Can You Eliminate $500 of Your Expenses Each Month?
How to Save $500 a Month: Saving money doesn’t have to hurt. We’ve developed a plan to help you save an extra $500 a month without sacrificing your lifestyle.
Even when you’re good at managing your money, it’s surprisingly easy to let things get out of control.
When you’re young and broke, you can be incredibly creative in finding ways to save. Or maybe when you first catch the “get out of debt and save money bug” this happens to you. You take on roommates to reduce your living expenses. You live without a car, cable, and dining out. And when you start getting out of debt and finally investing, it’s all worthwhile.
But then your income starts to increase. And you may let your expenses inflate along with it.
Maybe it starts with some reasonable moves, such as moving into a more expensive, but more comfortable, home or apartment. Maybe you then buy a cheap car because it’s so much more convenient than public transit. Or maybe you start taking on more expensive hobbies and interests on the side.
None of these things is bad, in and of themselves. But over time, you might find that your new lifestyle is more expensive than you want it to be. Luckily, when you find yourself in this place, getting back to the basics may be easier than you think.
Even if you think you already live quite frugally, chances are likely that you can reduce your monthly expenses. Maybe you can even reduce them by $500 or more per month. Think that’s crazy? Start with these steps, and see how much you could save.
Step One: Shop Around for Insurance
All too often, consumers don’t take this step seriously enough. But you really should shop around for insurance–homeowner’s/renter’s and auto, at minimum–on an annual basis. You just never know what you could save by switching your policies. This is especially true if your financial or property situation has changed recently. For instance, as your car ages, you should pay less for insurance. And if you paid off your car and have money in savings, you might consider dropping the requisite comprehensive coverage. This can save you a bundle!
But even without major changes, you could save on insurance by switching companies. So be sure you’re shopping around at least once per year. And be sure to shop all of your property insurance policies at once, since most companies offer hefty discounts for carrying more than one policy with the same insurer.
Step Two: Optimize Your Life Insurance
Most people, even single people, ought to have a life insurance policy. But if you do have a policy, you may want to be sure you have the right amount of coverage. If your children are older or you have significantly less debt than the last time you purchase life insurance, you may be able to downgrade to a smaller policy. This could save you significantly each month or year, depending on how often you pay your life insurance premiums.
Step Three: Refine Your Food Spending
Too many people spend too much money on food. It’s easy to do, especially if you eat out often. But you can often tweak your food spending slightly to save big bucks.
According to the most recent USDA figures, there’s a huge variance between frugal and liberal food spending plans. As of August 2017, a family of four with two school-aged children could spend $642 per month on a frugal food plan. A liberal plan, on the other hand, could cost over $1,200 per month. There’s your $500 in savings, right there!
Maybe you’re somewhere in the middle, though, and maybe you don’t want to spend time clipping coupons and taking other steps to get your grocery budget down to the “frugal” level. But there are some simple ways to save on food spending, which could save you $500 or more per month with barely a thought. My top tips include:
- Plan your meals. If you’re not great at meal planning, check out online meal planning services. They cost just a few bucks a month and can help you save hundreds by being more frugal with your food.
- Shop your pantry and fridge. It’s easy to over-buy food. This isn’t as much of an issue with nonperishables. But check for fruits and vegetables or other perishable items you need to eat before your next grocery store trip. You might be surprised what you can make out of what you already have!
- Look for sale items. You don’t have to clip, organize, and use coupons to save. You can do it automatically by shopping for items that are on sale. You’ll get the biggest bang for your buck by planning meals around on-sale meats and fresh products.
- Switch to a cheaper store. My family loves the Aldi chain of grocery stores. They offer generally high-quality off brands, and we automatically spend way less when we shop there as compared with other local stores. Find the cheaper grocery store in your area, and buy everything you can there first.
Step Four: Optimize Your Services
If you’re like most modern consumers, you have a huge variety of services that you use every month. This could include basics like your trash and recycling services or optional items like internet and cable service. You can easily save $100 or more per month by optimizing these services. Here are some service-specific tips to try:
- Shop around for trash and recycling. If your area offers more than one service, they’re competing for customers. You can use this to your advantage by shopping around. Before you switch services, though, be sure to let your existing provider know what the new offer is. They might just beat it and save you even more money!
- Consider a different cell phone plan. When you’re in an area with good cell phone coverage, switching to a cheaper provider can make a huge difference. If you’re in a less-covered area, Verizon probably still has the best coverage. But you can often save on your plan by cutting out data you don’t use, downgrading to a cheaper phone, or just calling to ask for discounts.
- Try a lower internet speed. Unless your family is consistently streaming with multiple devices, you may be able to get by with a slower, thus cheaper, internet service.
- Get away from cable. With all the online options available today to get your favorite television programs, there’s not much excuse to have cable. If you have to have it, go with the lowest-paid subscription you can.
- Review your subscriptions frequently. From magazines to apps to other services, we all have a lot of subscriptions these days. Some may be well worth your while. If you read a lot, Amazon’s Kindle Unlimited subscription could actually save you money, for instance. But subscriptions that you don’t actually use will just waste your money.
Step Five: Pay Off Your High-Interest Debts
The first four steps could very easily get you to the $500 per month savings level. But what if they don’t get you quite there? Then use the money that you have saved and pay off your credit card debt.
Right now, the average American family owes just over $8,000 in credit card debt. If you’re paying 15% interest on that debt, that’s about $100 in interest every month! So you could save 1/5 of that $500 per month just by paying off your credit cards. And, of course, on $8,000 in debt, your monthly minimum payments could very well cost $500 per month of itself! Sure, it might take you a while to pay off your credit cards, but each month you save on other expenses could be a month closer to this goal.
Another option, of course, is to transfer your high-interest credit card debts to 0% introductory APR credit cards. This can help you pay down your balances more quickly since your payments won’t be eaten up by interest each month.
I only spend about a $1000 a month. A 50% cut would be pretty difficult.
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 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.
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.
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.
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.
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.
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.
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!
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.
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.
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.
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.
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.
Use a coupon or stock up when soup is on sale and you can do lunch even cheaper. Lots of varieties, too!
You have a cat named Rupert? That’s awesome.
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.
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.
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.