I may have fallen back into old habits. Several years ago, when I was refreshing my life and beginning to control my finances, I made deep cuts into my expenses. I took on three roommates, paying only $325 a month for my portion of rent. I didn’t own a car and relied on mass transit for most of my transportation. When I did move out on my own, finding one of the least expensive apartments in town, I eliminated all but the most basic cable television.
There was more I could have done had I wanted to reduce my expenses, but I reached the point at which I was consistently investing and saving money every month.
As my income has grown over the past few years, I’ve allowed my expenses to follow. I moved into an apartment I actually like and feel comfortable spending some cash on unnecessary things I like, such as amateur coin collecting, amateur photography, and amateur high-definition entertainment enjoyment.
I’ve already thought of some ways to reduce my expenses by $10,000 a year. Consumer Reports has some suggestions for finding another $6,000 a year, but only a few apply to me. How about you?
Find cheaper auto insurance. I mentioned that several years ago I didn’t have a car. That wasn’t quite by choice; my license was suspended when I was younger for failure to pay speeding tickets. It would be easy to say that I received those tickets thanks to a stressful job working 100 hours a week and my failure to pay was because I had no money, but I should have been more responsible. Until I got rid of the car, my insurance was about $4,000 a year if I remember correctly. Now my insurance is about $1,500 a year, and I could only find that rate by shopping around for a while. It’s been several years since I’ve shopped around, so that’s something I will consider. I need to add renter’s insurance as well — something I’m sad to admit I’ve never had despite its reportedly low price.
Optimize your life insurance. Right now, my cat Rupert is the only living being that relies on my income to survive. I have not opted for life insurance yet as it will be generally unnecessary until I have a (human) family. According to Consumer Reports, insurance premiums have decreased on average, so it may be a good time to replace your policy with a new one. You may be able to get the same coverage for less.
Shop smart for food. Buying food for a single guy is not simple. Food is usually packaged for families. This means I usually end up spending more per meal and eating larger portions that I should be. I don’t enjoy spending time preparing and cooking dinner. I have accepted my failure at brown-bagging my lunch and moved on. Consumer Reports’ advice is tailored to a family, indicating on average an household could save $190 a month by shifting to less expensive food. My entire monthly grocery bill is about $190, though eating out (and ordering in) matches that.
Plan menus around sales on fresh poultry, fish, meat, dairy, and produce, and make use of leftovers. Avoid costly prepared meals. Eat more low-priced, high-nutrition foods such as beans and potatoes… Shop in lower-cost stores such as Aldi Foods, PriceRite, Costco, Trader Joe’s, Wal-Mart, and Sam’s Club, but be sure to compare prices. Try less-expensive store brands. Sign up for store discount cards. Stock up on sale-priced staples.
Stop paying bank fees. This is one of the most unnecessary expenses for just about everyone in the United States of America. There is rarely a reason that you should have to pay incidental or monthly fees for any basic banking service if you manage your money. Avoid overdraft fees or over-the-limit fees by being aware of your account balances. Avoid monthly or yearly maintenance fees by taking advantage of only free accounts — there are many to choose from if your bank insists on charging you a fee for your banking. Avoid cash withdrawal fees by using the right ATMs.
According to Consumer Reports, 52% of consumers don’t pay any bank fees, but the rest pay lots.
Optimize your telephone service. I don’t spend that much time on the phone. I could probably save a lot of money if I were to choose a prepaid cell phone plan. However, I chose a Blackberry plan with Verizon Wireless, which I use more for business, and I don’t intend on changing the plan.
I’ve helped other people look at their telephone usage habits and choosing a plan that better fits the amount of time they spend on the phone. On many plans, going over the allotted number of minutes can be very expensive. If you’re consistently exceeding your limit, you can save tons of money by switching plans.
Pay off your credit card. According to Consumerism Commentary, “On average, consumers who carry a balance owe $2,200, on which they pay 15.2 percent in annual interest charges.” Paying that much interest negates any progress you may be achieving with your savings or investments. To get rid of credit card debt, stop using the cards and then apply the Debt Avalanche.
It’s been several years since I’ve paid interest on a credit card, but I still pay about $30 a month on my student loan interest. I still have a student loan because several years ago, I applied some tuition reimbursement towards expenses rather than my loan. I probably should have done whatever possible to avoid that, but for whatever reason, it was the choice I made. At the time, the interest on the student loan was about 2% and I was earning more in my savings accounts, but that’s no longer the case. Therefore, I have been increasing my debt repayments every month this year, with the goal of vanquishing the remaining balance by the end of the year. If I decide that goal still makes sense, I’ll have to accelerate in order to achieve it.
According to Consumer Reports, the average family can save $500 by making the changes listed above. I have a feeling that many Consumerism Commentary readers are already optimized.
Cut your spending by $500 per month, Consumer Reports, August 2008 (subscription required)
About the Author
{ 18 comments… read them below or add one }
Well, I’ve done all of these things in the past 8 months. I could, however, probably save money on phone service….but I live with roommates and we split the bill anyways, so changes would be minimal.
Food. I think I could save money on food, but I too have accepted failure at bringing my own lunch and I’m actually just too lazy (although I like to call it tired) to cook for one person.
