How to Cut Costs Without Sacrificing Your Quality of Life
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Budgeting and personal finance get a bad rap for getting in the way of living the life you want to live. However, when done correctly, budgeting can be a pathway to the life you’re looking for, not a hindrance. Of course, for many Americans, living with debt to “keep up with the Joneses” is all too normal. Even so, there are ways to cut costs and live within your means without sacrificing your quality of life.
While television shows on TLC like Extreme Cheapskates show the wild ends people will go to in order to save money and live frugally, frugality doesn’t have to be all about restriction and abstinence. Sometimes, all you need to do is cut costs in a few areas in order to improve your cash flow and meet your financial goals.
If you have certain areas you don’t want to sacrifice in with low-cost products or services, that’s okay — within reason. Here are some tips and tricks to consider as you look to lower your costs without sacrificing your quality of life and ability to pursue what you love.
In this article
Assessing your current financial situation
To live responsibly while still targeting a certain quality of life, it’s important to know where you stand. Here are two vital steps to take as you audit your current personal finances and start to think about the life you want your money to afford you.
Calculate your income/expenses
Having a clear picture of your monthly expenses and any other annual expenditures that occur with regularity is a great place to start. Looking at your income each month can clue you into the amount of money you have to spend each month. Make sure to look at a physical bank statement so that you can see what you actually earn after taxes and other deductions or contributions. If you make $60,000 a year, that doesn’t mean that each month you’re getting paid $5,000.
Once you’ve evaluated how much money you earn each month, you’ll want to look at certain fixed costs. These are non-negotiables that you need to spend money on to survive. If you make $3,800 each month after taxes but spend $1,200 a month in rent, plus an additional $200 in utilities, that means that you actually only have $2,400 each month that you can budget for non-essentials.
From there, take a look at your current spending habits. Some banks like Chase will automatically categorize various purchases across categories like groceries, eating out, bills, and rent or your mortgage. You may also want to look at a personal finance app like Rocket Money or Mint, which can also help educate you on which areas you spend more of your money.
It can be helpful to aggregate this data and get an average to know what an average “normal” month is. Of course, one could argue there is no such thing as a “normal month” in personal finance — a vacation, unexpected potluck, holiday, or birthday celebration can quickly throw off your best intentions. Getting an average number for your expenditures can thus be a helpful way to understand what your cash flow roughly needs to support each month.
Determine your goals
As you look at your expenses, ask yourself, “Do I really want to spend this much on this category?” Some people choose fast food or carryout as a convenient meal on busy days without realizing that it’s costing them hundreds of dollars a month. You may be someone who values convenience in the area of food, in which case, that’s totally fine! However, if you’re really wanting to save for new countertops in your kitchen, you may want to interrogate where your money is going.
As you work to determine your goals, keep in mind that this work is personal! Some people can’t fathom living without organic produce and meat, while others are fine shopping whatever’s on sale that week. Others don’t see the point in paying for a personal trainer or a gym membership and would rather get exercise outdoors. There’s nothing wrong with keeping some of these higher-ticket items in your budget; however, you need to be sure that the places you’re spending your money align with the goals you have for your quality of life.
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Create a realistic budget
Once you’ve audited your monthly income and expenses, you need to come up with a realistic budget. While you may already have a budget, it’s important to start fresh and consider how your budget can be a helpful tool in strategizing and achieving your financial goals without sacrificing the things that matter to you. After all, cost savings are only useful if you can commit to them regularly.
Create categories with your new goals in mind
Whether you use one of the many budgeting apps (like YNAB) available to you or are setting up your own spreadsheet, it’s important to create a budget that has categories with your new goals in mind. This lets you know where your income needs to be directed each month so you can be sure you aren’t hurting for extra cash in an important category.
Make sure to include categories for debt and savings
As you make your budget, include categories for debt and savings. Not only do these play a role in your month-to-month cash flow, but they also keep you from fully living the quality of life you’ve defined in your goals. Staying on top of paying off your credit cards each month is one of the easiest ways to keep your cash flow positive and flexible.
