When Looking For Expenses To Cut, Start With The Big Things

Today’s post is part of the “Family Financial Guidelines” series. Whether you’re going through a financial turnaround or are just wanting to stay on top of things, this series will give you the tools to get and keep your family’s finances on track.

Expense Control
No matter your financial situation (though especially when first starting your financial turnaround), an important part of successful personal finance is getting expenses under control. There are a lot of ways to do this, and you’ll generally hear two schools of thought:
1. Cut back on a lot of little things
2. Cut back on a couple big things

Looking at the Big Things
For today’s post, we’re going to concentrate on the big things. Cutting back on these will give you the most bang for the buck and can really go a long way in improving your financial situation. This isn’t to say that cutting back on the little things doesn’t make a difference. It does, and we’ll discuss that in the future.

First things first, what do I mean when I say “big” things? Well, for starters you should have a list of all your monthly expenses as well as regular expenses that aren’t necessarily paid every month (such as car insurance or life insurance premiums). Your list should be pretty long and include everything you spend money on. There is no set threshold of what things are “big” versus “little” but a general rule would be to treat at least the five largest items as “big”.

Housing
For most people, the item at the top of the list is going to be housing. This is also the item that is probably the most difficult to reduce, but it can be done. If you own your home and have a mortgage, what is your interest rate? If you’re paying 6% or higher, you should definitely look into refinancing the mortgage. We refinanced our mortgage last fall, going from a 6.5% rate down to 4.75%, and reduced our monthly mortgage payment by around $150.

If you rent a house or apartment, look into the possibility of moving to another property with lower rent. Of course you have to consider the safety of the neighborhood and quality of the schools (if you have children). Additionally, you can look into the possibility of getting a roommate (or two) to split the monthly payment.

Vehicles
Another big item for many people is their monthly car payment. If you bought a car more than a year ago, check with your local bank or credit union about refinancing the loan. Interest rates have come down significantly, and refinancing can help reduce your monthly payment. One other possibility is to sell your vehicle and buy a lower-priced used vehicle instead.

Cell Phone
Did you know that the average household with a family cell phone plan including data and texting pays around $150 a month? There are multiple ways to cut this down. First, monitor your cell phone bill for a few months and see if you’re actually using all the minutes included in your plan. If you signed up for a 1,000 minute plan, but only use an average of 600 minutes you are over paying for service. Contacting your wireless carrier and switching to a plan with fewer minutes can easily save you $20 or more a month.

Another thing to consider is your monthly data plan. The average data plan now costs more than $30 a month. While you’re monitoring your monthly bill for how many minutes you use, you should also check how much data you use. If you aren’t using much of your plan’s data, you should really consider dropping the service. However, keep in mind that dropping the data plan will limit your phone choices, as most of today’s smartphones are only available if you sign up for a data plan.

Finally, consider using a pre-paid or no-contract cell phone plan. This way you can make sure you’re only paying for what you actually use, and there will be no large early termination fee if you decide to cancel or switch carriers.

Groceries
One final “big” item for most people is the monthly grocery bill. We all have to eat, we have to do laundry, and we have to shower, brush our teeth, etc. But there are many ways of reducing the cost of all these things. For food purchases, use your weekly grocery store flyers to plan a week’s worth of meals around the items that are on sale. This will help you stretch your grocery dollars and can also help encourage you to try new foods. Buying store brand products and using coupons for name-brand products can also put a big dent in your grocery bill.

There are also many other tried and true methods to help lower the cost at the grocery store. Always make a list beforehand of what you need, and stick to the list once you’re at the store. This helps to avoid purchasing unnecessary items. And it’s true when they say not to go shopping on an empty stomach. Everything in the store looks so good when you’re hungry, and you end up buying more.

The Bottom Line
By first focusing on cutting your largest expenses, you can really get a good start to getting your personal finances under control.