If you’re feeling like your money doesn’t go anywhere near as far as it once did, you’re not alone. The price of everything from food to lumber and energy prices has increased dramatically for people all over the world.
While low-income families will always feel the pinch most, this rise in the cost of living has come quickly and taken families at all income levels by surprise. Decisions you made a few years ago when the economy was more stable may now threaten your financial security.
So what can you do?
In this article, we’ll help you take a hard look at your finances and help you make decisions that will secure your future.
1. Audit all your automatic payments
First, make sure you’re looking at your bank account(s) on a daily basis. You can’t measure what you can’t see, so check in daily to see which payments are going out and then use that payment as a prompt to check if you’re overpaying for that service.
If you find that you’re paying more than other companies are offering, put in a little effort to switch or mark the date on your calendar when your contract ends so you can switch to a more affordable option.
Some new online-only banks will send you a notification on your phone every time a payment goes out, so if you’re not tied to your current bank, or are willing to get another, this may be a great way to keep track of your payments.
Payments to look out for in this category includes:
- Insurance payments
- Breakdown cover
- Phone bills
- Software (like anti-virus software, VPNs, etc)
2. Meal plan ahead of time
It’s not exciting, but meal planning once or twice a week can help you reduce your trips to the grocery store and so help you avoid those last-minute purchases you want but don’t need. It also gives you the opportunity to plan low-cost meals and buy dry goods in bulk to maximize your savings.
If you need inspiration, search “easy cheap recipes” on YouTube or Google (feel free to add other keywords to help you find what you need or are feeling, such as “vegan”, “gluten-free”, or “Mexican”) and keep a note of the recipes so you can use them over and over. If you make more than you need, most meals can be frozen for another day.
3. Look at your energy usage
Evaluate how much you’re paying for energy and compare it to the average cost for your area. You may be able to switch to a more affordable provider or reduce your energy usage to save money. For example, during spring and summer months, consider drying your clothes outside instead of using a dryer to cut your electricity bill.
4. Make a list of your optional expenses and prioritize them
List all your optional expenses, such as streaming subscriptions, gym memberships, or hobbies, and prioritize them based on their importance to your well-being. When you need to cut costs, refer to this list and eliminate the less important expenses first.
For example, if you have Hulu, Netflix, Amazon Prime, and a gym membership, you could pick just one subscription to stick with (you can change most of these month-to-month) and keep your gym membership to prioritize your mental and physical health.
If you don’t want to get rid of something, but can’t afford it, explore cheaper options or cut down elsewhere to make room in your budget for what you want.
5. Evaluate your transportation
Transportation is a huge money suck for most of us who don’t live in dense cities with good public transportation. While you may be able to live without a car in Boston, most of us simply can’t live without a set of wheels to get us from A to B.
But most of us also have huge car payments to keep us on the road. Be honest with yourself about whether or not you can afford the car, and if not, is there any way you can get out of your contract and get a more affordable car?
Do the math, and consider your monthly payments, maintenance costs, fuel, and any other associated expenses. Then find a cheaper vehicle you would consider, look at the same factors (you’ll have to do a little guesswork here), and figure out if you would save a significant amount of money or not.
Perhaps more importantly, if you’re a two- or three-car family, could you survive with just one or two? The answer can be “no”, but it’s worth considering if you’re struggling to pay all your bills each month. Remember, changes like these aren’t permanent. You can always buy another vehicle when your economic situation improves.
Debt is at its most unaffordable when inflation rises and the economy slows. Take a look at the debt payments you’re making every month and consider if there’s a way you can reduce them to help reduce your monthly burden. For example, if you’re carrying credit card debt, could you get a consolidation loan? If you need to remortgage, would it be worth increasing your mortgage so you can pay off all your consumer debt? Could you call your credit card company and negotiate a lower rate? Now is a great time to reduce your debt and get your spending under strict control – it will set you up for financial security in the future when times aren’t as lean.
7. Be realistic about your home
It can be difficult to think about cutting costs related to your home, but it’s essential to consider if your mortgage payment, property taxes, or maintenance costs are becoming unmanageable. If your home is becoming a financial burden, you might want to explore the possibility of downsizing or moving to a more affordable area.
If the majority of your monthly income is going toward simply keeping the roof over your head, imagine your life elsewhere in a home that’s smaller or in a less desirable area, where you can comfortably afford the bills, all your other bills, and still have some money left over for life’s pleasures.
It may sound strange, but it’s incredibly common for people to stay in homes they cannot afford because they are attached to the home, feel bad that they cannot afford it, or simply haven’t considered moving as a way to cut down their expenses. They will cut down on every other area of their lives – including food – just to stay there. However, by moving to a more affordable home, they can change their financial situation overnight – literally.
The cost of living crisis can be overwhelming, but by implementing these practical tips, you can begin to regain control over your financial situation. If you decide that you’d rather live in a more affordable home so you can keep other quality-of-life expenses, we’re here to help.
We are a licensed realtor and a home-buying company, so we can talk you through your options and help you decide on the best way to sell your home as soon as possible so you can move on and finally breathe a sigh of relief, leaving the intense stress of trying to afford your home and all the things you need and want behind. To find out more about us or to reach out to us to discuss your options and how they may affect your financial situation, click here.