How to Cut These 3 Expenses and Save Thousands

When it comes to expenses, you pretty much can narrow it down to a black and white discussion, with zero shades of gray.

You either need to spend the money on something or you don’t, and it truly is that simple of a message.

Granted, that can be a slippery slope for some given that they turn what is a pretty cut and dry argument and start putting in words like “need” when it really isn’t that, or start down the road of justifying purchases in a way that makes saving money nearly impossible.

The average you should be spending each month for expenses is hard to pinpoint as a general rule of thumb, as far as naming a specific dollar figure. While some would say expenses in the neighborhood of $1,000 is steep, others are teetering more around five times as much.

Generally speaking, the average mortgage in the United States is just above the $1,400 mark ($1,483), while rent isn’t far behind, about $1,380 and $483 on a new car payment and $756 on transportation in general.^[1]

Those numbers, again, are about a national average, but varies obviously from state to state.

A better way to tabulate expenses has more to do with your income and being sensitive to that, with the always popular and often avoided debt to income ratio.

Debt to income ratio, commonly referred to as DTI, measures your overall gross income with your monthly expenses and comes up with a percentage that allows lenders to determine if you’re at risk for defaulting based on how much available income you have.

The lower the debt to income percentage is the better you’ll be perceived by lenders, particularly when it comes to the expense of buying a house (i.e. mortgage) with 28 percent being fantastic and 43 percent being acceptable but on the high side of DTI with 36 percent being about average.^[2]

So when the topic of expenses come up, you have those who classify everything as a “need,” even when it is hardly the case, but also individuals who have needs that are legitimate but are overpaying for them, and such struggle from one paycheck to another.

Just because an expense is a need doesn’t mean you have to overspend as a result, particularly with cars and homes, two of the more acceptable and common pieces of debt and subsequent expenses you’ll have.

Credit card debt, unfortunately, is an expense that you were all too willing to take on when you spotted that hot tub on sale or for something like a leaky roof or braces for the kids, but that also has to be managed accordingly.

Getting rid of thousands of dollars of debt isn’t as easy as cutting a monthly bill, but managing it needs to come with a plan to pay it off expertly. The average credit card debt tips the scales at more than $16,000 per household and nearly $6,000 per person.^[3]

That hefty sum not only means paying more on interest than you’d care to admit, but also larger monthly payments that only suffice the minimum. A credit card with a balance of $9,000 is going to cost you about $300 just for the minimum payment, and that’s what you’re trying to avoid.

But as much as we can’t help but focus on expenses like cars, houses and credit cards, not to mention school loans and other debt we almost except willingly, this is more about expenses that you’re putting in that pesky “need” category when that is exactly what they’re not.

They’re expenses that are expendable, and they’re costing you dearly in the savings column.

Here are a list of five expenses that you could easily rid yourself of tomorrow, and start taking that money and either paying off that aforementioned debt or starting a savings account.

Recall that the average person has less than $1,000 in a savings account, roughly 62 percent of the population, so there’s room for improvement, growth and gaining ground on expenses that you really don’t need.^[4]

Restaurant tab: Why cutting lunch and dinner on the go (breakfast) too goes long way

Did you know that just a few years ago you were spending more on take-out food than groceries, and that the trend is continuing at a rapid pace?

Most likely you didn’t realize that from 2015 to 2016, the average American spent more at restaurants and the bar versus the grocery store around the corner, down the street or wherever you buy your food to the tune of 54 billion against 52 billion overall.^[5]

The fact that dining out has usurped grocery food prep and eating is astonishing when you consider that most of you are probably heavily invested in both groups. The thing that sinks any budget and is an expense that needs cut out of your life immediately is a propensity for take-out food based on how easy it is to buy it, eat it and not worry about making meals.

The sad truth is not only are you doing that act on a daily basis but you’re also spending money every week or month on grocery store foods.

The double dipping is digging you a deeper financial hole.

About 90 percent of the American population doesn’t like to cook, and that equates to some heavy numbers, dollar wise, you’re outputting each month and year, to the tune of $3,000 per year just on take-out food.^[6]

That seems like an astronomical number when you consider that doesn’t include anything at the grocery store, and $3,000 over the course of 5 years gives you a nice, little nest egg ($15,000).

