Do you want to cut your living expenses or just want to save more money?
The following tips help to give you more control over your finances. In a world where anything can happen – and does – that’s something we all need.
Giving yourself a regular financial health check each year helps rein in unnecessary spending and reminds you of sometimes forgotten saving habits. And the good news is, you don’t need to become a boring, penny pincher to cut expenses and save more money!
Cutting Expenses: Where do you start?
Understanding where your money goes is essential, so it’s time to get your expenses in order.
To figure out if you need to cut costs, you need to know what they are. You’ll already have some idea of where your money goes, but do you know the specifics? Here’s how to really drill down on your expenses.
- To start, use your bank’s expense trackers. They give you an indication of where the lion’s share of your money goes.
- Take it further and export an itemised spreadsheet from your bank to see the full picture of your spending.
- Once you’ve done that, total up all your spending for the year.
- Next, add in a row which totals your after-tax income – from all sources.
How does it look, compared to your expenses total?
You likely fit into one of these 3 circumstances
- Living beyond your means: If your expenses are more than your income, you need to do something to cut down your spending – and fast! More on how to do that next.
- On the line: If your income is just higher than your expenses, you need to do something to widen that gap. If you don’t, as soon as something goes wrong or you find yourself with an unexpected expense, you’re in trouble. As for saving, that’s going to be tough!
- Looking good: If your income versus spending has a healthy gap on the income side, that’s great. But what about savings? Are you saving regularly – or are you saving enough?
So what’s the next step?
Whether you live beyond your means or just want to cut down on your spending and/or save more money, you’re going to have to do ‘The Split!’
Splitting expenses: the #1 way to cut unnecessary spending
So now you’ve got your itemised list, split all of your expenses into costs that are essential and costs that are not. To make that easy, we’ll call them ‘Needs’ and ‘Wants’:
- Needs = Rent/Mortgage, utility bills, insurance, car expenses, food, etc.
- Wants = Streaming subscriptions, nights out, takeaways, beauty treatments, clothes, etc.
Once you’ve got your two columns, add them both up.
Let’s start with the fun one: Your ‘Wants’ list.
None of us want to cut back on the fun things in life, but if you need to cut expenses this is the easiest place to start.
The good news is, there are ways to shrink the costs of your favourite things, without giving them up all together.
Here are a few ideas to reduce spending on non-essential items
- Do you have more than one streaming subscription? If so, which one do you watch most? It may be tough but pause, or cancel, the other(s).
- Do you eat out? How often? You can cut your spending here by going out less and/or going to cheaper places. Better still, rotate with friends for dinner nights in. A bowl of pasta, a wine and some good laughs is a great – and cheap – night out.
- Save on groceries. Make a shopping list and stick to it. And never shop hungry. You can also try shopping at farmers markets, fruit and veg shops and your local butcher. Often, the food is better quality and cheaper than the supermarkets.
- Takeaways – Of course, cutting back on takeaway food all together is going to save you the most money, but you don’t need to take it that far! Delete delivery apps like Uber Eats, Deliveroo, Menulog etc. and pick your food up. Call the restaurants directly if you’re really hanging out for your fav’ dumplings. You support a local small business by putting more money in their pockets, and you’ll pay less because you’re not paying for service fees and inflated delivery charges.
- One for the girls: Paying a fortune for hair, nails, eyelashes etc.? Try a monthly or quarterly pamper night with friends. You can book a mobile or at-home beauty technician or hairdresser and all chip in for a group session instead. It’s far cheaper than visiting a salon individually.
- Personal shopping tips
- Check out the outlet shopping centres like DFO for discounted designer label clothes.
- Visit weekend craft markets to hunt out new designers with unique clothes and accessories.
- If you just love your gadgets, check out secondhand outlets and websites. You’ll quickly learn how to pick a great bargain!
- If you just have to have new, look at the prior year’s model for things like cameras. You’ll save a few hundred dollars but still get a shiny new toy!
- Watching your team live costing too much? – It doesn’t have the same vibe, we know, but when game costs are too much, get your mates together at home for Low and Slow BBQ, beer and plenty of screen yelling! – Obviously, whoever has the biggest TV has to host!
- Day trips instead of weekends away. Everyone needs a break, but hotels cost money. Try planning weekend day trips instead and take food with you to make it even cheaper. Check online for awesome road trips or hikes around you for some great ideas.
- The 50% cut. Sometimes you don’t need to cut things out or change the way you do them. You can simply halve the frequency you do them. So, if you go out every Saturday night, go out every other Saturday night. Swap the alternate Saturday for a movie night at home instead.
But how do you cut expenses on your ‘Needs’ list?
Ok, so we’ve talked about cutting back on your ‘Wants’ list but what about your ‘Needs’? It might feel like you don’t have a choice when it comes to this list, right? Actually, you do!
There is a lot you CAN and SHOULD do, every year, to make sure you’re not paying more than you should for those unavoidable expenses.
Let’s start with a nasty little thing called Loyalty Tax
This is such a big topic, we’ve actually written an entire article about Loyalty Tax. Put simply, Loyalty Tax is the sneaky increases in the amount you pay for ongoing subscriptions, insurances and contracts.
Instead of rewarding loyal customers, many companies sneakily increase their fees over time or at the end of initial contract periods.
Companies get away with it because many of us don’t check the renewal notices properly, or just can’t be bothered to put in the effort to pull them up, or do the research needed to change providers. For subscriptions that just roll over and over, it’s hard to even know where and how to check them.
Check your policies, contracts etc. at least annually to make sure you’re getting the best deal. And, do it for all of these providers:
- Power and gas
- Health insurance
- Home and contents insurance
- Car insurance
- Credit cards
- Pay TV
How to reduce bills and start getting a better deal on everyday expenses
Have a quick look at what your current provider is offering new clients, then look around for competitor rates so you have a good idea of what you could be paying. Next, give them a call or send a message. Most providers will listen because it’s in their interest NOT to lose clients.
You can genuinely save thousands of dollars a year by doing an annual loyalty tax check-up.
So how do you increase your savings?
Ok, so now you’ve cut your expenses, how do you save more money?
Answer: Separate and Automate!
What do we mean by separate?
It simply means separating your money into three separate areas:
- Spending/play money
Create different accounts (or sub accounts) for each one. These days this is known as ‘bucketing’. It helps make sure you don’t spend too much on things you shouldn’t. You can even create accounts for different saving goals when you want to save for big and small goals at the same time.
And now, Automate
Pay your wages/salary into your expenses account, then set up automatic, regular transfers into your savings account and your spending account. This stops you dipping into your savings money unless you really need to and leaves your expenses safely separated from your spending money.
Give your savings a little boost by checking in on your spending account each week, transfer any excess that you haven’t spent into your savings. An extra $10 or $20 here and there soon mounts up.
TIP: To make life even easier, automate each of your expense payments that are regular bills so you don’t forget or fall behind on anything. It’s much harder to catch up than keep up.
Saving doesn’t need to be hard or something you need to remind yourself to do. Automated, regular payments in, even just a little each month, will grow your savings without you needing to do anything.
Staying in control of your money means you’re better able to adjust if things go south for a while. Plus, having a savings buffer gives you a little more security.