Cutting Expenses: The First Step
Earning more money is easier said than done. It isn't always feasible to land a higher-paying job or turn a hobby into quick cash. The first step to increasing your bottom line is cutting expenses by reconsidering the way your current income is spent. The sooner, the better!
List Out Expenses
First, make a list of your expenses. This list should include, at a minimum, housing, food, gas, clothing, insurance, phones, internet, TV, and travel / entertainment. (This process is much easier if you're using Talent Financial's budgeting tool.) List out what you typically spend on each category per month. For each category, ask yourself this crucial question:
"Do I have to spend $______ on ________?"
We filled it in this way: "Do we have to spend $157.82/month on our cell phone plan? (And yes, we share 2 gigs and pay $157.82 with AT&T- totally insane). The answer? NO. So, we're in the process of switching to Mint Mobile which is $30/month total. This one switch will save over $100/month! We may have sub-par coverage and customer service may be mediocre at best, but to us, it's worth the savings. To others, it may not be - and this is where priorities come into play.
Determine your Priorities
For people who want great cell coverage or place a high value on the customer experience, switching to Mint Mobile may not be the top priority. Determining your priorities is important when deciding where to cut expenses. Sometimes, you don't have to spend a lot on something but you want to. In that case, choose a different category to cut from. But, if you truly want to cut expenses, you must be willing to make sacrifices and it's up to you to determine where those sacrifices are made.
“If you truly want to cut expenses, you must be willing to make sacrifices and it's up to you to determine where those sacrifices are made.”
To determine your priorities, ask yourself:
"What can I not live without?"
"What can I live with less of?"
Additionally: Can I live with 50 TV channels instead of 200? What if my internet was a slightly slower speed? Can my thermostat be set two degrees higher? What if I make coffee at home instead of grabbing Starbucks on my way to work? Is my car insurance company offering any specials / discounts right now?
Cutting expenses requires work. You may have to implement some lifestyle adjustments. But, the more you cut out and the more work you put in, the more you save. Living simply and scaling back is counter to our culture but provides freedom and joy in ways we will never experience unless we're willing to give it a try!
What's your next step?