Your grocery bill is averaging about $151 per week, with 10 percent of the population spending $300 per week.^[7]

Even if you take that average, you’re still spending $600 on groceries per month, so $7,200 per year on top of the three grand in take out so a $10,000 per year bill just for food.

Seems excessive and all the more reason to cut out 30 percent of that yearly food bill by skipping the to-go and drive-thru window.

Cable, Internet, Phone: Take your pick on this three-headed, budget-busting monster

Having fast internet is important, just ask the cable company.

Stream, surf and get exceptional Wi-Fi all over the house.

The same sales pitch is all too common with cable channels, hundreds of them bundled together to get you into some sort of promotion or deal, only to watch that evaporate with those temporary savings.

Cell phone providers also are quick to give you unlimited data (at a price, of course) and tell you that $300 monthly cell phone bill is pennies versus benefits.

If that all sounds familiar, you’re most likely spending too much on these three expenses, when you could easily eliminate one of them off the bat (sorry internet and cable) and go with a much cheaper version.

Cable companies are up 35 percent in average revenue during the five-year period that was 2010-2015, with costs going from $119 per month to $161.^[8]

Cell phones are right around the $80 per month price range, which varies based on the number of phones you have on the plan, lines and if you’re leasing a new phone with additional monthly charges, too.^[9]

Now, these companies are going to tell you that they have bundles and packages and all those things to lower the cost, but the truth is you can live without cable and internet, even if that means having a phone bill that is higher. Consider having your phone as your internet hotspot, with unlimited data that slows down after a certain point but still exists, and get rid of internet altogether, as an example. If you want cable, perhaps you might want to look into a streaming version. As much having lightning fast internet is ideal, you can get by with a hotspot and streaming all the way (usually around $10 to $20 per month).

Habit Forming: Bottled water, coffee, smoking and shopping can simply go

This one is pretty easy to see when you look at the yearly statistics on how much you’re spending, but also the hardest to ditch, again predicted on convenience and, well, being habit forming.

The problem with bottled water, daily coffee, smoking habits and others of that ilk, along with shopping sprees all the time is that they’re not only convenience but they’re enjoyable quite frankly too.

Sometimes the sheer brutality of the dollar amounts is enough to sway you into a different, money-saving direction.

Take smoking for instance.

It can cost anywhere from $5 a pack to in upward of $12, and the entire lifetime of a smoker can cost you a cool million dollars.^[10]

That $8 pack of cigarettes, on average, in a shorter time period than a lifetime is about a $3,000 per year if you smoke a pack a day.

While smoking isn’t good for you, nor do those numbers take into consideration the e-cigarette market, bottled water is good for you, just not your bottom line.

Americans spend 16 billion dollars per year on bottled water.^[11]

You’re spending about $346 per year on bottled water.^[12]

As far as clothing, this one is probably the most fervently argued point about wants versus needs because, of course, you need clothing.

That point can’t be debated but rather the dollar amounts you’re spending.

You should, on average spend about 5 percent of your gross monthly budget on clothing.^[13]

Consider if you’re making $3,000 per month, you can spend about $150 on clothing, which seems more than adequate particularly if are just adding pieces, not rebuilding from the ground up, which is what you’ll be doing to your bank account if that 5 percent limit hits 10 or 15.

Any time the topic goes toward cutting expenses or living without, individual fret that all of a sudden life has turned boring and you’ll be left without a vacation, eating tuna out of a can and going from work to home, and not so much stopping at “go” or even at the gym.

Here’s the thing: saving money takes patience and the ability to forgo expenses that quite frankly are costly and can’t really be justified.

If you’re going to the gym five times a week, don’t cancel your membership. If you’re traveling for work for the entire week, and you have to eat take-out food, then so be it.

This is more about overspending due to convenience and not thinking through purchases on every scale, whether it’s an expenses that may make sense in the moment but hardly was worth your hard-earned dollar.

More than 65 percent of people are concerned if not outright terrified about money, and that means if you fall into that group, you’re not managing your finances properly.^[14]

Something as simple as waiting 24 hours before a purchase, a tool that is used by the best savers and non-spenders, to ensure that they really need this item or product, and it isn’t an impulse, can save you thousands but requires restraint, poise and practice.

You won’t be perfect when it comes to saving money and avoiding expenses but you’ll certainly greatly improve if you avoid certain ones most of the time.

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