I could also cut back on the amount of money I spend socialising, but I’m not going to. I stay in often enough as it is, and catching up with friends over a few drinks is just one of the things that I want to do with my money.
One thing to watch out for is over-optimizing. You don’t want to ratchet things back that you have a backlash and go on some spree as a release from your self imposed optimizations. For example, you decide to stop buying something in bulk to cut it out but instead randomly buy the same items, at higher ala carte prices… something like that can easily happen.
You have a cat named Rupert? That’s awesome.
You definitely need to re-visit the work-lunch spending thing. You will save more than enough money to get rid of that student loan debt and drop any extra weight in the process. I challenge you to run the numbers on brown-bagging vs. lunching out for 6 months – you will be amazed. BTW – no home prep required. I bring soup most days – $1.50/can and 90 seconds in the microwave.
How do you only spend $190 for groceries every month, that’s impressive! Even for my wife and I, we are averaging about $500-$550 each month, and that’s with fresh fruits/veggies/cooking from scratch most nights.
Flexo: ironically when I started eating healthy when I was single was when I saved the most money on food. Its true most things are packaged for families but surprisingly the more hardcore I got about my eating healthy, the cheaper and easier it got. I doubt it would be for most people because the catch is that my diet was targeted toward bodybuilding, which many people probably would get sick of very fast. Egg white omlettes in the morning, protein shakes galore (a huge bucket of chocolate flavored protein + gallon of milk is a cheap and effective combo). Veggies and fruits, Tuna, chicken breasts, cottage cheese, peanut butter and the like were all staples.
One other suggestion for people concerned about the cost of fruits and veggies: I would suggest having a garden if you can. Right now I have an almost unlimited supply of tomatoes, cucumbers, radishes, and peppers with a bunch of honeydew melons on the way….and my garden isn’t all that big. I live in a very dry place and the water cost for the garden is maybe $10-$15/ month if I had to guess. It paid itself back long ago in the summer. We’re also going to pickle some of cucumbers for winter. Its really a great way to save money on fruits and veggies.
PS I forgot one thing above: I also saved a ton of money by ordering things online. All my protein powder, multivitamins and stuff I ordered online. Its amazing how much cheaper it is.
I would say the one reason to go ahead and get a whole life insurance policy is that you would be paying your premium based on your current age and the younger you are the cheaper it is. I pay $500/year for a $250k policy because it is based on me being 22 when I started it. Then I just added my wife as the beneficiary when we got married.
Wait — you don’t have renter’s insurance?
Dude, come on. $12/month is what we used to pay for $23,000+ worth of coverage.
Stop doing whatever you’re doing and go get it. Seriously!
We could probably save some money on our car insurance if we shopped around. We have Allstate through a local agent who has been providing insurance for my wife’s family for a long time. We feel very comfortable having insurance from someone we can contact in person at just about any time. Additionally, we get a discount for having our homeowners insurance with him, as well. So if we changed car insurance, we would likely have to change homeowners in order to maximize our savings. I think the benefit of having a local long-term relationship with an agent can pay off in other ways down the road.
Allstate + local agent + ‘relationship” + higher premium = spending rationalization.
You can get the same multiple policy discounts at a lower cost provider, such as GEICO. If you file a large claim and Allstate claims department wants to deny it, your agent will be powerless to intervene. Insurance is a money business – accept it.
When I started working from home, I was able to cut $2,300 a year off my Starbuck’s addiction. It became a habit every morning and afternoon to stop by Starbucks for my daily fix. Now I brew my own pot and spent about 25 cents a day.
Great post Flexo. I continuously talk with my wife about this. Each month when we review our financial position, we look at a detailed analysis from our online bank statement, download it into excel and determine where we could’ve been better each month. For us, it is usually the categories of “groceries”, “dining out”, and “entertainment.” Apparently we like to eat good food! We could easily trim our expenses in these categories, and need to do a better job on a weekly basis regarding these purchases.
Personally, I itemize every single dollar I spend and save each month. I find it useful to see how I sometimes nickel and dime away a sizeable portion of my take home that I could have otherwise saved or invested. But the drawback to this itemization is the physiological side. I may look at the large % of my monthly salary that I saved or invested and feel like I can “treat” myself to some of the more wasteful things in life with what is left over. Thing is, I know it’s financial wrong but I justify it by saving first and using some of the remainder as my play money. So if look at my finances, I can easily save $500 a month but that would cut into my “perceived” quality of life. So for now as a young person, I’m happy with my current savings rate and the ability to maintain my freedom to do financially irresponsible things. Breaking that physiological barrier is a tough thing to do. I have to focus on thinking past the current month into the future for my ultimate savings or retirement goals.
– David
I agree that $190/ month on groceries would be hard to do even for just myself. Sometimes I wish I was a smaller guy so I could afford to spend less on groceries but I have a raging appetite and I must feed the hunger or I feel my stomach would eat itself. I suggest trying a grocery price log to track prices of everyday grocery items from various stores. You may be surprised to find out how much you can save. Do a Google search for a grocery price log or if you can’t find one I have a link at my blog for a simple one you can print out or copy in Excel.
Cheers
That’s an interesting challenge. I think that would be about 1/6 of my current salary… or 16%… a challenge. But then we’re not very careful with our $$$
I only spend about a $1000 a month. A 50% cut would be pretty difficult.