Top Tips for Cutting your Monthly Expenses

I’m often asked how I paid down massive amounts of debt. When I start talking about reducing monthly costs, some people think I’m skirting the question. But reducing monthly costs is the answer!

You can have the best debt repayment plan in the world, but if you don’t have the money to put toward it, it’s not going to work. Minimizing monthly expenses is essential to leveraging your income to tackle debt.

Expense Category Tips
Housing Aim for ≤ 25% income (If make $42,000, can afford $875 in rent; If make $80,000 per year can afford $200,000 house); No more than 30%
Food $100 per person per month* (If 1 person, then $25/week; If 2 people, then $50/week)
Car Value of all vehicles <50% of your annual income (If income = $42k/yr, car should be worth <20k)
Car insurance Consider increasing deductible; Consider whether you need collision or comprehensive coverage
Gasoline Learn about Hypermiling
Electricity In the summer, set your air conditioner:
  • 78◦ F or higher when you are at home
  • 85◦ F when away
  • 82◦ F when asleep
Water By reducing shower time by just 4 minutes, you can save almost 4,000 gallons of water/year
Cell phone Consider a discount service with no contract
Internet Cut it and use cell phone as a hot spot at home
Credit Cards People spend 12-18% more when using a credit card  (not including interest)
Student Loans Forget 10 year repayment plans. Pay them off as fast as you can!
Gifts/Entertainment Explore free entertainment and DIY gifts
Reduce, Reuse Upcycle, Trade, or Borrow before buying new

Housing –Most apartment complexes want you to show proof that your rent will less than 1/3 of your net income. This is based on the Brooke Amendment (1969) which determined the point at which a family was financially burdened by housing costs. In the Personal finance world, the recommendation is that rent or mortgage be no more than 30% of your income, but ideally <25%. If make $42,000, you can afford $875 in rent. If you make $80k, you can afford a $200k home. (Financial Samurai, GRS)

Food -If your housing costs are skyrocketing due to high cost of living area, food may be the one large monthly expense that you can change. Jordan Page recommends families budget for $100 per person per month. This includes diapers, dog food, toiletries, and cleaning products. Jordan excludes restaurants. I do include eating out in my food budget, except when I’m going out to eat for someone’s birthday (I include that under gifts/entertainment). (Read about my tips for saving at restaurants.)

*Think $100 per person per month can’t be done? Read how I spend less than this for my family. I will be sharing my family’s grocery spending, saving tips, and recipes during our Food Finances Fridays features!

Car paymentDave Ramsey recommends that the total value of “everything with a motor” (e.g., cars, boats, four wheelers) be < 50% of your yearly household income. If your income is = $42k/yr, your car should be worth <20k. If you make $80k, you can afford $40 in vehicles. Because cars depreciate so quickly, he recommends not buying a new car until your net worth is at least a million. By that time, the depreciation of a new vehicle will be a small percentage of your net worth.

Financial Samurai supports the 1/10th rule, which states that your vehicle should be 1/10th of your gross annual income. So if you are making $40,000, you should be driving a $4,000 car. If you are making $100,000, you should be driving a $10,000 car. (This may be a good guideline in San Francisco where those with a $100,000 income are considered to be low income, but for lower cost of income areas this sounds too extreme for me. And the Debt Shrink is not shy of extreme frugality. I lean more toward Ramey’s recommendation. Sorry Sam.)

I haven’t had a car payment in seven years. This has been a huge help in my journey toward financial freedom. I like it so much, that I don’t plan on having a car payment ever again!

Car insurance -Shop around for car insurance. Get the highest deductible that you will be able to meet if you are in an accident. If your car is paid off (you hold the title) and you drive an older model car that would not cost much to replace, consider whether you need collision or comprehensive  insurance. Removing these can greatly reduce your bill. Also, many insurance companies offer a discount for paying six months in full. Anything to save a dollar and reduce the number of bills you have each month is a great idea.

My vehicles are 14 and 12 years old. Given their low value, cost of collision/comp is not worth the expense.

Gasoline-Learn the art of hypermiling. And what you can to reduce idle time (his includes avoiding any drive-thru).

I take the route with the most right-hand turns whenever possible. If my route is mostly left turns, I “follow the green” to and turn at the first opportunity I can to avoid idling in traffic. Read more about saving on gasoline.

Electricity– For every degree above 78◦ F, you can save  3% or more on your monthly cooling costs in the summer. Consider getting a programmable thermostat and set the A/C 10◦ higher for 8 hours per day, which can save 10% on your cooling bill.

I’ve worked my way up to 83◦ F while at home sitting under a fan (I turn it down when we have other people over) and turn it up to 85◦ F while away.  Read more about my best tips to save on electricity.

Water -Potable water is a precious resource. What do you do differently when there’s a drought in your area? Continue the changes you do during water restrictions all year long. By reducing shower time by just 4 minutes, you can save almost 4,000 gallons of water, which could be worth as much as $100 per year. Save money and save water!

I try to treat every day like a water restriction day. Clean water doesn’t grow on trees.

Cell phone-I refuse to enter into any contract I do not have to. I have used a discount plan for years. We pay $40 a month for two lines (no contract, no fees!).

Internet-Before renewing your internet contract, experiment with using your cell phone as a hot spot.

If you know of an internet provider who offers service with no-contract, please let me know!

Credit cards-Even if you pay off your balance in full each month, you are estimated to spend 12-18% more (not including interest) when using a credit card than if you pay with cash. Think about it. When you go to the store with $100 cash for groceries, you will tally your haul and put back anything over that amount. We usually don’t do this when paying with plastic. When you pay with cash, you can also see how much money you have, and it’s painful to see those bills disappear. We don’t have that same reaction with plastic.

Student loans-Avoid taking out any more than you absolutely need. Stay clear of private loans. Student loans are notoriously difficult to discharge in bankruptcy and they will continue to grow larger and larger. If you already took out loans, create a plan to destroy them as fast as you can. Read more about paying off student load debt.

Gifts/Entertainment-There are so many fun and inexpensive things to do in our world. Seek not to be entertained. Make rather than buy gifts. Explore nature. Participate in local festivals, art shows, parades, and farmers markets. Take turns hosting with friends. Some of my best memories are of hanging out at friends’ houses. Fun does not have to be expensive. Read about my family’s experiment with free entertainment this year.

Reduce, Reuse-Before buying something new, consider whether you really need it and look around at what is already available to you. Overcome functional fixedness and look at things with a eye to upcycle (e.g., old salsa jar do instead of buying a new toothbrush holder). Ask friends and family if they have something you need that they’re not using. For seldom-used items, look to rent instead of buy. And of course, consider gently used items.


I hope this overview of money saving tips will help you to cut your monthly expenses. Future posts will go into more detail in some of these areas as well as my family’s actual  expenses.


What are your favorite money saving tips?

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