I would challenge most anyone if they told me, “Our situation is different. We are living paycheck-to-paycheck and have no flexibility in our budget to improve upon.” For as long as I have been helping and guiding people with their personal finances, there has never been a client who couldn’t improve on what they were currently doing. When you examine everything you are spending money on, I guarantee, with focus and diligence, you can realize a significant reduction with your expenses. This exercise is the result of years of research and analysis. Most middle class families can see expense reductions at this level. Let’s take a look:
- Car Insurance – If you shop around and challenge agents with other quotes, most families will be able to save about $330 a year.
- Gasoline – Aggressive driving, Jack Rabbit starts, low tire pressure, hill acceleration, panic stops, driving over 55 miles per hour all contribute to increased fuel consumption. Adjusting your car driving behavior will save you about $72 a year.
- Cell Phone – Grab your most recent cell phone bills and look at them to see what you are actually paying for. Are you paying for internet service that you are not using? Are you paying for 1000 minutes a month, when you are only averaging about 350? Are you paying for text messages that you are not using? There is so much competition amongst cell phone providers. With minor adjustments, you can save on average $240 a year.
- Home Phone Line – Ask yourself a tough question, “Do I really need a land line? Would it be possible to use my cell phone for all calls?” If the answer is no, you may want to look into Skype or Magicjack. If you can get by without a land line, call and cancel it. This will probably save you $200 a year.
- Dinners Out – Most families spend on average $400 + a month on dining out. If you make this a special occasion and cut it in half, you will save on average $2400 a year.
- Groceries – Many families buy prepackaged foods and convenience items and many produce hundreds of dollars worth of waste every year. On average with diligence and some added meal time preparation, most families can save $1200 a year from their grocery bill.
- Lunches Out – Most of my clients ate out for lunch about 2 to 3 times per week. Most averaged $10 per day. Even if you cut this back by 1 lunch a week, you will save $520 a year per working adult.
- Conveniences – If you have a coffee or soda addiction, you could easily save over $360 a year cutting back.
- Fees and Overdrafts – If you pay your bills on time and avoid low checking balances you will be able to avoid about $150 a year in fees and overdraft fines.
- Gift Giving – This has been one of the largest issues with so many clients over the six years that I have been a financial navigator. My motto is, “A gift from the heart has more value than a gift that costs more than you can afford.” If you put some effort into giving of your time, talent and abilities, you could provide some very low cost gifts that anyone would be grateful to receive. This is an adjustment, but once accepted, it could save you $800 a year.
This is just the skim off the milk of some very cost effective changes you can make with some minor adjustments. So what is the total annual cost savings produced in this exercise? When added all up, the annual grand total of all savings is more than $6200. Can you imagine what this savings could be if you examined every expense category?