Tired of being stressed out about money? Struggling to find ways to reduce expenses? You’re not alone. The majority of Americans live paycheck to paycheck and can’t make ends meet. While misery may love company, this information doesn’t help you reduce expenses or achieve your financial goals. If you really want to get rid of the stress, a plan to reduce expenses is essential. Fortunately, many solutions on how to reduce monthly expenses exist that you can easily adopt.
The Need to Reduce Expenses – An Epidemic Problem
Americans struggle with debt today. More than 70 percent are in debt, and 56 percent describe themselves as being over their heads. Likewise, more than a third of Americans have no savings at all. By failing to reduce expenses to a reasonable level, many Americans are forced into debt. High interest loans and credit cards then contribute to the problem and further limit the ability to reduce expenses. And Americans are wasteful. Surveys exploring how to reduce expenses have shown a third of Americans could make tremendous improvements by eliminating wasteful purchases.
The Big-Ticket Items – Major Areas to Reduce Expenses
When thinking about how to reduce monthly expenses, it helps to know where the big dollars are being spent. The three biggest areas where you can reduce expenses are in housing, transportation, and food. Generally, you should not spend more than 30 percent of your income on housing. If you are among the millions who spend excessive amounts on your rent or mortgage, this could be a quick fix. Likewise, reducing transportation expenses can also be a big help. The average yearly cost of a car is nearly $9,000! If public transportation options are available, this may be another way to reduce expenses quickly.
Food is another major area where you can reduce your expenses. In fact, nearly 70 percent of Americans report they are willing to reduce expenses in restaurant dining. Twenty-five percent said the same about alcohol consumption. But dining outside the home is not the only place where you can reduce expenses related to food. Unused groceries also represent a significant amount of waste where you can reduce expenses. If you are looking for a quick-fix, these are how you can reduce monthly expenses fast!
Perhaps You Prefer Baby Steps to Reduce Expenses
Some people prefer to reduce their expenses in a more gradual way. While cutting back on housing, transportation and food can help you reduce expenses rapidly, this is not the only strategy. Smaller steps can be taken and still provide you with measures of success. For example, if you reduce dining expenses by one meal each week, you can save around $600 a year. One less beer or glass of wine each week can reduce expenses by $300 a year. And if you can go without cable television, you could save up to $1200 a year.
The 50-15-5 Rule
Want a steady guide to reducing your expenses while also getting ahead? The 50-15-5 Rule is recommended by many financial experts. Based on the formula, you should reduce your expenses to 50 percent of your income each month. Next, you should put 15 percent of your income in retirement. Finally, 5 percent should go to an emergency savings fund. Your emergency savings is for a “rainy day,” and should be between 3 to 6 months’ worth of income. Not only will this keep you out of debt, but it will reduce your expenses to a healthy level.
Budgeting and Mindsets – Choosing to Reduce Expenses
Regardless of the approach you prefer, you must create a budget if you want to reduce your expenses. This means identifying every expense each month, and then setting limits on those expenses you want to reduce. Choosing to reduce your expenses will likely require a change in your mindset as well. You will really need to decide the areas in which you are willing to reduce monthly expenses. Here are some additional considerations:
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Entertainment/Activities
We all need some fun, but if gym memberships, club dues, and other expenses can be reduced, this can help. You may even decide to cut back on cable packages or streaming speeds.
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Outsourced Costs
Dry cleaning, house cleaners, pool services. These may be tasks you could do yourself to reduce expenses. Baking or making gifts might also be an option to reduce expenses.
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Debt Management
Already in debt? Reducing expenses by reducing interest charges can help. Loan consolidation, rate reducing transfers, and other options should be explored.
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Insurance Costs
Raising deductibles, bundling insurance packages, and changing life insurance types offer additional ways to potentially reduce expenses.
Reducing your expenses can be challenging to say the least. At the same time, dealing with financial stress is no fun. Whether you choose to reduce your expenses quickly or gradually, committing to a budget is your key to success. Likewise, with the simple steps provided describing how to reduce your monthly budget, you can soon experience less financial stress. And we all could use a little less stress in our lives!
