How To Drastically Cut Household Expenses and Family Budget

In this post, I want to discuss how to drastically cut household expenses and family budget and still live comfortably.

This is not an easy thing to do as bad habits die hard but it is something that has to be done especially for people swimming in debts. In this case, you either have to choose to be pestered by debt collectors or even being taken to court or just to extricate yourself from debts.

To be honest there is nothing really easy in this world. To be successful in this world you have to learn to fight against all sorts of forces.

Steps To Take to Identify Areas To Cut

One of the steps that you need to take to identify areas to cut is to collect all your bank statements, credit card statements, bills, receipts, etc. You will use these to determine your monthly expenses and payments.

This is a very critical step and one you cannot afford to do a shoddy job. Therefore getting as many documents as you can is very important.

The goal is to get an accurate picture of your current financial situation.

Besides these expenses, you also need to look at all your debts or loans with a special focus on your monthly repayments.

Analyze your income or cash inflows

Once you have all the documents you need then you can start by analyzing the easy bit which is your income. This is easy for most of us as we rely on only one source of income, i.e. salaries or wages.

If you are a businessman then it can take a bit more time depending on your customer base.

Analyze your expenses and repayments

Once you are done with income you can then go to the difficult bit of analysing your expenses. This is a bit of a headache as most of us rarely keep receipts of our purchases.

I would suggest that in this area you need to be as detailed as you can be. Summarizing too much can make it difficult to analyze where to cut.

Therefore I would suggest listing everything that you buy monthly. That is list even the smaller things like sugar, cooking oil, milk besides the bigger ones like rent.

You can also add a column that shows whether the costs are fixed or variable. The variable ones are the ones you can easily play around with during the budgeting process.

How To Drastically Cut Household Expenses and Family Budget

Compare Income Vs Your Expense or outflows

Once you have a picture of your income and expenses then it is time to compare the income against the expenses.

The goal is to make sure that your expenses do not exceed your expenses. Spending more than you earn is unacceptable as it has to be financed somehow.

And for most people, our over-expenditure is financed by credit card debt which is a very expensive way of financing your expenses. And if you do this every month it is only a matter of time before your debts are unaffordable.

Once you know your current financial situation, it is then time to set your financial goals which in our case is to find areas to cut drastically.

I am assuming that in this case, you fall into the category of people who are spending more than what they earn. However, even if you are not overspending the areas mentioned in the following paragraphs can help you to save money.

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Prepare a budget for the following months

There is no better way to manage your personal finances than through a family or personal budget. It is a must for corporations and organisations and should be a must for you too.

A budget will add focus to your efforts to cut household expenses. You can through a budget see to it that all the things you need are taken care of.

If you are not comfortable preparing a budget on paper or a computer spreadsheet you can use various budgeting apps that are available nowadays.

At this point, I want to suggest that you read Senator Elizabeth Warren’s book titled, All Your Worth: The Ultimate Lifetime Money Plan. In the book, she suggests that you follow the 50/30/20 rule in analyzing your expenses. She advises that one spends 50% on needs, 30% on wants and 20% on savings.

I have a post titled, The Difference Between A Need And A want that will help you to know more about needs and wants.

In the following paragraphs I will provide you areas in your budget that can easily be cut.

How To Drastically Cut Household Expenses or Budget

Below are some areas where you can drastically cut household expenses or budget.

Suspend your Cable TV Subscription

This is probably one of the most costly expenses that we can do without to be honest. I currently pay at least a $100 monthly in cable tv.

In exchange for my $100 I get scores of channels that I doubt I will ever watch as I am more interested in the sports channels. I am therefore forced to pay for channels that are for some reason bundled together with my sports channels.

It would probably be cheaper if cable tv companies were forced to sell channels based on needs of customers.

While $100 may not seem a huge amount for some it is money that could best be invested in the stock market for example. If you invested a $100 every month in the stock market you would be surprised at the value of those shares in ten, twenty years time.

Therefore paying $100 in cable tv is not really a wise use of your resources. There are so many free channels out there that you will be spoiled for choice.

If you are a soccer fan may be the best course of action would be to watch the games for free at a pub or somewhere else. After all sports is best watched in a group than individually.

I therefore urge you to seriously consider cutting this from your budget. I am very sure that you won’t regret your decision. Especially if you take my advise to invest that $100 in stocks.

Consolidate all your debts into one and reduce your repayments

If you are struggling to repay your credit card debt and other debts, maybe time has come to consolidate all your debts and arrange an affordable repayment plan.

