When you receive your paycheck, a myriad of obligations and desires pull at your attention and purse strings. One of the first things to be addressed is your monthly bills. You may find that once your bills are paid and necessary purchases are out of the way, very little remains for savings and nonessential purchases.
This can be frustrating and demoralizing as we struggle to build savings and our quality of life and financial security are compromised. However, you can substantially reduce your monthly bills with these simple suggestions.
1: Evaluate Your Expenditures
Begin by making a spreadsheet with all of your monthly bills. Include the organization you’re paying, payment amount, category of expenditure and the total balance and interest rate for debts. In doing this, you’ll track exactly where your money is going and be able to identify which expenses you can cut back on.
It may be helpful to remember that experts suggest our daily expenditures and bill payments comprise only 50% of our annual salary. Take a good look at what you can truly afford, and begin to identify potential means to cut back.
2: Identify the Essentials and Prioritize
Next, determine which of your monthly obligations are absolutely essential, and which can be considered optional. For example, your rent or mortgage payment is a must, while your cable bill can be reduced or eliminated. Now consider which non-essential obligations you value most and should keep, and consider potential ways to reduce the amount spent on what remains.
Below we discuss how to reduce monthly bills for cable, home phone service, mortgage payment, rent, utility bills, credit card debt, car insurance and food.
3: Reduce Your Cable Bill
The average household cable bill for 2011 was $86/month, and many households pay up to $200. That adds up to $1000-2000 annually. Much of this cost is for channels that you don’t watch or may not even know about. Unfortunately, most cable companies sell all-inclusive packages and it’s not possible to pick individual channels.
As an alternative, you can use a digital antenna, or web-based TV services such as Netflix, Hulu and Amazon Instant video. These alternatives are up to 90% cheaper, and many consumers find that they actually prefer the on-demand nature of web-based services. You can watch videos from these services on your TV using a Play Station 3 or Roku.
4: Eliminate Your Home Phone Bill
When cell phones first became available, they were considered a luxury item, and consumers had a very limited number of minutes that were used judiciously. Using a cell phone while at home was considered frivolous.
Now that more minutes are available for less money, many people frequently use their cell phones at home, negating the need for a home phone number. Consider doing away with your home phone or “land line” and using your cell phone exclusively.
5: Reduce Your Mortgage Payments
If you have a sufficient amount of equity and you credit score is good, you may wish to consider refinancing your home. Interest rates are at an all-time low, and by refinancing you can take advantage of this.
Refinancing isn’t for everyone, and you should base your decision upon your individual financial needs. Read the find print to find all of the costs involved in refinancing, and compare this to the money saved by locking in a lower interest rate. You can use a refinancing calculator application to calculate the potential benefits.
6: Cut Back Your Rent
If you rent your apartment or house, you may want to consider moving to a location with lower rent. You may be able to reduce the square footage of your apartment or home, or to move to a location that doesn’t come at as much of a premium as your current location.
7: Lower Your Utility Bills
You can reduce your water and electricity bills by taking some simple steps to reduce your water and electricity usages.
To save water, limit shower times to 10-15 minutes, only run your dishwasher when it’s full, do laundry once per week and combine loads as much as possible. You may also be able to cut back your lawn and garden watering schedules.
To save electricity, switch to LED or CFL light bulbs, turn lights off when they’re not in use, raise your thermostat in the summer and lower it in the winter, and when you purchase new appliances, ensure that they’re energy-efficient.
8: Eliminate Credit Card Debt
Credit card debt is both easy to accumulate and difficult to resolve. Because interest rates are so high (an average of 16.87%), much of your monthly payment goes to interest, and you continue to waste your money each month. Although it may be hard to get rid of credit card debt, it can be done.
Start by paying only in cash, or only charging an amount that can be paid in full at the end of the month. Next, as you cut back other expenses, allocate the money saved to pay off your credit card debt.
9: Decrease Your Car Insurance Payments
You can find many possible means to reduce your car insurance payment while still maintaining sufficient coverage. The proper options depend upon the coverage you currently possess, your car, and whether you are still making payments on it. Consider the following:
- Request a higher deductible – it can reduce your payment by up to 40%
- Drop coverage that you don’t need, and consider moving to liability only if your car is paid off
- So long as you have medical insurance, purchase only the minimum required personal injury protection
- Insure all of your vehicles under the same carrier to take advantage of special incentives
- Shop around to ensure that your carrier is offering the best rate
- Speak to your agent about other potential discounts or promotions
By taking the suggestions that apply to your specific needs, you will likely be able to reduce your payment substantially.
10: Cut Back on Your Food Expenditures
You may be surprised by how much you spend on food. On average, Americans spend between 10-20% on food. Eat at home or bring your lunch to work more often, and when you do eat out, opt for cheaper restaurants and take advantage of coupons and promotions. Also clip manufacturer’s coupons for grocery shopping.
If you make a firm commitment to reduce your monthly bills using the above suggestions, you will be able to pay down debts and build your savings to increase financial security and save up for big ticket items. Adopt a proactive attitude and you will be well on your way to financial success.