My Simple 4 Step Financial Plan:
- Stop increasing debt
- Get Out of Debt
- Build an emergency fund
- Bonus step: retire
Now we finally get to the post you’ve all been waiting for. What I did to save money This is largely my personal story and my not apply to you. The ultimate simplistic formula for financial success is money coming in greater than money going out. It is in the actual execution that we encounter problems. To make sure you have more money coming in than going out there are two things you can do. You can reduce your expenses and/or increase your income.
How I reduced Expenses:
There were three major places I worked on to cut my expenses. I sold things that still had a monthly payment, I reduced my monthly bills, and I created and stuck to a monthly budget.
Sell Things that Have Payments
This one may not be possible or even apply to some people. Sell item(s) that have payments. These items include cars, other vehicles, boats, property, and large ticket items like appliances. For some items the decision might be emotionally difficult but from a practical angle a no brainer. I am talking about that boat you splurged on or your extra car/motorcycle just for fun.
It may seem simple to just get rid of anything that has a payment but the actual decision can be very hard to make. What if you are underwater on the loan. Should you wait until you can get enough in payment for the item or sell it immediately taking a big hit to cover the cost. Maybe you don’t even have the money to pay off the extra. You have to have a car for work but you won’t have enough money to buy a reliable vehicle if you sell the one you are still making payments on. I can’t make these decisions for you. You have to make them, but be willing to make very hard choices that might cause difficulty in your life. You gotta do what you gotta do to get out of this mess. Luckily, I was able to sell my car and had access to another vehicle free of charge.
One important way you can cut expenses is to lower your monthly bills. I was shocked how much money I could save a month.
One of the biggest places I found savings was in the cable/tv bill. I cancelled all my extra channels just going with the most basic package to keep my internet connection. I saved almost a hundred dollars a month this way. I know people that are paying over 200 hundred a month just on TV. The world is full of cheap and easy ways to be entertained.
Another place you can find savings is in paying for phones. If for some bizarre reason you still have a land line get rid of that thing. Also look for a simpler plan. Perhaps you lower you data package or join someones family plan.
You can cut some more expenses by reducing your electrical bill. If you are still using old school bulbs replace them with modern energy savings one. Turn your heat down. Turn your ac down. Make sure you turn off lights when they are not in use.
Cancel any service or subscription that you can do without. You don’t need magazines most information can be found online for free. I canceled my spotify subscription. I could handle having commercials in my streaming music. I did keep my netflix because I have to have some entertainment. Do you really need that World of Warcraft game?
This is where the real battle to save money mostly takes place. This is when the daily/monthly struggle of keeping a budget is fought.
Eating out had been one of my biggest out of control expenses. In the dark olden times I spent about 600 dollars a month eating out, sometimes more, rarely less. So one of the biggest targets of my cost reduction was eating out. I didn’t just come up with a dollar amount I would allow per month. I created a whole plan of what days and where (or what price range) I would allow myself to eat out. I cut out all paying for lunches except for one 10 dollar lunch a week. I scheduled 2 dinners a week at approximately $20. I also allow an extra meal out every other week. Like with most of things I allow flexibility and don’t beat myself up if I have an extra meal out.
Now with much less eating out the amount you spend on groceries will most likely go up. There are things you can do to try and keep costs down here. Wasted or rotten food can be one of the biggest cost amplifiers with groceries. Meal planning will help you only buy food you actually end up using. This will help you make a grocery list and only buy things you will actually eat. You can also save money by buying at a cheaper store or cutting back on expenses cuts of meat etc. I also have been able to get meals from getting free food at work. At least once a week we have pizza or sandwiches or something that I can grab for later.
One almost completely unneeded expenses are drinks. Whether we are talking about drinks at the bar or spending six dollars on that nutrient deficient calorie filled vente iced frapo whipped diabetes drink, you aren’t really adding anything to your life. Having said all that I do still allow myself to have a couple beers with friends. So much for my pontificating.
This one doesn’t really apply to me, but maybe you spent a lot of money on clothes, shoes, household items, etc. I don’t. In fact I haven’t bought on article of clothing in over two years and have barely noticed. Though I am starting to run out of socks.
My goal with my budget was to cut my expenses as much as I could while still living my life. I could have gone really extreme and cut another couple hundred dollars off of my monthly budget, but I wanted to make this a long term sustainable thing. I spent several months playing around with the budget, decreasing this increasing that, till I found one a could consistently stay within while still living my life.
Next up, earning more money.