Cutting monthly expenses is one of the best ways to help you reach Financial Freedom. You reduce your monthly cost of living moving forward, thereby lowering the amount of money you will need to retire (sometimes substantially). AND instead of that money leaving your wallet each month, it’s now increasing your monthly savings contributions, even further speeding up your path to early retirement.
The art to cutting monthly expenses is to weed out the unnecessary, but keep the things that really bring you substantial value. When you do it correctly – you won’t even notice the things you’ve left behind.
One of the best ways to do this is to start by identifying 5 things you LOVE to do in your day to day life. Like really love to do. If you had an entire weekend of free time, what would you choose to do with it? Read a book, watch a movie, go for a hike, meet up with friends you haven’t seen in awhile?
Once you have your list of 5 things, try and plan how you can cut your expenses to minimize the impact on the things you love. This will help you feel like you aren’t sacrificing the things that are most important to you, and prevent you from cutting your expenses to an unsustainable state.
To help get you started, here’s some ideas of 5 monthly expenses to consider eliminating or reducing:
1 – Cable TV
If you still have cable TV now’s a great time to get rid of it entirely. With the variety of streaming services out there, there’s never been more availability to watch what you want, when you want, at a much smaller cost. Cutting cable can save you anywhere from $50-$250.00 a month depending on the extent of your package. We got rid of ours about 3 years ago, and haven’t regretted it once. Mike initially hesitated on this one, he likes to watch his sports, but as it turns out he easily gets his sports fix from watching highlight reels and sports news on the internet.
Aside from just the savings, there are two bonus side effects of not having cable TV that I didn’t anticipate, but make the change even more worthwhile:
1 – It puts an end to channel surfing. No more just watching whatever happens to be on, you have to sit down and intentionally pick something. As a result, it’s reduced our TV watching substantially. Now we only watch our favourite shows, and when it’s over, we do something else. (Like playing board games!)
2 – Our kids also watch way less TV, AND with no commercials. No commercials = way less wanting and asking for the crap toys and junk food they advertise during kids TV shows. It’s AMAZING! Highly recommend it for this reason alone.
2 – Fitness Membership
How many of us have fitness memberships where we just aren’t getting the value for our money. At one time in my life I was at the gym religiously for 1-2 hours each day (Oh and I thought I was busy back then……!) At those times I was definitely getting my money’s worth, but paying $50-$150 a month to hit the gym 2-3 times a week (or even less), just doesn’t feel like a good use of hard earned, after tax dollars.
So if going to the gym isn’t on your list of top 5 things you love to do, this is an excellent monthly cost to eliminate. There are so many alternative and free ways to stay active these days that it simply isn’t necessary to pay high fee’s to workout in a smelly gym. Ride your bike, go for a walk, run, hike, or do some yoga in the park. With a little creativity, the options are plentiful.
Although not free from upfront costs, installing a small home gym can also be an extremely cost effective option over time (so long as it’s something you will actually use).
If you really like the motivation going to the gym provides, but still want to reduce your monthly fitness expenses. Consider swapping your gym membership for a pass at your local municipal recreation centre. Rec Center’s generally offer more variety than your typical gym membership, and often at a much cheaper monthly rate. They tend to include a wide range of fitness classes, swimming, gym access, sports drop-in’s, and art’s/social groups. These are particularly cost effective if you purchase the family plans, which can provide all sorts of activities and access for adults and kids alike. As a cherry on top – check to see if your local rec centre offers any type of corporate incentive rate for your company/employer. Often municipalities will offer these rates to companies working within their community, so don’t be afraid to ask!
Mike and I went with a combination approach. We took advantage of some outrageous deals on Craigslist and at a local auction to convert part of our garage into a fully equipped home gym. As a former gym junkie, this small little home gym has literally everything I need and want, AND I can sneak in a work out while our youngest is napping. It took us nearly 2 years to recover the costs for the equipment based on what we were paying out for our gym fee’s, but we’ve had it for nearly 5 years now, and with the amount of use we get from it and how long it will last us, it’s a total no brainer.
Last year we also went ahead and purchased an annual family pass at our local rec centre. For all four of us its half the monthly cost of what our previous gym membership cost for just Mike and I alone. We get to take the kids swimming as often as we like (which is very often in our house), and we both have access to the gym, a wide variety of fitness classes, and drop-in sports. Our whole family gets a lot more out of it, at a much lower cost.
3 – Shop Around
Although you might not be able to entirely eliminate monthly expenses like your cell phone, or internet, it pays to shop around on a regular basis. Companies are always trying to woo new customers with big incentive starter rates.
The key to continuing to save is avoid the contracts and remain a free agent. This will allow you to keep your company accountable when you see their competitor offering better rates. The best way to get these rates without a contract is to call up your customer retention department and let them know that you will be switching providers if they can’t match or beat the rates their competitors are offering. Generally they will oblige – and if they don’t, don’t be afraid to provider hop in order to maintain the monthly savings.
4 – Cancel Subscriptions
Whether it’s your local newspaper, favourite magazine, or streaming music service, all of those small monthly fee’s add up to a lot.
And all of those things are available via free resources. You can read the news online, you can generally access the articles from your favourite magazine on their website, and there are all sorts of free music plans to take advantage of. Sure you might have to listen to more ad’s, but is that really so bad?
So try canceling everything. All of your subscriptions. Then give it a good 6 months and see what, if any, you actually miss. If you really do miss a few products, than bring them back selectively (but try to do so at a lower promotional price point), but if not, and I’m willing to bet that you won’t, its extra money in your pocket every month.
5 – Consolidate Debt
If you do carry multiple sources of consumer debt, consider consolidating that debt at a lower interest rate. Consolidating can turn multiple monthly payments into one simple, low interest payment, and ensure you avoid a lot of fee’s associated with overdue bills or failing to make payments on time. All of that extra money saved on fee’s and interest can and SHOULD go directly to paying off the principle debt that much faster.
Generally the lowest interest rates will be available on secured debt (IE: Home Equity Lines of Credit) as opposed to unsecured debt like a regular line of credit, or a credit card. You can even lock in an interest rate on a HELOC, which would result in a repayment structure akin to a mortgage. Like a mortgage, these locked in amounts often come with options to double up your payments, or pay up to a specified percentage in annual lump sums.
They do however have penalties which apply if you pay off the debt faster than the plan allows. So if you think you can pay off your debt in a short period of time (IE: a year or two) it’s probably best not to lock into a rate and maintain flexibility in your payment structure.
Consolidating your debt repayment can simplify your life, reduce interest and fee payments, and allow you to focus on paying down a single debt source quickly.
BUT, if you do choose to consolidate; cancel the credit sources that enabled the debt in the first place. The LAST thing you want to do after consolidating debt is build more. Consolidation is not a free pass to continue spending, it needs to be accompanied by a strategy to eliminate the debt and change the habits that generate the debt in the first place.
There’s five simple ways to get your started on your hunt to cut monthly expenses. But don’t stop there. Be creative, look for individual ways you can eliminate monthly costs – whether it’s changing your hair style so you don’t have to go to the salon as frequently, or biking to work to save on gas and get your workout in, there are endless options to lower your costs without sacrificing the things that really matter to you.