15 Apr How to Cut Costs to Gain Financial Freedom
Are you ready to cut costs? In our article on how to calculate your monthly expenses, we went over the difference between “wants” and “needs.” For a quick recap, “Needs” are expenses that you can't live without like housing, food, and transportation. “Wants” are expenses that make life fun but are not necessary, such as buying a Starbucks every morning, getting your hair highlighted, or seeing yet another live concert. By adding those two sets of expenses together, we were able to figure out your average monthly cost of living.
Luckily, there are many steps that you can take to cut costs and lower your average monthly expenses. It may not always sound fun, but by reducing your expenses you will be helping yourself two-fold in retirement savings! Plus, many of these suggestions only require a small change in behavior. Saving serious cash is likelier simpler than it seems.
Note: This article contains affiliate links. This means that if you purchase a product or sign up for a company through one of our links, Thrive Oak will make a small commission (at no extra cost to you).
Cut Costs on “Needs”
Housing is likely one of your largest expenses, so it’s also one of the places that you can save the most money. If you’re looking to make drastic cuts to your expenses, moving to the next neighborhood over could be a simple way to reduce your spending. Before you call your landlord though, make sure to consider other factors to make sure you aren’t creating new stressors or increasing costs elsewhere. For example, moving to a new location could increase the cost of gas for driving to work or an unsafe neighborhood could create other issues. By taking a quick look at rent costs around your area, you could save hundreds of dollars each month!
Another way to ‘save’ money on housing is by “house hacking”. This could mean getting a roommate or renting out a room through a company like Airbnb. Before jumping in, do your research. In most cases, living with a roommate can be significantly cheaper than living by yourself. Moving into a 2 or 3-bedroom apartment could end up saving some serious dough. Airbnb could be a bit trickier, but can totally pay off. Some landlords, buildings, and cities don’t allow for Airbnb; so, make sure that it is legal and available to you before signing up.
If you have high car payments, it may be time to cut costs by switching to a cheaper car or more efficient car. Trading in your vehicle for a more affordable one can lower both your monthly payments but also your insurance premiums. I mean, do you really need satellite radio and a sunroof?
The way you drive can also save you money. Depending on the length of your commute, accelerating more slowly and trying to maximize coasting can also add up. If possible, instead of driving to work each day on your own, you could take public transportation or carpool with friends who live near you. If your area has decent public transportations system, you could save tons of money on gas, parking, and overall wear and tear on your car.
The easiest way to cut cost of utilities is to be eco-minded. Being eco-minded means turning off lights when you leave the room, taking shorter showers, programming your thermostat, unplugging electronics when they aren't being used, and more! Next time you’re at home, take a quick look around you to see which items are using electricity. Are there any energy suckers around you that you can turn off to save cash? How about light bulbs? Are any of your bulbs still the old-fashioned incandescents? Switching to LED bulbs could save you $100+ each year in addition to reducing your carbon footprint!
Do you have a telephone, internet, or cable bill that is way above what you need or what you originally signed up for? You can cut costs in two ways. First research a competitor’s introductory price and call your provider to negotiate a lower monthly bill. It’s highly likely that they will match the competitor’s offer and you can save hundreds of dollars a year with just a 5-minute call. If the provider is not willing to budge on price, you could switch to a lower plan or jump to the cheaper competitor. The second option would be to split the plan with a friend, roommate, or family member, therefore cutting the cost in half.
Obviously, food is not something that you can live without, but you can make it significantly cheaper!
The first option would be to buy in bulk. If you have a Costco or Sam's Club membership (or you know someone who does), you can stock up on big-ticket items for a drastically reduced price. Just be mindful to not buy so much that it goes to waste!
Second, you can watch for sales or coupons. Professional couponers can seem a bit nutty, but they save mad money! We are not asking you to go that far, but you can try to cater your weekly meals around sales that are happening.
Third, shop at cheaper stores. Instead of going to a gourmet store that’s closest to you, head over an extra few blocks to the local big name grocery store. You can get the same stuff at a lower price.
Fourth, buy cheaper food! Quick tip, the more expensive, name-brand food in a grocery store is going to be at eye level, making it easy for you to see and grab without thinking. Instead of falling for this trick, look at the lower shelves. Here you will find the cheaper store brand options that are almost exactly the same products. It may only be a $0.50 difference each time, but it will add up quickly!
Want Cost Reduction:
Now that we have cut down on some of your monthly need expenses, we can work on your monthly want expenses. These are the most manageable costs to cut, and you'll be surprised at how much money you will save. Let's get started!
Dining out is expensive, we all know this, yet people do it all the time anyway! We are not asking you to become a hermit, but to instead limit the frequency and/or expense of eating out. This can be done by simply not eating out as much (like taking lunch to work), dining at cheaper establishments, only ordering an appetizer, or splitting a meal with a friend.
