Strategies to Reduce Expenses and Save Money:Personal disposable income, according to classical economics, is composed of savings and spending. It specifies that Yd= S+C. (where Yd is disposable income, S is savings and C is consumption). Thus, whatever is saved is your discretionary income less your consumption. (S=Yd-C). This suggests that in order to increase S or save more, you must decrease your consumption, C.
Consumption, in ordinary parlance, is synonymous with spending. As a result, by cutting your expenses, you will be able to save more.
Why Should Expenses Be Reduced?
To achieve financial freedom or independence, the difference between your income and expenses must be increased. There are two methods to accomplish this: either increase your income or decrease your expenditures. Experimentation has demonstrated that it is far easier to reduce expenditure than it is to increase income because, more often than not, you do not have the luxury of increasing income at will, particularly when the source of income is your salary, the incremental rate of which is determined by your boss or company.
As a result, because you have greater control over your expenditure than your income, it is much easier to cut spending in order to widen the gap between income and expenditure.
Establish a Priority List for Your Expenses
Each effort to cut costs begins with an examination of your personal financial situation. It is not uncommon to feel overwhelmed by the quantity of monthly bills. By prioritizing your spending, you’ll be able to distinguish between those that are truly necessary and those that you can eliminate without jeopardizing your physical or social well-being.
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If possible, provide a priority value to your expenses while prioritizing them, such as high priority, medium priority, or low priority. Once you’ve done that, it’s simple to determine which expenses you can live without and which you cannot.
What Should Be Your First Priority?
Following Maslow’s hierarchy of needs, your first priority should always be the fundamentals, such as food, medical care, and housing (rent or mortgage payment). Next, examine home expenses such as your electricity bill and other requirements for daily existence. Prioritize additional expenses such as a car based on your demands (car loan, car insurance, car maintenance, and gas or petrol).
If you do not require a car to commute to work due to the availability of cheaper alternatives such as train or bus, then car-related expenses should be placed low on your priority list. As you progress down the list of requirements, assign them the appropriate priority ratings.
Investigate Savings Opportunities
While prioritizing your expenses, you may discover that you have been spending significantly more than necessary in several areas. That realization should not fill you with sadness, as you are not alone. Almost no one, including yours truly, does not have an area or two in his or her life where they spend more than necessary. The most effective technique to uncover those hidden savings opportunities is to go through each cost you listed while ranking them and determine whether you were conservative with those expenses.
Investigate Cost-Cutting Opportunities
After assigning a priority level to your expenses, it’s time to determine which ones you can cut or possibly eliminate entirely. Here are a few methods for accomplishing it.
Mortgage interest is a significant expense associated with mortgages. Interest rates are not fixed; they fluctuate in response to economic developments. The CBN periodically examines prime rates, which influence other lending rates. If mortgage rates have decreased, consider refinancing. If your mortgage is N15 million, a 1% interest rate reduction by refinancing will save you N150,000 in annual interest expense.
Electricity Bill: There are a thousand and one ways to save money on your home’s electricity bill. When not in use or when leaving the house, turn off the lights. Unplug goods that are not in use on a regular basis, such as computers, printers, and television sets. Compact fluorescent lights are more energy efficient than incandescent bulbs. Unless it becomes excessively hot, use ceiling, standing, or table fans in place of air conditioners. Dimmers and sensors on lights can be used to control energy use if they are available.
Telephone: In Nigeria, the cost of data and telephone is exorbitant. Examine your most recent telephone statement to ascertain your usage. You may be overpaying for minutes. If you haven’t used all of your monthly minutes allotment, it’s time to downgrade.
Compare packages offered by different carriers and service providers and switch if you find a better deal. However, keep in mind any any cancellation penalties. If possible, make use of internet telephony.
Groceries: Look for coupons and take advantage of any shop discounts or rewards programs. Look for daily or weekly specials. When grocery shopping, adhere to your list. Before you leave the house to go grocery shopping, make a list of what you already have to avoid purchasing items you already have. My lady is prone to make such error. We’ve realized numerous times that we already had the laundry soap we’d purchased, but she always says it doesn’t go bad, so we keep it. That is not a prudent cost-cutting strategy.
Savings on Personal Care: From apparel to personal hygiene to hair care, you may be able to save money. Examine your clothing spending; if you are accustomed to acquiring new clothes each month, consider reducing back. Locate locations where they are having sales and take advantage of the associated price reductions. Purchase clothing in less trendy styles and colors and use accessories to create a new look for yourself. Purchase a home manicure and pedicure kit and reduce your reliance on professional manicurists.
Bring Your Own Lunch to Work: The money we spend on lunch at the office quickly mounts up, particularly if we work in costly areas. When a friend realized that a $6 slice of pizza or a $10 lunch pack of Chinese cuisine was digging a hole in his pocket, he resorted to bringing rice and other veggies to work, including sweet corn, sliced carrots, green peas, lettuce, asparagus, and broccoli. He discovered that the cost of purchasing two-worth week’s of vegetables equaled the cost of two-day lunch packs of Chinese food. He has not only been eating healthfully, but he has also been saving money.
All Said and Done: The list above is only the tip of the iceberg; you know what you spend your money on; examine them critically and see where you can save a penny here and there. As the Jews usually say, “every penny counts,” and as the Ibo man says, “get and throway no dey make man a billionaire,” make every penny count by saving it rather than wasting it away on unneeded and avoidable things.