If you’re trying to cut your expenses so you can save more money, you’re going to want to be strategic about your choices. After all, you can’t just cut all of your expenses. Some things you’re still going to need! So, in this post I’m going to help you navigate how you can analyze and cut expenses so you can save as much money as possible while disrupting your life as little as possible.
HOW TO ANALYZE AND CUT EXPENSES
When you’re trying to save more money, cutting your expenses is a great place to start.
After all, if we spend less money, we will have more money, right?
But, unfortunately, it’s never just as easy as cutting out expenses.
Which expenses should you cut? By how much?
To save the most money, with the least impact on your quality of living, you need to strategically analyze and cut expenses. And that’s exactly what I’m going to explain how to do in this post.
STEP 1: TRACK YOUR EXPENSES
Before you can cut your expenses, you need to know what they are.
So, the beginning of this process is simply to start tracking your expenses.
You’ll want to write down everything you spend for a set amount of time – at least 2 weeks, but a month would be best.
Record key information about each transaction. You’ll need the date, what the expense was, and the amount.
There’s a pretty printable worksheet to help you with this in my free expense cutting workbook. You could also make a chart for yourself in a notebook or use the notes app on your phone to record your expenses.
The key to tracking your expenses effectively is to make sure you are recording each and every one.
Even if it’s small. Even if it doesn’t seem important to you. Write it down.
This is the best way to know exactly where your money is going.
Determine Necessary vs. Unnecessary Expenses
Look back at all of those expenses you tracked and sort those expenses into two categories: necessary expenses and unnecessary expenses.
There are several quick and easy ways that you can do this. You can go through your expense tracking worksheet and highlight necessary costs in one color and unnecessary in another. You can put an x next to all unnecessary costs. Or you can simply create a chart with one column marked necessary and one column marked unnecessary.
What is a necessary expense?
Things that you absolutely need to pay for. Some examples include:
- Home repairs
You’ll likely find that most of the expenses you’ve tracked are actually unnecessary expenses.
Because for most of us, we’re spending out money on things that we just don’t need.
Here are some examples of unnecessary expenses: clothing (unless your children have grown out of their clothes and even then you can find super cheap or free alternatives), take-out food (or coffee), getting your nails done, or going to the movies.
If you’re married, I encourage you to sort out your list out with your spouse. Being on the same page is going to be vital to your success.
Related: The First Step to Saving More Money
Keep in mind that just because you decide an expense isn’t necessary doesn’t mean you’ll have to cut it out completely. You’ll be able to decide which expenses you want to cut out or cut down on.
STEP 2: ORGANIZE ALL OF YOUR EXPENSES INTO CATEGORIES
Next, you need to dive deep and pinpoint exactly where your money is going.
Looking at one big list of expenses isn’t as helpful as itemized lists organized by category.
I suggest organizing your expenses into 5 main categories:
- Groceries & Household Expenses
- Stuff (clothing, etc.)
- Extra (for everything else)
I walk you through this process in my Expense Cutting Workbook so if you want to know more, you can grab that here.
STEP 3: CUT YOUR EXPENSES
Go through each of your 5 main expense categories from step 2 one at a time.
For each category, lower or cut out as many expenses as possible. Then move onto the next category and repeat this process.
Again, I walk you through how to do this and provide worksheets for you to use in my free expense cutting workbook.
HOW TO CUT EXPENSES
Maybe you’re thinking that you don’t even know how to lower or cut your expenses.
Don’t worry, I’ve got you covered!
Here are some super helpful posts about cutting expenses:
GET STARTED NOW
Write down your goals. Put a reminder in your wallet. And then spend less money.
Set aside ten minutes each week to reflect on how you’re doing and make adjustments to your plan as needed. You may find it helpful to continue to track your expenses so that you can compare your spending week to week.
Each time you’re tempted to spend those precious dollars on something you don’t need, remind yourself why you want to save money. It’s important to keep your goals fresh in your mind so that your motivation doesn’t start to dwindle along the way.
Cutting down on your expenses will feel hard at first, but over time spending less becomes part of your habit. Your bank account and your future self will thank you.
And remember that I’m here to help you along the way. Grab your FREE Expense Cutting Workbook here and I’ll send you loads of bonus freebies and my very best tips for spending less money so you can have so much more!