You've undoubtedly heard it said that necessity is the mother of invention. The truism certainly applies to finances. When times are tough, people invent all kinds of ways to save a buck. They may have already considered themselves to be quite frugal but suddenly, in the face of absolute necessity, they discover that they didn't truly know what frugality was. You invent some cost cutting approaches, your neighbor invents others and when everyone shares their insights, there are a multitude of opportunities to consider.
But just as there are many ways to save money, there are as many (or more) opportunities to waste it. A bounced check, an impulse buy or a holiday shopping spree can erase all of your hard-earned gains. That's why it's important to look, not just at the little things that can be tweaked in your budget, but at your overall approaches to personal finance. Do you tend to lose track of how much you have in the bank? Then the best way to cut your expenses might be to explore options for getting organized. Do you spend more money dining out than you plan to? You might want to examine that bill a little closer for savings opportunities. Do you burn through your entertainment budget faster than you'd like? Perhaps you haven't considered all the entertainment options available.
Your monthly living expenses can be cut. Some of the cuts may involve tiny tweaks that add up over time, while other cuts may involve broad changes in your lifestyle and habits. Either way, the opportunity to reduce costs is waiting.
Imagine you're in a boat that's quickly taking on water. You're sinking. Yes, you have to bail out the water but unless you want to keep bailing indefinitely, you're going to need to find the source of the leak. Sounds obvious, doesn't it? The same is true with your monthly budget. If you want to eliminate overdraft charges from your bank, late fees on bills and snowballing interest on debt, you have to get organized.
Take the time to write out all your monthly expenditures and all your sources of income. If you have a clear picture of what you're dealing with, your boat will take on less water. Then you can begin the bailing process, having confidence and peace of mind about the stability of your craft.
It's kind of an old-school approach to cutting expenses, so old that some people have forgotten about it. Maybe it's time to bring back the envelope system.
Once you're organized, you can divide your paycheck by category: entertainment, gasoline and food, for example. Decide how much money you're willing and able to spend for each category [source: Ramsey]. Put that amount of cash in the correspondingly addressed envelope. When your entertainment cash is gone you can't swipe a debit or credit card. If you've nearly spent the cash in your gasoline folder, you avoid taking that last-minute excursion out of town.
How does the envelope system cut your monthly expenses? By erasing the illusion created by that plastic in your wallet that there's always a little extra that can be spent. An envelope doesn't have an expanding and tempting credit limit. When it's empty, it's empty.
You're organized and you have discipline -- now you want to find ways to get the most bang for your limited buck. You could avoid eating out altogether, but that provides an opportunity for you to socialize with friends and family. So, what do you do? You certainly don't need to go hungry.
Portion sizes are increasing at restaurants. Often, you'll get more food than you could ever eat. Consider ordering a la carte. For instance, rather than getting the three enchilada, two taco combo with a side of beans, order a burrito and eat the chips that are provided instead. It could save you as much as 50 percent on your main course.
Speaking of the main course -- stick to it. Appetizers, desserts and alcoholic drinks are the big profit categories for most restaurants. Drinks of any kind will add a couple of dollars to your bill. By some estimates, a $2 glass of iced tea actually costs the business two cents [source: Howard]. That's an enormous profit margin that will cost you. A glass of water is not only better for you, but it could easily save you $25 a month, too.
Do you love books and movies? There's a great way to keep the entertainment and information coming while cutting the expense.
Lending libraries (as they were first called) were a source of controversy when they were introduced in the 19th century. Publishers were concerned that they wouldn't be able to make any money if books were simply loaned out for free. Fast forward more than 150 years and it's clear that the entertainment industry is still making money despite the availability of free books, movies, music and even video games. However, many people still don't take full advantage of their neighborhood library.
You may have to wait a little while for a new release but, otherwise, you can access an evening of fun for your kids or yourself without spending a cent. Just think about the savings opportunity -- if you were to buy a novel for $20 or $25, you'd be lucky to get a $5 return even if you sold it to a discount bookseller. But it's on loan at your local library for free.
Technology can also be a lifesaver when it comes to your monthly expenses.
It's an all-too-common story. The hustle and bustle of daily life doesn't give you the time to make smart financial decisions that'll reduce your monthly expenses and plan for the long term. But, as it turns out, it doesn't necessarily take long if you embrace the latest technological advances.
Secure software applications like Mint.com will assimilate all your bank accounts, investments, bills and expenses and send recommendations and reminders to your smart phone or e-mail account so you don't have to manage it [source: Mint]. Such applications are like having a coach and financial adviser with you as you work and play. Maybe it's just a gentle nudge to say "your spending on clothes this month is unusually high," or "it might be best to avoid this high-priced outing." Staying informed has the potential to save you a great deal of money.
Cutting monthly expenses is about realizing that, yes, "a penny saved is a penny earned," but repairing the holes in your piggy bank is helpful, too.
Ready to slash your spending and start saving? Visit the links and resources on the next page to get started.
Dollar stores — where most items cost just a buck — always seem to make money. HowStuffWorks finds out how they do it.
- Grant, Kelli B. "7 Ways to Save in 2009." Dec. 29, 2008. (Dec. 8, 2011) http://www.smartmoney.com/spend/family-money/7-ways-to-save-in-2009/
- Howard, Clark. "Clark Shares Ways to Save Money When Eating Out." Nov. 28, 2011. (Dec. 8, 2011) http://www.clarkhoward.com/news/clark-howard/shopping-retail/clark-shares-ways-save-money-when-eating-out/nFpDp/
- Military Money. "Proven Ways to Cut Expenses and Save Money." Nov. 28, 2011. (Dec. 8, 2011) http://www.militarymoney.com/bankingsaving/budgeting/tabid/67/itemId/1585/Default.aspx
- Mint.com. "How it Works." (Dec. 8, 2011) https://www.mint.com/how-it-works/
- Ramsey, Dave. "Dave Ramsey's Envelope System." Sept. 5, 2009. (Dec. 8, 2011) http://www.daveramsey.com/article/dave-ramseys-envelope-system/lifeandmoney_budgeting