Nothing screams adulting more than sitting down to figure out how to lower your monthly expenses. Whether you’re forced to do so because of a recent job loss, or simply want to take charge of your finances, taking stock of your spending habits and taking action to make better financial decisions is always a smart idea.
Not all of us are in a position to make major changes, such as moving to a less expensive state or selling our car. But there are simple, easy changes we can all make to create more room in our budget. Most of which we won’t even notice!
But truly cutting expenses requires a bit of thought and planning. Sure, we can cut out those $5 overpriced lattes for a week or two, but how do you really make an impact with your money? And do you really need to cut out your favorite drinks if you can reduce your spending elsewhere?
Tasks to complete before you start cutting expenses
As much as you may want to jump right in and figure out how to find a few hundred dollars, it pays to do a little homework beforehand. By completing these two tasks, you set yourself up for a more realistic approach to managing your money.
Focus on your personal finance goals
Before you sit down to review your expenses, take time to write down your financial goals. Ask yourself what your short-term and long-term goals are for your finances like to save money, or pay off debt.
Goals such as:
- Getting caught up on your monthly payments and bills
- Build a small emergency fund
- Save for 3 to 6 months of expenses
- Pad your existing savings account
- Pay off credit card debt
- Pay off student loans
- Pay off personal loans or car loans
- Save for a down payment
- Start contributing towards retirement
- Save for your children’s education
Every single one of these may be a goal for you, plus more. These goals are completely achievable. The key is to select a timeframe and assign a date for completion. Otherwise, you’ll keep putting it off.
Track your current spending habits
If you’re trying to lower your monthly bills, the next step is to track your spending habits
for a month. This means writing everything down you spend money on. Even the $2 you spent in the vending machine last week. It’s time to take stock of your spending so you know exactly what you’re dealing with.
Once you’ve identified all the places your money has gone, you may find it easier to categorize your spending first. You can label your categories like “utilities” or “car expenses.”
Once you have the facts in front of you, you can start dealing with your reality and making decisions.
And when the decisions get tough, then you need to refer back to your financial goals and focus on why you’re doing this in the first place.
7 ways to lower your monthly bills
Now it’s time to start slashing and make better decisions with your money.
1. Slash the subscriptions
One of the first places to look for reduced spending is with your monthly subscriptions. The ones where your money is automatically withdrawn each month without you noticing. This could be a clothing box, a beauty box, or athleisure wear that shows up on your front porch.
There are also streaming services that come out of our accounts without any second thought each month.
And then there are the small subscriptions, the ones that are only $1 or $2 per month, such as extra cloud storage. While these may seem small and harmless
, when you add them up, you quickly see the impact it has on your budget.
I’m slightly embarrassed to tell this story but recently I went through this same exercise for our family budgeting. As I added up our monthly (and mindless) subscriptions, I was shocked when I saw I was spending about $250 a month in total on various items. This was coming out of my checking account each month, without me paying too much attention, but it was in small increments so I never realized the full impact.
What exactly was I spending $250 on?
- Multiple streaming services - $40/month
- Unlimited car wash plan - $35/month
- Nutrition plans I subscribed to and never used - $79/month
- Cloud storage - $10/month
- Unlimited music - $16/month
- Audiobook subscription - $15/month
- Satellite radio - $12/month
- Extra charges on my cell phone plan I didn’t even realize I had - $20
- Plus more!
Needless to say, I quickly whittled the subscriptions down to the bare minimum. It took about one hour, but I went through one by one and either canceled or modified my plans (and yes, my Netflix subscription is still there but most others are not).
Fast forward a few months later and I don’t even miss the items I canceled.
You can do the same exercise. Make a list specifically of your subscription services and then go through them one by one to decide which ones are worth keeping. What if you found $200 you could do without? What difference would it make to your bottom line? If you’re like me, it would make a huge difference and be worth it.
2. Be honest about your gym membership
If your goal is to lower your monthly bills, then it’s time to get real about your gym membership. It’s similar to the subscriptions, where the money comes out automatically and you typically don’t think about it.
But a gym membership is worth thinking about. The average cost of gym membership in America is $50.03 per month
. Some of you undoubtedly are paying twice as much, or maybe a fraction of this cost.
Whatever the case may be, it’s time to ask yourself if this money could be better spent elsewhere. Now, there is no denying the health benefits of regular visits to the gym. But what needs to be examined is if you can get the same benefit by working out at home.
As much as we’d like to block 2020 from our memories, there were tough lessons learned. One of those lessons was how much we are capable of accomplishing from our own homes. Exercising is no exception.
There are plenty of opportunities to exercise without committing to a pricey gym membership. There are numerous options now, from using a daily app, working out at home or with a friend, or taking your cardio outdoors. Consider canceling your gym membership if you aren't actually using the gym. A good way to look at your membership fee: How many days per month do you go to the gym? Divide your monthly fee by that number and that is what is costing you every time you go. If it's under $5 per day, you're getting your money's worth but if you find yourself with $10/day gym visits, that money would be better invested in equipment for your home.
3. Stop paying for convenience
There’s another lesson we learned in 2020 and that’s how much we depend on services like GrubHub, DoorDash, Instacart, and other convenient services. While there are times we legitimately need someone to bring us our food and groceries, if you take advantage of these services regularly then it’s impacting your budget.
