinance to a loan with 4% interest, your monthly payment drops to $302 and you save close to $20,000 interest.
All it talks it 10 minutes to save $80 every month. There is no reason not to.
When I refinanced my student loans to a lower interest rate, I went from paying $400 a month to $200. It was amazing to have that extra $200 a month.
Click here to see how much lower your monthly payment will be and how much money you will save with Credible.
Cable TV is a huge monthly bill and the price only goes up every year.
I used to call up Comcast every few months to get a new promotion, but as an existing customer, they have changed the game.
But this doesn’t mean you are stuck paying an outrageously high cable bill.
There are many things you can still do.
But first, I have to warn you of a trick you will run into. It’s the more channels, same price trick.
This seems to be cable companies go-to option. Here is how it works.
You call asking for a lower monthly bill. The representative puts you on hold and comes back with an offer.
They offer you a handful of new channels that you don’t get and will keep your monthly price the same as what you are paying now.
To many, this sounds like a great deal. You are getting upgraded at no additional cost to you.
The problem is you aren’t accomplishing your goal of cutting monthly household expenses because you are paying the same price for more channels.
You are just getting more channels.
And when the deal expires, you will pass out when you get an updated bill now charging you for all of those “free” channels that got added.
This what happened to my Mom. Over the course of a year, she kept calling for a lower rate and every time she fell for the more channels, same price deal.
The result was she had every single channel the cable company offered. Had I known this, I would have moved back home!
But when the deal finally ended, her monthly bill skyrocketed to $425 a month!
Remember when you call your goal is a lower price than what it is now, not to increase services.
Now that the warning is out of the way, let’s look at a handful of options for you to lower your monthly bill.
- Use Trim. This is a free service that will negotiate your cable bill for you. They are pretty good at getting you a discount. In fact, they cite they lower cable bills 70% of the time and save on average of $30 a month. That’s over $350 a year! You can try Trim for free by clicking here.
- Stream TV. There are many other lowered priced streaming options out there. You have more control over channel packages too. My favorites are SlingTV for most people and PureFlix for families. Right now, SlingTV offers free trials to new users. You can click here to try SlingTV for free.
- Cancel your cable. If you are fed up with the service, you have the option of cutting the cord. Before you think this isn’t an option for you, pause for a minute. There are a lot of free channels you can get and all you need is an HD antenna. The good news is they won’t set you back a lot. In fact, here is an excellent option that costs less than $50.
A final option is to create your own bundle. For example, you could sign up for Netflix and HBO and have 99% of the shows you typically watch for less than $50 a month.
All you have to do is a little work to see which bundling of services works best for you.
Groceries are one of the monthly household expenses that can quickly get out of control.
For example, the average family of four spends close to $900 per month on groceries, which is more than some people spend on their mortgage or rent!
If you find your grocery bill to be too high, what can you do to save some money?
The first thing you should do is shop smarter. If you have multiple grocery stores in your area, find the one that offers the best prices.
This will take a little work, but you can make it easy on yourself.
Next, stick with the basics. What do you buy every week? Make note of these and then price compare.
As time goes by, price check other items as well.
In some cases, you might find that you have to shop at two different stores. This is what happened to me.
Our family does most of our shopping at one store and then we go to another grocery store to buy our produce since it is cheaper there.
Once you know where to shop, learn to buy things that are on sale.
Be sure to read all of the circulars you get in the mail as you never know when they might have a great deal.
For example, one store I don’t shop at had a sale of frozen vegetables for $0.75 a bag. I stocked up since our daughter is now transitioning to solid foods.
To curb last minute eating out habits, cook ahead of time. For my wife and me, we would get tired or lazy by the end of the week and not feel like cooking.
This led us to eat out a lot on Thursdays and Fridays. Now we take some time on Sunday and cook meals for the week.
All we have to do is just reheat them and we have dinner ready in 5 minutes.
In addition to this, learn to make some simple meals that only take 20 minutes to make. There are thousands out there, just take a few minutes to search around.
For example, learn how to meal plan around what is on sale.
If you take the time to do these three things you could easily end up saving a few hundred or even thousand dollars a year or more.
The reason I like tackling these first is because it is one and done. I refinance, I never have to do anything else to save money.
The savings happens automatically every year or month.
By just tackling these large expenses, you will easily save $1,000 a month or more.
But you will save even more money by looking at your small expenses too.
The Small Expenses
Now that we have covered your big monthly household expenses, it’s time to start focusing our time to lower monthly bills that are small in size.
There are thousands of small expenses that everyone has.
Because of this, I am not going to cover all of the various ways you can reduce your household bills on small things.
