How To Drastically Cut Household Expenses and Family Budget (8 Ways)

In this post, I want to discuss how to drastically reduce 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 many 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 including student loans with a special focus on your monthly repayments.

1. 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.

2. Analyze your expenses and repayments

Once you are done with the income you can then go to the difficult bit of analyzing 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

3. 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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4. 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 organizations and should be a must for you too. It can heal you save money.

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 expenses or budget.

1. 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 the needs of customers.

While $100 may not seem a huge amount for some it is saved money that could best be invested in the stock market for example. If you invested $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 maybe 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 advice to invest that $100 in stocks.

Instead you can look at Alternatives To Cable TV.

2. Consolidate all your debts into one and reduce your repayments

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

There are some organizations 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. Consolidating your debts can save money if done correctly.

3. Find a better mobile phone contracts

Find a better mobile phone contract: How To Drastically Cut Household Expenses and Family Budget
Better Mobile phone contracts

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.

The 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.

4. Learn to buy in bulk from wholesalers

If you have a big family, one of the best ways to save money is 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 the future things could be different. In such situations, supplies of basic items could be very scarce.

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

Another way to cut expenses is to 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.

6. 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 gym. In this way, you will get the benefits of exercising while you save money too.

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 don’t go to a gym.

This is simply not true. People still exercised before the advent of gyms. So canceling your gym membership is one of the ways to save money.

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7. Move to a smaller house to save money to cut expenses

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

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.

8. Rent out your spare room

Sometimes it may not be possible to move houses and in this case, you could find ways to subsidize 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 big cities. You just need to make sure that you do proper vetting of prospective renters.

You should go for people that share the same beliefs and lifestyles like you to avoid friction in the future. For example, if you are a teetotaler it would be better to find someone who does not drink like you.

I once lived in a shared apartment where one of the housemates 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.

9. Sell Your Car

Another drastic action you can do to reduce your household expenses will be to sell your car. I know this can be a tough decision for most people who cannot imagine living in this world without a car.

However, in some cases, you may have no choice but to take this drastic action. I know in some places in the United States a car is a necessity and therefore this action is not workable.

But there are places like big cities where public transport is readily available and affordable where this will work.

And selling your car can save you a lot in terms of gas costs, insurance, and other maintenance issues that cost us a lot.

This is therefore an action you should seriously consider as you reduce your household expenses and budget.

10. Avoid Eating Out

Avoid eating out: How To Drastically Cut Household Expenses and Family Budget
Eating out

One of the avoidable expenses that we can easily control is eating out. It is a very expensive thing if you do it regularly.

Preparing your own food at home is still the cheapest way to get your food. And it is also one of the healthiest ways of preparing food as you have control over what you put into your food.

The food that we eat in restaurants is prepared with too much salt and oil and therefore not good for us. It is therefore a very expensive thing in terms of money and health. It is therefore best avoided.

If you are not a good cook you can search for easy to prepare recipes on the internet. Another way would be to prepare your food in advance and store it in your fridge.

11. Use coupons

Another way to reduce your household expenses is to use coupons. If you do it correctly you can save money, a good sum of it actually, you spend on groceries by using coupons.

Coupons: How To Drastically Cut Household Expenses and Family Budget
Coupons

The challenge is to not make a purchase for things you don’t need just because you want to take advantage of a coupon. If you do this you will find that you will instead of reducing the cost you will increase them.

There are several ways you can get coupons. One way will be to use shopping apps to save money as some apps will search the net for coupons on your behalf.

Another way would be to use browser extensions that search and apply coupons at the checkout of your purchases. You could also join the loyalty programs for your retailers.

Many of the major retailers run loyalty programs that can save you in some cases $50 a month on your groceries. Another way would be to check your newspapers for coupons.

You could also find coupons by visiting the social media accounts for the products you use. There are companies that share coupons on their social media sites.

I have seen coupons on the Facebook pages of some companies. Finally, you can also check the packaging of your products. Some companies attach coupons to their product packaging.

12. Use the Envelope Method of Budgeting

Money in envelope: How To Drastically Cut Household Expenses and Family Budget
Money in an Envelope. (Envelope method)

The envelope method of budgeting is the in thing nowadays. This is a method where at the end of the month you will put money for budget lines in envelopes.

For example, at the month-end, once you get paid you will put money for groceries, transport, etc in envelopes. And you are not allowed to use funds in one envelope for anything else but that for which it was initially allocated.

In this way you avoid spending more than what you planned when preparing your budget.

There are now budgeting apps that allow you to do this electronically by creating electronic envelopes within the app. The app will then track your expenses for each envelope.

Ofcourse all this can be overridden by you if you are not disciplined enough. It is therefore important that you learn to be disciplined.

You can make yourself disciplined in your spending by for example having an accountability partner who will monitor your expenses and warn you if you are not meeting your targets.

If you are married you can use budgeting apps that allow you to sync your budgets and also receive alerts for each spending. Your partner can therefore keep track of each other’s expenses. In this way, you will be able to cut expenses that you should have incurred if someone was not being alerted of your spend.

Using these budgeting apps can also help you in your budgeting and is therefore much better than doing it on paper.

As I have said earlier the first thing you do in controlling your expenses is to start budgeting your money every month. Spending without a budget is a sure way to go off the rails in your spending.

Conclusion

I hope you have picked one or two tips on how to cut back your household expenses and budget. If you follow them you will be able to drastically improve your financial situation. You do not need to follow each of the recommendations above as we are all different and in different financial circumstances.

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