Paying down your debts ultimately gives you more money to play with and improves your quality of life, so it can be helpful to think of it within the context of your overall goals in order to stay motivated. Sure, you might only have $50 to budget towards your upcoming vacation this month, but once you’ve paid off your car loan or credit card debt, you can put that money towards vacation and save that much more quickly.
Cut unnecessary expenses where possible/applicable
Once you’ve laid out your goals, it’s easy to see some of the areas that make sense to prune. After all, if fitness isn’t really part of the lifestyle you’re trying to live, you now have even more reason to cancel the gym membership you never use anyway. Having your priorities clearly defined and laid out can help you retain the aspects of your life where you love to spend while compromising in the areas that really don’t matter much to you.
In some situations, though, there may be other places where you’re struggling to cut back on expenses. Here are some of the most common culprits of lifestyle creep — and some ideas on how to address them in your budget.
Housing
Being “house poor” has become all too common after the pandemic made the housing market a major battleground for home buyers. Now that the dust from 2020, 2021, and 2022 has settled, you may want to look at your housing costs. With interest rates higher than they were when you may have purchased your home, you may not be able to refinance to save money; however, there are some lower-cost solutions you may want to consider.
For starters, investing in energy-efficient appliances and exploring alternative internet or utility providers is one way to save money. Sure, this doesn’t impact your mortgage payment, but it can help reduce some of the extraneous costs associated with your house. If one of your savings goals isn’t to beef up your emergency fund, now’s a great time to do that, too, since not having the money to cover short-term expenses if your water heater fails can really set you back.
If you really feel like you’re paying too much each month in rent or your mortgage, then the next best thing may be to consider downsizing. Whether that means that you’re selling your existing home or switching to rent, downsizing is a pretty major life adjustment, so it shouldn’t be taken lightly. However, if you’re really spending too much money each month on housing, this may be an area to explore — if it’s not something that is directly correlated to your personal definition of the quality of life you want..
Transportation
Owning a car is expensive, and comes with additional costs like registration fees, city stickers, auto insurance, gas, and maintenance. If you’ve got to own a car, consider whether or not you need the latest model or could downsize to a cheaper used vehicle. If you and your partner both have vehicles, maybe it’s possible to consolidate to just one car and manage it with a schedule based on who needs it when.
You may also consider taking public transportation or riding a bike some of the week in order to reduce how much wear and tear you put on your vehicle. This also means you won’t need to pay for gas as much, which gives you another area to save money in.
Another way to save money if you own a car is to see if you’re overpaying on your auto insurance. Researching other cheap car insurance options can be one way to reduce the annual costs associated with owning a car.
Food and Dining
If dining and food isn’t almost everyone’s Achilles heel when it comes to budgeting, I’m not sure what is. When it comes to cutting down costs in these two categories, the solution is always the same: meal prep and cook more at home. Even if you’re buying high-quality ingredients at the grocery store, properly planning for your meals can save you a lot of money and reduce food waste.
Entertainment and leisure
In this day and age, it’s really easy to have a ton of subscriptions to streaming services, but how many do you really watch? More importantly, is that really how you want to spend your leisure time, or would you rather be spending some of that money on a different hobby, like playing a musical instrument or bird watching? Especially when there are a few free apps or ad-based streaming services out there, even if you keep some of your streaming subscriptions, it’s possible to trim these costs.
Beyond limiting memberships and subscriptions, it could be helpful to take up free or low-cost hobbies as a form of leisure. Many cities have free museum days or other attractions at lower costs to residents throughout the year, allowing you to save money while still getting to go out. Checking out state or national parks in your area is another low-cost activity that can still be quite interesting. Again, this comes down to defining what you’re actually looking for out of these sorts of activities. If you’re just wanting to catch up with your spouse after a hectic week, is cooking a meal at home and watching something on Netflix just as fulfilling as a date out to an expensive restaurant and live comedy show?
