In the quest for financial freedom, many are asking how to start making progress and to stop living paycheck to paycheck.
To accomplish this, there are two approaches: Increase your income, or decrease your expenses.
Of the two of these, decreasing your expenses the easiest to accomplish. Regardless of how much money you earn, there is always a tendency to spend that amount or more.
This is why it is so important to get on a budget and decrease your expenses wherever possible.
If you want to become financially successful, you need to be able to save and invest. To have any money left over to save and invest, you have to decide what is important to you and where your money is going to go.
Today, we’ll share with you the most common expenses that can wreak havoc on your budget, but in many cases, they do not have to:
There are a few simple ways to spend less when it comes to housing.
The first is to make a tradeoff between how close you live to where you work and housing costs.
The farther you live from population centers, the lower the price of homes and apartments tends to be. In exchange for a longer commute, you could save hundreds of dollars per month in rent.
Another way to cut your housing costs, is to find a place with less square footage. Today, many builders are constructing smaller apartments and homes in order to give people quality living spaces at lower prices.
2. Credit card interest payments
Not paying your credit card balance at the end of each month is one of the easiest way to wreck your wallet.
In case you have credit card debt, we recommend making a plan to pay it down with the avalanche method.
3. Car Payments
In the United States, the average monthly car payment was $479 dollars per month in 2017. Meanwhile, the average car loan takes 68 months to repay. This means that average person is spending almost thirty thousand dollars to purchase a car.
Instead of spending almost five hundred dollars for over five years, you would be far better of saving over time and paying cash for a used one.
The next time you buy a car, instead of buying the most expensive one you can afford on a payment plan, save a few hundred dollars per month and buy a used car for cash. This will drastically reduce the amount of money you are spending on transportation.
In addition to having a lower total purchase price, you will also not have to pay tons of interest over the life of your loan. You will also save thousands of dollars per year by buying a less expensive car because of depreciation.
Since cars decline in value every year, cars that are more expensive result in a greater decline in value. Not only are you probably paying more than you should to buy a car, but you are also probably losing more money on the decline in value of your vehicle over time that you even realize.
2. Unnecessary Insurances
Insurances like buying a two-year extended warranty on a new TV are useless since manufacturer’s warranty is already included.
Some others are:
- Accidental death insurance
- Automobile collision
- Automobile medical
- Cancer/dreaded disease insurance
- Credit card insurance
- Credit card fraud insurance
- Extended warranties
- Flight insurance
- Flood insurance
- Life insurance for a child
- Mortgage life insurance
- Optional group life insurance
- Rental car damage insurance
- Scheduled property
5. Overpriced Gym memberships and exercise
Pricey fitness classes and gym memberships can eat your pockets without need.
Think about what makes these places special from others and how regularly you go. Are they really worth it? There are many alternatives to such as outdoor and at-home workouts.
6. Costly gifts
Did you know that 33% of Americans spent $1000 on gifts last year.
Buying presents for Birthdays, Christmas, Valentine’s day, Mother’s Day and Father’s Days really adds up. Creating a list, setting a budget ahead of time and thinking bit of outside the box can help you overspending big time.
For those of you that are still using cable, you are wasting money.
Today, there are more alternatives to cable than ever before. In the entertainment space, the theme has continued to be an increasing number of options that offer better content at lower prices.
Currently, companies are creating streaming services that tailor their programming to what people want.
There is also the added benefit of not having to suffer through as many commercials. With the average cable bill in the U.S. at over one hundred dollars per month, it is no wonder that alternatives like Netflix, Amazon Prime Video, and Hulu that are doing so well. Each of which, costs less than half of the average cable package.
8. Cigarettes and e-cigarettes
Besides regularly spending money on cigarettes, smokers spend more on life insurance, long-term care insurance and health insurance than nonsmokers according to Centers for Disease Control and Prevention.
9. Pricey cellphone plans
Cellphones are a major expense for many people. According to Labor Department data, the average household in the U.S spent over $1,000 for cellular service. If you feel like you are overpaying try to reduce cost by switching to a no-contract plan, staying away from constantly upgrading your phone, and limiting data usage.
Of all of the expenses on this list, coffee is by far the easiest to cut back on. The best part is that you can enjoy just as much coffee for the same amount of money. For the same cost it is now even possible to enjoy the same brands.
In 2018, the average person in the United States spent $120 per month on coffee ordered outside of the home.
Instead of going to Starbucks or Dunkin Donuts and paying a few dollars for a single cup of coffee, you could get the exact same coffee by brewing it at home.
Today, most of the major coffee shop companies have their own brand of coffee or Keurig cups that can be purchased for home brewing. This takes the cost of a cup of coffee from a few dollars down to a few cents.
With personal finance, small amounts make the difference over time. With just a few extra dollars a week, it is possible to start making real progress towards achieving your financial goals.
11. Takeout and delivery meals
Dining out frequently is another major expense. Making meals at home is not only healthier but cheaper.
12. Hefty financial commissions
Hiring a financial advisor can defintely help people better manage their investments, savings and budget. However, some of these services come with a higher price. If you don’t mind having a personalized service, consider robo advisors such as Betterment and Wealthfront which come with way lower fees.
13. Pay full-priced items
With so many ways to buy items on sale either on store or online, there’s no need to be paying more for than you have to for your purchases. Loyalty programs, shopping on special days or holidays, and cash rewards can help you pay less for you items.
Cutting your expenses for once
To succeed financially, it takes an enormous amount of discipline. No matter how much money you make, there is always a tendency to spend as much as you make.
For a lot of people, they go even further and spend every dollar they earn and then some.
The most important thing for you to do is to get on a budget and manage your expenses. To accomplish this, it is very helpful to clearly outline your goals and put them on paper. By doing so, you will have actual reminders of why you are going through all of the effort to cut your expenses.
This does not mean assigning a dollar value to shoot for or a specific amount of wealth to accumulate.
Proper financial planning means finding out how much your goals cost and figuring out what it is going to take to get there. Accumulating money should never be your only goal.
Money itself is only a means of getting the things we really want. You should always remember to sit down and take the time to ask yourself what you and the people you care about can accomplish if you win with money.