Reducing Expenses Isn’t Easy
When we had our “Come to Jesus” moment and realized our lives were on a crash course with the pain and misery of massive debt and possible bankruptcy, we realized we need to start focusing on reducing expenses. As John always said, “We gotta stop the bleeding.”
We wanted our lives to still be about having a good time. Duh! #HaveFun is part of our “Money Mantra” as Farnoosh Torabi calls it on her podcast, So Money. Instead of cutting out all of our fun, we focused on reducing expenses in categories rather than eliminate categories altogether. This is one of our recommendations in our book 4: The Four Principles of a Debt Free Life, in the budgeting chapter.
Small and Big Examples of Reducing Expenses
Hallmark is good at capitalizing on holidays. They’re cards are nice and aren’t terribly expensive. There are cheaper card companies, but Hallmark a good middle-market product. Of course, there are more expensive card companies. The shorter of the two of us loves Papyrus Cards. They’re intricate, festive and unique. They’re also $6 or more. Target has a $0.99 card section. Is spending five times that a vice or a virtue?
Another example is wine. Both of us love wine. We hosted a game night recently and our friends brought a couple nice bottles of wine. After we finished the bottles, we were tempted to tap into our wine collection for better (also more expensive) wine. Luckily, cooler heads prevailed. We opened our not-so-expensive (NSE) Bota Box of Zinfandel or Cardboardeaux. We had a great time and didn’t give into our vice.
Our Top 10
What vices can you eliminate or cut back on to save money? Below are suggestions to consider.
- Brand name products – We were the kings of brand names at one time, but store brands are as good as name brands in many case. Shop at The Dollar Store, Big Lots or other similar store for basic home products such as dish detergent, soaps, shampoos, household cleaners, some kitchen supplies and more.
- Cable – One of our first steps reducing expenses was to cut the cable cord. Even if you’re not ready to cut the cord completely, and with Hulu and Netflix we can’t figure out why not, you can lower your payments by going to a cheaper plan. Going from a Premier to a Basic package with Comcast saves about $50 a month, $600 a year. If you can’t stomach cutting back on sports packages, check out Sling.com, where you can stream ESPN and a bunch of other cable only channels for as low as $20!
- Entertainment – The Internet is full of recommendations to entertain yourself and your family for free or cheap, such as The Simple Dollar and Mr. Free Stuff. If you’re lucky, your city or state lists things to do such as Denver.org. Not all of it is free or cheap, but with a little searching you can find things that will fit your budget. We built a calendar and planned our activities around free or cheap events.
- Movies – A 3D IMAX movie these days goes for $16 a ticket. For an $8 per month subscription to Netflix you have access to an unlimited number of movies. It may be worthwhile to spend $65 on a third-generation of Apple TV and rent a higher grade, more current movie for $5. Not only is the cost of seeing the movie cheaper, but homemade or store bought popcorn and other treats are cheaper and healthier than at the movie theater. If this doesn’t work, we now go the coupon route when we go see most movies.
- Smart Phones – If you’re trying to cut back, save money or even pay off debt, you can get a free phone with a cheap plan and save $100 or more. We delayed upgrading our phones when we were getting out of debt as a means to save an extra $20-30 per month.
- Credit Card Expenses – If you’re not of the rare breed that can religiously pay off credit card balances monthly, not using your credit card can save hundreds to thousands of dollars a year. Considering that most interest rates on credit cards are between 10%-18%, you’re paying 10%-18% more than you should on your purchases. Those credit card perks may not be worth it. Think about using companies such as Payoff or SoFi to refinance your cards to lower rates.
- Groceries – Save $1,560 by not prematurely throwing away food. Create a weekly grocery list and menu. On average, we spend an additional $30-$50 per week if we go to the store without a grocery list. That’s $1,560-$2,600 annually for two people. Investing $1,560 annually into a retirement account for 10 years at 6% interest equals $24,590. That’s better than throwing away food or over-eating.
- Coffee – Brew coffee at home or with a French Press at work. We don’t think Starbucks is the evil empire you must avoid at all costs, but the average trip to Starbucks costs a customer $5. Most areas have at least one coffee shop that sells locally roasted coffee by the pound. A pound of coffee yields about 45 eight-ounce cups of coffee. If that pound of coffee costs $12, that’s $0.27 per cup, saving about $4.73 per cup compared to Starbucks. If you’re hitting Starbucks three times every week, you’d save $737.88 annually. In addition to saving money, locally roasted coffee taste considerably better.
- Prepared Foods – Americans spend a lot of money on prepared food. Take popcorn, for example. A 10-serving box of Pop Secret Homestyle Microwave Popcorn costs $4.98 at Walmart. That equals $0.498 per serving. Also for $4.98, Walmart sells a 3.2 pound container of Orville Redenbacher un-popped popcorn that yields 32 servings. That equals $0.156 per serving. Popping popcorn saves $0.342 a serving. That’s a $10.94 savings with one container of Orville. That adds up and that’s only one example. Make your own pizza. Marinate your own chicken. Bake your own cookies. Fry your own potato chips. An added benefit to cooking from scratch is that you’re in control of the ingredients. Anything you cook will be healthier than anything you buy. Eating healthier helps with reducing expenses long-term medical care.
- Books – If you’re still buying hard or soft cover books from a bookstore, you’re paying too much. We don’t have to remind you that your local library loans books for free. If that’s not up your alley, convert to eBooks. Used Kindles go for less than $50. Amazon offers close to 3 million free eBooks. That’s $0.00! After reading eight to 10 books, you’re Kindle has paid for itself. This is free entertainment that’s culturally and intellectually stimulating.
These are just 10 things we cut back on when reducing expenses. You may think our lives got boring by your standards, but we saved enough money to pay off $51,000 in credit card debt in two and a half years and socked away over $2,500 that we used for our reward vacation to Mexico the month after we became debt free.
Where have you cut back and how much are you saving?