To reduce expenses, you can cut costs on big-ticket items like housing and transportation, lower ongoing payments like utility bills and insurance, and make behavioral changes such as starting a budget. Cutting back on spending will be your first step when working toward many big financial goals, like saving for a home and paying off credit card debt, and it's a skill you'll return to again and again.
Scaling back doesn't necessarily mean cutting out all of the fun stuff, such as travel and entertainment. Instead, in many cases, it's possible to negotiate down the cost of services you regularly use or find discounts to make them more affordable.
Here are 10 tips to reduce expenses, in ways big and small.
1. Track Your Spending for a Few Months
There's a lot of power in simply seeing where your money goes, and tracking spending may motivate you to make big changes. You can do it by auditing your bank and credit card accounts and categorizing your expenses into buckets, if your online banking tools don't already do so.
You can use a spreadsheet to keep tabs on every expense, or an app that will do that automatically for you. To really see patterns, try expense tracking for more than a month in case there are any outliers that skew your data.
2. Pick a Budgeting Method
With the information you glean from expense tracking, the next step is to choose a budgeting method and tweak your spending accordingly. Common, low-effort budgeting plans include the 50/30/20 budget, in which you split expenses into the categories of needs (50%), wants (30%), and savings and debt repayment (20%); and the pay yourself first method, in which you save first and then spend the rest knowing your most important financial goals have already been accounted for.
Learn more >> How to Find the Best Budget for Your Spending Personality
3. Cancel Unnecessary Subscriptions
As you're taking a close look at your expenses and financial goals, one of the first changes to consider is canceling monthly subscriptions and memberships you don't regularly use. This can have a major impact, since automatic payments often prevent intentional consideration of whether a product or service is truly worth it for you. Canceling ongoing membership plans can free up a significant amount in your budget over time.
4. Look for Discounts
Aside from canceling, you can also save money on subscriptions and memberships by hunting for discounts. Check regularly for promotional offers and ask the company if they'll give you the promotional rate (which is often most effective if you're considering canceling altogether). Or, opt for service bundles, like a free streaming subscription if you sign up for a certain cellphone plan. Some services, such as Spotify, also have family plans that can lead to savings.
5. Shop With Cash Back Apps and Browser Extensions
Beyond subscriptions, you can also save on one-time purchases in stores and online with cash back apps, or with browser extensions that find store coupons for you or compare prices when online shopping. While these programs can require some effort to onboard and navigate, try using them at stores where you frequently shop and stand to save the most.
6. Use a Cash Back Credit Card for Certain Spending Categories
Alternatively—or in addition to—cash back apps and browser extensions, cash back credit cards can be a way to save money in common spending categories, like groceries and gas. Some cards offer the same flat rate on cash back, such as 2%, on some or all purchases. Others have rotating categories that provide cash back on different types of purchases every quarter. You can typically redeem the cash back you've earned as a credit towards your card's balance or in cash via check or transfer to your bank account.
7. Negotiate Your Bills
It's often possible to negotiate down the cost of your monthly bills directly with the provider, or by using a third-party service like Experian BillFixer™. Utility bills, car insurance rates and credit card interest rates may all be negotiable, for example. You can also ask your cellphone provider if it has any new plans that may be a better fit for you since you first signed up for service. You can also switch to a prepaid plan or downgrade to a plan with less data if you need a lower amount than you're paying for.
8. Make Use of Employee Benefits
If you haven't checked out the full extent of the employee benefits your workplace offers in a while, now is the time to ask HR for a list. You can save money by using employee wellness programs like gym membership subsidies or free workout classes, transit discounts when commuting to work and student loan repayment assistance.
Learn more >> 11 Financial Wellness Benefits Your Employer Might Offer
9. Consider Cutting Housing and Transit Costs
To make a substantial impact on your bottom line, look at ways to spend less on housing or transportation. This is a more complex change, but it could lead to the biggest savings. If you can't downsize your living situation, consider renting out an extra room in your home, even for just one weekend a month, as a way to make passive income. You can opt to buy a used car rather than a new one—or you can simply rent out a parking spot or car you're not using, either regularly or occasionally, on apps like SpotHero and Turo.
10. Use Meal Planning to Reduce Grocery Bills
Meal prepping helps you save money on groceries by cutting down on food waste. You'll plan your meals day by day, make them in advance—potentially during a Sunday cooking marathon—and either freeze or refrigerate them. Kitchenware that lets you make meals in bulk, like a slow cooker, can be a good investment that ends up reducing your expenses overall. An added benefit is no longer feeling perplexed and overwhelmed at the grocery store at 5 p.m. on a Tuesday, since you'll have your meals ready to go.
The Bottom Line
Reducing expenses can mean looking for quick wins or making thoughtful lifestyle changes. But with every dollar you save, you're closer to the financial goals you're aiming for. Consider putting your savings from reducing expenses toward an emergency fund, retirement account or outstanding debt to get the most out of your efforts.
