Need to Cut Back?
There comes a time in almost everyone’s life when they must cut back on expenses. This can occur after an emergency forces you to reassess your spending and come up with money that you didn’t know you had, or when you decide to take on an additional financial burden and need to find the money to pay for it somewhere. And while every expense you pay has the potential for being cut, there are some expenses that make more sense to cut than others.
Good items to cut from your budget are those that aren’t really necessary to begin with. Sometimes, it’s just a matter of being deliberate about what expenses you allow through on a regular basis.
- Go DIY: If there are any services you currently pay for that you can do yourself, this should be one of the first places you should look for cuts. This would include services such as lawn maintenance, house cleaning, car detailing, and so on.
- Cut automated monthly subscription fees: Whether you subscribe to magazines, newspapers, online video games or streaming video services, you can save a good deal of money just by clearing out many of these optional monthly charges. If you aren’t sure which to start cutting, you can compare the cost to the amount of time you spend enjoying the subscription services. Those you spend less time with might be good candidates for cutting.
- Go for whatever’s easy: Some people may find it easy to cut their restaurant spending and instead, cook at home. Others might find it prohibitively difficult to give up restaurant spending but very easy to cancel their cable subscription. When you first start to cut back, choose something that’s easy for you to cut back on instead of choosing something that really enhances your quality of life, no matter how unnecessary it is.
Bad items to cut from your budget are those that knock you off track from your savings and debt repayment goals or those that expose you to even greater financial risk.
- Reducing savings: Unless you are in a dire financial situation, you should always make contributions to your savings accounts.
- Reducing debt repayments: Don’t reduce your debt repayments or defer payments on your student loans as a first line of defense when looking for expenses to cut.
- Lapsing insurance: It may not seem as important to pay insurance premiums as it is to accumulate cash for a financial emergency, but insurance protects you from additional financial emergencies so allowing your insurance protection to lapse when you have monetary difficulties is just setting the stage for even more potential budgetary failure. Likewise, increasing deductibles in order to reduce premiums could spell additional financial hardship after an insurable event. Instead, make sure that you are paying for efficient insurance policies—those with limits that don’t exceed potential financial damages and with benefits that reflect your actual needs.
Cutting back on your spending is a good idea during both lean and flush times. By taking the time to understand the difference between good ideas and bad ideas for cutting back, you enhance the chances that your cutting back will yield successful financial results instead of failure.