Focus On Cutting The Big Expenses, Not Just The Little Ones
When it comes to managing your finances, one of the important steps to take is to reduce your expenses.
Most people tend to have similar expenses, which could look something like this:
- Council Tax
- TV Licence
- Car insurance
When it comes to cutting down expenses, we tend to focus on the variable ones – such as food, or petrol. This is a smart thing to do, because we could be wildly overspending when we don’t need to buy as much as we have been buying. For example, food shopping is a big one that most people tend to concentrate on reducing.
With food shopping, if you do not plan it properly, such as by meal planning, shopping your store cupboard before going, making a list and sticking to it – you will end up buying too much food and end up throwing a lot of it away. Statistics show that as a nation we throw away a lot of food – the average person in the UK throwing away approximately £470 worth of avoidable waste each year. That is literally throwing your money in the bin.
It makes sense to reduce these variable expenses, because with a little bit of work, you can drastically cut down the money going out in these areas – and the less money that you have going out, means the more for you to put towards debt payments or other financial goals.
However, it seems to be that we avoid looking at reducing our big expenses. I can speak for myself here too – when I needed to cut back, I looked mainly at the small, variable expenses such as food and petrol. I made sure that I found a cheap electric/gas company, and I cut back on our water consumption. When the contract ran out on my phone, I shopped around to find the best deal which would include a new phone (because mine was cracked/broken in other ways) which would save me around £100 per year.
Something that I did not do straight away however, was to look at my biggest expenses. When I say it like that, it sounds obvious, doesn’t it? But I wonder how many people are aware of things like their mortgage terms, and actively search for better deals?
The main expenses for most people generally speaking are:
- Council Tax
The largest expense that most of us is our housing – whether that be paying a mortgage, rent, or a combination of the two. Decreasing your mortgage payments is possible – gather up your paperwork and find out all of your terms and conditions, especially when you need to re-mortgage. MSE have a great resource all about re-mortgaging.
If you are paying rent, it may be worth seeing if you can move somewhere cheaper to save yourself money. This can come up with a lot of resistance when suggested, but with things like paying off a ton of debt – sometimes you need to go for short-term pain to get long-term gain. Yes, there will be fees associated such as a new deposit, but you can save this up or use the deposit from your current place of living.
Work out the fees, write it all down and see how much money it would save you to rent another place. Think about moving costs too – if you don’t have a car, could family or friends help you? We’ve moved twice and never had to hire a man with a van.
If you manage to reduce your mortgage interest payments, this will save you a huge amount of money in the long run.
This is another one which can seem set in stone, and it normally is – but what if you’re not paying the correct amount? There were approximately 400,000 homes in England and Scotland which could be on the wrong council tax banding – though now 130,000 homes have already been rebanded, which shows that there are may errors.
The reason for this is because when the system was introduced to band all areas, it was a rush job and not done properly. It has not been re-assessed since it was done, apart from in Wales. Checking if you are on the correct council tax band could net you thousands in a tax rebate.
You need to make sure that you do this properly though, as it could mean that your council tax band goes up instead of down, especially if you have done something that makes your house go up in value. MSE have a great system to guide to help you with this process.
Transport consists mainly of car expenses, as they are so large. When I went without a car for years, it amazes me how much money I would have saved from doing so. There’s the cost of the car itself, the insurance, tax, petrol, maintenance and repairs. Cars are costly items!
Car insurance is a big expense, but one that many can’t be bothered to check if they could get it cheaper. If you shop around, you can save yourself hundreds every year. The best sites tend to be: Confused.com, GoCompare, MoneySuperMarket, CompareTheMarket – these are best for regular drivers. It’s best to check as many as you can – it is a tedious job, but it is worth it to save you loads of money throughout the year.
When buying car insurance online (or anything else for that matter!) make sure that you check cashback sites. Just by clicking on a link and then searching as you would have done anyway, you can get paid money into your account. The main cashback sites are Quidco and Topcashback.
With regards to petrol, it sounds kind of obvious, but using the car less will save you lots of money. Something that I do is not fill up my car completely, because psychologically I think that I therefore have loads and don’t think too much about taking lots of trips. If I don’t have much petrol in the car, I tend to think more about if I need to use the car.
You could also combine trips that you need to take in the car – for example getting your food shopping on the way home from work instead of going on a separate trip for it.
Check petrolprices.com and it will show you the cheapest places in which to get your petrol locally.
For a lot of households, debt payments can be very big – I’ve recently had a reader write to me saying that their payments are £900 per month. Debt payments are a necessary expense, and need to be removed out of the equation as early as possible. The quicker that you can get rid of this expense, the quicker you can work on using your money for more positive means.
This one seems like an obvious expense to cut down on, but many people leave it and just pay the minimum payments with the thought that it is just an expense that will always be there.
Check that any of your debt can be transferred to a 0% interest rate – but make sure that you are able to pay off the balance before it comes to the end of the term.
I’ve spoken here about how I paid off my debt, which was by the basic methods of: creating a budget, reducing food shopping costs, reducing water bills, reducing electric bills, earning extra money.
Reducing all expenses is obviously the key thing to do, but if you reduce the biggest expenses, this will save you a ton of money and should be quite simple to do.
Could you cut the cost of any of your largest expenses?
Blogging is my favourite way to earn extra money. Follow my step-by-step guide on how to start a blog here.