Featured | Jun 25, 2010 | 0 Comments

How To Cut Expenses, So You Can Invest More—The Everyday Example

It's Not As Hard As You Think . . .

So the other day I got to thinking about you. I was wondering how I could help you cut your expenses and increase your investments. Now, I don’t know you personally, but given the economic conditions around the globe, I was picturing you as someone who isn’t flushed with extra cash just floating around to add to your investments. Perhaps you’re not even investing at this time. And even if you are doing well, here are some ideas to help you gain more.

In preparation for this article, I looked at my own life and looked at things I could do to cut down my expenses and add to my various investments (looking at stocks and currency trading mainly).

I’m operating under one simple premise: every dollar counts. People who understand what investing can produce don’t have an “it’s only a few bucks” attitude.

Even if you only do some of these things for a month or a limited time, that’s still extra money for your investments that you wouldn’t have had originally.

Cable TV

Ouch, sorry Cox and others, but your TV services are just not as valuable as you think. This is the first area I looked at because the bill (at least mine) is so out of proportioned to what I consume.

Do you really need TV? If you said yes, I beg to differ. There’s so much free content online (legally I mean). For example, if you’re a Bloomberg TV fan like me, you can watch it all day long for free here:

http://www.Bloomberg.com/tv/

And even if you feel you need TV, are you paying for all sorts of channels you never watch? Could you reduce your package even a little? One thing I looked at was the fact that I wanted to watch at most a few channels. And even my basic cable (no HD channels) was around $50 a month.

So I cut it. And you know what? I don’t miss it. While there are a few things I don’t get to see in a timely fashion, I can get whatever I need online and I love seeing the extra money in my bank account.

Think about this. If your bill is just $60 per month, that’s $720 per year. Put that $720 into investments that gain 12% annually and after 10 years your monthly bill is really costing you 300% more and it just gets higher after that.

Savings: $60 monthly (cost for my lowest package, but I’ve spent up to $100 monthly)

Home Phone

I had two thoughts about this one. First was to dump the house phone and just use my cell as so many people do now anyway. This move alone can save you $25 or more monthly usually.

But, this type of change isn’t for everyone, so I just looked at something simple to cut expenses by even a few dollars per month without any real inconvenience.

There are basically two viable options:

1. Look for a phone company that operates on the back of your Internet service, like Vonage.com. If you’re paying more than $25 per month, you’ll save money. I’ve used Vonage for many years and never have issues with them. The $25 package gives you unlimited long distance, voice mail, etc.

2. Bundle your phone service with your Internet supplier. Sometimes this can be cheaper. For me, it wasn’t unless I went with plan that didn’t provide free long distance.

Remember, a dollar is a dollar. By retooling my Internet and phone, I saved about $25 per month.

Savings: $25 monthly

Internet

It’s possible that your Internet provider provides different plans. If possible, going down one level could be beneficial.

I’m at the top level with my cable company, so going down one level (they offer about 4) would save me about $15 per month.

However, I do a lot with my Internet connection (business, etc), so I didn’t think it was beneficial.

Savings: $0

Cell Phone

Here’s one that’s likely to not sit well with some people. I should preference this by saying I love gadgets.

That said, here’s one area where a lot of people are simply overspending. How much do you spend per month?

I saved a pretty penny by cutting my Blackberry service with Verizon and going with an inexpensive phone with Cricket.

In fact, I saved so much that the difference of just about five months is enough to buy an Apple iPad. I actually bought an iPad at launch—love it.

So what did I lose and what did I gain? First, I can still make and receive calls (gasp). All I lost was the ability to surf around when I was bored. My contacts are now in my iPad, which looks better by the way. I gained about $80 per month. That’s $960 per year. I won’t even tell you what that’s worth to me over a 10-year cycle.

Yes, my phone doesn’t look cool or do cool things, but my money sure does. And at the end of the 2 years, I’ll have almost $2,000 extra at work for me while the alternate me would be $2,000 lighter in the wallet and have an out-of-date phone with nothing to show for his money.

Savings: $80 monthly

Business Expenses

I don’t know what portion of Financial Rebel readers are business owners, like me, so I’ll keep this short.

Look around your business—every single expense—to see what can be reduced, even by a single dollar.

In doing so, I found some key replacements and reductions. On their own, it might have seemed minimal, but overall they added up to about $350 per month ($4,200 per year).

Savings: $350 monthly

Eating Out

This one kills me. I think cooking is a lost art. For me, I often don’t have the time or desire to cook. It’s just too easy to go out to eat or order something for delivery.

Sit down and take a look at your food bill over the past month or two. While going from eating out a lot to cooking a lot might be too much to ask, could you do something simple like eat out one less time per month or choose a more economical restaurant? If so, you could cut expenses right there.

Remember, it’s not about one huge cut. It’s about little changes here and there, that you can live with, that add up to an overall gain and an increase in your financial outlook for tomorrow.

Savings: $40 monthly

Starbucks

Funny, you’re joking right? I have a confession to make. I love Venti Caramel Macchiatos. Sigh.

But at $4.50 a pop, it adds up over a month. Being realistic I know I won’t cut this down to zero because there will be days when I’m on the go and desire one. However, I can surely drop two a month. Again, it’s about little cuts adding up.

At times I actually go months without buying coffee from places like Starbucks because I make my own at home or because I’m on my green tea spree.

Savings: $9 per month

My Total Cuts & New Gains

When it’s all said and done, I cut roughly $464 from my monthly expenses, which means the amount I have to invest has increased by $5,568 annually.

Did you know: $5,568 invested with a 12% annual return over 10 years ends up being about $17,000.

Here’s one more thing: If I keep investing that $5,568 savings each year and get the same return rate, at the end of 10 years I’d have about $126,000. Not bad for cutting a few things.

Got any ideas on what else we should look at to cut expenses? Have you done anything similar or want to? Share your comments below!