Cutting expenses to the bone can help you survive in a downturn, or stash away cash towards your savings goals.
Is cutting expenses to the bone your top priority right now so that you can get some breathing room in your budget?
There are three different people who live paycheck to paycheck:
- those who spend too much money
- those who don’t make enough money to cover basic costs + save
- those who both spend too much money, and also do not make enough money to cover basic costs (including saving money)
Which category do you fall into?
Here’s the thing: you work hard for your money.
We all do.
I'm not here to tell you how to spend your money, or that you should put it all in the bank and not spend a single dime on yourself — you can spend your money on whatever you would like to.
Then you're spending beyond your means.
Has your paycheck been mortgaged away before you even receive it? Is it just a piece of paper or a lump sum of money that promises to hold the creditors at bay, keep the lights on, and keep you driving to and from work for a month longer?
Since I know you want more for your future than this, let's work on increasing the gap between your bills and your paycheck by cutting expenses to the bone.
Crunched for time? Use a service like Trim to analyze your bills and then actually negotiate on your behalf to get them lowered. They'll even cancel subscriptions for you! They only earn money if you save money, so it's worth a shot.
Bare Necessities Budget — What Does it Look Like?
Hold tight — we're about to list out over 49 ways to cut your expenses to the bone.
But before we do that, let's get clear on what your end goal is here, and what you're trying to accomplish.
Your end goal right now is to get down to what is called a Bare Bones Budget.
A budget that includes ONLY your absolute necessities. No extras. No fluff.
(That's what it means to cut expenses to the bone).
And why should you get excited about this? Well, figuring out what your bare bones budget looks like is going to free you to be able to cover all of your bills, and if you have any leftover, to funnel money to your savings goals.
What's in a bare bones budget:
- Food: Note that this category does not include things like stops at the coffee shop or eating out. A bare bones budget includes only grocery ingredients that you need to feed you and those dependent on you (your family) three meals a day plus a few snacks.
- Housing: Your costs to keep a roof over your head, like rent/mortgage, escrow payments, home insurance, renter's insurance, and property taxes.
- Utilities: This includes the electricity bill, oil bill, natural gas bill, and water/sewage/trash pickup bills. Include internet here if you need it for your job.
- Transportation: Include your bare minimum costs to get to and from work and school. Gas, car insurance, and necessary repair costs to keep your car(s) running.
- Childcare: If you need childcare in order to work, then this is part of your bare bones budget.
- Medical Costs: Prescriptions you need to have, health insurance premiums, doctor appointment copays, and ongoing medical needs.
- Debt Minimum Payments: In general, you always need to make at least your minimum debt payments in order to avoid collection agencies, ballooning debt, and other non-niceties.
That's about as bare-bones as it can get. What didn't make that list? Things like cable television, clothes, or kid's sports programs. That might make me look like Scrooge, but if you are finding it hard to pay your necessities, then you need to be ruthless when creating your own bare bones budget.
And also don't forget that even within the categories that you have to have, you can find ways to save money to cut expenses. We're discussing these steps below so keep reading.
How to Drastically Cut Expenses
A lot of articles I write here are about fine-tuning your frugal habits, your budget (here's some great budget advice), and your spending.
It’s as if I ask you to take a scalpel and slit open the tiniest of holes in your finances in order to reap that extra little savings.
But what if that is not enough?
It sounds like it’s time to take more drastic measures.
You need to forget about the scalpel and break out the machete, cutting expenses to the bone.
We generally don’t like to talk about these options because they make for oftentimes drastic changes in a person’s lifestyle.
But these options could make the difference between retiring in fear versus retiring with dignity, or even the difference between foreclosure/bankruptcy and financial independence.
Cut #1: Drastically Reduce Your Housing Costs (without Moving)
If moving is not an option for you, or not an option you're willing to take, then check out these two resources for how to drastically cut your housing costs while staying put:
- 9 tested strategies for negotiating lower rent (without having to move)
- How to save money on your current mortgage
Cut #2: Move to a Cheaper Place
Did you bite off more than you can chew at your current apartment/home? Or did your financial situation change since moving in?
I found myself in this situation. After being laid off from my first job out of college, I found a position at the company my aunt was working for in Florida. While I was able to rent a room for the first 5 months with someone and split the rent payment (so my rent portion was around $560/month), I had to get my own apartment next. That cost me over $900 per month.
And you know what? It was so expensive, that I could hardly save any money at all.
My next move was to a cheaper place to live, and it made all the difference.
When is your lease up? How much would it cost you to get out of your current lease? It may be worth it to break the lease and free up much-needed cash flow.
