Have you ever been left wondering where all your money went a day or two before payday? Said a silent prayer at the checkout that your debit card goes through? Or just thought, as you forked out more dough for this expense or that, Sheesh, I need to stop spending so much money.
We feel your pain. In 2014, the average American household earned $66,877 and spent $53,495, according to the latest available BLS data. Where’d it all go? Take a look:
- $2,728 on entertainment
- $2,787 for eating out
- $3,548 for “other” nonessential expenses
- $1,786 went to clothes and services
- $1,112 went to vehicle insurance
- $5,726 went to personal insurance
We can give you tips on how to save on many of these expenses, especially the monthly bills and subscriptions. Let’s look at a few ways to trim these down, spend less and save more:
Set a Budget
A first step toward reducing your bills is setting a budget. Sixty-one percent of Americans don’t have a strict budget where they closely track their spending, and 13 percent don’t even have a good idea how much they spend, a Harris Poll found.
To create a budget, the first thing to figure out is how much you earn each month. You then allot a percentage of your income toward covering different expense categories.
A simple budgeting guideline many personal finance experts recommend is the 50/20/30 rule. Here you set aside:
- 50 percent of your income for fixed payments on necessities such as mortgage, rent, car payments and health insurance
- 20 percent of your income goes toward repaying debt and building your savings
- 30 percent is left over for variable expenses and non-necessities, including entertainment and dining out
Evaluate Your Monthly Bills
Deciding which of your monthly bills and subscriptions fall under necessities and which do not is the next step toward reducing your bills. If you discover that your spending on variable expenses and non-necessities is exceeding 30 percent of your monthly income, you need to either cut something out or find a way to reduce what you’re paying for it. This includes anything you’re spending on monthly subscriptions you don’t need.
Sometimes you may be paying subscriptions you’ve forgotten you have. For instance, you may have signed up for a health club membership you’ve never used but you’re still paying for, or you may still be getting charged for a magazine subscription you cancelled. One way to identify which subscriptions you don’t need is to review your credit card statements to see what you’re paying for. You can do this manually, or you can use an automated tool such as Trim.
Lower Your Payments
Once you’ve cut out any bills and subscriptions for items you don’t need or don’t want, the next step is to reduce your payments on ones you do. For instance, you can cut your monthly cell phone bill by using strategies such as shopping different carriers, paying more for your phone up front instead of paying a monthly contract, cutting out extra services you don’t need, using an app to streamline your data usage, or going with a data-free plan.
If you’re paying a monthly cable bill and you’re getting charged for modem rental, you may be able to reduce your costs by buying your own modem. Sometimes signing up for a long-term contract can get you a reduced rate at a locked in price.
When Subscriptions Make Sense
On the other hand, sometimes adding subscriptions can lower your total bills. For instance, if you find yourself eating out a lot, you might compare the cost of signing up for a healthy food subscription service to see how the prices compare. If you spend a lot on clothes or cosmetics, you might try signing up for a monthly clothing or fashion club instead to see if this curbs your impulse shopping.