Money Management 101 is more than seeking additional income to pay your expenses but instead fixes the leaks that exist within your budget. Households must understand that budgeting requires more than just boosting one's revenue. It requires taking a deep-dive look into your costs and determine where to start slashing and cutting.
In this article, you will discover:
- How to reduce your expenses with practical methods
- Determine if you need this subscription or membership
- Can you reasonably cut expenses
This article may contain affiliate links. Affiliate links are a form of receiving a commission should you purchase anything from the links selected. The commissions earned help to keep this website running. Please read the Disclaimer page for more information.
Take a deep dive into where your money is being spent by starting off researching your monthly utility expenses. According to EnergyStar.gov, the most significant expenditures of energy in a single family home are heating (29%) and electronics (21%).
#2 Energy Bills
To assist in lowering these bills alone will require some elbow grease and labor. Start by determining if there are any drafty rooms in your home and which places have uneven temperatures. After determining the source, check the insulation levels in the attic to determine if it's adequate, needs to be replaced, or requires additional layers.
Check your doors for air drafts coming into your home. These entryways may require sealants or insulation strips. Learn more about how to Identify the Problems You Want to Fix in your home.
#4 Light Bulbs
If you continuously run a high electrical bill, consider replacing the light bulbs in your home and patio with Compact Fluorescent Lamps (CFL) or Light Emitting Diodes (LED) light bulbs. Replacing just five of the most "used light fixtures or bulbs with models that have earned the ENERGY STAR...can save $45 each year".
#5 Water Heaters
While on the topic of hot water, it is estimated that hot water heaters consume about 4,000 watts for three hours a day costing about $0.10 kWh. If your home has a gas hot water heater, then this may not apply. For a 50-gallon tank, it is estimated to cost you roughly $781/year to run this heater.
Consider reducing the temperature to 120-degrees Fahrenheit or replacing the unit with an EnergyStar-approved appliance if it is an older model.
While researching topics for this article, I decided to avoid programmable thermostats. While many colleagues in the personal finance niche claim they save money, the evidence doesn't prove this; therefore, I will recommend it because a study conducted by Norbod.com showed that while some households reported saving 6.2% to 6.8% on energy, residents in Florida reports a 12% increase. Read more here.
#6 Household Appliances
Do you love doing laundry? While it is no one's favorite chore, did you know that according to the U.S. EPA, a clothes dryer uses about 769 kWh? The top four costliest appliances in your home are clothes dryer (769 kWh), refrigerator (596 kWh), clothes washer (590 kWh), and your favorite...dishwasher (206 kWh).
Switch to using cold water instead of hot water when washing your clothes. With newly formulated cold-water detergents, these brands can now get rid of stains and ensure your fabrics are clean while using more than half the energy it takes to use hot water for cleaning. Also, when washing, do not fall into the habit of filling up your washing machine with small loads. Ensure you are washing full loads as the machine requires just as much energy to operate no matter how many clothing articles are in it.
Unlike washing machines, the more clothes you have in a dryer, the longer it takes to dry and the more energy it uses. You will need to determine which load size is appropriate but consider air drying on a drying rack if possible or drying on a low setting. While not all clothing articles can dry on a rack, many items will dry on it, and this alone will save you money every month.
Many homeowners are unaware of "Peak Hours." Peak hours are designated times established by your energy company on when charges for electricity are inflated due to high demand. Times do vary based on where you reside, but traditionally, the hours are from 4 p.m. to 7 p.m.
An interview conducted by Bankrate.com reported that Parul Goel tested the use of washing clothes before peak hours and recognized savings of about $30 per month.
#7 Smart Power Strips
Did you know, appliances not in use but plugged into your outlets, count for approximately 5% to 10% of your energy consumption, according to HowStuffWorks.com?
Power strips work great to protect your appliances from electrical surges, but these items have no ability in stopping power from continually being used. By switching to smart power strips, the power is cut off entirely ensuring appliances aren't continuously sucking electricity from the outlets. Take a look at your power strips and consider making the switch.
#8 Balance Transfer
If you're paying interest on your credit cards, consider transferring to cards that offer 0% APR. There are many great cards out there from Chase Sapphire to American Express which also provide high reward points.
