Ways to Save Money - Household Budget Cost Reduction
If you are looking for ways to save money on your household budget and begin a program of cost reduction, then you've come to the right place. I'll share tips on how to quickly save money and reduce costs.
You might want to begin a cost reduction program because you have high debt, your income has reduced or you simply want to save money, or have that long dreamed for (but unreachable at the moment) holiday. Whatever your reason, be prepared to make some really tough decisions.
If you want to cut costs immediately, then the easiest place to start is your discretionary expenditure. This budget category is where your "enjoying life" expenses reside. Things like travel, dining out, hairdressers, clothing etc hang out here. I didn't say it was the most enjoyable place to look to save money!
Look Closely at All Your Household Budget Expenses
Closely examine all of your household expenses. Its only by getting a handle on what you are spending now that you can reduce costs so this step is very important.
- The Big Ticket Items
The big ticket items in your budget include the amount of money you pay for your home, whether that's paying a mortgage or giving money the landlord for your rented accommodation. There's no doubt you can save lots of money in this category which is typically 25-35% of your budget costs. Ways to saver money here include:
- Downsize your property so your mortgage costs you less
- Move to a cheaper suburb
- Renegotiated your mortgage rate
- Or, if you're renting, move to a cheaper (and or smaller) place
- The Smaller Cost Items
Once you've done all that, then its time to look at the smaller cost items, especially those in the discretionary expenditure category. It's a mistake to underestimate these costs and they can all add up alarmingly quickly. There are often expenses here you can reduce and help you to save money.
How to Reduce Costs
You can do this on some basic budgeting software or a piece of paper works just as well too.
If you choose a piece of paper, draw some columns like that shown in the table below.
You'll need seven columns:
- one to list the expense name,
- two for current expenses (monthly and annually),
- two for future expenses (monthly and annually),
- one for the total amount of savings (its motivating).
- On the far right hand side allow some space for comments. Use this column, to write down the action you're going to take to implement the cost reduction changes so that you save money.
Identifying Ways to Save Money
Expense Item
| Current Costs (monthly)
| Current Costs (annually)
| New Costs (monthly)
| New Costs (annually)
| Cost Savings
| Notes
|
|---|---|---|---|---|---|---|
Telephone
| $65
| $780
| $25
| $300
| $480
| Cancel telephone contract with XYZ and use Skype
|
Hairdresser
| $1,600
| $1,120
| $480
| Still get hair done every 6weeks but find a cheaper alternative
| ||
Magazines and books
| $45
| $540
| 0
| 0
| $540
| Cancel subscriptions and use the free public library
|
Total Savings
| $1,500
|
So Many Ways to Save Costs
What's shown in the above table is a small selection of areas to look at.
There are so many more: coffees out, insurances, the number of times you make small (unnecessary) trips in your car which reduces your fuel economy, gym membership etc.
About Communication Costs
Communication costs have skyrocketed over the past few decades as we all scramble to buy the latest smart phone, telephones for the children, have wireless internet connections, home telephone lines, mobile telephone lines etc.
These costs aren't usually referred to as discretionary but the impact on the household budget has been significant so they are worth examining as a separate category. Look to see if you can identify ways to reduce costs here.
- Can you bundle the services and get a cost reduction?
- Can you use Skype instead of paying a service provider? Skype now offer a bundled package which you can use on smart phones.
- Is prepaid going to be a better option for you? Then you can restrict your calling costs to a particular amount - when its gone, its gone! When I lived in Australia I was able to communicate effectively using a prepaid card (with extra benefits like free credit) and Skype for making free international calls. I dispensed with a land telephone line altogether.
- Do you really need that extra fast (and higher priced) internet connection?
Misplaced Loyalty?
Are you loyally sticking to one provider for goods or services?
Whilst loyalty is valuable and a wonderful trait (particularly frequenting smaller local providers), it is misplaced when applied to large corporates. I'm not sure if I'm alone, but I know that I've been guilty of misplaced loyalty in the past. For example I've stayed with a power company I've used for years and years and the costs crept up. The reality is that they don't really care about me, whereas the village supplier of fruit and vegetables does and so I don't mind paying a little more to give them my custom.
There are many more ways to save money
There are so many ways to save costs and every person; every budget is different so only you can investigate whats happening with your household budget and make the adjustments. Then enjoy the fruits of trimming your budget.
And finally.....
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