At this time of year, we have all trimmed our trees for Christmas. Its struck a cord with me. Trimming. I thought it prudent as we enter a New Year to review trimming our personal expenses to lower our cost of living. The last two years have forced changes to our cash flows, whether it be a loss of work, or embracing the increased costs of living imposed by inflation. Prices for all goods and services have seen some dramatic increases.
Cost-of-living expenses are the must-haves: the recurring monthly costs that command a big percentage of your overall budget, such as housing, food, transportation and utilities. And sometimes those expenses can be so overwhelming that you consider moving somewhere cheaper. But before you do, take a good, hard look at the amount of money you spend on your rent or mortgage, car payment, insurance, food and utilities. Surely, there’s some room for improvement.
Rent out extra space
One of the best ways to save the most amount of money on fixed living expenses is house-hacking: when you rent out a portion of your living space, like an extra room, to offset the cost of living expenses like rent and mortgage. Some of the benefits you reap beyond reducing financial stress are actually psychological. After house hacking for years, some people have noticed that they spent less time away from their house, suffered less fear of missing out, and were able to tackle household emergencies with a built-in tenant.
Get serious about cash flow
If you aren’t focusing your attention on your household budget, you should start. One of the best ways you can increase savings, is to analyze and improve your current cash flow. By outlining every monthly expense, you are able to find which expenses can be reduced. Whether it is cutting subscriptions, eating out less, or finding ways to carpool in order to save on gas, there are usually a few ways everyone can save some more money monthly.
Contact your insurance broker
It figures I would plant this here. Insurance premiums can eat up your budget. Don’t be afraid to negotiate a better price. Call your insurance broker (e.g. rental, homeowners, automobile) and ask them how much you can save by increasing your deductible. Also, inquire about any discounts available to you (e.g. good student driving or driving course discounts). Also, ask if there are other providers they represent that may have less expensive options. When comparing, make sure you are comparing the same coverage, it is adequate, and you have the deductible amounts set aside in a savings account.
Evaluate your grocery spending
This is usually an area where most people can cut down. If you like to shop at big box stores or membership clubs, you might be overbuying, even if the cost per item is lower. See about splitting purchases with friends or family. Use coupons and cash-back offers every single time you shop; think of this as free money. In some online apps, you can find offers. These offers are good at any store that provides an itemized receipt. You choose your offers, then choose your store, and watch your cash back grow in your account. It’s an easy way to save on things you’re buying already.
Buy generic when possible
If you look around your home and see nothing but name brands, consider buying generic to save big. The name brands of products we buy are often produced in the same facilities as generic products, just with different packaging. The difference in price can be significant merely for having a name that everyone recognizes. But by purchasing generic brands more frequently, that extra cost is eliminated and you can use that savings for other purposes.
Pay off debts
Debt, especially if it’s high-interest debt, can cost you hundreds of dollars or more per month. Pay off your debts as quickly as possible and don’t take out more. Debt takes away your financial security and ability to build wealth. Without any payments on debt, you will have much more of your take-home pay at your disposal. Paying your debt off requires short-term sacrifices, but long-term the resulting financial freedom is well worth the tradeoff.
Weatherproof your home
Energy costs are some of the most expensive and hardest to predict, so they can have the best return-on-investment in the long run. If you’re trying to cut energy costs, try using thermal/light blocking curtains, block drafts, and learn to live with temperatures slightly warmer in the summer and cooler in the winter by wearing appropriate clothing. You can also get an energy audit, and most states have rebates for things like these to encourage green and efficient energy consumption.
Consider a side hustle
Lowering your cost of living isn’t just about cutting expenses, it can also mean making extra money to offset your cost of living. Are you handy around the house? Do you like to paint? Do you have a green thumb? Is interior decorating your thing? See if you can turn a hobby or passion into an income generator. Many people will pay for skills like these, especially if they’re busy and don’t have the time to tackle home projects themselves.
Simple and meaningful visual reminders can help maintain motivation once the initial excitement of tackling a financial goal wears off. You can use a post-it note on the bathroom mirror, a screensaver on your phone, a picture on your dashboard, and countless other ways to remind yourself what is important.
Visual signs are strong incentives and reminders. You can also contact your financial advisor and have this discussion. There are always ways to trim or lower your expenses. It’s an important part of our discussions with clients every year when we review their cash flow. Keep money in your pocket. Increase your savings and investments. Be prudent and pro-active in Keeping Life Current.