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Have you been asking yourself, how can I cut back on household expenses? Whether you’re trying to save for a major purchase, get out of debt, save for retirement, or just want to build financial security, finding ways to save more money can help set you on the right track. Today, I’m showing you how to drastically cut your household expenses. Let’s jump into these 15 ways to save so you can set your finances up for success.
1. Understand Your Monthly Expenses
If you want to find ways to reduce your living expenses, first, you need to understand your expenses.
With every dollar that comes in, you have a choice of where to allocate that dollar. You can allocate it to spending, to saving, to investing, to giving, etc. But here’s the problem. The vast majority of people don’t make this decision consciously. For most, money gets spent, but they don’t know where.
The secret here is to understand where your money goes – every dollar of it. To do this, you’ll need a budget. Budgets track where your money goes so you can start to make more conscious decisions about your spending.
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Tackle Your Biggest Expenses
When trying to radically reduce your expenses, your best bet is to start with your biggest expenses first.
2. Cut Your Housing Costs
The number one expense for most people is housing.
If you can reduce your housing costs, you’ll be well on your way to drastically cutting your household expenses. Here are a couple of ideas to cut your housing costs.
First, house hack. House hacking is probably the single most powerful wealth-building tool. Here’s how it works. Typically, you buy a multi-family house and live in one unit and rent out the remaining units. The other units’ rent pays your mortgage, allowing you to live for free. Imagine how different your finances would be if you didn’t have housing costs.
If you already own your home, consider whether it’s worth refinancing your mortgage. In today’s low-interest-rate environment, this could save you hundreds of dollars per month. Paying less in interest could mean keeping hundreds more in your wallet.
Monthly Savings: $100 – $1,500
3. Ditch the Car Payment
Next, most people’s second largest expense is transportation. Between car payments, insurance, gas, and maintenance, owning a car can add up.
Here are a few ideas to help you save on your transportation costs:
- Buy a used car instead of a new car – you’ll save a fortune by letting somebody else pay the depreciation
- Instead of having two cars for your family, see if you can get by with one
- If you’re serious about cutting expenses to the bone, get rid of your car altogether and use public transportation, biking, etc. to get around
Monthly Savings: $300 – $500
4. Lower Your Insurance Costs
One of my least favorite budget line items is insurance. I can’t stand paying for auto, home, and umbrella insurance every month.
However, insurance is a necessary evil, and it’s not an area I suggest you skimp. That said, there are ways you can lower your insurance costs while maintaining adequate coverage.
First, shop your insurance around regularly. By regularly comparing insurance prices, you tend to save money when compared to sticking with the same insurer for a long time. Why? Because insurance companies have a bad habit of raising your premiums every year once they have you as a customer.
Second, if you can afford it, consider raising your insurance deductible. While this could mean more money out of pocket in the event of an accident, you can save a heft amount every month.
Monthly Savings: $50+
Lower Ordinary Expenses
Once you’ve tackled the big budget line items, it’s time to take on the smaller expenses – the ones that are somewhat ordinary and happen month after month.
5. Stop Eating Out
First, eating out is one of the best ways to blow through cash without even thinking about it. If you want to save money, you have to consider scaling back on eating at restaurants.
When eating out, it’s easy to blow through $75 for a meal for two. Instead, you could probably eat at home for $15.
Now, I’m not saying you have to go cold turkey on eating out. In my view, food is one of the great pleasures in life. Instead, scale back on how often you eat out.
For example, if you eat out once a week now, consider scaling back to once every two weeks. It can save you a bundle.
Monthly Savings: $150+
6. Save on Groceries
If you’re committed to cutting expenses on the family budget, there may be ways to save on groceries. No, I’m not talking about clipping coupons out of the Sunday newspaper. I am talking about using an app to help you earn cashback on grocery purchases.
If you’re looking for other ways to save on groceries, one other tip is to consider cutting back on meat purchases. While I love eating meat, it can get costly. Instead, consider eating more poultry, pork, etc. – you’ll find that it saves you a bundle.
Monthly Savings: $25 – $50
7. Cut the Cable Bill
When you look at your budget, only a handful of expenses cost more than $100 per month. If you want to know how to drastically cut household expenses, consider looking for big wins on expensive items.
One of these items is the cable bill. Cable bills add up quickly. Of course, if you want to cut out cable, you can consider switching to a streaming service instead. However, some streaming services, particularly live TV services, have become just as expensive as cable.
Instead of cutting out cable entirely, see if you can lower your bill. I did this using a service called Truebill, who essentially negotiated my cable bill on my behalf, and it has saved me a bundle.
What’s more, Truebill can help negotiate other bills like your cell phone, home security services, and much more. It has saved me hundreds, and it’s one of the easiest ways to lower your monthly expenses.
Monthly Savings: $25 – $75
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8. Cancel Memberships & Subscriptions
If you’re wondering what bills you can cut to save money, one area to get quick wins is canceling subscriptions. Whether it’s a gym membership (which can be replaced with working out at home), multiple streaming services you don’t use, or even magazine subscriptions, chances are you have at least one subscription you aren’t using.