Call your credit card company and ask for a rate reduction. If you're in good standing with the company by never missing a monthly payment and show you are responsible, the firm may consider it and willing to negotiate.
It is becoming more beneficial for commuters to carpool. If you live in a big city, many highways and interstates reward drivers with the advantage of driving in an HOV lane if the automobile occupies more than one person. Do you have a coworker who lives within a few miles from you and you can ride share? By taking turns to drive, not only are you keeping the atmosphere clear of pollutants, but you are saving money on fuel.
#10 Cancel Memberships and Subscriptions
Tally up the total cost of memberships and monthly subscriptions being paid each month. Next, determine what's required and a necessity. Are you actively using it? Is it a "nice to have"? You can easily save $100 or more every month instantly.
#11 TV Subscriptions
For this particular one, we are lumping all entertainment expenses that relate to monthly subscriptions such as cable, Netflix, Hulu, Amazon Prime, i.e., streaming services. While many of these services, other than cable, are compelling due to the low monthly rate, they quickly add up to sum equal to that of a cable bill. Start trimming the services you aren't actively using.
It isn't surprising to learn many Americans overspend on groceries and waste quite a bit too. Fortunately, there are several tips to save money while shopping.
SouthernLiving.com recommends reviewing the store ads for weekly sale items before shopping. Also, try incorporating vegetables from meals into other meals such as soups or a side dish with your baked chicken, for example.
You may consider coupon clipping, buying generic brands, and buying in season, but I recommend using 5dollarmealplan.com. For $5 a month, you will receive a weekly meal plan that is designed to keep your meals low-cost, creative, and fresh and helps you save time grocery shopping.
Choose between two custom plans: Classic Plan or the Gluten-Free Plan.
#13 Delivery Meals
With the ease of technology apps, making it is faster and easier to order meals online, it can be tempting, especially in a time crunch. It is also destroying your budget. You are paying in excess anywhere from 15-40% more per meal. Find alternatives by picking up the meals yourself, or prepping a similar meal at home.
#14 Get Assistance to Lower Bills
With services such as Billfixer, Billshark, Trim, Truebill, you allow companies to negotiate with challenging service reps on your behalf. Each firm is different in its fee structure, but the cost is usually a set percentage in the amount they can save you. If they don't save you money, then there is typically no cost but check their fee structure for exact terms.
For example, if a firm can save you $100 on your phone bill and the percentage is 30%, then $30 will be the cost of getting this assistance.
#15 Lower Grooming Expenses
How much are paying for haircuts, shampoos, face washes, and nails? If you are still looking for ways to cut expenses, can you reasonably extend the waiting period of getting a haircut by one week? How about switching to a shampoo that is a few dollars less?
While it can be enticing to purchase products from your local salon, shop around and see if online stores such as Amazon can sell you the products at a lower price.
#16 Reevaluate Insurance Premiums
Are you overpaying on your insurance premiums? Many households are not aware because they haven't shopped around. At least once a year, you should explore the possibilities of new rates. As technology continues to improve, firms are finding it easier to operate more efficiently and more cost-effective. This usually helps with the pricing to lure in new customers.
Many consumers who have insurance don't mind overpaying because of loyalty to a firm. However, if you are looking to cut expenses, it can save you money but browsing around online to receive quotes on an automobile, health, life, and renter's insurance.
#17 Pay With Cash
Start paying cash for items when possible. According to an article by Psychology Today, cashless payments have drastically increased, finding "only 14% of American consumers use cash for everyday purchases". While it is convenient to use a debit or credit card, "paying with a credit card is less painful than paying with cash." You are more likely to stick to your budget when paying cash because of the associated pain factor that goes along with it.
You can physically see your money disappearing. This makes you become a more responsible spender while second-guessing purchases.
#18 Establish Spending Limits
When budgeting your monthly expenses, establish spending limits on your categories. For instance, in the entertainment category, perhaps you limit your monthly spending to $200. While it is challenging to do this for categories that include fluctuating expenses such as utilities, you can reign in your expenditures to limit the possibility of your overspending.
Cutting expenses in your household budget doesn't have to be complicated. By following just a handful of the tips mentioned above, you can reduce household budget leakage to save you more money and to assist you in managing your money better.