There are some organisations that can help you to consolidate your debts. That way you won’t have to deal with so many lenders.

In the case of credit card debt consolidation it is even easier and you could easily avoid paying interest for some months if you find a better offer. There are so many credit card companies that are willing to conduct a balance transfer for you.

Even if you are heavily in debt you can still take advantage of these offers and thus avoid paying interest or the capital element for some months.

You can then use that period to sort out your finances so that by the time the grace period is over you will be better financially.

Find a better mobile phone subscription

Marketers are getting better and better at making us feel inferior if we don’t have the latest phones on the market. We therefore end up with new phones and new contracts every two years for no good reason if we think about it.

The changes these makers of phones every year are not that fundamental to be honest. But somehow the find ways to convince us that we need those new gadgets at premium prices.

Time has come to be realistic about our finances and find the contracts that match our financial situation.

For example if you have broadband internet at home why would you go for a data package that you rarely use? Maybe it is time to start paying for only a data package that you need for things like Google maps that you may need once in a while.

Recently my contract expired and instead of going for the latest phones I went for an old model which half the price of the latest ones. I have never regretted that decision as I have what I need.

If you are considering a mobile phone contract shop around first and choose the plan that meets your needs and not what you see in television ads. You can do this by using various price comparison sites.

Learn to buy in bulk from wholesalers

If you have a big family, the best way to cut down on your grocery expenses is to buy in bulk from wholesalers like Costco. Buying at wholesale prices is a great way to cut down on non-perishables like cooking oil, toothpaste etc.

You will actually be amazed at the amount of savings you can make by just deciding to do this.

Besides the cost cutting you will also make sure that you are well stocked in case of emergencies. This has especially been evident during the coronavirus shutdowns.

While this emergency has involved a less dangerous virus in future things could be different. In such situations supplies of basic items could be very scarce.

Review all your subscriptions and cancel any that you don’t need

A few years ago I was going through my PayPal payments and discovered that I had been paying some subscription fees for things I was no longer using. I definitely won’t be surprised if you too are in the same situation.

There are so many “free” subscriptions that we involve ourselves and fail to cancel the subscriptions before they start charging you for the service.

I therefore urge you to take a few minutes to review all your standing orders and direct debits. You will be surprised that you are paying money for services you no longer use.

Even if there are services you still use you still need to ask yourselves if you really need them. There could be better and cheaper alternatives.

There are subscriptions such as magazine subscriptions that you may not really need. You could find that you could easily find the information in those magazines for free online.

Cancel your gym membership

Another membership subscriptions that you may not need is a gym membership. One can still find other ways of exercising that may not involve you going to a gymn.

You may, for instance, cancel your gym membership and cycle for free instead and still get the same benefits.

If you don’t like cycling you can find other ways of exercising available for free on Youtube.

It is the adverts on television that make us believe that there is only one way to exercise. And people are led to feel that they are somehow “primitive” if they dont go go to a gym.

This is simply not true. People still exercised before the advent of gyms.

Move to a smaller house to save money

Rent is one of the big items on many family’s budgets. It is not rare to find a family that spend half of their net salaries on accomodation.

When thinking of cutting your budget this is one area that you need to critically analyse. It does not make much sense to live in a four bed house when you only need two.

It therefore makes sense for all of us to seriously consider moving to a smaller house. Generally smaller houses will cost us less money all things being equal.

Saving $100 to $200 from moving houses could go a long way in improving our financial situation.

Sometimes we end up renting houses just to keep up with friends etc. I remember when I first started working I ended up living in an expensive area of our city just to keep up with some friends.

And I had nothing in terms of furniture and other household items. In hindsight, I wish I had first of all been renting a small apartment and use the savings to buy household items.

Rent out your spare room

Sometimes it may not be possible to move houses and in this case you could find ways to subsidise your rent. One way of doing this is to rent out your spare room.

There are so many people who are doing this especially in the big cities. You just need to make sure that you do a proper vetting of prospective renters.

You should go for people that share the same beliefs and lifestyle like you to avoid frictions in future. For example if you are teetotaler it would be better to find some one who does not drink like you.

I once lived in a shared apartment where one of the house mates was a drug user and would always argue with fellow housemates. I had to put up with all sorts of shouting matches and banging of doors.

I would not wish this on anyone. So do your homework well before you admit someone into your house.

As the owner of the house, you may need to set out the rules of conduct before the contract is signed. The person joining you should know exactly what is expected of them.

Conclusion

I hope you have picked one or two tips on how to drastically cut your household expenses and budget. If you follow them you will be able to drastically improve your financial situation.