The easiest way to meet all your financial goals is through budgeting. An important lesson budgeting teaches you is that you don’t need to pay expensive monthly bills. Most people live on a paycheck to paycheck cycle, surviving only on their monthly salaries entirely without saving any part of it.
This style of living leaves you vulnerable in case of emergencies, and you have to wait for your next paycheck before settling your emergencies, be it debt or a medical crisis.
For you to build your emergency funds and other savings and luxury funds, you need to either increase your earnings or find ways to reduce your monthly expenses.
Since finding new sources of income can be a challenge, the next best option would be to manage your monthly bills to leave room for savings and investments.
Keep an account of your monthly expenses
The first step in cutting your monthly bills is to figure out where the money is going. Tracking your spending for a period of 30 to 60 days will probably be an eye-opener to just how much you were spending before.
The old-fashioned way to track is to pen down every expense as you make it, this can be a cumbersome task, therefore, discouraging people from tracking their monthly bills, but thankfully technology has stepped in to make it. If you pay your monthly bills using a debit or credit card, check your statements. If you pay using cash, make sure you get receipts.
Plan your monthly budget
It isn’t quite complicated to plan a budget; it is simply planing where your money will go. It’s important to allocate money each month to financial goals. Paying off debt should be the main objective, and you should not be tempted to spend that money on other areas of your life.
Want to create a budget? Follow the three easy steps below.
- Determine your income
- Determine fixed monthly expenses – rent or mortgage, car payment, insurance, etc.
- Determine needs – gas, food, medical bills, etc.
- There are several apps and other resources online or offline that help with budget planning
Reduce electricity use
Electricity is used for the heating and cooling of homes, power lights, and other appliances, but there are options to lower your electricity bills. Electricity costs make up about 12℅ of the average household budget.
There are things which you can do to lower your electricity bills…
Don’t leave the computer running, don’t run the dishwasher until it is fully loaded, hang out the laundry instead of using the dryer, turn down the thermostat, change to energy-efficient light bulbs, buy appliances that do not consume much electricity, and check with many electricity providers to find the cheapest.
Eat at home
Eating at home is one of the main effective ways to save money because preparing and eating meals at home cost less than going to a standard modern restaurant. Weekly meal planning can simplify it; figure out what you will eat for the week and stick to your plan.
The Internet offers an endless variety of recipes to suit all tastes and even cooking tips for people who do not consider themselves the best cooks. If you don’t have the time to make meals during the workweek, make something during the weekend to provide several meals.
Shop with a list
There are many methods to save money while grocery shopping, but it starts with a shopping list. This can reduce wasteful spending and impulse buying. It can be simple or complicated, and some apps help with planning lists and finding bargains. Below are some of the tips for planning a shopping list.
During the week, keep a running list, plan your list and add items to the list before you go. Arrange the items on the list in categories (dairy, produce, etc.); you can even put them down where they are in the store so that you don’t end up wandering to the candy or chips aisle where you may be tempted to waste money.
Lower your housing expenses
One of the biggest expenses is likely accommodation – people with income below $50,000 yearly spend an average of 36.6℅ plus of their income on housing. This is over the thumb 30℅ recommended by financial experts.
When considering a mortgage application, lenders like to see someone spend about 28 ℅ of their pre-tax income on accommodation. Reducing housing expenses may seem like a nuclear option, but it is something worth considering. Below are some ways renters can reduce housing expenses:
- Get a roommate
- Give up a paid parking space
- Move to a cheaper apartment or a cheaper region in your area
Pay off your outstanding debts
The faster you get cleaned of your debt, the more you will have in your monthly budget. As mentioned earlier, to pay off outstanding debt, credit card debt must be a major focus as it is the most common debt. Unlike car loans or mortgage payments, it grows and, over time, is hard to lower.
Part of your budget should include higher than minimum payments on your credit card. Keep debt consolidation in mind, mostly credit counseling. By adding additional principal payments to your mortgage or car loan, you will also reduce them faster.
Consolidate your debt and lower interest rates
Consolidating debt is a drastic way to reduce or cut expenses. If you own credit cards, those monthly payments take a big portion of your take-home pay. Check the interest payments on your cards-it is probably between 16℅ and 30℅. Debt consolidation means joining multiple debts into one monthly payment.
The goal is to reduce what you pay in interest, lower the monthly payment, and pay the debt off.
Reduce your insurance premiums
Another way to cut expenses is by adjusting your home and car insurance. If you pay both, shop about for companies that will give both at a cheaper rate. To reduce car insurance costs, check out companies that offer cheaper rates for a safe driving record or those who drive a cheaper car.
Cars with increased safety features also can get cheaper rates. You can get cheaper rates by installing safety features around your house like smoke detectors and fire extinguishers.
Put a hold on your credit cards
A big obstacle in cutting expenses is credit card debt. When you don’t have money on hand for payments, you use a credit card, but the card balances can grow fast, especially if the credit card’s interest rate is high. If you have a ton of credit card debt, you can freeze your card to cut monthly expenses.
You can do it officially by going to the card issuer’s website or app and freezing the credit card, allowing only subscriptions to be renewed, stopping all purchases.
How to Reduce Your Monthly Bills – Conclusion
Reducing your monthly costs is an excellent way to cut down costs and save a little money by the end of every month. In addition, you will be able to live according to your means and avoid situations that will make you go into debt. Besides this, you will lead a happy life and will be free from all financial worries.
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