I am going to highlight a few of the more common monthly bills. Hopefully this will spark a curiosity in you to tackle other small expenses as well.
Utility bills can easily get out of hand. And for some of you, this monthly bill is one of your biggest.
But even though it is large in size, I am putting it this section because lowering it can take more time than the other ideas listed above.
With that said, here are some ways to lower your utility bills.
I am lucky that I live in a state that offers electricity deregulation. This means that I can choose my electric distributor and potentially save money.
This should be your first option.
For me, the cost of electric from my utility is $0.08 per Kw. But I use a third party company and pay $0.05 per Kw.
The catch is I have to research and switch companies every 6 months to 1 year. Luckily it doesn’t take me long to do the research as there are websites comparing my options.
To switch, all I have to do is fill out a short online form.
If you don’t live in a state that offers this, there are still many options for lowering your utility bill.
All you have to do is pay attention more.
As crazy as it seems, turning off the lights when you aren’t in the room works. Here are a few more electricity saving tips:
- Spend the money upfront on LED bulbs. They do cost more to buy, but they cost less to operate and last a lot longer. And you don’t have to replace all your lights at once. Start with the most used ones. This means the kitchen and main bedrooms and bathrooms. From there, wait until you can find some sales and then buy some more. When we did this in just our main living areas, we saw an immediate drop in our monthly bill by $20. I was blown away. Here are the bulbs we like the most.
- Buy a programmable thermostat. We use ours and have it set up so that the house isn’t heated or cooled when we aren’t around. We’ve seen a nice drop in our electric bill as a result. In fact, by looking over our monthly electric bill we realized heating and cooling the house was the biggest factor in a high bill. By using a programmable thermostat, we are able to better control this cost. Here is the model we use. In addition, close doors and vents in rooms you rarely use. There is no point in heating or cooling these spaces.
- Buy ceiling fans. This is another great way to lower utility bills. You will have to pay upfront to get and install them, but they will save you money. We used to keep our house 5 degrees cooler in the summer before ceiling fans. Now with them, we are able to keep the house warmer because of the cool air the fans blow on us.
- Unplug electronics. Many electronics still draw power when turned off. This includes your phone and tablet chargers as well as flat screen TVs. Pull the plug on these when not in use and watch your electric bill drop. If you aren’t sure which electronics are secretly sucking money from your wallet, spend $20 on a Kill A Watt. It will pay for itself almost immediately. Alternatively, you can get smart power strips that turn off electronics from using electricity while in standby mode.
- Check doors and windows. You can do this on a Saturday afternoon. Go around the trim on all of your windows and see if you feel a draft. If you do, get a caulk gun and seals the gaps. For doors, check to see if you can see any light around the edges of the door. If you can, you should replace the insulation. In most doors this simply means pulling out the old strip of insulation and snapping a new piece in.
This is just the tip of the iceberg when it comes to lowering your utility bills. But you don’t have to go crazy.
By using the tips I outlined above, we slashed our electric bill by close to $100 a month on average.
There are some simple things you can do to increase your fuel mileage and as a result, cut your budget when it comes to fueling up your car.
First, learn to drive slower. This isn’t to say drive like you are out for a Sunday drive. Just slow down a little bit. The faster you go, the more fuel you use.
Don’t believe me?
Let’s say you drive 50 miles to commute to and from work every day. Your car averages 30 mpg and gas costs $3.50 a gallon.
If you reduce your speed from 80mph to 70mph, you save $400 a year on gas and only add 5 minutes to your commute.
During this extra 5 minutes you can listen to your favorite song or talk show on the radio!
Additionally, learn how to accelerate and stop.
When you punch the gas at a green light or slam on the brakes at a red light, you are wasting fuel. Accelerate slowly and anticipate red lights and stop signs by coasting to them.
From there, keep your tires properly inflated and keep your trunk empty. Underinflated tires and added weight in your trunk will kill your gas mileage.
Next, pay attention to gas prices. Find the station around you that has the lowest prices.
There are apps you can use to accomplish this, or just pay attention when you drive around town.
Just make sure you are comparing prices on the same day. Prices fluctuate by day, so pay attention!
Finally, don’t think the solution to saving money is to buy a hybrid car.
In many cases, hybrids aren’t worth the price. You are better off learning how to drive smarter in order to cut your monthly fuel bill.
By simply using these simple tips, you will cut your budget on gas and save money.
Most people don’t get their money’s worth out of a gym. You don’t need to join a gym to be healthy and get in shape.
You can do something as simple as buy an activity monitor. I have been wearing a Garmin VivoSmart activity tracker and love it.
I sit at my desk all day and have read the horror stories about how bad sitting all day is for you.
