Despite an improving economy and declining unemployment rates, most Americans are still struggling to save money. According to a CBS report, almost 80 percent of Americans are living paycheck to paycheck. Nonetheless, following a few simple tips can help Americans end each month in the positive, regardless of their incomes.
Organizing expenses
To save money, it is crucial that people first get a firm grip on their current expenses. To do so, it is often helpful for people to broadly categorize their expenses in order of importance. A preliminary list of expenses will probably look something like this:
- Housing and utilities
- Healthcare
- Groceries and household items
- Transportation expenses
- Entertainment and miscellaneous purchases
Once people have this broad categorization, they can begin to subcategorize individual expenses within these broader categories. The purpose of this practice is to help people identify their financial wiggle room, flexible expenses that can be reduced or eliminated in order to free up funds for savings.
Cutting costs
Some expenses will likely be relatively firm; reducing the cost of a mortgage or a power bill may be impossible or impractical, but as people examine all of their expenses, they will eventually find room to maneuver. When it comes to groceries, for instance, using coupons, buying things on sale, buying generic rather than name brands and shopping around for the best prices allows people to either drastically reduce their grocery bills or at least make their groceries go further.
People should also pay attention to those monthly expenses that are highly competitive. A lot of companies are constantly vying for control of their respective markets. Indeed, people can save quite a bit of money by adjusting things like:
- Car insurance
- Cellular phone service
- Cable or satellite services
- Monthly newspaper or magazine subscriptions
Shopping around in these areas can cut costs even if people do not switch companies. There is an old saying that “the squeaky wheel gets the grease,” and as cliche as it might be, it is undoubtedly true; many of these companies would rather lower customers’ bills than lose them altogether.
Likewise, people often find that they are paying for things they either do not use, do not need or cannot really afford. Instead of paying a monthly cable bill, for example, a streaming service may offer comparable entertainment at a fraction of the price. In fact, some streaming services are entirely free, even if the advertisements are a bit heavy.
Paying down debt
As handy as they can be in a pinch, lines of credit can be dangerous. In fact, according to a recent CNBC report, the average American in 2018 had $6,375 in credit card debt, and many credit cards have an interest rate of 25 percent or more annually. This means that, just to avoid default, the average American pays nearly $1,600 in interest each year. Using some of the money saved by cutting costs in other areas to pay more than the minimum payment each month will eventually eliminate the burden of credit card debt, even if it takes several years. The longer people carry this kind of debt, the more money they throw away on interest.
Though it may not always be fun, people looking to save money can do so rather easily. By organizing their budgets, lowering or eliminating monthly bills and paying down debt to avoid hefty interest payments, people can free up precious funds and enjoy the peace of mind that comes with having the extra money to deal with unforeseen circumstances.
