It’s important to take stock of where your money is going and what it’s doing for you. Just because you spent money on something in the past, doesn’t mean it’s still a worthwhile expense. This is the time to break out of the cycle of laziness or emotions that keep you in a spending rut.
How to Reduce Fixed Costs:
As we discussed in our last budget post, there are fixed costs and variable costs. While it is true that fixed costs do not change from month-to-month, it doesn’t mean that you can’t make a significant change to better accommodate your lifestyle. For example, typical loans people have include: mortgages, car loans, and student debt. While these must be paid, depending on when you made the original purchase and what the market looks like now, you can make a significant change by refinancing. There are pros and cons to doing this, so it’s important to evaluate the impact on not just your monthly expenses, but your future financial goals.
How to Reduce Variable Costs:
If you’re being honest with yourself, which can be extremely difficult, this is where you have the potential to make the most significant changes in your spending. Some examples I previously gave for variable costs include food, electricity, clothing shopping, dining out, and entertainment.
My husband and I recently went through a significant family finance overhaul and here are some easy changes we made to our variable costs that had an immediate impact:
Coffee Cup Status Symbol vs The DIY Version: This one was tough for me. As a tea drinker, I am particular to a certain green-logo coffee shop that has all kinds of fancy tea drinks. My usual carries a $5 price tag per cup. OUCH. While I still treat myself occasionally, I replaced this with a homemade version of a different drink (London Fog, anyone?) that tastes pretty darn good for a fraction of the price.
Dropping the Shopping: As someone who used shopping as therapy, to celebrate a bonus, or for any other reason (let’s be honest here), this was another change that took a lot of will-power. So, I made some changes in my shopping habits as well. To start, I didn’t shop unless there was something I absolutely needed. Next, I maximized sales by planning around holiday weekends, because stores love an excuse for a sale. Lastly, I started shopping at less expensive stores and on consignment. Not only do I get a kick out of the discounts, but gone are the days of smelly thrift stores. Sites like thredUP make the experience fun and you can do it from your phone while you’re waiting in line at the grocery store!
Bring Cable to the Table: Yes, we all love our various shows and I’m sure you have your cable plan bundled with your internet plan. You’re also getting a lot of extra content that you don’t want or need, because cable companies know that bundling items gives you less choice. We dumped cable and now pay for high speed internet in addition to subscriptions to Hulu and Netflix. Now, we started with the premium package of everything but realized that our cash flow didn’t support the extras, so we had to dump HBO and Showtime. This sucked! I know someday we’ll be able to add them back in, and then I will binge watch a whole slew of my old favorites, but until then, we earnestly needed to reduce spending and sometimes the cuts can hurt.
Exercise Yourself, Not Your Wallet: I know I just touched on a sensitive topic for a lot of y’all. People feel like they should have a gym membership, because paying for it will guilt them into going. How’s that working out for you? I’m certainly not advocating not working out, but for those of you who truly don’t use your gym membership or make it there once every couple of weeks, consider switching to a pay-per-class type of program or even an at-home workout plan. I fully understand how hard it can be to motivate for a workout, but I also know how much worse it feels to see that monthly expense on my credit card statement and then feel even more deflated about not making it to the gym.
So, my challenge for you is to take an earnest look at what you’re spending looks like and where you can make changes. Some can be as low as $5 a week, but every little bit counts and a few $5 per week changes can add up to big bucks on a monthly basis.