It will be much more involved to sell a home to get out from a mortgage that is too expensive for you. Still, it should be considered as an option.
Cut #3: Cut Rent and Utility Costs by 30% (at least)
My Aunt lives in a great area in a posh city since her mid-20s.
How has she managed to afford that?
Well, for as long as I've known her, she's rented out 1-3 rooms in her apartment. She gets to split the rent (and now mortgage, because she owns it), utilities, electricity, etc.
Psst: Don't want to get a roommate? You can at least lower your costs by using these tips on how to lower your electric bill in an apartment.
I had a roommate in my first and second apartment right out of college.
While not ideal to many people, this could quickly free up cash for other expenses and allow you to stay where you are.
If you live in a two-bedroom+ apartment, make sure your lease allows for a roommate, and discuss this with your landlord.
Cut #4: Get a Second or Third Job
Cutting your spending can only take you so far if your income is low to begin with.
In some cases, you may actually just not be making enough money to cover necessities and any financial obligations you have.
If picking up extra hours, taking on more responsibilities, a raise, or promotion has not worked with your current employer (all of these possibilities should be exhausted before taking on a second or third job), then it is time to see what you can fit into your schedule.
Waiting tables, seasonal work, freelance work, mowing lawns, consulting: these are all options for you. It will be hard, but it should not last forever.
Here is my article on ways to make extra cash from home fast.
Cut #5: Get Rid of the Second Car
This will take some flexibility, faith, and the go-ahead to change schedules from your boss to make this work.
But it can work – in fact, my husband and I became a one-car family after we lost two vehicles in flooding within three weeks of each other (*sigh*).
We were a one-car family for 2.5 years, and just bought a second car (with cash) a few months ago.
The savings should be immediate and huge if you decide to do this. For example, we got to pay $58 less each month in car insurance, and about $50 less per month in gas/oil change costs.
Over 2.5 years, that was a total savings of $3,240!
Cut #6: Get Rid of Cable and Internet
Heck, you can even sell the television(s).
Americans (and myself included, though we only have one small television in the living room — I refuse to have a television in our bedroom) have accepted a television and home computer as a right, not a privilege.
If you ever watch financial shows like ‘Til Debt Do Us Part, you see that a person can be completely in the dumps financially, eliciting all kinds of sympathy…and they are being taped in front of their large screen, plasma television.
But if your finances and future security is at stake, how can you possibly justify cable and internet?
Go to the library, use a friend’s computer, or use your work computer after hours if you have to.
Cut #7: Quit Something Cold Turkey
Smoking, alcohol, and any other addictive habits will suck the life out of your finances.
I should know — Paul used to smoke, and that sucked up about $100 per month out of our budget.
Thankfully, he quit cold turkey again and hasn't turned back. It was a rough few weeks to say the least, but he is doing beautifully and he made the right choice for his health, our life, and our finances.
Cut Everyday Household Expenses and Lower Bills Fast
Looking to cut expenses to the bone, and fast?
Great – one of the fastest ways to lower your bills is by negotiating down your contracts.
The only problem is, you'll have to work around what's called “Switching Costs”.
Switching Costs are things like the time and energy it takes to switch to a new provider, and the fees and penalties you might have to pay to get out of a plan early.
In an effort to keep you, companies do things like:
- Charge an early cancellation fee
- Give promotional offers when you sign on for longer contracts
- Make it cumbersome to remove the piece of equipment they installed as part of using their service
Any sort of barrier between you and leaving your service provider is in the favor of them – because it means that you're less likely to do it.
And if you're less likely to do it? Then they can keep raising the rates on you.
Use these 4 call scripts below, and slash your costs.
Cut #8: Get Your Cable/Internet/Home Phone Lowered
When was the last time you called your cable/internet/home phone service provider and asked for a discount? Sometimes you need to be sent to the cancellation department in order to get one, but the effort could save you a lot of money. In 30 minutes of my time, we saved $300 on our annual costs, were upgraded to the next set of channels for free for one year (with no further commitments), and were sent a $50 visa gift card!
Pay Per Half Hour: $350
Phone Call Script
Customer Service Rep: How may I help you?
You: Hi! I’m hoping you can help me. My promotional period has ended, and I am wondering if I am eligible for a new promotion? [OR] I cannot afford my current cable/internet package and need to know if there is any way that you can reduce the monthly cost. [OR] I recently received an offer from [company] for [amount of offer]/Saw an advertisement from [company] for [amount of offer]. Can you beat this?
Rep: Can I have your account number please?
You: Sure. It’s XXXXXXXXXXXXX. A pause while the rep looks into your current plan.
