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Get Ahead in the New Year Part 2: Cutting Expenses

In this article, Part 2 of our “Get Ahead in the New Year” series, we address a no-brainer way to get off to a good start. Cutting expenses is a logical step, but it can get confusing as to what to cut and just how much. We look at different areas of your budget and specific things to do in each.


Before getting started, have you set up a budget? Doing so will help you identify the costs you currently incur and the income you have coming in. This is important so that you have a base from which to begin fine-tuning your outgo.



In this article, Part 2 of our “Get Ahead in the New Year” series, we address a no-brainer way to get off to a good start. Cutting expenses is a logical step, but it can get confusing as to what to cut and just how much. We look at different areas of your budget and specific things to do in each.


Before getting started, have you set up a budget? Doing so will help you identify the costs you currently incur and the income you have coming in. This is important so that you have a base from which to begin fine-tuning your outgo.


Cutting Expenses


What does cutting expenses really mean? Is it belt-tightening, self-deprivation time? Maybe, but maybe not. Reducing expenses doesn’t just mean cutting back on things. It also means being smart about where you are spending money.


When we talk about cutting expenses, we are doing things like:


● Identifying current expenses and dividing them into essential and nonessential categories. An example of this is your mortgage or rent, which would be classified as an essential or needed expense. A nonessential expense is something like a pricey restaurant dinner every Friday night. It is the difference between a must-have and a nice-to-have. You must have a place to live, but that can’t be said for a fancy meal out every week.

● Analyzing essential expenses, such as housing, transportation, and food, and seeing what can be reduced and by how much.

● Examining nonessential expenses, such as dining out, entertainment, and vacations, and identifying what can be reduced or eliminated for a time.

● Tracking down hidden or unnecessary fees you may be paying for conveniences, whether you use them or not.

● Being smart about all outgoes from your monthly budget. Little bits add up.


In the next few sections, we look at specific areas where you can potentially cut your expenses this year.


How to Cut Back on Expenses


It can be easier to cut back on nonessential items because, well, they are nonessential. But here we are going to focus on the essentials like housing, transportation, and food and see how small changes can add up to saving real money.


Housing


Whether you own or rent, there are some fairly painless ways to save money in this area.


Reduce heating and cooling costs. Even if you live in a temperate climate like Southern California, you have to pay for utilities to cool and heat your place of residence. Set the temperature at 68 ℉ during the winter and 78 ℉ during the summer to save money while remaining comfortable.

Lower water costs. This can be done in several ways. Fixing leaking faucets, sinks, and toilets can save nearly 200 gallons a week. Replace older showerhead and bathroom fixtures with WaterSense ones that use 20% less water. This saves a few hundred dollars a year.

Consider downsizing. Granted, moving is never pain-free, but if it makes sense, you might think of downsizing to a less expensive home or apartment. Another option for renters is to renegotiate your rent.


Transportation


Over 92% of Americans own at least one car. What are some ideas for trimming costs?


Don’t trade it in. Keep your current car for as long as you can and keep it well-maintained. It’s tempting to want the latest model or to trade in your car for something newer, but cars only depreciate in value (unless they are rare vintage models). By having your vehicle regularly serviced, you will get many more years of use from it.

Shop around for cheaper insurance. Competition is high in the car insurance industry, and there are many online sites like The Zebra that help you compare rates. You can save money on lower premiums.

Consider giving up a car. With so many people now working from home or working flexible schedules, do you really need more than one car for the family? True story: some friends sold the wife’s aging minivan, and they shared the husband’s truck for a time. Both spouses were working from home and coordinated times when each would need the vehicle. They saved money on gas, insurance, and maintenance for two years until they decided to buy a small car.


Food


We all need to eat. But with spiraling food prices (Have you seen the price of eggs lately?), it’s important to be wise with how we spend money on food.


Buy generic. It’s an old hack, but it works. Purchasing the store brand for packaged items, hitting up the bulk foods section, or looking for items that are on sale may seem like work, but the savings add up quickly.

Buy in season. Fruits and vegetables that are in season are always cheaper than those that aren’t. Watermelons are cheaper in summer than they are in winter for those that live in the northern hemisphere.

Buy for specific meals. Meal planning doesn’t have to be elaborate. Sketch out a general outline for the week such as chicken and veg on Monday, ground beef tacos on Tuesday, pasta on Wednesday, leftovers on Thursday, and make-your-own pizza night on Friday. Making a list and shopping for those meals you planned keeps you on track at the store and reduces food waste. It also prevents you from hitting the fast-food drive-through on the way home from work.


Final Thoughts


Cutting expenses doesn’t necessarily mean drastic measures or draconian crackdowns on your budget. A few simple steps can help you get ahead this year by reducing your outgo. For other ideas on how to cut expenses, take a look at 10 pain-free ways to save money.

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