It helps me be motivated to get up and move so I reach my daily step goal. I also like how it vibrates after sitting for a while.
This gentle nudge is what I need to get me to stand up and move around for a couple minutes. You can get your Garmin Vivosmart here.
If you are interested more vigorous exercise routines, you can still skip the gym. Body weight exercises all you need.
Just doing a 30 minute routine will change your life. Here is the best one I’ve found.
The bottom line is you can cut your budget by canceling your gym membership and save the money instead.
And if you are having a tough time canceling your membership, get the help of Trim.
This app will do the work for you! Click here to try it out!
How much are you paying for your cell phone service? My guess is close to $100 a month or more.
Do you want to know how to slash this monthly bill by 75%?
Thanks to resellers, you can get the same great service for much less.
For example, I use Cricket Wireless. For $35 a month, I get unlimited calls and texts and have 5 GB of data.
My coverage is the same as if I were with AT&T since Cricket uses AT&T towers, plus they are owned by AT&T.
This same plan with AT&T would run me $90 a month. I’ve been using Cricket for 2 years now and have saved over $1,500!
I’ve had zero issues and switching is a breeze. If you switch over using this link, you will get a $25 statement credit.
Simple Tricks You Need To Try To Cut Expenses
There are a few other ways I want to highlight that will help you cut your monthly expenses.
When you shop online, you can typically use a coupon code to save money.
But you can also use a shopping portal like Ebates. When you shop online through Ebates, you get cash back.
Most times it is between 1% and 25% but sometimes they offer double cash back.
Over the course of the past few months, my wife has earned over $100 cash back from Ebates on purchases she was going to make anyway.
It was free money that we ended up putting into our savings account. Try Ebates out for free and you will get a $10 gift card!
And here is a bonus trick. Sign up for a free Swagbucks account too.
With Swagbucks you will do the same thing as with Ebates by saving money on your online purchases.
Before I buy anything online, I compare the two sites to see which one offers more cash back and shop through that site.
Swagbucks is free to join and they will give you $5 for signing up! Click here to get started!
How many subscriptions or memberships are you paying for but never use? You can use Trim to help cut these expenses out.
They will look over your checking account, identify recurring charges that you may be able to cancel, and help you with canceling them. Click here to learn more.
This is another spending trick that will help you save a lot of money. Before you buy something, wait a couple of days to see if you really need it.
Many times when we want to buy something, it is purely emotional. Later, when we see the item, we have regret for having bought it.
This is when the thinking side of our brain catches up to the emotional side. If you can learn to hold off on buying things, you will save yourself a ton of money.
More Expenses To Cut From Your Budget
As I mentioned before, everyone’s situation is different, so you will have many other expenses than what I list here.
Because of this, it is critical that you run through all of your expenses so you will save the most money.
To do this, you need to track where your money goes.
You can do this manually by writing down every time you spend money.
The post referenced above will show you the best ones to start with.
Another option is to use Tiller. This is a budgeting app that will automatically pull all your transactions into one place.
All you have to do is edit the category and you are set.
In less than 5 minutes you will see where all of your money is going and start taking action to save money.
You can click here to get started with Tiller.
Finally, here is a chart of 67 things you can do to save money.
Some have been mentioned in this post already, but the goal is to get you thinking about how you spend your money and where you can easily cut back.
Recapping Best Ways To Cut Monthly Bills
This was a lot of information and you might be feeling a little overwhelmed right now.
To help you start taking action right now, I’ve summarized everything here for you.
#1. Start using Trim.
This will help you lower or eliminate subscriptions and memberships you are paying for but never use. Plus it will help you to slash your cable bill. All this while you relax.
#2.Refinance or consolidate credit card and student loan debt.
If you have credit card debt or student loan debt, see how much money you will save by refinancing with Credible.
Not only will you save money each month, but you will save money on interest charges over the life of the loan too, thanks to a lower interest rate.
Click here to see how much you will save.
#3. Take 15 minutes and get free auto insurance quotes.
Again, another simple tip that will easily save you $100 or more for 15 minutes of work.
My favorite is Liberty Mutual because of the benefits they offer including accident forgiveness and new vehicle replacement. Plus they partner with many organizations to offer greater discounts.
I get discounts from them because of the college I attended and a friend gets a discount because of his employer.
#4. Review your property taxes and appeal if you are overpaying.
This one will take a little more work, but you can easily outsource it to a local real estate attorney. They will figure out if you are overpaying, how much you will save, and will represent you in court.
As I mentioned earlier, we did this and saved over $1,000.
#5. Start contributing or increase your contributions to your 401k plan.
