With so much volatility going on in people's day to day lives and uncertainty for what tomorrow brings, we have been asked by many; what are good ways to cut spending now while still thinking about my future for the long haul? This is something great to think about right now it is important to analyze your discretionary expenses (things that you chose to spend money on) and non-discretionary expenses (things that are more fixed in nature). However, it is also important to think through where you want to be 10-20-30 years from now and still plan for what it will take to get there. Here are several steps and areas that we recommend to start analyzing where you are at and how to save more.
CREDIT CARDS
The convenience of credit cards is tough to understate; however, convenience can be to the borrower's detriment. It is very easy to sign up for a credit card and never look for alternatives again. It is always helpful to shop around and look at different credit cards, some may be able to customize rewards or cash back programs that will be better suited to your individual spending habits. This is an easy way to increase the money that stays in your pocket. In addition to this, so many times people can fall into just making the minimum payment each month - this can lead to paying extremely high interest on your outstanding balance. It is important to understand what that looks like and analyze if there are ways to get a lower rate or payoff the balance if you are able to.
THINK TWICE
I always recommend asking the question "Will I be happy with this purchase a week from now, a year from now and 10 years from now?". It is so easy to get caught up with making impulse purchases and rationalize them as logical purchases in the short term. But it is important to truly analyze why you are making this purchase and what the long-haul implications are. The large the purchase typically means that it should take longer to analyze, not vice versa. That being said, small purchases can add up extremely fast and should not be easily dismissed as small purchased but thought of in the aggregate of all small purchases.
LOOK FOR DISCOUNTS
There are so many areas that are easy to overlook for discounts. First and foremost, I always recommend looking in the "Sunday Ads" - this is where you used to be able to find most of the discounts for grocery stores or consumer good stores. While it is still a good place to look, there are many online vendors or stores that publish these discounts or codes for discounts throughout the week. This can be a simple way to save on your monthly expenses by not putting in too much additional effort. In addition to this, look for purchasing major goods when they are on promotional sales - many companies are offering these right now which can make items look attractive, outside of the current environment, typically looking for major purchases around holidays or the end of the month can give you additional negotiating power.
LOOK AT SUBSCRIPTIONS
Our world right now seems to revolve around subscript ions - most companies are switching to this and makes sense. We always get the most up to date content or device and we can cancel it as soon as we don't need it… except, it is easy to forget to cancel when you no longer need it. This is one of the first things I look for on expense sheets and I would admit personally it is tough to actually cut items from this. But we recommend looking at the last month and analyzing if you used the subscription or not, most of the time there are a number of subscript ions that can easily be cut. Remember, it is not a one-month expense but multiply it out for the year and a number of years to see the true impact. In that light, it is much easier to cut subscriptions that you are not using.
TRACK EVERYTHING
There are so many great software companies out there that allow you to easily t rack what you are spending each month. It is important to differentiate between what you need and what you do not need. It surprises most people what they spend each month when you look at everything compiled together - it can be easy to review your expenses and find simple ways to cut out things that you really do not need each month.
SHOULD I STOP INVESTING
This is a common question that we get as a follow-up to reducing monthly expenses. While it can seem like an easy way to cut expenses-as you won't see this money for years until retirement. However, much research that we do shows that it can be easy for people to turn off but tough to turn savings back on. It is important to save for the long-haul unless you really are forced into a position where you can no longer cut back on discretionary spending, and this is the only area where you have flexibility. If that is the case, I always recommend seeing how little you can cut back and remember if your company has a match on their 40l{k) or employer sponsored plan - try to utilize that as long as you can. These are just several areas of many that we recommend analyzing when you are trying to cut back on your expenses. The key items to analyze are where you are at now and where you want to be in the future - focus on the decisions that will help you reach both goals and not just focusing on the immediate or more apparent outcome.