You work hard and earn a good wage, but still are left with close to no savings at the end of the month. Sound kind of familiar? Too many good people do seemingly everything right yet end up unable to accumulate wealth after ironing out monthly expenditures.
Saving is a simple equation with a few variables at play. The fact is, that the accumulation of savings can only be achieved when income exceeds expenses. The data states that 10.5% of families live below the poverty line of $26,500 earned annually, for a family of four. That statistic indicates that 89.5% of families can look at expenses as the prime driver (or killer) of their ability to accumulate savings.
While the validity of using the poverty line as a benchmark for wealth accumulation is certainly questionable, what is not questionable, is this idea that anyone earning below the poverty line has an income problem while anyone living above the poverty line is more likely to have a spending problem.
For the sake of this article, let’s focus on the primary ways you can (and should) reduce expenses to increase savings at the end of each month.
1. Pay off your debt
Debt is the #1 cause of financial jail. Debt comes with interest, fees, and a set of parameters meant to transfer your wealth from you to someone else slowly but surely, under the guise of helping you “buy the American dream now instead of later when you actually can afford it.” I’m not of the camp that young people can come up in today’s world of hyperinflation without a home loan, but outside of that, you must proceed cautiously when acquiring debt. Do not trust banks, agents, or brokers to tell you what YOU can afford. Use a housing affordability calculator, like NerdWallet to come up with your number and stick to it.
In regards to other types of debt, the rule of thumb is this…If you don’t have the cash to buy it, you can’t afford it. Go on a savings binge to get it instead of paying a premium to get it now. Anything worth having is worth earning…
2. Drop your cable bill, like yesterday.
According to decisiondata.org, the average cable bill is $217.42 per month. To put this into perspective, utilities (power, water, sewer) average $205.50 per household. You may be thinking, so the average household spends more on entertainment than water, electricity, and sewer combined? You wouldn’t be wrong. Most people have Netflix, Hulu, and a handful of other entertainment-related subscriptions on top of the cable bill, which are hardly justified for the value. Stop wasting your hard-earned dollars by dropping cable for cheaper alternatives such as Sling, which typically you can try free.
3. You don’t need the latest version of everything.
You see it every day…Your best friend just has to have the new iPhone 2021, the new iPad, the latest Bluetooth headphones, yada yada yada. Don’t be a marketer's dream…Be realistic about what you need and don’t need. Keep giving your money away to slick marketers and you can bet you’ll never have any.
4. Stop supersizing everything you buy.
You super-size your double cheeseburger meal, you go with the brand-new car instead of the 3-year older version (which is identical) but the older car would have a positive loan to value ratio, helping your net worth. Again, get only what you need and not what you want.
5. Stop eating out so freaking much.
People today are obsessed with laziness. Do not sit on your bum and pay for the delivery of your meals. Moneyunder30 reports that the average American household spends $250 per month eating out – which accumulates to a whopping $3,000 annually. Inflation is eating away your hard-earned dollars and cooking more at home is an easy way to offset some of these inflation costs.
6. DIY it.
Cave men didn’t have electric saws, heavy equipment, or easy-to-use materials. They gathered villages to move boulders, built houses out of clay, and hunted for each and every meal. I’m not asking you to be a caveman per se. I am asking you to reach out of your comfort zone to try to DIY some unavoidable projects. For example, patching holes in the wall, cutting your grass, and washing your car. In this information age, you can literally learn anything online in minutes. In addition to savings, you will get an amazing shot of confidence that only comes from learning and executing from scratch.
7. Drop your insurance company
Much like cable providers, insurance companies are notorious for raising rates. The only cure to the insurers' impulsive nature to annually raise rates on existing customers is to “drop em like it’s hot.” Threaten to change providers to lower your bill. If the insurer doesn’t bite, switch insurers. Insurers typically use soft credit pulls which have ZERO impact on your credit score, so don’t worry about that. Switch insurers early and often and they will keep giving you the best possible rates in your area. Also, be on the lookout for unneeded add-ons and drop additional services that aren’t either required by your state’s law or aren’t really necessary for your situation.
There are so many simple ways to find savings. In fact, I plan to grow this list by adding 5-10 more ways to save in a later article. The only thing holding you back from saving is, well you. Dive into this important work. Fight hard for your hard-earned dollars. And remember, every time you buy something you are really just moving your hard-earned dollars to someone else. Keep your wealth and you’ll be wealthy!