Rep: How about we give you some extra channels, or higher internet speed?
You: That is wonderful. Thank you. But I also need to decrease the amount of money I am paying each month.
Rep: I’m sorry, there’s nothing else we can do.
You: Okay. I appreciate your time. Can you please transfer me to a rep in the cancellation department?
Rep: Sure. Have a nice day.
At this point, you can be sent to either a retention rep, a cancellation rep, or someone who acts as both.
Cancellation Rep: How may I help you today?
You: Hi, I’d like to have my monthly payment lowered. However, the customer service rep was unable to do this.
Rep: I see. What if we offered you $XX.XX for cable/internet for six months?
You: Is that the best you can do?
Rep: How about I extend that to 12 months?
You: Fantastic. Thank you so much for your help! What’s my current bill now, and what is it after this new deal? Also, can I please have your name and Agent ID number?
Rep: $XXX.XX per month to begin with, and $XX.XX now. My name is [name], and my Agent ID Number is XXXXXXXXX.
You: Great. Thank you very much for your help!
Cut #9: Get Your Homeowner’s/Renter’s Insurance Lowered
I was once told by an insurance agent that I should shop around for insurance quotes every six months.
He explained that each company can offer you a different price because their pool of insured customers is unique to them. This also explains why one company may offer you a price at a significant savings from another company.
Back in 2010 I shopped around for better homeowner’s insurance and was able to get comparable coverage for $739 less than we were paying before. This took me about two hours on the phone.
And in 2018, I did it again – our homeowner's insurance rate had been creeping up at every single renewal (but because we had had a baby, I just didn't have the time). BOY am I glad I shopped around – I went with USAA, and saved a huge $1600/year!
Pay Per Hour: $369.50 (total is $739)
Cut #10: Get Your Auto Insurance Lowered
The first thing that you should know with auto insurance is that if you combine your auto insurance with your homeowner’s/renter’s policy you should receive a discount. Doing this is one of the reasons why we received the $739 in savings in the example above. If you have already combined insurance policies, then call your company and ask them if they can do better. If not, shop around for better quote(s).
Cut #11: Stop Using Your Escrow Account
Paul and I have a VA loan, so we are required to keep an escrow account. If you have a conventional loan, you might want to find out if you can ditch your escrow.
The benefit to doing so is that you can then use your money to earn you money.
Instead of giving your mortgage company an extra few hundred dollars each month that is earning them interest, you can keep this in your own savings account and pocket the interest. True, this might just be $50 or so per year. But wouldn’t you rather pocket that instead of a bank?
Depending on your lender, you will need to meet a few requirements in order to stop using an escrow account, such as: your mortgage typically has to be at least a year old, you have to show that you have made consistently on-time payments, and your loan-to-value ratio typically needs to be under 75%.
Word of Warning: Understand that if you get rid of your escrow account, you will need to be diligent in putting enough money into savings each month (and keeping it there) so that when your property taxes and homeowner’s insurance bills are due you have the money.
Bonus: 4 Ways to Get through to a Live Customer Agent
You generally can't get anything outside-of-the-box done without talking to a live rep.
Fortunately, I've become somewhat of an expert on how to get through to a live person. Let me share some tips with you for how to get through all those phone systems to a live person.
- By Voice: Say “Agent” or “Representative” sternly into the phone. Many systems are voice activated through each of the menus. You can also say that you want to cancel the service, and your chances of being patched through to a live person will increase immensely (thanks, ADRealty!).
- By Keypad: Press “0” in a menu. This is typically a default to connect you through to a service rep. If it does not work in the main menu, try it in the second menu, and the third. In most systems, you do not need to hear all of the options of each menu in order to press a number.
- By Placing an Order: You do not actually need to place an order, but most systems will punch you through to a live rep if they know you are going to buy something from them. From there you can ask to be directly connected to whichever department you need. ***Word to the wise, once you find that most rare of species (a live agent), ask for their direct line number in case you are cut-off during the transfer.
- By Selecting Tech Support: Once again, I know that you do not need tech support, but select this option because you will most likely be put through to a live rep. Once there, they can directly transfer you to any department you need (and will likely be happy to pass you off).
Don’t Be Discouraged by Contract Agreements and Not Having Enough Time
The two main obstacles I can see to prevent you from making these phone calls are your contract provisions and not having enough time. I want you to know that there can be ways around both of these problems.
