Cutting Expenses

The following are some ideas on how to cut your expenses in order to "generate" some additional cash that should be used first to pay off debt and then to invest.

Why pay off debt first and then invest? It's all about interest. Basically you pay creditors more than you can make investing. For example, you may owe $3000 to a credit card company at 12% interest, but want to have some cash in a savings account for "just in case". If you pay off the credit card you can always charge the amount if you have an emergency - DON'T charge if it's not an emergency (see wise use of credit cards). But, if you keep a balance on the credit card, you'll be paying 12% interest, as opposed to getting 0.3% in the bank (as of March, 2005). The difference is 11.7%, which is what you're paying to "feel good" about having money in the bank. You ain't makin' no money, you'se spendin' it, in fact, you'se wastin' it.

In other words, Interest: them that get's it, gets it, them that don't, don't.

Here are some ideas for cutting expenses, some of them are simple and you may already be doing them:

• Eat out less. Don't stop completely, but you'll save money by eating out less. For example, a family of 4 eating out at MacDonalds ("cheap" food), will spend upwards of $20 for one meal. That same family can have hamburgers, fries, and cokes for less than $10.
  • Hamburger: Lean ground beef patties (already made up), $2.30/lb - 2 pounds=$4.60
  • Lettuce: $1.49 each
  • Tomato: 6oz, $1.12
  • French fries: $2.49
  • Total (assuming you have ketchup, mustard, salt, etc.) $9.70
  This is shopping at an expensive grocery store, and you'll have some things (fries, tomato, lettuce) left over for another meal. If you buy some foods at a discount warehouse you'll save even more.
  Now, if you save $10 for just one meal a week, you'll have an additional $40 per month to put towards paying off your debt
• Shop at warehouse stores, but only for those things that will "keep". If you don't have a large freezer, don't buy lots of stuff that has to be kept in a freezer. Only buy those items you can use before they expire. Buying a case of tuna, for example, can save you 10 to 15 cents per can, and if you eat two cans a week, that's $10 per year - not much but it all adds up.
• Change your diet. I don't mean change everything, just a few things. Eat more vegetables, they're less expensive. Choose the store brand instead of the name brand - if it's actually less money. Reduce your intake of food if you can.
• Rent a movie instead of going to the movies. A family of four will spend $32 to go the movies, before buying drinks and snacks. You can rent a movie for $3, buy popcorn for $3 and a couple of 2-litre bottles of coke for $2, saving at least $20. And you can watch the movie in the comfort of your own home, and put the kids to bed if they fall asleep during the show. This doesn't mean that you never go out, just that you can save $20 a week if you go out one less time per week.
• Take the kids to the park instead of buying them a video game.
• Combine trips and errands, saving gas and time.
• Track how much money you spend on "stuff" each day. If you go by the corner store on the way to work to get a donut and coffee, maybe you can buy some donuts at the grocery store, and make your own coffee. Buy soda at the grocery store, instead of individual cans or bottles at the corner store. A 2-liter bottle of Coke is $1 right now at my local grocery store, but a 1-litre bottle at the corner store is $1.59. It's not a lot, but it adds up.
• Every time you spend money, whether it's cash from your wallet, using a debit card, credit card, or writing a check, ask yourself a couple questions.
  1. Do I really need to buy this now? or can it wait?
  2. Is there something I can buy for less money that will fit the bill?
  3. How am I going to pay for it? Don't take it from the amount you're using to pay off debt
  If you ask yourself these questions, you'll be less likely to fritter money away.
• Carpool
• Close off the rooms in your hose and shut the heating / cooling vents to those parts of the house you're not using.
• Put up window insulation wrapping. This is a clear plastic that you put over the windows, it creates an insulation area between the room and the outside, reducing energy costs.
• Insulate the house - this can be a large expense, so analyze it well before doing this.
• Use less expensive methods of heating your house - a fireplace if you have free or cheap wood available for example.
• Don't get a new (or used) car until the old one is paid off and will cost too much to repair - and then pay cash for it.
• Reduce, re-use, recycle. Wherever possible use less of whatever it is you're using. And then use it again for something else. If you've exhausted it's uses, recycle it. The local grocery store gives a 5 cent discount for every bag you bring in to re-use, for example. Use grocery bags as trash bags. Don't use paper plates or cups. Use the backs of paper to write on.
• Keep more organized. If you can find something, you won't go buying another one.
• Turn off the lights in the rooms you're not using.
• During the summer, open the windows at night, close them and the shades during the day. This will keep the house cooler, and save energy.
• Get a programmable thermostat, or turn the heat / air conditioner off (or down) when you're not in the house.

More finance tips

• Permanent files What to store in your permanent file.
• Safe Deposit Box What to store in, and how to get, a safe deposit box.
• Filing Checklist How to develop a filing system, either to start a new one or improve your existing one.
• Other Files What to else to keep in files.
• Budget Keeping a budget.
• Medical Records What to keep, and what to do with medical records.
• Home Inventory Creating and maintaining a home inventory file.
• Car Purchases The most efficient use of your money when purchasing a car.
• Phone Book An organized personal phone book file system.
• Keeping Records Where to keep records.
• A home office Setting up a home office.
• Home Office Running a business from home.
• Banking Banking, savings, checking, and other bank accounts.
• Balance the checkbook How to balance a checkbook.
• Interest What interest can do for you or to you.
• Bad checks How much a bounced check really costs.
• Tax refund What to do about tax refunds, how to calculate what to have taken out for taxes during the year.
• Pay off debt How to get out of and stay out of debt.
• Cutting Expenses Ideas for reducing expenses as much as possible.
• Investing Making wise investments.
• Credit Cards Making wise use of credit cards.
• Debit Cards How to use debit cards.
• Finances and records Getting started with your finances and records.

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