May 4, 2020
Ways to Reduce Spending to Pay Your Bills
Due to the current market uncertainty and social distancing orders, now is a great time to analyze your expenses, create a budget, and reduce your spending.
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With the American economy in turmoil and unemployment on the rise, many are looking at their spending as a way to reduce the impact on their financial condition. Whether you’re a budgeting expert or have never taken the time to create a budget, now is an important time to budget if your income may have been reduced or altogether eliminated. Reducing your spending can be easier than you think now that you’re practicing social distancing.
Analyze Your Expenses
Now is a good time to start tracking your budget online. Start by reviewing the transactions in your accounts and develop a list of every recurring expense you incur. After you have a full list, you should classify each expense as essential and non-essential.
Finally, calculate total expenses against your expected income. This will help you evaluate if you have a monthly surplus or shortfall so that you can determine how aggressively you should seek to reduce line items from your budget. There are budgeting and expense tracking apps that can automate this for you. If you’re tracking for retirement, Silvur will calculate expenses against your income to see the likelihood of achieving your goals and project your future finances.
This exercise will also help you to determine how long the money you have saved might last.
Reducing Non-Essential Spending
Items that fall into the non-essential category should likely be temporarily reduced, paused, or eliminated altogether. Keep in mind that non-essential items include subscriptions or services. In our society, it is not uncommon that you will have many of these expenses each month. Everything from landline phones to cable television could be reduced or eliminated. For example, your cell phone can replace your landline phone or get low-cost access to streaming providers, like Hulu, that are often less expensive than your cable bill.
Other items that can be reduced include memberships to things like gyms that you can now stream these classes online. Finally, watch your online spending. While Amazon is convenient, you should put a pause on non-essential shopping to reduce your spending.
Creative Ways to Reduce Spending and Save
Create No Spending Days
There are also creative ways to help you reduce non-essential spending. For example, you can challenge yourself to have a couple of “no spending” days a month. This challenge means you spend $0 on those days, allowing you to reduce spending significantly. However this doesn’t mean you roll over your spending to the following days. See how long you can go without spending. Get creative with ways to meet your needs rather than spending. You’ll see how making your own iced latte or preparing your own lunch will reduce your spending.
Transition Into Digital Platforms
The world is constantly innovating and streamlining traditional practices into easier, faster, and cheaper solutions. These efficient companies are taking advantage of online and app platforms that reduce the need to interact with a human, that may charge a hefty service fee. Consider transitioning to online platforms from traditional service to reduce costs. For example, TaxSlayer or TurboTax, an online tax filing platform, is cheaper than hiring a tax professional. This can apply to other services from personal finances to estate planning. If you need to create or update a will or trust, you can use Trust & Will compared to a lawyer.
Reducing fixed or essential spending
When cutting back, non-essential tends to be low hanging fruit. However, you can also look to areas of essential spending to reduce costs. Food, transportation, utilities, and insurance are all essential but there are opportunities to reduce.
Food cost can especially be an area you can control. One way to trim this expense is to plan meals carefully to avoid food waste. You may also look to discount grocery stores as an alternative to fill your pantry. Meal prepping can also be a fun way to get creative in the kitchen. As you’re planning out your meals, make sure you’re only spending on essential ingredients. Don’t be afraid to look up recipes for new dishes you can try to cook like a hearty soup that can last you a couple of days. If you’re able to, try growing your own vegetables or herbs.
After reducing your grocery bill, evaluate your budget and see if you may need to cut your spending even further. If that is the case, it would be a good idea to talk with creditors and vendors of essential services. Many lenders are offering some form of temporary relief to borrowers.
You can try contacting your mortgage lender, student loan, or credit card companies to see if they can offer any assistance by reducing your monthly payments during this time. Also, contact your property and casualty insurance company to see if there are ways you can negotiate your policy that will allow for a reduction in your premiums.
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Implementing a spending strategy in good economic conditions is important, but having one during times of economic uncertainty is critical. By taking the time to analyze and then reduce your expenses will be more likely to make it through these challenging times.