To Really Save Money, Cut Recurring Monthly Expenses, Not Daily Splurges
Among the most common advice given by personal finance experts is to reduce your day-to-day expenses, or so-called latte factor. These experts would have you give up your daily cup of coffee, bring your lunch to work (which is actually quite frugal and healthy), and cut back on eating out. The money saved on these daily wastes of money, the theory goes, would go a long way towards helping pay off your debt and save for retirement. This is absolutely true: most of us waste obscene amounts of money on life’s little luxuries every single day. The amount we spend on these things would probably surprise most of us.
Cutting The Daily Luxuries Is HARD!
The traditional advice is right on, but have any of you ever actually tried to do it? Cutting daily expenses is hard! You may succeed for a few days or even a few weeks, but eventually most of us fall back into the same old habits. That morning cup of coffee is just too delicious to pass up and sometimes, you just have to get out of the office for lunch when the walls seem like they’re closing in on you. Who wants to eat lunch at their desk when the company is falling apart around you? Besides, you tell yourself, going to lunch with coworkers is good for networking.
The problem with this approach to saving is that it’s too difficult for most people to manage. It requires making a conscious decision every day to deprive yourself of something you want. Many people have the will-power to pull this off but most, unfortunately, do not. Most will eventually cave in to temptation and return to their old spendthrift ways.
Focus On Recurring Expenses
The key to really saving money, in my mind, is to focus on trimming recurring expenses. These are the expenses that really make a dent in our budget: cable television, internet, magazine subscriptions, auto insurance, car payments, etc. Taken together, we spend a large portion of our monthly income on recurring expenses. Fortunately, they are also the easiest to cut because you only have to make the decision once. Taking your lunch to work requires a daily, conscious effort, but cutting back to basic cable or finding a way to trim your car insurance premiums is a one-time deal. Once done, it’s much less likely you’ll be tempted back to your old ways because you won’t be confronted with what you’ve given up on a daily basis. Here are some recurring expenses you can probably trim back.
- Cable Television – Do you really need digital television and every premium channel known to man? Probably not. Chances are, you can make due with basic cable. If there’s something on the premium channels you really have to see, you can probably get the entire season from Netflix for a small fraction of the cost.
- Internet - Unless you are a hardcore gamer or run a popular website out of your basement, you don’t need the fasted internet connection available. An old-fashioned 1.5 mbps T1 connection is more than adequate for practically anybody’s needs and can usually be had for about half the price of your provider’s most expensive package (which will probably never hit its theoretical top speed, anyway).
- Cut Insurance Costs - It goes without saying you should shop around for the best price, but quite often, you can save a bundle simply by purchasing both your auto and homeowners insurance through a single provider. I go through Allstate Insurance myself, and their rates are very competitive. Why not get a quote from Allstate while it’s on your mind? Who knows, it may be lower than what you’re paying now.
- Property Taxes – With property values plummeting, many of you own homes that are now worth much less than they used to be. The upside of that is lower property taxes. Make sure to carefully review your property tax assessment this year and challenge it if you think it’s too high. I wouldn’t put it past many cash-strapped municipalities to err on the side of higher values.
- Pay Down Your Credit Card Balances – Seriously, credit card interest is the most useless of all recurring expenses because it brings no current value whatsoever. Instead, you’re paying for something you bought months or even years before. With the insane interest rates on many cards, reducing your balance by just a few thousand dollars can make a huge difference in your monthly interest payments. If you have decent credit, you might be able to “cheat the system” somewhat and do a a low- or even zero-interest balance transfer to another card. Check out the balance transfer credit cards offered on CardOffers.com and save money when you transfer high balances.