By: Dividend Sensei
Cut What You Can, Economize What You Can’t
Daily expenditures are where it’s easiest to get into trouble.
For one thing our lives are full of subscriptions that auto-renew and automatically extract money from our wallets. While convenient, and major time saver, it also means that extra expenses can build up overtime without you realizing it.
So the second step in savings, is to cut what you can. Again, go through your credit statements and see what subscriptions or auto-pay you have. Things like utilities for the most part can be left alone, unless you truly are struggling so much that things like raising or lowering the temperature of your apartment/home to save on energy costs, might be worth it to you (I personally love basking in the glory that is central air conditioning).
But for things like cable and cell phones, those there you can generally make some meaningful cuts. For example, I found that streaming TV and movies is equally, actually more, satisfying than watching live TV, or having cable/satellite with a DVR.
It’s also about 10X cheaper, easily saving you $100/month. Of course for that to work you need reliable and fast internet, but there too, assuming you live in a large metro area, you might be able to play off the local ISPs against each other by getting special introductory rates that can cut your internet bill in half.
As for cell phones, I’ll admit I love my phone, I use it for so many things, MP3 player (for podcasts and audiobooks while driving, walking dog, and going the gym), TV (literally don’t have one because I’m more than happy watching TV and movies on my glorious 6″ OLED screen), and of course a source of news and internet (for daily news reading).
But, while the return of unlimited data is certainly a wonderful CHOICE, keep in mind that most people (thanks to wifi) end up using just 2-3 GB of data a month. Thus it’s often cheaper by $50 per month (for my family on T-Mobile) to not go with a family unlimited plan, but with the cheapest, 2GB per line option.
Another big expense is eating out, which I admit is very appealing to me, especially having spent so long living without food at all. Eating out, even at fast food restaurants (my all-time favorite restaurant is Wendy’s) is the ultimate luxury for me.
However, I never forget that it is, in fact a luxury, and thus spend all week minimizing grocery costs so that I can have my weekend Wendy’s meal. The rest of the time its eating at home, and buying generic store brands when I shop (can you really taste the difference between store milk and the name brand stuff? I can’t). And don’t forget about the price discounts for bulk purchases for non-perishables. My family saves about $200 a month by shopping at Costco.
This kind of cost optimisation needs to be applied across all your cost categories. For example, comfortable, and durable clothes, that fit your lifestyle, (can’t be dressed like a beach bum if you’re an attorney going into the office) are important, but again you need to really ask yourself what you NEED vs WANT.
For example, my attire of choice is comfortable cotton t-shirts and shorts for around the house. For going out with family and friends, say to that restaurant once every month or two, it’s a nice polo shirt and khaki trousers from Wal-Mart.
Have a special event coming up like a Wedding? Rent a tux instead of buying it, unless you attend enough to make the cost benefit analyis swing in favor of buying one, and even then Mens Warehouse is your friend.
The bottom line is that, across every category in your budget you can find ways to get the very same things you truly need (and that actually make you happy) for less.
Combine this with less frequent mindless splurges, such as cutting on Starbucks before work everyday, and before you know it you are saving $400-$600 a month and living a life that is just as happy as before.
More so, because now you have less financial stress, because your emergency fund is full, and once it it, you can start to invest for the future. But that’s for part three. We still have one final prong to discuss regarding savings.