Save Money By Cutting These 5 Expenses

Save Money By Cutting These 5 Expenses

December 29, 2020
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If you're struggling financially right now, you are certainly not alone. In fact, new data from Pew Social Trends shows that one in four adults have had trouble keeping up with their bills since the pandemic started, and about one in six adults have visited a food pantry. Approximately one third of adults have also had to use savings or retirement money to make ends meet during this challenging time, which can be frustrating for those who have worked hard to build wealth. 

If you need extra cash in your pocket, there are plenty of ways you can cut your spending as the pandemic runs its course. But where to cut first? 

As a financial advisor, here are the major expenses I would consider cutting for the biggest impact. 

Food Expenses

If you're struggling to make ends meet right now, food spending is one area where you really do have a lot of control. If you're dining out or relying on food delivery a little too often, cut back and see how much you can save. Also, look for ways to spend less at the grocery store, whether that means making bulk meals and eating leftovers, cutting down on meat or pricey specialty foods, or creating a meal list every week. Even a few small changes can add up fast.

Insurance Premiums

If you have home-owners insurance, auto insurance, life insurance, or any other type of insurance, now is a great time to shop around and compare quotes. Switching carriers can be the best way to find significant savings.

In addition to shopping around for homeowners and car insurance coverage to compare rates, also consider the type of coverage you have and if it's enough or too much. If you have a whole life insurance policy and you're on the fence about needing permanent coverage, for example, you could save hundreds of dollars each month by dropping your whole life policy and switching to a term life insurance policy instead.

Subscription Services

Now is also an excellent time to take a close look at your subscription services to see if you can make any cuts. Sure, your kids probably make sure you get your money's worth out of Disney+, and most people can get value from Hulu, Netflix, and other streaming services, but you may not need all of them. Also, look at other subscriptions you have, whether that includes Audible, Spotify, Apple Music, or satellite radio for your car. 

You may find that at least some of your subscriptions are well worth the cost, but it's possible you could cancel some of your lesser-used subscriptions for some monthly savings right away. And if you feel overwhelmed at the mere thought of diving into which subscriptions you have, consider using a service like Trim. This company claims to save users an average of $645 per year by canceling unwanted subscriptions, negotiating your bills, and more. 

Online Shopping

Because of the pandemic, many of us our working from home. We find ourselves on our computers and cell phones most of the day and evening. Retail companies have ramped up their online marketing efforts to advertise their sales and specials. If you are like me, you are constantly receiving emails offering discounts to your favorite retail stores. This is very convenient and can be very tempting.

Companies like Amazon can have your products at your doorstep in a day or two if you are a Prime member. If you are not careful, you can find yourself spending hundreds of dollars buying clothes, home furnishings, etc., while still in your slippers. Instead, I recommend that you stay focused on your savings goals. Build up your emergency fund and begin paying down debt. 

Your Mortgage Payment

Finally, consider refinancing any large debts you have if your income is still sufficient, your credit score is in good shape, and you have considerable equity in your home. Keep in mind that mortgage rates are still incredibly low.

How much could you save by refinancing your mortgage? Imagine you currently owe $300,000 on a 30-year home loan with a fixed rate of 4%. In that case, you would owe $1,432 per month in principal and interest on your loan, and your total loan costs would add up to $515,609, including principal and interest, by the time you paid your home off.

But if you refinanced into a new 30-year loan at 3%, your monthly principal and interest payment goes down to $1,265 per month and your total loan cost goes down to $455,332. That's a savings of more than $60,000 for a little time spent comparing mortgage rates and filling out paperwork. And, in the short term, refinancing can help you ease into a new housing payment you can more easily afford. 

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