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.
Updated October 4, 2017 and originally published August 14, 2008.