Seven Ways to Cut Back on Your Expenses

Adam Rust

If you don’t have a bank account, then get one. Preferably, you should find one that fits how you bank. If you like to use ATMs, then make sure the account gives you access to convenient ATMs. Do not sign up for an account if the minimum monthly balance exceeds the amount that you can reasonably leave untouched over the course of the month. Personally, I like accounts that offer the remote deposit of checks, because I don’t like taking time to go to a bank branch. The opportunity to save money should compel everyone to get an account. The alternative – to go to a check casher and then carry cash – is expensive and inconvenient.

Leave room in your budget for ebbs and flows in your expenses. Why plan to be surprised when you need to go to the doctor or fix your car? These events are part of life. They just happen. In my mind, the right approach is to pocket those future expenses on an as-you-go basis. Every time you get paid, pull out a bit and drop it into a separate bucket. If you can, arrange to have the transfers occur automatically.  Move it to a place where those funds can’t be spent. A savings account could be a good solution. The prepaid cards on WiseWage give their account holders the option of putting money into a savings “pocket” or to an optional savings account.

Drive an older car. Although depreciation rates have slowed, auto experts say that they still lose almost twenty percent of their value within the first year of ownership. Within three years, a car is likely to have lost half of its value. But that decline can play to your advantage, too. Carmakers have learned to build cars, so they last much longer than they did in the past. It’s a better than even chance that a car with 100,000 miles still has a lot of driving left to do. Plenty of cars come off-lease after three years, and as a result, leasing companies flood used car lots with high-quality late model cars. Because leasing companies penalize drivers when they put too many miles onto their cards, most only have about 50,000 miles. They can be purchased for half the cost of a new car. 

At some point in time, you may be lucky enough to pay off your car before it has come to the end of its useful life. Not only will you now have one less thing to pay for every month, but it’s also likely the other costs associated with owning a car will have shrunk as well. Property taxes on an older car are much less than those for a new car. You will see that your bill for comprehensive car insurance drops.

Perhaps the best way to reduce your car expenses is just to drive less. When you couple the cost of gas with maintenance costs and depreciation, it becomes more and more clear that each mile is expensive. The federal government estimates that each mile of driving costs 53.5 cents. Driving one less mile per day could amount to approximately fifteen dollars in savings every month.

Be careful during the holidays. Spending tends to peak at the end of the year when a trifecta of extra expenses collide. Many people travel between Thanksgiving and the end of the year. Everyone wants to be generous when it comes to bestowing presents upon family and friends. One study estimated that, on average, Americans spend $882 on Christmas gifts during the 2015 holiday season.  Finally, people tend to have a busier social calendar. Many people find they can catch up during the following months, but nevertheless, the spike in expenses at the end of the year creates a demand for debt. Corporate earnings reports by payday lenders and pawn shop franchises consistently show that financially distressed households use their short-term credit products more at the end of the calendar year than at any other time.

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Don’t carry a credit card balance. Interest on credit cards can be as high as 25 percent. Pay down your credit cards first. It is a good idea to have credit available, but it’s not smart to use credit cards for longer-term borrowing.

Put your recurring expenses on a diet. Could you go from unlimited data to a 2GB plan? Sprint charges $60 per line for unlimited data, but the 2GB plan costs only $20 and the data can be shared among multiple accounts. Do you need a premium cable subscription? Cable television prices continue to go up, but many people are too busy to really watch more than a few shows per month. “Cable cutting” may make it possible to reduce your television costs by fifty dollars per month. Are paying for a gym membership that you don’t use, or for one that costs more than other alternatives that would fit your needs equally well? Many gyms offer promotional rates and some have ongoing membership fees of less than $10 per month. Alternatively, you could break out your running shoes. If you like the benefit of a class, you might find that a video-based app could substitute for a gym membership. Premium subscriptions to some of the best exercise apps cost only a few dollars per month.

The net effect is that you will reduce your monthly expenses permanently. It might not seem like a big deal to shave twenty dollars from your cell phone bill and twenty dollars from your gym membership, but over the course of the year that adds up to almost $500 in after-tax savings.

Shop around for insurance: It used to be that your insurance company would give a discount for longevity. Now, they have figured out that some people are more likely than others to comparison shop. Guess what? Many insurance companies charge more if they don’t think you are likely to switch. Another option, suitable for people who drive fewer miles, is to look for a plan that will reduce your rates if the evidence shows that your driving habits will be less likely to lead to a claim. All things being equal, being on the road less should reduce your risk of filing a claim. These products benefit safe drivers, too, because the companies install monitors that record your driving speed and your breaking habits.


The last step – and one of the most important – is to improve your credit score. If you have a score below 720, you will pay more to borrow money. You may even pay more for insurance. In fact, a bad credit score can set you back in more ways than you might think. Some employers review credit scores as part of a job application, and naturally, they view a bad credit history unfavorably.

You’ll want to do this as soon as possible, as your score matters less and less as you grow older. Unless you plan to keep borrowing after you retire – and hopefully that won’t be necessary - then your credit score won’t matter very much at that time. The good news is that Americans seem to be accomplishing this goal.

The good news is that consumers are finally advancing on some of these goals. This summer, the average FICO score crossed the 700 line. Likewise, the Federal Reserve says that savings rates recently reached 6 percent of income. The also notes that most people are not carrying a balance on their credit cards, and at this point in time only about one in four reports that they make it a habit to maintain a balance on a regular basis. 

Plenty of people resolve to reform their financial lives at the beginning of the new calendar year. This year, be one of them!

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