Goal: Review your loans and expenses to reduce your outlay.
How can I reduce my expenses?
To increase the amount of money that we can use for savings or spending, requires either increasing our income or reducing our expenses. While there are ways to increase income, it is easier for most of us to find ways to reduce our expenses. Here’s some ways to reduce your expenses:
- Prioritize your expenses. Do this in a way that works for you. It’s up to you to decide which category an expense falls into, so if you like your daily Starbucks Frappuccino, then count it as a necessary expense. Use these three categories:
- Essential/Mandatory - examples housing, food, insurance
- Necessary/Can be delayed - such as clothing
- Can be eliminated (services that you either no longer use or use infrequently such as a gym membership or other subscription).
- Consider asking your service providers for a better deal. Many consumer companies such as cable companies and phone companies will offer you a better package at a lower rate when you tell them you are considering other options. Prices in these industries have a lot of flexibility so it pays to shop around and ask your current company if they will make you a better deal.
- Prioritize all of your debts by interest rate and amount. Pay off your highest cost debt as quickly as possible and then work your way to paying off your lowest cost debt. Always pay more than the minimum balance due on a credit card or similar debt. If you pay only the minimum balance due, it will take you many years to pay off that loan. Ask for a better rate from your current card or seek alternatives - be wary of balance transfer fees.
- Review the terms of your home mortgage periodically. You may be able to reduce your interest rate or guarantee it for a longer period. There are two main types of mortgages: fixed rate and adjustable rate.
A key to positive cash flow is to be mindful of expenses. This includes being a fully informed buyer, and extends to the even more important task of monitoring existing expenses to search for the most favorable pricing. This is the core of the GET READY! principles. Be informed, ask questions and trim expenses.
Pick up a copy of Get Ready: A Step-By-Step Planner for Maintaining Your Financial First Aid kit to guide you through organizing your financial documents and summarizing all of your loans, expenses and taxes. Pick up a copy on Amazon (here), purchase a digital copy (here) or learn more (here).
Access the Get Ready Toolkit and download worksheets for all of your loans, expenses and taxes along with a Cash Flow (budget) worksheet so that you can view them in one place (here).
The Get Ready Toolkit also includes a subscription to the Get Ready Newsletter which follows the Get Ready Financial Calendar to help you stay financially prepared.