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Shopping and savings strategies
Cutting costs is all about thinking strategically, and ensuring that your purchases are in line with the life you want to lead. While your budget will help provide a road map for this sort of thinking, you might still need to find other ways to cut costs. Here are some ideas to help you adopt a more frugal mindset in the budget areas where you don’t care about making sacrifices.
Buy generic where possible
Not everything has to be name brand, but there’s nothing wrong with valuing name brands, too! Maybe you care about having high-end athleisure when you work out, so you want to have name brand Nike, Adidas, or Lululemon for that. That’s totally fine! But that might mean that you cut back on name brand cereal, chips, or soda in order to make a little extra room in your budget.
If you have a membership to someplace like Costco or Sam’s Club, you may be surprised by how some of their alcohol and other products compare to popular name-brands.
Coupons, cash back, and rewards
Sometimes, the only way to get better prices on things you want to spend your money on is to use coupons, cash back, or other perks and rewards programs. Some people think about couponing or using apps like iBotta as extra work, but if it’s work that allows you to live the life you want, what’s the problem there?
If part of your defined quality of life is to get coffee every Monday, Wednesday, and Friday from your favorite coffee shop, but you don’t want to default to drip just to stay within your budget, consider joining their frequent buyer program where your perks can accrue. Or, if you want to buy organic produce, look for coupons to help keep this habit affordable.
Automate your savings
When one of your goals is to be able to maintain your quality of life into retirement, you’ll likely need to contribute to savings accounts and investment accounts. If you feel like you don’t have the know-how to tackle this on your own, there are plenty of roboadvisors out there to help manage your money. The most important thing is that you contribute consistently in order to build up your savings! Automating your savings and timing these automatic contributions every paycheck is a great and easy way to accomplish this.
Meditate on frugality
If there’s one throughline throughout this entire piece, it’s about adapting the right personal philosophy. When you’re only spending money in the areas that matter to you, you’ve given yourself permission to live generously and guilt-free. At the same time, all of this comes back to balance in accordance to your own values. Depending on your income, it might not be possible to only by sustainable and organic foods, dine out four times a month, and go on a lavish vacation overseas every year. Once you’re realistic about your priorities and your capabilities, you’ll be able to live in more alignment with the quality of life you truly desire.
Speaking of desire, there’s something to be said, too, for finding the joy in frugality. Not everything needs to cost money in order to be worthwhile — and, in some cases, the most potent memories you make have to do with the people you’re with; not the cost of the activity. When your personal finance goals are aligned with your values, you’re much more likely to be happy with the life you’re living, regardless of the size of your paycheck.
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The bottom line
Everybody has an idea of the sort of life they want to live. While many people dream of living in a mansion or owning a yacht, in reality, most folks also have a much more realistic dream life that they would be comfortable having met each year. That might be taking a family vacation each year that’s truly exciting. Or, it could be finding ways to invest in their health and fitness, or having the latest tech gadgets.
None of this is wrong — as long as it’s aligned with your values and isn’t causing you to struggle financially in other important areas, such as paying your bills or the deductible necessary to receive important healthcare. What matters most is that you’ve created a conscious plan to help direct how you want to spend your money. Many Americans live life on auto pilot, buying a new car because they want to seem like they have wealth, without even considering whether or not they care about having a new car in the first place. By being intentional and realistic about the life you can afford, it becomes easier to cut costs in the areas that aren’t important, while freeing up money for the expenses tha really contribute to your quality of life.
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Writer
Brent Ervin-Eickhoff is a Chicago-based writer, stage director, and filmmaker with a background in digital marketing and content creation. In addition to Joy Wallet, Brent has written for Complex, Volkswagen, HowlRound, Picture this Post, and Third Coast Review, among others. He currently serves as the Associate Director of Marketing for Content Creation at Court Theatre at the University of Chicago. Brent graduated from Ball State University with Academic Honors in Writing.
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