- Get Out of Your Contract Without Paying a Penalty: For cell phone contracts where there is an early termination fee, know that you can use sites like Cell Swapper to find a willing person to assume your contract. There may be a small fee to do this, but it will be much less than the termination fee. For cars that are leased, you can use services such as SwapALease.com where you can list your car and a buyer who is looking to take on your lease will hopefully find you. Note that you cannot do this without your lease company’s consent. A final way to get out of a contract for free is if your service provider changes its terms of services. Typically after they do so, you can void the contract within 30 days (this happens frequently so take a look at your last month’s bill for any indication that this has occurred).
- Outsource Your Negotiations: If you are crunched for time, know that you can outsource this task. Trim will make these types of phone calls and negotiations FOR you. Trim will analyze your accounts to find recurring subscriptions that they can cancel for you if you'd like, and they'll even negotiate on your behalf for a lower cable bill, lower car insurance, etc. And they only earn money if they save you money.
Now let's move into actual examples of cutting household expenses, so that you can get more ideas!
Cutting Household Expenses – Real Life Examples
I’d like to highlight stories from others who have chosen to take drastic measures in order to free up more of their money. These are real life examples!
A note: what is extreme to someone may not be extreme to another person. Interestingly enough, I asked several bloggers for articles on their extreme financial moves, and there is quite a continuum on what is considered extreme.
Cut #12: Extreme Grocery Savings
Faced with Graduate School, NoDebtMBA decided to start a $25-a-week grocery challenge. They eat almost vegetarian meals, stock up on staples, and eat at home for their meals. Six weeks in they were going strong.
Prairie Eco-Thrifter posed a grocery challenge to her husband to only purchase dairy and fruit from the grocery store so that they could eat through their excessive food supply; after 8 weeks, they had only spent $200 on groceries. Typically they spend $400 per month on groceries.
Here’s another great blog to check out that details their grocery shopping of just $30 a week in New York City. They offer weekly receipt breakdowns — pretty neat!
Cut #13: Extreme Cable and Cell Phone Savings
Money Cone was previously paying $720 for their cell phone plan, and now just pays $100 per year by switching to prepaid. Moneycone also cut cable television for a savings of $700 per year. They purchased rabbit ears for $10 which gives them 13 HD channels. They also use Hulu, Netflix, and Roku.
Cut #14: Putting 100% Money Down on Home Purchase
Money Saving Mom offers a great series on how her family saved 100% of the money needed to purchase their first home outright.
This is a great series — everything that they did will certainly not work for everyone, but it is very inspirational. Some of the highlights include the wife being a stay-at-home Mom and the father attending and finishing law school debt-free due to their convictions, choices and opportunities.
Cut #15: Extreme Transportation Savings
Super Frugalette shared a car with her husband for six years, and discusses the pros and cons of ditching the second car in her article.
My husband, Paul, and I have shared a car now for over a year since we lost both our vehicles in Hurricane Harvey. We're a one-car family!
Cut #16: Extreme Christmas/Holidays/Gift-Giving Savings
The Saved Quarter spent a grand total of $68.75 on holiday gifts for friends and family several years ago, and has started her $100 Christmas Challenge again for this year.
Her strategy includes mystery shopping, making homemade gifts, playing the drugstore game, earning free gift cards, etc
Cutting Expenses to the Bones — Our Own Examples
I wanted to give you all a rundown of 17 things we've done to cut expenses to the bone that have made an incredible change to our lives (to the tune of $111,350.19!).
