10 Common-Sense Ways to Cut Expenses and Get Rid of Debt
Do you know how much you spend on groceries every month? Do you understand the way your monthly home bills add up? These are just a couple of questions to ask yourself when figuring out how to cut expenses. Better budgeting doesn't mean you live a boring, restricted life or have to feel weighed down by money. It's actually the exact opposite! When you have a deeper understanding of your savings and expenses, you're able to do more with less. You can still enjoy your life within a reasonable means of spending, while also putting more money away in your personal savings. If this sounds like the answer your bad credit score has been looking for, keep reading. Here are 10 simple ways to cut expenses and create more financial freedom in your life.
1. Take Care of All Your Late Payments
First things first, you have to get all of your late payments in order. These will come back to haunt you if you keep putting them off. The longer you wait to pay bills that are past due, the higher the late fees become. Sit down and take care of every single one of your bills. Pay off the ones that are late right away and set a schedule to pay your next cycle of bills ahead of time. This is the best way to keep yourself from falling behind.
2. Avoid Paying Interest on Debt
Keep in mind that your minimum billing payment may not be the total amount you owe. This is common for things like credit cards and other big amounts of debt. Instead of just paying the minimum, commit to paying off all of your debt every month. If you don't, you risk accruing interest which can sometimes be just as bad as a late fee. Keep in mind that long-term loans - like for cars, homes, and higher education - work a little differently. But, there are still ways to lower your interest rate.
3. See if Some Plans Can Be Lowered
Another option you have is to lower your monthly expenses altogether. You may be paying more than you need to for a lot of your services. Consider how much of your phone plan you really use, for example, or how often you take advantage of having cable. It's worth talking to your respective providers and seeing what kind of options are available to you. This goes for everything from your phone and cable bill, internet expenses, and insurance plans (for home, health, and auto). Even your water and electric bills can be lowered with smarter habits at home.
4. Refinance Your Mortgage
Speaking of home-related bills like water and electric, how's your mortgage doing? This is one of the highest average household monthly expenses most people have to budget for. But, it doesn't have to be as costly as it currently is! You can refinance your mortgage to create a better monthly payment. Keep in mind that this may extend the period of your mortgage loan or change your interest rate. It's also not a way to cut spending that you should do all the time. Still, it's an option worth looking into to better allocate your monthly funds.
5. Stop Buying Coffee Every Day
There are the big ways to cut expenses like refinancing your mortgage and avoiding late fees, then there are smaller habits that add up. Your morning coffee doesn't seem like much if you only spend $2-5 on it. But, if you're buying coffee every single day (M-F) instead of making it at home, you're not making the best use of your money. The average American spends over $1,000 on coffee every year. That's a thousand dollars you could better allocate to your mortgage, car payment, or savings account.
6. Eat at Home More Often
Coffee isn't the only expense that can sneak up on you. Eating out as a whole is a big expense for most Americans. Between grabbing breakfast on the go when you're running late and going out to dinner with friends, you're probably spending more on eating out than you think. It's not like you have to eat at home for every single meal from now on. But, it is smart to create an eating out and entertainment budget and stick to it. This will help you enjoy yourself without worrying so much about your personal finances at the end of the month.
7. Shop Store Brands
Eating at home means you're going to be frequenting the grocery store a lot more. You'll start to learn how to stretch your grocery budget even further and create delicious dishes with seemingly simple foods. More so, you'll realize just how much you can save by buying store brands! Store brands are equally as good as name-brand products, if not better. They're cheaper, too - and saving a dollar here or a few bucks there as you go through each aisle makes a difference when you're checking out at the cashier.
8. Buy Items on Sale or Secondhand
The next way to cut spending is to lower the amount of money you spend shopping for things like new clothes, home decor items, and other miscellaneous goods. Try to shop secondhand for these things before you drive to the mall. You can do so at thrift stores and pawn shops, or you can go online and check out all kinds of re-sell sites that specialize in everything from clothing to auto parts. If you do have to go to the store for something, at least try to find a discount code or go during a sale to make your efforts worth the cost.
9. Set up Automatic Savings
Two of the best ways to start using automatic savings are either with your paycheck or your debit card. If you have direct deposit, you can set up your paycheck so that a certain amount of it goes into savings right away. This will lower your temptations to use your money on miscellaneous things or "splurge" because it will already be put away. With your debit card, you can look into your bank's cash back options or use a personal finance tool to help you make the most of every transaction you swipe for. These can help you better understand where your money is going and put some more money away, too.
10. Take Advantage of Free Things
Last but not least, don't hesitate to take advantage of free things when they're available to you! This goes for everything from free food at work to free flu shots at the pharmacy down the street. But mostly, free entertainment is what you can save the most with. You don't have to go on fancy date nights every week or do expensive things to treat yourself. There are all kinds of ways to cut back on entertainment spending without lowering how much fun you get to enjoy.
How to Identify the Best Ways to Cut Expenses
As great as all the ways to cut expenses above are, they're better when you utilize them one by one. If you try to wake up tomorrow and do everything on this list, you're going to be overwhelmed. But, prioritizing the financial decisions that are most beneficial to you is a completely different story. This makes you more comfortable with taking on debt and improving your personal finances as a whole. Before you know it, many (if not all) of the things on this list will feel natural to you! For more tips and tricks to improve your financial stability as a whole, Click here