Go through your credit card bill and see what subscriptions you’re willing to cut. If you want to make it even easier, Truebill can also cancel subscriptions for you.
Monthly Savings: $10 – $150
9. Lower Your Utility Bills
Next, utility bills can take a big bite out of your budget. While it may seem like “it is what it is,” there are some surprising ways to cut household utility costs.
Here are some simple ideas to help you lower your utility bills:
1) Unplug unused devices – they tend to draw electricity even when they’re not in use. Or you can also get a smart power strip to help save on this unnecessary draw.
2) Get a smart thermostat – rather than setting your thermostat at one fixed temperature, use a smart thermostat to learn your habits and help use electricity when it’s most cost-effective. This one from Ecobee is the one I use in my home.
3) Buy LEDs – Switch from those old incandescent bulbs to LEDs. LEDs last a whole lot longer, and they barely use any electricity at all. I switched my entire house to LEDs, and I know I’m doing some good for the planet and saving money as a result.
4) Switch to Arcadia Power – If you want to save on utilities and go green simultaneously, consider checking out Arcadia. They can help you get the best rate on electricity in states with deregulated energy markets, and you can power your home with green energy at the same time. I have been using them for years and am a big fan. Check out this Arcadia Review to learn more.
Monthly Savings: $25
10. Make Your Own Coffee
Alright, I love Starbucks as much as the next person, but it’s expensive. Instead, consider making your coffee at home. While some complain that Keurig K-cups are costly, they cost a heck of a lot less than a daily trip to Starbucks.
Plus, there’s no reason to relegate yourself to a mediocre cup of black coffee.
Just this morning, I made myself a copycat Starbucks Irish Cream Cold Brew. And guess what? It was delicious! And it didn’t even cost $6!
If you want complex Starbucks drinks, try making drinks at home, and save the real thing for special occasions.
Monthly Savings: $20 – $60
Address the One-Off Expenses
Once you address the regular expenses, consider what you can do to address the one-off expenses.
11. Spend Less on Gifts
If you want to learn how to drastically cut household expenses, consider this tip to save big.
I love spoiling my friends and family with gifts for their birthdays and at the holidays. However, gifts can get expensive. According to the National Retail Federation, the average American spends $1,047 on the holidays, and that’s not counting occasions like birthdays.
Rather than spending big on material items, consider gifts of experience or even homemade gifts. Not only can they save you a bundle, but they’ll also be more meaningful to the gift recipient.
Check out these ways to save on gift-giving if you’re looking for more ways to save.
If you spend $1,000 per year on gifts, do you think it’s possible to trim this to $600 per year? Doing so could save you almost $40 per month.
Monthly Savings: $25 – $75
12. Stop Buying Clothes
I know people who are constantly buying clothes. For some people, it’s a hobby. And that’s okay if it is. But make sure this is where you want to be spending money.
I buy clothes once or twice a year, and when I do, it’s usually only $200 – $300 at a time. While this means I don’t have many new outfits, I find that I end up going back to the same outfits over and over again anyways.
If you cut back even $25 per month, that can add up to $300 per year.
Monthly Savings: $25 – $100
13. Wait before Making Purchases
This next tip isn’t about any specific purchase, but it can help you save a lot of money. If you want to make a purchase, consider waiting a day before pulling the trigger.
Avoiding impulse buys can make you think carefully about how to spend your money. When you have to pause before making a purchase, it’s much easier to make sure your spending aligns with your financial priorities.
Other Ways to Reduce Living Expenses
Finally, I have two other tips to help you cut expenses.
14. Switch to a Bank that Doesn’t Charge Fees & Pays You Interest
First, it’s incredible to me how many people still spend money on bank accounts. Not only do most people allow the bank to use their money for free (keeping money on deposit without interest), but countless people also pay monthly bank fees.
Let me be super clear. You should not be paying a monthly account maintenance fee. Period. Instead, switch to a bank that avoids these silly fees and pays you interest instead. While interest rates are currently low, you might as well try to get what you can. My current favorite account is at CIT Bank.
Monthly Savings: $15
15. Try a Money-Saving Challenge
Finally, if you’re serious about learning how to drastically cut household expenses, try a money-saving challenge. Doing one of these challenges, you’ll have to get creative about ways to save. From finding free entertainment to having no-spend days, money-saving challenges can push you to stretch your savings.
I’ve put together a list of 15 money-saving challenges to give you some ideas to get started.
How to Drastically Cut Household Expenses: 15 Ways to Save More Money
If you want to drastically cut household expenses, the key is just to get started. No matter which ways might be the best fit for you, start somewhere and continue to identify opportunities to cut back.
- Understand Your Monthly Expenses
- Cut Your Housing Costs
- Ditch the Car Payment
- Lower Your Insurance Costs
- Stop Eating Out
- Save on Groceries
- Cut the Cable Bill
- Cancel Memberships & Subscriptions
- Lower Your Utility Bills
- Make Your Own Coffee
- Spend Less on Gifts
- Stop Buying Clothes
- Wait before Making Purchases
- Switch to a Bank that Doesn’t Charge Fees & Pays You Interest
- Try a Money-Saving Challenge
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