- Ditch your bloated cell phone plan and enter the low-cost smartphone plan market (so you still get everything you want anyway, with an extra $40-$80 to play with per month!). Our (Annual) Savings: $410.76
- Take a stab at Travel Hacking for almost-free airfare (you still have to pay the security fees + an annual fee on the credit card you open). Our Savings (one trip): $1,200
- Nab that next juicy bank offer deal that comes your way (but only if it’s worth it). Our Annual Earnings: $200
- Play the Drugstore Game (without getting the Sunday Paper). Our Savings (since 2008): $3,500
- Fight your property taxes. Our Savings (over three years): $612
- Start getting your oil changes for free by mystery shopping them. Our Annual Savings: $200
- Shop around for Homeowner’s Insurance. When we did, we found a policy that was $739 cheaper! Our Annual Savings: $739
- Chop your grocery bill down without coupon clipping, ad scouring, or store hopping. Over three trips, we shaved $76.43 off of our bill. Our Savings: $76.43
- Refinance a 30-year mortgage down to 15 years. We did this, going from 5.5% to 3.5%, for a total interest savings of $103,000! Our Savings (over life of loan): $103,000
- Sign up to this free investment aggregator site to get the lowdown on how many fees you’re paying across all of your portfolio. You might be surprised, and compelled to move to lower-costing funds. Our current annual fees are $116.48, but I never would have known that without using this free service. Our Annual Savings: $0 (I did not move my money, just am paying attention to the fees now)
- Move your money to an interest-bearing checking account, and a high-yield savings account. Our Annual Savings: N/A
- Work on decreasing your water bill. Ours is generally around $30/month, and the average Houstonian’s is usually around $55/month. Our (Estimated) Annual Savings: $80
- Take the time to liquidate your electronic graveyard. We did, and reaped $107 in cash, $25.99 in tax deductions, $4 in Office Depot store credits, and 150 Recyclebank points. This was in 2012, so I’m sure we’re due for another liquidation. Our (Cash) Savings: $107
- Attack the cost of doing laundry in your household. My favorite way we do this is by making our own laundry detergent. Not only does it save us good money (we can wash 81+ loads for about $8.00), but it keeps some chemicals out of our home. Our (Estimated) Annual Savings: $25
- Get a little creative when you’re on a high-deductible health insurance plan so that you still get the care that you need, but without coming close to meeting the deductible for the year. Our Annual Savings: Hard to quantify, so I’ll skip
- Consider grocery shopping every other week instead of every week. Not only is this a money-saver, but it’s a time-saver as well. I estimate this alone has saved us about $100-$160/month from what we were spending when we shopped each week. Our Annual Savings: $1200
This is the kind of stuff I get super-excited about. When I can take the same pile of cash as everyone else, and get more from it after researching new frugal living hacks and then show you how to do the same, I feel my purpose.
Up next, I want to show you one final way to cut your everyday expenses.
A Secret to Cut Everyday Expenses
Here's a secret to cutting everyday expenses in your household: get rid of the vampires trying to suck your bank account dry.
I'm not talking about your kids, nor those annoying people that keep calling for you to donate to your alma mater (even though you're still paying down your student loans), nor the IRS.
No. It's the “Maintenance + Upkeep” things you own in your life that cost money to keep them going.
I don't really remember the time period when I started thinking that a purchase was a one-and-done thing. But I definitely remember the day when the fact that it typically isn't smacked me in the face.
So let’s talk about what sort of products you want to avoid buying (or ones you need to get rid of and replace with others that don't require upkeep costs) so that you can cut everyday expenses.
Cut #47: Belongings with Lots of Moving Parts
Things with lots of moving parts, all interconnected and necessary for the functioning of the item, have a much higher probability of breaking down.
Like electric toothbrushes versus manual ones. Or cars with lots of electrical systems that are great for the first several years, but promise some pricey bills after an accident or from normal wear and tear.
How to fix: Beware of movable parts. Of course, that's much easier said than done in our modern times. So what you want to be on the lookout for are really great warranty programs. This doesn't mean you have to buy expensive warranties; many credit cards offer extended warranties just for being a card member. Be sure to check into the details of yours and save receipts as necessary (I have a “receipts + manuals” file in my filing cabinet for this very reason).
Cut #48: Belongings with Frequent Replacements
Hello Brita Water Filter and the Swiffer Mop!
I thought once I had splurged on these sleek new appliances (I was in my early 20s just out of college, so they seemed like shiny appliances to me), that my investment was done.
But anyone with a Brita or a Swiffer knows that the refills can be an endless money vampire. It really rubbed me the wrong way every few months when I had to dedicate more of my paycheck to disposable items just to be able to use my original purchase.
And then one day it dawned on me: after a year or so of buying these refills, I had paid MORE in refills than I did for the dang product! Light bulb moment right there (reminiscent of those BMG Music Club days of my teens).
How to fix: Sometimes it's better to pay a bit more upfront for a product that does the same thing, but does not need refills. Such as the Reveal Mop vs. the Swiffer Mop. It is about $10 more to buy, but the pads are washable, and the cleaning liquid container is refillable (we use vinegar and water in ours).
Cut #49: Belongings with Lots of Maintenance Needs
Pets are the best example for this category (vet appointments, flea medication, carpet cleaner, etc.); however, if you're like me, you consider pets family and not belongings.
So other examples can include cars (oil changes, annual registration/inspections, insurance, gasoline, etc.), or swimming pools (chemicals, water refills, liner repairs, etc.).
How to fix: See if there are maintenance plans included. Like when we purchased our central A/C and furnace, there were several cleanings included in the price. After that, definitely shop around for places that have opened up shop to complete this maintenance (typically cheaper than getting maintenance done by the original seller of the item).
Bottom Line: you better figure in the maintenance and upkeep when you purchase items…which can cost even more than the product itself. Otherwise, prepare to have your monthly cash flow sucked dry!
Let me know what you’re going to try next from the list above!