In these uncertain times, many families are looking to cut back on spending. This article looks at ways to approach cost cutting that make sense and deliver results.
Penny Wise, Pound Foolish?
One saying about money is: “look after the pennies and the pounds will look after themselves”. But the opposite of this is also an old saw, and for most people probably truer: That is: “penny wise, pound foolish”.
To make substantial savings it is important to look at those things that account for the greatest portion of expenses. While cutting out visits to coffee shops will save some money, for most people that will not make a major impact on their financial position.
Identifying the Main Cost Categories
The pattern of expenses varies from household to household. If you know your own pattern in detail then you are in an excellent position to start. However, most families, especially those in the most difficult circumstances, will not have a clear idea about their expenses.
In this situation, keep calm, and make sensible guesses. Look at recent bank or credit card statements, utility bills and shopping receipts to get an idea. Make estimates if you don’t have the information to hand.
Often the biggest categories might include mortgage payments, food and fuel or other transport costs. Sometimes utility bills, interest on credit card balances or phone bills might also be significant items.
Consider Many Options
For each of these high expense categories, consider the options for reducing costs. There are usually many different possibilities, so don’t limit yourself to the first thing that comes to mind. Also think about which areas are easiest to change and where you have less flexibility. Some examples of what can be done are:
Mortgage payments – remortgage with a different provider, or negotiate with your own lender for a different payment schedule.
Food – use an alternative supermarket, replace expensive foods with equally nutritious cheaper alternatives, or cook more and rely less on ready meals. Consider taking a lunch box rather than paying for meals at work or school.
Fuel – trade in for a more economical vehicle, or look into alternative modes of travel, such as public transportation or car-pooling.
There are many sources of advice, so if stuck for ideas look around on the internet, listen to radio shows about money, talk to friends and family, and look for local citizen’s advice groups.
For each option you think of, look at how much difference it might make to your finances over a year. Some options will make a huge difference, but others will have very little impact.
Having come up with a list of ideas, pick the one that appeals the most, and go for it.
It’s probably easier to work on one thing at a time, so unless there is a real emergency, don’t try to do everything at once, take things one at a time.
The right mental attitude can make all the difference. Don’t panic, stay calm and be positive. Don’t let the stresses become a cause for conflict in the family. In fact, a time of trial can be a time that draws families closer together in a shared effort.
And if emotions do sometimes boil over, as they do in all families, be forgiving of others, and be ready to apologise and make up yourself.
Try to keep some little treats going, so that life is not all stress and worry. Things like going to the movies or having friends over for dinner are relatively cheap, and can be wonderful for raising the spirits.
Ultimately a positive, determined spirit is what sees people through difficult times.
In summary, focus on whatever are the major areas of cost for your own family. Consider a variety of options, and get ideas from others, before deciding what changes to make and where to start. Throughout this process, keep spirits up, and keep the family united.
Money Saving Expert – British site with lots of advice on best deals, ways to save money, manage debt etc.
Your Money – BBC site with pointers about issues like mortgages, debt, and benefits.
Advice Guide – Advice from the Citizens Advice Bureau. Their local offices can also offer advice in person. They can be especially useful if facing extreme problems such as very large debts or risk of home reposession.