Plus, cooking at home can be fun too! It is easy to cook for oneself with short recipes and minimal ingredients. Try checking out One Dish Kitchen for hundreds of easy recipes.
If you are getting Starbucks every morning on your way to work, you are wasting serious money. Math it out with us real quick. Say your morning Starbucks costs $5.00, and you get a coffee five days a week on your way to work. $5.00 x 5 days a week = $25.00 a week. Times this by every week of the year, $25 x 52 weeks = $1,300! Think of all the things you could have done with that money! Is it worth it now? Don't believe us? Check out what this young millionaire has to say about coffee!
The same idea goes for alcohol. Instead of buying 3 to 6 drinks every night that you go out, buy a big bottle of liquor (preferably from a bulk store like Costco) and pre-game before you go out. You will have the same desired effect at a fraction of the cost.
The price of style can be insane. If you are spending hundreds of dollars on a pair of shoes, a purse, jeans, or a dress, then we hope that you have got the money to spare. However, if you are looking to cut costs, this should be the first to go! We understand that with specific brands comes “awe” and “glory,” but that isn’t going to help you with your retirement fund. Instead of buying Gucci, Channel, and Rolex, think of the alternative options.
The obvious solution would be not to buy more clothes, only buying clothes when you need them. You could implement a “capsule wardrobe.” This is where you only buy items that are versatile and that can be mixed and matched in a variety of ways. You can have dozens of different outfit choices without the cost.
Next, you could buy cheaper clothes. You could go to the mall, buy online, or check out a local thrift store. Another option would be to sell your fancy clothes on consignment, and use the profits to purchase other used brand name labels; an excellent place to do this would be through merchants like The Real Real. Fashion is becoming cheaper, faster, and more sustainable; a little bit of research could save you thousands of dollars.
Again, we’re not telling you to be a hermit. We aren’t saying that you can never go to a concert, a pro game, or other fun activities. However, we’re suggesting that you can cut back. If you are going this every weekend, try only to do it once a month. The world is full of fun activities that you can do cheaply or for free such as going to the beach, hiking, hanging out with friends, hosting a home movie marathon, and more.
We would never tell someone to skip a vacation! There are many incredible sites to see in the world, and traveling is a pastime that should be treasured. BUT, yes there is a “but,” traveling doesn't equate to spending lots of money! With just a little bit of practice, you will be able to find cheap flights, cheap accommodation, cheap transportation, cheap tours, cheap food, and many free events. Take a look at Nomadic Matt’s travel blog for the best insight on how to cut costs and achieve cheap travel.
If you consistently go to the gym or a club, go you! However, if you’re going once or twice a month, it isn’t worth it to have a membership. If you aren’t using it, cancel it. However, if you’re hoping that one day you will be consistent with it, then try to find a cheaper membership that is close to your home/work to incentivize you to actually go!
I know that going to get your nails done or get your hair highlighted is fun, but is it essential? Many self-care appointments can be done right from home! Paint your own nails and dye your own hair if you are looking to save money. If you want to add more fun to it, invite over a bunch of friends and make it a party!
Subscriptions, like gym memberships, are only worthwhile if you use them and they better your life. Do you really need Netflix, Hulu, AND Disney+? Consider canceling one to save some extra cash. The same goes for if you subscribe to magazines, Kindle Unlimited, or monthly product deliveries. If you aren't using them consistently, then cancel them. You may even have some that you forgot about. Check your monthly credit card statement to see if something you never use is set to auto-pay and get rid of it!
Having “stuff” is a part of living, but do you really need all of those knick-knacks? There is something to be said for owning less. It means that you have less to clean, less to maintain, and less to organize. This can save you both time and money. This doesn’t mean that you have to get rid of all your stuff, but you could make some changes. If you would like to take a more minimalist approach to your life, check out this website!
Impulse shopping is a real thing. There is a reason why all the glittering and cute little goodies are always right by the check-out counter. They are there to entice you, but not give you too much time to think it through. If you want to cut down on spending, implement the 24-hour rule. This is where you wait, you guessed it, 24 hours to make a purchase that you weren't planning. If you still can’t get it out of your head after 24 hours, then you go buy it.
For example, say that you found this beautiful piece of artwork on your way out of the store for $50.00. You wanted to buy it right then and there, but you decided to implement the 24-rule. After leaving the store, you realize that while it was pretty, it served no purpose, didn't match your décor, and wasn't as amazing as you thought. Within a couple of hours, it has been completely forgotten. You just saved yourself $50.00! This money can now be used more productively!
Now that you have cut costs, you have extra money floating around. What are you going to do with it? You can take a moment to re-evaluate your budget, take on living below your means, and start investing!