Lowering your expenses can seem tough at first. You think you live a normal lifestyle and don’t spend too lavishly, so how can you lower your expenses? Well you’re in the right place because we have a few ideas that might get your brain juices flowing and more money in your pocket!
In part 1 of this series we talked about why expenses are important. Now we’re going to cover a few things you can do to lower your expenses and allow you to save more. We’ll cover 5 different areas and suggest a few points for each. This is not meant to be a definitive list, and it’s also not all going to be relevant for you. Some things will work great for you, and others might be a complete flop. Nothing ventured, nothing gained. Give things a shot, even if you think they may not work. I see people making big savings all the time from things they never thought would work! The important concept to get from this is that there are always areas where money is leaking out of your hands and into the hands of others.
1. Aim for the big things
There are some big expenses in life that have such a disproportionate effect on your finances that cutting them a little can have a huge benefit. Always a good place to start.
Rent: If you are renting, ask for a rent reduction when your renewal comes up, or when a rent increase is proposed ask for it to stay the same. You might think this is unlikely to happen but landlords often don’t want the pain of having to change renters or risk having a vacancy even for a few months. If you are good tenants and ask for a smaller or neutral rent hike when it comes around, you might have better odds than you suspect. I’ve seen people offer to fix up little issues in rentals in exchange for different rent prices and get accepted just because the landlord doesn’t want to put in the effort.
Mortgage: If you own your own home, you know there are lots of fees, bills and costs to be paid. By re-mortgaging when rates are preferable, switching insurance providers and paying off slightly more when possible, you can save yourself tens of thousands of euro over a few short years. Nice!
Car: Cars are most people’s second largest expense. By spending less on a car in the first place, or avoiding the 2nd car you can typically save a few thousand upfront. This also has the added benefit of reducing payments as many will finance their car purchases. Buying a brand-new car is also not the best financial decision as the price can drop around 20% just driving it off the lot. Ouch. Depreciation is a major hidden cost of having a car. By looking at cars that are older than a year or 2, you can save a pile of cash as the price has reduced a lot and the car is basically the same quality.
Bills and recurring expenses: Bills like electricity, heating, internet and insurance are a constant part of your expenses. A great way of building in savings from these is to switch at the end of contracts and chase deals. Most providers are exactly the same in terms of service so it often is simply a price comparison. Some providers will guarantee discounts for bundling products (eg. Combining internet and phone provider). This can be a great way of savings 10-15% on your bills at times.
Mobile phone bills are another area to watch. It can often be a lot cheaper to buy your phone up front and just pay for a sim only setup rather than paying for a more expensive plan with the phone “included”.
Move to a less expensive area: The area you live in can subconsciously guide you into a particular lifestyle. The inherent social pressure to follow the cultural norms will lead you to do whatever the people around you do.
2. Aim for the little things
While a few big things can have a large effect on your spending, there are a thousand little things that cause money to leak away from you. These constantly drain your money little by little and it all adds up.
Sell some stuff, replace old lightbulbs with more efficient ones, discover actions to lower your energy bill, turn off electrical items when not using them or not in the house, lower your heating by 1 degree, get rid of any club memberships you’re not using, get rid of subscription TV or go to the lowest price package, stop magazine subscriptions, cook your own meals, bring lunch to work, buy generic or home-brand where possible, eat out less.
Ask for a discount, just do it! Ask if they have a student discount, they may not ask for evidence….and you didn’t say you were a student
Finding a few areas like this where you can save on recurring expenses can build up. These are often things that you don’t even care about. Bringing your lunch in to work could save you money, and you might be eating healthier. Try focus on things that have more than a monetary benefit and you get a double win.
3. Lower your transport expenses
Transport is mostly one of the large expenses for most people. It also has an impact on our health and the environment. With a few tweaks, you can get a double benefit with some lifestyle changes.
Although cars offer great freedom, they also make us lazy. By committing to walking to the shop when you only need a few things you can carry, you get more exercise and start the habit of driving less. If the shops are a bit too far to walk or you need too much to carry, get on your bike. Investing in a basket or bag mounter on your bike could save you a fortune in the long run, while you get fit.
Getting a bike can be one of the best lifestyle moves you make. A friend of mine sat in traffic in his car watching bikes fly past him in the bike lane, while he was commuting to his job for about a year before he tried cycling to work. It turns out his commute is the same time while cycling. He has saved thousands of euros in a few years of cycling and he gets more exercise than most people could motivate themselves into doing in a week.
Using public transport, getting a bike, walking and running more, and carpooling are all ways of improving your lifestyle in tandem with your finances. If you are driving your own car, ensuring the tyres are inflated properly and keeping it in good running order can increase efficiency.
4. Take free money!
There is free money out there for the taking. This isn’t a scam, it’s much more boring than that. There are tax credits and benefits available that are often not used to people not knowing where to look. Many employers offer employee benefits that are great, but when you’re in the door they don’t push them on you. Investigating the free money available to you can get you a high return with little effort, because it is available you just don’t know it. Check out my article on free money to get started with this.
Get an EHIC card. E.U. citizens can get free health cover travelling with the Union. It’s free to sign up and could save you a fortune if something happens and you need medical care while travelling in Europe.
5. Track your expenses
Once you start tracking expenses you’ll find ways to lower and remove unnecessary things and things you don’t value.
There is often a disconnect between how we think we are spending our money and how we actually are. Tracking your expenses, even if only for a month, can give insight into the reality of your savings that is hard to get just looking at bank statements.
There are plenty of ways you can lower your expenses. Focus on long term fixes and go for a few things at a time. As you start seeing savings, it’ll get easier to cut more areas and get better deals as you motivate yourself with your early progress.
Financial literacy leads to reduced stress, better decision making and the ability to plan to meet your personal goals.
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