Focus on fixed expenses: Just because they're "fixed," it doesn't
mean they're not negotiable. Many items are fixed only in that they come
out of your paycheck every month, or you write checks for them automatically–like
rent and life insurance.
Rent or mortgage: Your home is your castle, but can you afford the one
you have? Moving is not something you're going to do tomorrow, but if your
castle is eating up more than 25 percent of your income, start making long–term
plans.
Utilities: Turn down the heat and air conditioning. Analyze your phone
needs. Do you need so many lines? Is your cell phone essential?
Insurance: If your term life insurance policy is five or more years old,
you're in for a pleasant surprise: you can almost certainly get a better
rate. Increase the deductibles on your auto and homeowner's policies, and
drop collision insurance if your car is paid for. Don't skip disability
insurance, though. If you can't work due to a disability, you could jeopardize
everything without insurance.
Groceries: Is there really that much of a difference between generic and
name brand products? Do you really enjoy the prepared foods you buy? Could
you make something fresh and simple–and cheaper?
Clothing: What can we say? The biggest enemy of a clothing budget is impulse.
You need a strategy. Make a list of what you need. Shop from your list.
Buy the best you can afford. Think about all the stuff hanging in your closet.
Transportation: This item can eat up 50 percent of a budget. Take a hard
look at where you can save. Set a budget for transportation. Negotiate for
bargain air fares. Cars are better made and last much longer than they used
to. Get one you like. Take good care of it–and keep it two or three
years longer. Ride your bike instead of driving short distances.
Household and babysitting help: It's tough cutting corners here. If you've
found a good caretaker for your children, don't cut his or her pay. Supportive
people to help in your business and home can make your life run much more
smoothly.
Credit: This one has a lot of opportunities for reductions. Pick up two
months' worth of credit card bills and total up the interest you paid. If
you pay off your credit cards, you will save that much every month.
Taxes: Contribute to your 401(k) and make use of healthcare and dependent
care spending accounts at work.
So look at discretionary expenses to see what you can do. Think of positive
lifestyle changes. Vacations, too, can be thrilling without being costly
if you do some research and plan a trip that allows you to explore and further
an interest. You can find the fat in your budget–it just takes a little
creativity and willingness on your part.
