It’s probably stating the obvious, but if you’re struggling financially, one way to make your life easier is to decrease the amount that you are spending. This means that you don’t have to borrow as much money. It also means that you have more money available to repay your debts.
Reducing your expenses can also be important if you need to try to negotiate a debt management plan with your lenders. Those lenders will be more likely to agree to restructuring your loan repayments if you can demonstrate that you have taken action to manage your finances. If you are prepared to reduce your expenses, they will be more likely to consider reducing your monthly repayments.
How you decrease your expenses will depend on which of your expenses you are trying to decrease. Some are easier to reduce than others, and different approaches are required.
Discretionary spending is money that you are spending even though you don’t actually need to spend it. It’s spending money on luxury items rather than spending money on your essential day-to-day living costs.
In theory, it should be easy to decrease your discretionary spending. In practice it’s one of the most difficult types of expenditure to reduce because for many people, it means breaking a habit. It also means denying yourself the things that you enjoy.
But next time you’re tempted to put that new pair of shoes on your credit card ask yourself whether you actually need six pairs of shoes. Do you really need to go to the cinema every week, or would a monthly treat be better for your bank balance?
Some discretionary spending is unavoidable, in the short term at least. If you have a TV package or a mobile phone contract you might be tied in to a minimum contract term. But at the end of that minimum contract term ask yourself whether you could downgrade that package to reduce your monthly outgoings.
Spending on Food
Spending on food isn’t discretionary. You need to eat to survive. But generally, it’s quite possible to eat for less.
The first thing to do is reduce the number of takeaways that you eat and how many times you eat out. It’s OK to reward yourself from time to time, but if you’re eating out or getting takeaways every week you probably need to cut down. Also, think about what you are eating at lunchtimes. Rather than going to the local sandwich shop during your lunch break, think about making sandwiches at home and taking those sandwiches into work.
Think about what you’re eating at home as well. Ready meals cost considerably more than buying the ingredients and cooking those meals from scratch. You can reduce the money you are spending by spending more time in the kitchen instead.
Before you say, “but I don’t know how to cook!” bear in mind that if you’re reading this you have access to Google which is the equivalent of the world’s biggest recipe book. And bear in mind that although some meals are difficult to cook, there are loads of meals that are are really easy to prepare. Stews are simple to make, for instance, and the ingredients are cheap to buy.
If you’ve got a freezer and a microwave it’s also worth considering cooking food in batches. It’s usually not much more expensive to buy larger portions of the ingredients you need to prepare a dish and it costs roughly the same to use the hob to cook a single portion as it does to cook multiple portions. You can freeze any surplus portions and reheat them at a later date.
This is another area of expenditure that you cannot completely eliminate, but it’s an area of expenditure where savings should be possible.
The first thing to do is to consider switching to an alternative supplier. There are a number of comparison websites that make it easy to do this. Most households spend a lot of money on their utility bills so even a small percentage saving can make a meaningful difference.
Even if you can’t find a utility company that is cheaper than your existing supplier, you can reduce your utility bills by taking some fairly simple measures.
If you’re not already using energy saving lightbulbs, change your lightbulbs now. The first generation energy saving lightbulbs were terrible, taking ages to actually light up. That’s not the case any more. The current energy saving lightbulbs work perfectly and will pay for themselves via much lower electricity bills.
Even if you’re using energy saving lightbulbs, turn off any lights that don’t need to be on. And turn off the TV if you’re not watching it.
It’s the same with your heating. If you’re heating rooms that you’re not using you’re wasting money. Turn off any radiators in rooms that aren’t occupied. And rather than putting on the heating, think about putting on a sweater or even your coat.
There’s only so much you can save by turning down the heating and cutting down on your takeaway food consumption. If you need to save even more money, you might need to consider downsizing.
The first thing to think about is your personal transport. Do you really need two cars? Actually, do you need a car at all, or could you manage with public transport or even a bicycle?
Cars are expensive to run. When you add up the cost of annual servicing and factor in the cost of tax and insurance they’re expensive even if you don’t actually drive them anywhere. And it doesn’t take too many trips to the local petrol station to realise that once you start driving them they get even more expensive.
Consider swapping your current car for one with a smaller engine that uses less petrol and is in a lower insurance group. If you can, consider getting rid of your car entirely.
Similarly, it’s nice to live in a large house, but large houses cost a lot more to run than smaller houses. If you’re renting, moving into a smaller home will reduce your monthly rent. If you’re a home owner, moving to a smaller place will reduce your mortgage payments and could even release some equity that you can use to reduce your debts.