Planning out a budget can be a complicated task. You must think of all of the necessary expenses and payments, as well as those items that are unplanned. That said, there are often items in your budget that are unnecessary expenses. Those payments that you make because you always have, but not because they are vital.
You don’t need to say goodbye to every little bit of luxury. Cutting expenses and deciding on a new budget plan can help you identify which obligations you should keep and which you need to eliminate to make room for small splurges and tiny treats. These “rewards” will help keep you on track and add a little levity to your budget.
One of the biggest challenges when it comes to building your personal finances is figuring out different ways to start spending less money. Even if some of your everyday bills may look small and insignificant, when added up, you’ll be able to see how they can drain your resources.
To minimize these hits to your budget, look for ways to really cut down on those expenses. Then the next question you need to address is: What are the possibly overlooked, unnecessary expenses that are eating away at your finances?
Many American households spend more than $100 per month just to pay for their add-on TV services. You may see deals for less, but depending on your area as well as all of the costs that aren’t as clear, you could actually end up paying several hundreds of dollars per month.
There are cheaper options. Think about cancelling your cable/satellite subscription and using a streaming service instead. There are various services which provide you both TV and movie access (think Hulu, Amazon Prime, and Netflix). Additionally, you could install a digital antenna if you want to see shows in real time – and maybe discover some local channels that your cable provider doesn’t offer.
Credit Card Interest Payments
Not paying your total credit card bill when it is due may help you stretch your budget in the present, but can destroy your future budget in the process. If you are not paying off your balance every month, you’re paying extra fees that add up quickly. Try to live within your means and don’t put more on your credit card(s) than you can pay off completely each and every month.
If you struggle with paying off your debt, see what you can do as far as living off of cash instead. If you continue to add charges to your credit cards that already have balances, every single charge that you add costs more in the long-run. If you can pay your groceries, gas and/or other basic expenses in cash, you will know that they are paid for and done. There will be no additional charges in the future.
Exercising is great — it keeps your body fit and healthy, which is incredibly important. That said, maintaining gym and fitness memberships can be a nuisance to your budget – especially if you don’t use it regularly.
In this day and age, there are tons of ways to keep yourself in shape for free. Look for free (or super cheap) classes in the park or at park districts, take a run through the neighborhood or along the beach, search Google for workouts that involve household items (cans of soup as weights, push-ups off of the wall, etc.), or comb through the thousands of YouTube videos that will coach you through free workouts at home.
Cell Phone Plan
Do you really need that $100 cell phone plan? The question isn’t whether you want one, but do you really need one?
Eliminating your pricey mobile plan can stretch your budget immensely. You can reduce it by switching to a no-contract plan instead. Use free Wi-Fi whenever you can (even grocery stores have Wi-Fi now) and limit your usage of data. Be sure to keep up to date on any offers that can lower your bill and don’t let a special offer expire without calling in to adjust your details! The results of that fumble can be an extravagant rate hike.
Restaurant Meals and Takeout
Dining out or ordering your meals in can be a really nice treat, especially on busy nights or weekends. But, if it has become a habit – something you are doing frequently through the week – you might need to rethink your choices.
Frequent ordering out can eat into your budget quickly – and you aren’t always aware of how much you are spending. Instead of ordering out, try cooking cook at home. Search the grocery store flyers each week and create a challenge for yourself to make meals out of the front page loss leader items. Google the items and see what recipes you can find! (For example: Google “chicken cheese onions recipe” and you’ll get lots of ideas). It is more cost-effective, healthy, and often tastes better too.
Subscriptions and Memberships
Take inventory of everything you are subscribed to: magazines, newspapers, online services, memberships to local businesses, and any clubs. There’s a very good likelihood that you’ll find that you are still paying for memberships that you stopped using months ago.
If you are still using a service, ask yourself: Do I really need it? Can I replace it for free? You can read many publications online, you don’t need them in print. You can watch a ton of television and movies either for free or through one platform – you don’t need three. Do you actually go for that massage or use all of the fruit that gets shipped to you each month? Is there a cheaper way to purchase what you want when you need it? Go through each and every recurring payment subscription and cut what you can to keep your costs down.
Insurance is a very tricky thing. You absolutely need to have health insurance because one serious injury to anyone in your household can leave you with a mountain of debt if you don’t have it. But, you may want to assess your coverage and your options. Is your child in college and does the college have good insurance with a lower rate? That may be a better financial option.
Reevaluate your life insurance over time and make sure that it is meeting your current needs. Have you been paying for term life insurance since your kids were little, but now they’re married with their own children? See if the amounts that you are paying for are still necessary. Your life is important, but if something should happen to you, you don’t need to have as much money available to ensure that your small children (who are now adults) are cared for. Decide what is right for your current life situation and make changes accordingly.
Auto insurance is mandatory, but based on your car, do you need to be paying full coverage? If you are driving a 20 year old car, carrying only liability might be a more reasonable option since you may have to get another car in the future either way. Are you still paying for an extra driver on your car even though your child is out of the house and now has their own? Think through your individual circumstances and make the choices that are best for you and your budget.
The bottom line with insurance is that you need to have it, but it is worth sitting down and looking through the policies every few years to make sure that the current terms are still meeting your needs appropriately. If they aren’t right for you or the original situation for which you got the insurance has now past, make some changes.
Figuring out what expenses you don’t need in your daily life can free up a huge portion of your budget. Stop paying all of those unnecessary expenses and use the money you free up to build your emergency fund or add to your savings.