How to cut your expenses

Sometimes it becomes necessary to cut expenses, rather than figure out a way to make more money. If you’ve been laid off from a job or recently retired and have to live on a fixed income, cutting your expenses may be your only choice.

Before you make any cuts, figure out how much you spend. Keep track of all of your expenses. Include everything, even the soda you buy at work. At the end of the month, categorize your expenses how much money you spend and where you spend it.

For some expenses, like clothes or vehicle maintenance, it may be easier to figure out how much you spend each year and divide it by 12. Add those costs to your monthly total.

Divide your expenses into essential and discretionary expenses. Essential expenses are your mortgage payment, utilities, groceries, medical expenses – any expense you must pay. Discretionary expenses are ones you can usually cut – entertainment, lunches out, books, CDs. Look at your discretionary expenses closely. Could you cut out a couple of video rentals a week or bring sodas to work with you rather than buying them out of a machine for $1 a pop?

You can even cut costs with some essential expenses. Can you cut back on your long-distance calls or raise the deductibles on your insurance? Make a list before you go shopping and stick to it. Maintain your car to avoid costly repairs.

Make a few changes at a time and choose a realistic goal for your spending reduction. It can even help to cut back your spending just $1 a day! Be sure to take some of your savings and treat yourself. Giving yourself an incentive like a vacation or a luxury can help you stick to your new plan.