Spend less than you earn. That’s the mantra of personal finance success. Every week, month and year that you spend less than you earn, the more you can save and the better your financial situation will be.
A big part of that solution is cutting back on spending, and for many people, the thought of cutting back on spending seems unpleasant. Losing out on the things that bring you pleasure in life seems like a pretty steep price to pay for a little financial success.
The secret is to intentionally target spending on the things you don’t care about and rarely use while holding steady on the things you do care about.
Why should I reduce my monthly spending?
Before we get into how to reduce monthly spending, let’s consider why you should reduce your monthly spending. What’s the benefit of doing that?
The benefit is that the money you save by spending less can be applied to other financial goals in your life. You can get rid of debt faster, which eliminates a monthly bill that sucks up your money. You can build an emergency fund, save for a down payment on a home or start saving for retirement.
If you intentionally cut back on things that are of low importance to you while holding on to the things you really care about, cutting back doesn’t really have any negative impact on your life at all.
Here are 20 frugal living tips that do just that.
20 ways to cut down your monthly budget and save money
Reduce your energy costs
- Seal up any drafts in your home. Whenever you feel cold air blowing in your home in the winter, or hot air in the summer, that’s a draft. It’s outside air seeping into your home, and that means paying extra energy costs to keep your house at a livable temperature. Finding and sealing most drafts is pretty easy. You just follow the cool/warm air, then install weather stripping or caulk to seal the leak.
- Use your ceiling fans. In winter, a ceiling fan can redistribute the warm air that collects near the ceiling downwards into the room, making it warmer where you are. In summer, a ceiling fan can create a gentle breeze in a room cooling your skin. Use your ceiling fans, and set them to the right mode for the season, as a ceiling fan is far less expensive to run than an air conditioner or furnace.
- Adjust your thermostat. Once you seal the drafts and set your ceiling fan, you’ll find that the temperatures in your home are more consistent and that you can get away with running your thermostat a few degrees cooler in the winter and hotter in the summer while still being perfectly comfortable.
- Use cold water for your laundry. Unless your clothes are exceptionally stained or soiled or the instructions on your clothes demand warm or hot water, most manufacturers recommend using cold water for your laundry (the cold-cold setting on many washing machines). This saves on the cost of heating the water and still results in clean clothes.
Scale back on entertainment costs
- Cut cable. These days, streaming services and free over-the-air television provides more content than any one person could ever watch. Take advantage of the variety by eliminating cable or satellite service.
- Use your local library. Many people think of their local library as just a place to get books. It’s far more than that. Most libraries today have movies to borrow, audiobooks to listen to on your commute, equipment you can borrow and many other services — all for free. Lean in on your library for tons of free entertainment options.
- Focus your interests on finishing rather than collecting. Rather than collecting physical or digital items in a media collection, focus on actually finishing those things or enjoying them to completion. For example, instead of buying yet more books that go unread, aim instead to build a long list of books you have read. Make doing the center of your hobby, not buying. After all, isn’t that what you really love?
- Don’t treat shopping as entertainment. It’s fine to go out on the town to be entertained but keep to a simple rule: don’t go into a store unless it’s for the purpose of buying something you’ve already decided you need before going in. Don’t go to stores just to browse for entertainment, as they’re designed to convince you to buy things you don’t need or even really want, but just react on impulse. Find other places to be entertained.
Trim your loan payments
- Consolidate your student loans. If you have multiple student loans, look into your options for student loan consolidation, particularly right now with interest rates being so low. This step can reduce your monthly student loan payments and even reduce the total interest you owe over the lifetime of the loan.
- Use a zero interest credit card balance transfer. In order to entice new customers, credit card issuers will offer the opportunity to transfer the balance of an old credit card to the new one and charge 0% interest on that transferred balance for a year or more. This can help significantly cut a credit card bill and make it easier for you to pay off.
- Refinance your home mortgage. A mortgage refinance is when you replace your existing mortgage with a new one, usually with a more favorable interest rate and thus lower monthly payments. With interest rates at historic lows, this might be a perfect moment to look into refinancing your mortgage.
- Develop a smart debt repayment plan. Once you’ve reduced the interest rates and payments on some of your debts, it’s a perfect time to build a debt repayment plan. A debt repayment plan helps you identify which debt you should focus on paying off first by making extra payments. This reduces the total interest you’ll pay on that debt and eliminate it much faster.
Reduce your food costs
- Use a meal plan and make a grocery list. Instead of going to the grocery store whenever you feel like you need food, get into a routine of making a meal plan once a week, then constructing a grocery list from that plan. The time invested in making that plan is more than saved by spending less time in the store and having a list to stick to saves a ton of money on grocery store impulse buys that just sit in your pantry.
- Learn how to cook. Cooking for yourself doesn’t have to involve three-course meals or Gordon Ramsey-level skills. Start by identifying things you enjoy eating, then look for how to easily prepare it from scratch and with basic ingredients.
- Buy store brand items. Store brand items usually cost a lot less and are often functionally the same or even better than the name brand. Try buying everything in store brand form and judge them for yourself. Even if you decide some name brands are better, switching most of your staples to store brands is a huge money saver.
- Buy in bulk. The big bulk packages might seem like they have a high price, but they’re usually quite a bit cheaper per use, meaning you get more value for your dollar. If you frequently buy something at the store, look at the big bulk versions and save up for them. You’ll save over the long run.
Cut your monthly bills
- Shop for better insurance rates. It doesn’t matter what kind of insurance you’re looking at — car insurance, homeowners insurance, even life insurance — it pays to shop around for better rates every few years. Gather some quotes and compare them to what you have now, and don’t forget to consider bundling insurance packages.
- Go through your bills. Sit down with every regular bill you have and go through it line by line, making sure you understand everything you’re being charged for. If something isn’t clear, Google it. If it doesn’t seem like something you should be charged for or is a service you don’t want, call the bill issuer and get it removed from future bills.
- Cut your subscriptions down to just the things you actually use. If you have a subscription or membership that you haven’t used in the last month, cancel it. Turn off any auto-renew you have with that service and allow it to expire. You can always renew it in the future if you decide you have a need for it again.
- Drive your car until it’s worn out, then replace it with late-model used. The most effective strategy for saving money long term on your car is to buy a late-model used car, stick to the maintenance schedule, and drive it until there are major problems, then replacing it. Along the way, once you’re free from a car loan, start saving for the replacement now. Soon, you’ll be free from a car payment forever.
What you should do with the money saved from trimming your budget
The key to making frugal living tips really work for you is to not simply spend that money on something else fun. Keep your “fun” spending at the same level and use the money you save when you cut down your monthly budget on something smarter. Cut un-fun things like your energy bill for something financially useful that can build a bright future for you.
One great option is to open a new savings account at a good bank and use that to start building an emergency fund. Another option is to take that money and start using it for extra debt payments as part of your debt repayment plan. You could even get started with saving for retirement. All are good choices, and there is no wrong answer here — it’s about what you consider to be the most important for your situation.