When you do this, you lower the amount of income taxes you pay since your 401k contribution is taken out pre-tax.
If you aren’t contributing anything, start saving 5%. If you are contributing, increase the amount you are saving by 2%.
By just doing these 5 things, you will potentially save $500 a month or $6,000 a year.
And these are just 5 things that will take you a total of 3o minutes to complete.
Add in some of these other tips and you will save even more.
All you have to do is get started and you will drastically cut expenses and save money each month.
What To Do With Your Savings?
Now that you’ve taken action and reduced your monthly expenses, you are going to have to figure out what to do with the money you’ve saved.
Here is a clue: spending it should not be an option!
Below I list 4 ways for you to use your new found savings from cutting expenses to the bone.
#1. Pay Off Debt
If you have credit card, student loan, auto loan, or other types of personal debt, you should use the money you save by cutting monthly expenses to rid yourself of these debts.
Doing so will free up more money for you to save every month.
Look at it this way.
Let’s say you have a car loan that is costing you $400 a month. You cut your budget using some of the tips in this post and free up an additional $300 a month.
By taking this extra $300 and putting towards your car loan, you will pay this loan off faster.
Now instead of having $300 extra every month, you have $700 extra.
Another debt repayment option is your mortgage. Maybe you weren’t able to refinance because it didn’t make sense.
But if you reduced your balance, then it would make sense. You could take your $300 and put it towards your mortgage so you can refinance.
Doing so could allow you to save an additional $650 every month. Now you have an extra $950 a month.
If you do this and pay off your car loan early and you suddenly have an extra $1,350 every month.
The bottom line is paying off your debt is one of the smartest things you can do.
Not only will it free up more money in your budget, but you won’t have the added weight debt adds to your life.
#2. Build An Emergency Fund
The next option for your saved money is to make sure you have a cash pile for emergencies and other expenses you will encounter in life.
I like to have around 9 months of expenses in my emergency fund.
This gives me the peace of mind knowing I have more than enough money should the water heater break or someone loses their job.
The best place to park your cash is with CIT Bank.
They offer a free savings account that doesn’t charge any fees and pays a higher interest rate than most brick and mortar banks.
Here is how important this is.
If you take your $300 savings each month and put it into your local bank instead of CIT Bank, in 10 years you will have close to $5,000 less!
Make the smart choice with your money and click here to open your free CIT Bank savings account today.
The key to building long term wealth is through the stock market.
Sadly many people avoid the stock market because of a bad experience in the past or they think the market is rigged for them to fail.
The truth is you can make money in the stock market over the long term. You just need a plan.
By having a plan, you have a foundation for long term success in the stock market.
And don’t think for a minute you can’t do this. Investing is easier than you realize.
Just learn the basics and you are set. You can run through all of the basics by reading through the many investing posts I’ve written.
And if at the end of the day you still feel overwhelmed, use a robo-advisor.
They will do all the work for you, which will help you earn a nice return over the long term.
I cannot stress how important it is to invest in the stock market. You can’t grow your wealth anywhere else like you can in the stock market.
And by having a plan, learning the basics, and having goals, you can grow your wealth by investing.
#4. Savings Goals
Once you have reduced household bills by using the tips throughout this post and paid off your debt, it is time to start thinking about long term savings goals.
What you do you want out of life?
Do you want to take amazing vacations every year? Do you want to be able to retire early? Buy a house one day?
Whatever your savings goals are, now you can start to take action to achieving them.
Your first step is to figure out how much money you will need and then decide when you need it.
Once you know this, you can begin to save every month to reach your goal.
Again, I like to use CIT Bank for this. They allow me to have separate savings accounts for each of my goals, making it simple to keep track of everything.
Feeling like you are short on money each month is a lot of stress. I can remember when I was struggling to get by when I bought my first house.
It was hard and scary.
I took a lot of the steps I’ve outlined here and slowly over time, money was less stressful as I had a cushion between my income and my expenses.
This was due primarily to me cutting monthly expenses.
I negotiated my cable bill. I switched out lights for LEDs. I turned off power strips when I wasn’t home. I used a programmable thermostat.
I refinanced my student loans and was smarter when I shopped for groceries.
I started slow and kept at it. In time, my monthly bills got smaller and I had extra money left over at the end of the month.
You can too. You just have to take the first step.
Start by cutting monthly expenses that are big and work your way down to the smaller ones.
I am certain that if you take a few hours over the course of the month to save a little bit of money, that money will add up and you’ll be surprised at how much you will save.
Remember, don’t look at cutting monthly expenses as going without or in a negative light, see this as a step towards allowing you the freedom to live a better life.