How To Save Money By Reducing Your Expenses
This post contains affiliate links; please read our Disclosure for more information.
There are those who argue you can’t build wealth through a budget.
I agree with them.
Wealth building requires a lot more than counting the pennies.
Cancelling your Netflix subscription will not change your life.
Certainly won’t change your finances much.
With that said, we are advocates of budgeting.
Even though having a budget won’t bring you wealth, it’s the foundation.
The foundation to being skilled with your finances.
I’m going to show you how you can take control of your finances.
Specifically, I’m giving you a simple method you can use we call the 3R’s for this.
Table of Contents
My Finances Are Out Of Control
We’ve been there.
We’ve had days when our money was just not adding up or making much sense.
It may be easy to think more money is the answer you need to fix your money problems.
But it’s not, although it won’t hurt.
I firmly believe more-of-anything just amplifies what you already are.
If you struggle to control a four-figure income you’ll struggle with a six-figure income.
Earning more money will not magically empower you to be in control financially.
The answer is to have the right money system no matter your income.
I’m going to show you the system we use with our money.
What Value Are You Getting?
Before we jump into it I want to clear up something.
Earlier I said cancelling Netflix will not change your financial life.
I lied. Well, sort of.
Cancelling Netflix by itself may not do much.
But cancelling a number of outgoings that no longer serve a purpose will.
I’m not about swapping a £15 gym for a £14 gym just for the sake of saving £1.
I promote value for money.
If you get more value from the £15 gym than the cheaper ones, then stay with it.
Get value for your money with your outgoings.
Taking control of your finances should come from a place of value add, not penny-pinching.
In the book I Will Teach You To Be Rich, the author speaks on this.
How To Save Money By Reducing Your Expenses
The first step to taking control of your finances is to answer one key question.
How much does your lifestyle cost you?
This is the total amount you need to maintain your lifestyle.
Let’s break it down into two sections.
Download our free Expense Tracker to have a template to go through this.
Your Essential Expenses
Essential outgoings are the mandatory expenses you have.
Think of the things you can’t afford to live without.
Also, think about things you have to pay for.
These include your basic household bills, family care, food and transport.
Plus your insurance and debt payments.
Make a list of all the essential outgoings you have and how much each item is.
Your Non Essential Expenses
Non-essential expenses are the opposite.
These are things you can live without but are a part of your lifestyle.
This includes TV & streaming subscriptions, gym memberships and personal shopping.
These items may not be necessary for survival, but they are important to you.
Put It All Together
We can’t control what we don’t know.
The aim of the list you’ve put together is to have full visibility.
Add up the total amount of these two types of expenses.
The amount you see is the amount you need to live.
Another big question is: how does that amount compare with your income?
This is our Ultimate Money Plan budgeting spreadsheet template that empowers you to be in the driving seat with your finances.
Our 3 R’s Method To Take Control Of Your Finances
Making a list of your lifestyle expenses simply gives you the lay of the land.
Control gives you the power to make changes.
Our 3 R’s method is how we exercise this control with our outgoings.
The 3 R’s are:
- Remain
- Review
- Repurpose
For each expense, mark which of the 3 R’s applies to it.
Remain
These are expenses you have that you are keeping.
You are not going to make any changes.
The underlying factor we use for this is value.
As long as the expense still serves you and brings value to you, keep it.
Review
Mark expenses that still serve a purpose and bring value to you, but need to be reviewed.
This means you’re looking for an alternative source of that value.
This could be a cheaper alternative or more bang for your buck.
For instance, you may decide to start buying some of your groceries in bulk.
Or, you want to look for a cheaper alternative for your insurances.
This way, the money saved is allocated elsewhere, such as your money goals.
Repurpose
These are expenses that no longer serve a purpose or bring value.
Or, you have other areas with a higher purpose that need money.
You may think of this as cancelling the expenses.
But we prefer to say repurpose because it’s about intent.
We are cancelling an expense with the intention of using the money elsewhere.
You may choose to repurpose a car for a bike.
The money you were putting towards your car gets repurposed for your saving goals.
In essence, repurposing money from one place to another.
How To Save Money By Reducing Your Expenses
The aim for the 3 R’s is to reduce unnecessary expenses.
This ensures all your outgoings serve a purpose and bring value.
Plus it plugs the holes where there’s financial leakage.
A lot of money can be lost in these holes.
This enables you to save money by reducing your expenses.
It’s another way of giving yourself a pay rise.
For some of you, this will save some money. For others, a lot of money.
The other benefit is that this controls lifestyle creep.
Lifestyle creep is a leading cause of feeling out of control with your finances.
With 3 R’s, you’ll be able to gain and maintain control of your finances.
The Big Three Areas To Reduce Your Expenses
Ok, not to confuse you but cutting Netflix won’t change much.
We did it. Then we got it again after a month because we still found value in it.
However, there are three big areas you want to consider.
These big three areas have moved the needle the most for us.
If you really want to save money, reduce at least one of these three.
Housing
We all need a roof over our heads.
And housing costs make a large part of most people’s budget.
There’s the cost of paying the rent or mortgage.
The associated bills such as gas, electricity and water.
Plus other expenses like repairs, upkeep and insurances.
This can also include security systems, gardening and pool maintenance.
We were very intentional about the city we chose to buy our house.
We chose a city that was significantly less in cost than where we used to live.
This decision alone cut our house costs by around a third.
We know of some friends who opted to move in with their parents to save money.
This is one decision that could massively change your pocket.
Transport
Next to needing a roof over our head, is how we move.
In our society, we are heavily reliant on cars specifically.
But it costs to buy it, keep it and run it.
Tax, fuel, parking, finance deal, repairs and insurance. It all adds up.
Again, I’m not saying don’t have a car.
Just be smarter with your choices.
Instead of getting the latest model, you could opt for a 5-year-old car.
Or look for a car that is categorised as low in insurance premiums.
For us, we downsized to one car instead of two.
And that car is a regular car that is low on insurance and repairs.
Food
Finally, we spend a lot on food.
This includes household groceries, eating out, takeaways and random snacks.
We couldn’t believe how much we really spent on food once we did the numbers.
We had to make some changes to take control of this area.
At least housing and car costs can be fixed or somewhat predictable.
Food is a whole different game.
We can shop with our eyes and our appetite.
Which is usually much more than we can chew. Pun intended.
We broke down our food shop to be weekly according to meal plans.
Then we set a limit of how much we allocated towards our food budget.
We also set Fridays as our only takeaway night every week.
These simple actions pretty much halved our overall food spend alone.
Take Control Of Your Finances And Save Money
To save money you need to take control.
Taking control of your money starts with knowing where you are right now.
Then analysing your current expenses using the 3 R’s method.
Concentrate on the big three areas to save the most money.
Saving from the big three and will substantially increase your money.
Check out our Ultimate Money Plan to get in control of your money and smash your financial goals.
Take Action
Take control of your finances using the 3 R’s.
Save money by reducing your current lifestyle expenses
Share this to others if you found value in it and feel others should too.
Let us know how you’re getting along by getting in touch with us, we’d love to hear from you
Knowledge is powerless without action
So take action, and take care
Thando