Spend Less Money

There are two ways to get out of a bad place financially: Spend less or earn more. Most people have the ability to, and probably should, do both. In this post we’ll talk about the former, as it is often the quickest win when it comes to your financial health.

Some 60% of Americans are living paycheck to paycheck, or worse, spending more than they make. With stagnant wages and inflation rapidly increasing the cost of necessities, it isn’t surprising. Mortgage rates have more than doubled in the last couple years. The cost of certain goods has skyrocketed. It seems impossible for many to get ahead.

However, in many situations there are actions that can be taken in regard to money management that can improve one’s financial well-being. Here are some simple hacks that anyone can do to get a grip on their financial situation, even in difficult times.

The big three: housing, transportation, food

Housing

Housing is the biggest expense for most people, and likely the one that will be most difficult to change. Downsizing your house or apartment should be considered. If this is an option for you, it can save you a lot of money immediately and in the long run.

Consider the % of your gross income going toward rent or a mortgage. Many financial experts will recommend not going over 20-25% for your housing costs. Many people, however, spend close to 50% or more of their gross income on housing. This is what is known as being “house poor”. Spending too much money on housing will likely lead to financial stress and potentially the inability to keep up with your other needs in the long run.

Transportation

Transportation should be owned, not rented. Whenever possible, buy a car with cash instead of utilizing debt. Many people will scoff at that idea, because it is so common to finance transportation these days. The average new car payment is now over $700 per month! You can find a reliable car, oftentimes one you can pay cash for, for much cheaper! You do not need to purchase a new car; buy a quality used car for cash and stop trying to keep up with the Jones’s.

If you are unable to buy with cash, the 20/3/8 principal taught by Brian Preston, The Money Guy, can be considered. This formula gives a very reasonable amount of leeway for a person who is unable to purchase a car with cash. He recommends putting 20% down, financing for a term of no more than 3 years, and having no more than 8% of your gross income going toward car payments. This is a very reasonable accommodation for someone unable to pay cash for a vehicle.

There are other ways to save on transportation costs as well. We are not extreme-frugalists, but we have adopted some of the practices that some would consider “extreme” – I started taking public transportation to work last year. I ran all of the numbers and it costs me 2 times as much money, not including depreciation of the vehicle, to drive to work rather than take public transportation. I even ride my bicycle to the station when the weather is nice so there are additional savings there.

Food

Eating at restaurants is one of the most expensive (and least-healthy) ways to meet your nutritional needs. Your budget may allow for some eating out, but depending on your situation you should probably either cut it out completely or at least cut back on it.

Here are our recommendations for cutting back on food expenses.

Make a meal plan and stick to it. Plan what meals you will eat on a weekly basis, create a shopping list of those items, and then stick to the plan. Not only will you save money by having a plan and not running to get fast food at the last minute, but you will also save money on your grocery bill because you’ll be buying and actually using the items you purchase. Cooking and eating at home is a sure-fire way to save some money in this expensive area.

Set a date, and a budget, for meals at restaurants. If your budget allows for it, set a date and plan ahead for eating out. Which restaurant (or at least what type of restaurant) will you dine at? Are you going to a nice steakhouse, the local café, or a drive-through? Will you be getting dessert after? What about appetizers and drinks? All of these things will help you prepare for the cost of the outing.

Don’t pay for unnecessary convenience

Last month the registration was up on my vehicle, and here in the state of Utah I also had to do an emissions check in order to re-register the vehicle. I took the car to the local emissions station where they charged me $45 for the check. They also offered to renew my registration on the spot for an extra $10. “It’s just $10”, I thought, “and it would be convenient to just have it done”. However, I decided to re-register on my own on the state’s website – it took me about 2 minutes and earned me $10 (a penny saved is a penny earned) to have the entire thing done. Do not pay for unnecessary convenience.

Another example we recently encountered was a night that we had decided to order take-out. The restaurant we had decided on was about 5 minutes away, but they also offered delivery through a third-party. I decided to weigh both options: delivery from the third-party or pick it up myself. I was shocked at the totals on each of these exact same meals. The “delivery fee” was only $1.99, but the price of the meal was 50% more expensive than we would pay for picking up the food on our own. We decided to not pay for the unnecessary convenience, it took me 12 minutes to pick up the food and saved us more than $20.

Just say no

Our last tip for spending less money might take the most courage of all – just say no. Last year we were fortunate enough to take our family on a trip to Mexico. It was our first time taking our young kids (4 and 18-months) out of the country and we had a great time. The weather was perfect and our kids had a blast. This, however, was not exactly a vacation for us parents. We still had all of the same responsibilities as we do at home, the kids still needed to be fed, naps still needed to be taken, diapers still needed to be changed, etc.

When we were on this trip, some close friends reached out and asked if we would like to join them on a separate trip to Mexico just a couple months after we got back. We really wanted to go. We loved our vacation with our kids, but the thought of an adults-only trip sounded equally amazing. We’re in, we thought. The only problem was that we had just spent our vacation money on our family trip, so we’d have to pull from savings for this additional trip. We had to say no.

Saying no can apply to big things like a trip, large purchases like a new car, or small things like a night out. Saying no takes courage. Saying no takes maturity. Saying no to spending money that you don’t have is the right thing to do.

We hope these tips will help you spend less money and move toward more financial security!