Spending less and saving more can benefit you in many ways. It can allow you to establish an emergency fund, set aside cash for a downpayment on a house or carve out a chunk of your income for retirement, just to name a few. Overall, spending less and saving more helps you achieve financial freedom, enabling you to enjoy the kind of life that you dream about for you and your family.
Unfortunately, there's no single cookie-cutter way to cut spending in order to put you on the path toward financial freedom. What works for one person when it comes to trimming costs and saving more money might not work for you. When you devise a spending and saving strategy of your own, make sure you'll be able to live by it—doing so will help you accomplish your financial goals. Here are nine ways you can reduce spending and wind up with more money in your pocket, your bank account and your retirement account.
1. Reduce Credit Card Spending
Paying off your credit card bills in full every month can help you avoid interest charges. But that's not the only way. Here are three other approaches you can take to avoid credit card overspending:
- Stop storing credit card data online. While it's convenient to be able to complete an online purchase when your data automatically pops up, it can also prompt you to overspend. Wiping out that stored information, either in an online account or on an internet browser, can lessen the temptation to make impulse purchases.
- Stash almost all of your cards. You might need one credit card in case of an emergency or for purchases you know you'll pay off every month. But do you need to carry every one of them in your wallet? Keeping nearly all your cards out of sight—in a desk drawer, for instance—can help keep you out of debt. Don't also stash away your monthly bill, however. Even if you stop using a card, you'll need to be sure to keep paying down any existing balance.
- Switch to cash. Consider going on a short-term plastic diet and making in-store purchases with cash rather than credit cards. This can force you to think more about each purchase and help limit your overall spending.
2. Consolidate Your Credit Card Debt
If you're committed to reducing spending and want to pay off high-interest debt, consolidating your credit card debt may be a good strategy. Ideally, it should bring down the interest rate; for example, you could pay off a balance from a credit card with a 19.99% APR (annual percentage rate) with a personal loan that carries an 11% APR. You won't necessarily see savings immediately, but you'll pay less in interest over the life of your loan.
Credit card interest accrues when you don't pay your bill in full each month. According to one estimate, the average American couple with children paid $1,382 in credit card interest in 2019, assuming a 16.97% APR. Shaving even $500 off your annual credit card interest could give you more money to earmark for your emergency fund or other financial priorities. Just remember, this strategy only works if you don't continue to charge on the cards you paid off with the loan.
3. Cook at Home
No matter where you eat, food isn't cheap. Spending on food eats up 10% of a typical household's income, according to a recent U.S. Bureau of Labor Statistics study. But if you choose to eat at home rather than at restaurants, at least some of the time, you might be able to trim some fat from your food budget. A TD Ameritrade survey conducted in April and May 2020 found the average American had saved $245 by not eating out since the coronavirus pandemic began.
To yield even more savings when fixing meals at home, consider:
- Creating a weekly meal plan and building a grocery-shopping list based on that plan.
- Clipping paper or electronic coupons to cut costs on groceries. Coupon apps for groceries include Coupon Sherpa, Coupons.com, Ibotta and Rakuten.
- Shopping at low-cost grocery stores like Aldi and Lidl.
- Purchasing private-label or generic products, which tend to be cheaper than brand-name products.
- Making bulk purchases at warehouse stores like Costco and Sam's Club, as long as you're buying what you actually need and will use.
4. Shop Around for Insurance
Shopping around for insurance can lead to lower premiums. The Insurance Information Institute recommends obtaining at least three quotes for car, homeowners and renters insurance. However, keep in mind that the cheapest coverage might not be the best coverage.
Other ways to save money on insurance include:
- Raising your deductible.
- Getting rid of optional coverage.
- Asking your insurer about discounts. For example, you might be able to score a discount if you drive less than a certain number of miles per year.
- Bundling your policies. An insurer might decrease your premiums if you buy at least two types of coverage from them, like car insurance and homeowners insurance.
5. Give Thought to Big Purchases
Big-ticket purchases can trigger big-time debt. That's why it's important to think twice before buying that flat-screen TV you've been eyeing or that new sofa you've been coveting.