Pizza delivery is another popular option but we forget about the $3 to $5 each time. All of these charges add up. If you take advantage of this service once or twice a week, then you could be spending $40 simply by ordering food. That doesn’t even include the cost of your meal!
But there are other areas we overspend because of convenience. Eating out is another area where you’re paying for convenience since you don’t feel like cooking. Americans eat out an average of 5.9 times per week
. While it may not be realistic to cut all eating out, look at your current spending and see what would happen if you replaced two or three meals per week with eating at home?
If the average cost of a meal when you eat out is $10, simply cooking a few extra meals would save you $30, $40, maybe $50 each week.
Another area you pay for convenience is at the grocery store. Items such as pre-made salads, pre-cooked family meals, and baked goods are all categories we overspend in when we do not make it ourselves.
One of the most effective ways to reduce your monthly expenses is to start comparison shopping for your regular bills. Shop around for services such as your insurance premiums, phone plans, and internet service.
Take the time to pick two or three vendors per category and pick up the phone or go online for quotes. It costs you nothing to comparison shop, but you could save.
- Auto insurance: Car insurance premiums are one of the easiest ways to save. Use a service such as Gabi to help you get quotes online. When I performed my quote with Gabi, it showed a way for me to save over $900 a year by switching to a different insurance company. Read Gabi Auto Insurance: My Insurance Quote Experience for my actual experience and review.
- Homeowners or renters insurance: Like auto insurance, you can shop around for homeowners and renters insurance plans. Almost all carriers offer additional discounts if you bundle these policies with car insurance too. Read 8 Ways to Keep Homeowners Insurance Costs Down for more tips.
- Cell phone plans: If you can’t switch services because of a contract, call up your cell phone provider and walk through your bill with them. Get them to help you cut expenses, such as insurance you may not need or lower your charge for usage. Read Ways to Slash Your Cell Phone Bill for more tips.
- Cable bill/television service: With today’s streaming services and a variety of methods for watching shows, gone are the days where you have to watch your favorite shows through cable or satellite. Make them work to earn your business by lowering your rate each month. Read Cutting the Cord: How to Ditch Cable and Stream for Less for more tips.
- Internet providers: If you have a choice, review your internet provider options and start comparing plans. There may be an option to save $10 or $20 per month simply by switching.
But take this attitude to other services. What about your visits to the salon? Could you find someone to cut and style your hair that’s less expensive than where you currently go? Is there a low-cost vet you could take your fur babies to, instead of the pricey one close to your home?
Or perhaps you have lawn maintenance or cleaning service you depend on, but maybe there is room for negotiation with those rates.
By comparison shopping, you lower your expenses, plain and simple. There’s no reason to overpay for services when someone else can provide you equal service for less. Again, if you choose to do this, you could be looking at $100 or $200 in savings just by switching.
5. Reduce your electric bill
Electricity isn’t cheap. But there are ways to reduce your monthly electric bill without sacrificing comfort or huddling under blankets every day. And this is true for any energy bills, but it’s likely not an area we focus on too often.
One way to reduce your electricity bill is to install a smart thermostat. By doing so, some studies suggest you could save 10% to 20% on your monthly bill. Not only does it save on cooling costs, but also heating, so you realize the savings throughout the year.
Another tactic for saving on energy costs is to have your electric company perform an audit of your home. Most providers do this for free, you only need to schedule the appointment. The company will show you short-term and long-term methods for cutting costs. Plus you’ll find out where your home is “leaking” energy.
6. Refinance your student loans
If you have private student loans, it may be time to consider refinancing them. By refinancing
, you can get a lower interest rate, or shorten the term length of your loan and pay them off sooner. The amount of money you save in interest charges may be enough to provide much-needed relief in your monthly budget.
A service such as Credible helps you compare private student loan options from several different lending institutions and possibly find you a lower interest rate. Once you find a lender that meets your needs, then you go through the complete application process.
Just keep in mind that a lower interest rate per month helps you save money in the short term, but if you are adding years to your loan, you will pay more interest over time. Depending on your personal finance goals, you may be ok with this strategy.
7. Get out of debt
Getting out of debt may seem like an odd suggestion when you’re trying to lower expenses. But the truth is, you need to concentrate on getting out of debt to eventually reduce your overall monthly spending. Plus, once you pay off your debt, you have more money to go towards your other financial goals and achieve them sooner.
It may sound obvious, but by focusing on your debt — even if it means spending more towards your balances — eventually you’ll reduce your monthly obligations.
And think about how much money you’re spending each month on interest charges. You will never benefit from these charges. Only the credit card companies will. Speaking of which, this is the time to look into a 0% balance transfer card
, so you can put all your money towards your credit card balance and not in interest.
Once you pay off your debt, your money can go towards something that works for you and allows you to be in charge.
The bottom line
Cutting your monthly expenses not only gives you more breathing room in your budget, but it keeps you from wasting your hard-earned money. Whether you are trying to achieve big personal financial goals, or get through the next month as best as you can, you are doing yourself a huge favor by getting your spending under control.
All of the tactics mentioned take a little time, but most of these expenses will not be missed. If you can cut $200, $300, or more per month, imagine the difference this makes and how much more quickly you can achieve your big goals.