Adults in America spend about $18,000 every year on non-essentials. That’s money down the drain. Meanwhile, many people overspend eight times each month.
With overspending, that’s $215.16 on non-essentials you could have saved in the bank.
Don’t let your money go to waste. Instead, use this guide on how to drastically cut expenses. With these tips, you can start saving a nest egg.
Whether you want to save money for emergencies or a vacation, you’ll never know when you need it. Learn how to cut expenses and save your cash with these 10 tips.
Set Your Goals
Many people put money in the bank and claim they’re saving. Unfortunately, your expenses could drain that money all too quickly. In order to learn how to drastically cut expenses, you need to set goals, first.
What are your priorities? Why are you focused on cutting expenses right now?
Understanding the underlying purpose will help you remain focused. Instead of slipping up, you can remind yourself of that long-term goal.
For example, maybe you need to buy a new house or want to save for a wedding ring. Saving up for these expenses can take time. By learning how to cut expenses now, you’ll have that money for later.
Some people make vision boards to remind themselves of their long-term goals. Try cutting out a picture of what you’re saving for. Then, stash it in your wallet.
Every time you reach for your credit card or cash, you’ll have a reminder of your goal.
Remind yourself: unnecessary spending will only make accomplishing your goals take all the longer.
Determine Your Income
Before you can set a budget for yourself, it helps to calculate your income. That way, you’ll have a better understanding of how much to save versus spend each month. It can also help you determine new ways to lower expenses.
What does your monthly paycheck look like? Don’t forget to include any side hustles that are helping you make money.
Then, calculate the total.
Now that we have your monthly income, use the rest of these tips on how to drastically cut expenses to make the most of your money.
Track All Expenses
Grab your bills from last month. Review every document, print receipt, and digital receipt. How much are you spending every month?
As you review your expenses, create a spreadsheet. Organize your expenses into different categories. These categories can include:
- Debts and loans
- Food (eating out and groceries)
- Transportation (car payments, gas, insurance, etc.)
- Household expenses (rent, utilities, repairs, etc.)
- Entertainment (going to the movies, TV subscriptions, clubbing, etc.)
Use your spreadsheet to determine the total spend for each category. How much are you spending on unnecessary items like entertainment? Where can you find ways to cut expenses?
Need help recognizing your frivolous spending? Here’s a breakdown of how some Americans spend their money.
Set a Budget
Now that we know exactly where your money is going, it’s time to set a budget!
It helps to set a specific budget for each of the categories mentioned above. You’ll have an easier time by allocating money to specific areas. It can also help you prioritize.
For example, your living expenses like rent will likely come first. Then essential food items. It’s important to keep your debts from adding up, too.
You can set smaller budgets for the other categories.
This is the hard part. In order to find ways to cut expenses, you’ll need to avoid spending as much as possible.
Review your expenses and find easy ways to lower expenses. For example, maybe you eat out too many times a week. Start planning your grocery list based on a menu for the week.
Make sure your grocery list suits your food budget.
You can find weekly grocery lists online with a week’s worth of recipes using those same ingredients.
What about your subscription boxes? Are you spending money on Birchbox, Barkbox, and Hello Fresh? Consider pausing those subscriptions for a while.
What about your entertainment subscriptions? These include Hulu, Netflix, Disney+, Pandora, and Spotify. This cancel hulu subscription guide can show you the way.
Get (and Stay) Motivated
Now that you’re cutting back, stick with it! You might feel your motivation wavering at times. That’s okay.
Each month, review your current plan. How much are you saving? How long will it take you to reach your goal?
You might find you need to make adjustments to your category budgets each month. Make sure the adjustments still equal your overall budget.
Make a Nest Egg
Learning how to cut expenses can help you create a rainy day fund. Make sure to add a little of your savings to this fund each month.
You never know when a disaster can strike. After all, many people are out of work because of COVID-19. This fund can help you through difficult times without forcing you to drain your savings.
Cut Down Your Debts
Pay off your debts as much and as quickly as possible. Otherwise, they’ll slow down your progress.
See if you can lower your interest or consolidate loans to cut back.
Switch to Cash
If you’re struggling to stay motivated, stop using your credit card for smaller expenses. Instead, give yourself a weekly allowance in cash.
Throughout the week, you’ll watch that money run out. Once the cash is gone, stop spending until next week’s allowance.
Keep It Going
The key to learning how to lower monthly expenses is to stay on it. You won’t reduce your expenses overnight. Use these tips every single day.
If you need extra help, download an app that can track your spending for you. You might realize you missed certain expenses while you’re at it.
Keep it going until you accomplish your goal.
How to Drastically Cut Expenses: 10 Tips for Frugal Living
Want to learn how to drastically cut expenses? Now that you have these tips in hand, get working! Review your expenses, set your budget, and cut back on unnecessary spending.
Little by little will do wonders for your savings!
Searching for more helpful tips? Explore our latest financial guides today.