One of the simplest tactics for accomplishing this is to take a 24- to 48-hour break before making the purchase. Can you get by without that item? Can you put off the purchase until the item goes on sale or you save enough to pay for it with cash or pay off the credit card charge immediately? You might ultimately realize that you don't actually need that new TV or sofa.
If you decide to go ahead with a big purchase, ask these questions:
- Would a cheaper used item do the trick?
- Is the item on sale? If not, when will it go on sale?
- Have I looked around for the best deal? Another store might sell the item (or a better one) at a lower price.
- Can I afford it now? Perhaps you should save up money for the item rather than putting the purchase on a credit card.
6. Consider Secondhand Clothes
Secondhand clothes can dress up your closet and decrease your wardrobe costs—costs that add up to $1,866 a year for the average American. You can hunt for bargains at places like thrift stores, consignment shops, garage sales, yard sales and online retailers such as thredUP, Etsy and Ebay.
Not keen on hunting for deals on secondhand clothes? Here are some other tips for zipping up your clothing budget:
- Search for sales. To double up on savings, be sure to check out clearance items at discount clothing retailers like Ross Dress for Less and T.J. Maxx.
- Choose quality over price. A well-made article of clothing typically lasts longer than a poorly made one does. So even if you end up paying slightly more, you'll still save if it means you won't need to replace your finds in the near future.
- Request a discount. If you notice that a blouse is missing a button, ask for a lower price. Sewing on a new button is something you can do at home for free.
- Stock up on out-of-season items. You can probably snag a low-price swimsuit when there's snow on the ground, for instance.
7. Cut the Cord
With so many streaming services (think Hulu and Netflix) available these days, you might wonder if canceling your subscription to traditional cable TV—known as cutting the cord—might cut costs. Your savings would vary, but one estimate shows you could pocket more than $500 a year swapping your cable TV for streaming services.
Two related expenses are internet and cellphone service. You've got several methods at your disposal for lowering these bills. Here are five of them:
- Call to cancel your service. An internet or cellphone service provider might be willing to strike a deal to keep you as a customer.
- Ditch the equipment rental. Instead of renting a router and modem from your internet service provider, buy your own and save money in the long run.
- Decrease your internet speed. Doing so could reduce your monthly bill, and you might not even notice the speed reduction.
- Ask about discounts. If you're signing up with a new internet or cellphone service provider, be sure to find out whether any discounts or promotions are available.
- Shop around. Switching to another provider could pare down your monthly bill. Some providers even offer alluring, money-saving perks such as paying any early termination fees your current provider may charge.
8. Review Memberships and Subscriptions
It's easy to lose track of monthly memberships and subscriptions, especially if the payments are made automatically. If you spend a little time combing through your bank or credit card statements, you might spot memberships and subscriptions you rarely use or have stopped using altogether. Here are a few services to think about canceling:
- Gym memberships: A membership can easily add up to hundreds of dollars a year or more—money that's just going to waste if you never go to the gym.
- Digital subscriptions: A New York Times analysis showed the typical American spent $640 on digital subscriptions in 2019, including music services and dating apps.
- Newspaper and magazine subscriptions
- Subscriptions for health and beauty products
- Meal-kit delivery services: These services typically cost at least $60 a week.
Can't bear the thought of sifting through your bank or credit card statements to find memberships and subscriptions that you can dump? Some services will do the work for you, and then either cancel them or negotiate lower bills (for a fee, of course).
9. Switch to Reusables
Bottled water may taste great, but you might spit out that water once you start to think about how much it costs in the long term. The average American spends over $100 a year on bottled water. For a family of four, that could total more than $400 a year. Instead, start sipping plain or filtered tap water from a reusable bottle or canteen instead.
The same logic applies if you tend to eat off paper plates, drink from plastic cups or make your coffee with one-time-use pods. Aside from saving money, exchanging disposable products for reusable ones can help save the environment by cutting down on plastic waste.
The Bottom Line
The nine ways to spend less and save more that we've outlined certainly aren't the only ways to put more money into your checking, savings and retirement accounts. But those tactics and others will pack more punch if you create a household budget and stick to it so that you can stay on track with your spending (less) strategies. After all, you don't want to squander all of the hard work you've done on spending less and saving more.