Working on cutting expenses

Clearly, cutting expenses is not easy and fun for anyone. Everyone would try to avoid it if we all had unlimited money to spend. Because we are daily faced with limited cash in our pockets or bank accounts, we need to think about how to spend money wisely and avoid spending more if we can do with less spending. So we need to consider cutting on expenses, if we can. If we are successful in cutting our expenses, we will feel better about our savings.

So how do you go about cutting expenses? You need basically a system to track your expenses against your goal of how much you want to cut. Below I am showing you a simple table that you can print and use for cutting on expenses. To begin the challenge of cutting expenses, record all of you expenses for some period of time (preferably a month or longer so you have better a idea of how much you are spending).

In the table below I am starting to fill my table with first expense of long distance call expenses. Over the course of a few months, I have determined I am spending about $10 per week. In my first round of cutting expenses, I have indicated in the table I want to cut this expense by $2 per week. After tracking the expense for a week, I determined actually I spent $9 per week. Although this is a savings of just a dollar, it is significant to encourage me save in the future. So for my second round of cuts for this expense, I decided I want to cut by $1 per week. As noted in the final cut, I was able to maintain my long distance calling expense to just $9 per week. So my new spending amount on long distance calling is $9 per week. I have been watching this expense now for a few months and I have not seen it go beyond $9 per week.

In the example second example, the table shows my original spending on lunch was $20 per week but I was able to reduce it to just $16 per week by watching my spending and keeping it to my proposed spending limit.

Expense Amount you are spending Cut amount 1 Cut amount 2 Final cut New spending amount
Long distance calls $10/week $2/week $1/week $1/week $9/week
Lunch $20/week $3/week $4/week $4/week $16/week

In cutting expenses, keep the following points in mind:

  • set reasonable and realistic cut back limits. Try setting a lower cut back amount if your expense is higher than targeted amount. Conversely, set a higher cut back amount if your expense is lower than targeted amount.
  • identify expenses where there is room for cuts. Start with these.
  • your initial cut back savings may be small or large (depending on how much you cut back). Remember power of saving: the more you save (even if it is in small amounts), it will grow!
  • remember, you may reach an expense amount that you can’t go below. For instance, if you have reduced your lunch expense to just $10 per week for a few months. It may be reasonable to assume that this expense cannot be cut further.
Posted on 12/9/2006
by Raj Singh