How Can I Reduce My Spending?

Spending cuts, isolatedThe big question this week is, “How can I reduce my spending?”  What this really means is, how can I free up more money so I can save more…or at least spend it on things that I value more?

I like to educate clients that there are only three things you can do with your money:

  1. Spend it
  2. Prepay debt with it
  3. Save it

(Well, I suppose there are more things you could do with money…use it to start a fire, wrap presents with it, make paper airplanes with it…but let’s be serious.)

A key thing to grasp is that no expenses are too small or insignificant.  The daily newspaper, your monthly Netflix or Pandora subscription, the daily stop at Starbucks on the way to work, dining out too often…these little expenses are what adds up quickly.

Expenses generally fall into two categories:

  1. Essential expenses that you cannot avoid, such as your mortgage, rent, utilities, groceries, car insurance, etc.)
  2. Discretionary expenses that you choose to incur, like eating out, entertainment, gifts, furniture, etc.  Discretionary expenses are the ones you have the most control over.

Here are some simple tips to get you started at spending less, so that you can save more:

  • Do you buy a lot of books?  Try the library instead, or do a book swap with friends.
  • Take coffee or lunch to work rather than buying it.
  • Limit eating out to once per week rather than twice.
  • Cut back on smoking or alcoholic beverages.   Heck, quit smoking!
  • Turn lights and TV’s off, and don’t waste water.  Even though utilities are an essential expense, there are ways to reduce them.
  • Email more often, or use Skype which is free, rather than calling long-distance.
  • Always go grocery shopping with a list to avoid impulse items at the end of the aisles.
  • And one of my favorites…if you buy all of your groceries from Zupan’s or New Seasons or Whole Foods, try Trader Joe’s.  You’ll save hundreds, and eat very healthy as well.

Action Plan:  Pick a realistic goal for your monthly spending reduction.  Try not to make too many changes all at once.  To see how big of a difference this can make, do the math.  If you start by committing to reduce your spending by $2 per day, that is $730 per year!  Set the saved money aside for a family vacation or apply this new savings to reduce your debt faster.

We would love to hear how you are reducing your spending!  Comment below and share for everyone.

About Trevor Hammond

As a veteran of the mortgage industry, Trevor Hammond is the co-author of "Borrow Smart, Retire Rich," a Certified Mortgage Adviser and a founding Faculty Member and Contributor to the National Institute of Financial Education (www.niofe.org). And he has provided thousands of homeowners with the clarity and confidence to make smarter decisions when it comes to their mortgages and money. In 2013 he launched an entirely new kind of mortgage company: Aspire Mortgage Group, which is committed to educating and empowering homeowners to increase savings, eliminate bad debt, and safely increase net worth. The specialized group of mortgage professionals at Aspire Mortgage Group have redefined what homeowners should expect from a mortgage company. To learn more about Trevor Hammond and our team of mortgage advisors please visit our website at www.aspiremortgagegroup.com or email Trevor directly: trevor.hammond@sierrapacificmortgage.com. Aspire Mortgage is a Sierra Pacific Mortgage Partner.
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