If you’ve been following us for a while, then you know we’ve been making an active effort to figure out how to drastically cut household expenses. Travel is important to us and we want to make sure we follow our own guidelines on how to afford travel and budgeting for family vacations. However, learning how to drastically cut household expenses goes beyond travel. It’s about creating a free life for ourselves and our family without the confines of debt.
This is, of course, a work in progress [and probably always will be] but here are our methods on how to drastically cut household expenses.
How to Drastically Cut Household Expenses
Complete an Audit of Your Existing and Upcoming Debts
If you want to know how to drastically cut household expenses, you have to know where you currently stand. To get a better idea of what your household expenses actually are, compile a list of all your existing and upcoming debts. Include your monthly/recurring household expenses like your rent/mortgage, utilities, credit card bills, etc. But also include any upcoming purchases, upcoming debts, or one-off expenses. For example, if you are planning to purchase a car in the near future, add that to your list. If you have a medical bill coming down the pipeline sometime soon put that in the audit as well.
How to Drastically Cut Household Expenses – Existing and Upcoming Debts
- Rent or mortgage
- Monthly utilities [electricity, cable, internet, natural gas, etc.]
- Credit card bills
- Medical bills
- Upcoming purchases
- Miscellaneous expenses such as entertainment, eating out, gas for your vehicle, groceries, etc.
Assess Your Existing Assets
The next part of how to drastically cut household expenses is to perform a complete analysis of your existing assets. This includes all your checking accounts, savings, accounts, retirement accounts, investment properties, etc. Be sure to note which of your assets are liquid [meaning can be turned into cash] and which are not. For the purpose of learning how to drastically cut household expenses, liquid assets are more valuable.
How to Drastically Cut Household Expenses – Existing Assets
- Checking accounts
- Savings accounts
- Retirement accounts [401k, IRAs, etc.]
- Investment properties
- Stock accounts
Cancel the Unnecessary Expenses
How to Drastically Cut Household Expenses – Cancel the Unnecessary Expenses
- Cable TV
- Household cleaning services
- Eating out
- Miscellaneous entertainment [movies, concerts, bars, etc.]
Create a Timeline to Pay Off What is Owed
At this point in figuring out how to drastically cut household expenses, you should be down to your bare necessities and longstanding debt. Items that are considered longstanding debts are those with a high/unattainable payoff balance. This will vary for some but can include things like a high credit card bill, a car note, and student loans.
Create a timeline for yourself based on your remaining expenses and your income. Try to be realistic in this approach; the more realistic you are in what you can pay, the more likely you are to succeed.
There are three primary ways to focus on decrease your household expenses through debt reduction:
This method involves paying off your debt starting with the smallest balance due. As you pay off each smaller bill, that amount is then rolled [or snowballed] into paying the next smallest amount. You can read more about that method on Dave Ramsey’s site.
This method involves paying off your debt starting with the item with the highest interest rate. The idea is that this allows you to get rid of your most expensive debt first. Nerd Wallet has a really good walkthrough of the debt avalanche method.
Debt consolidation usually requires acquiring a loan and using it to pay off your debt in one quick payment. Subsequently, instead of owing multiple creditors different amounts at different rates, you would only owe the one creditor a fixed payment. Be careful with this method because interest rates can be high and payment terms can be lengthy.
Look Into Additional Means of Income
The more money you have coming in, the more balances you are able to pay off to help decrease your household expenses. Therefore, if you’re looking for how to drastically cut household expenses, look into additional means of income. Be diligent with any additional income earned and only put it towards eliminating any longstanding debt.
How to Drastically Cut Household Expenses – Gain Additional Income
- Ask for a pay raise
- Seek a new job altogether
- Get a part-time job
- Freelance [write, tech work, food delivery, ridesharing, etc.]
Negotiate with Your Creditors
If you’re looking for how to drastically cut household expenses, sometimes all you have to do is ask. Creditors are usually more than willing to work with you as long as you keep the lines of communication open. Some even have special programs ready to assist you once help is requested.
How to Drastically Cut Household Expenses – Negotiate with Your Creditors
- Ask credit card companies for a lower APR
- Seek a payoff settlement
- Ask your mortgage lender if your home value is low enough to remove the PMI
- Refinance your large expenses like your mortgage or car note
Do Your Research & Shop Around
Most providers of household services aim to stay competitive in the market. So if you’re looking for how to drastically cut expenses, use them against the other. For example, obtain a quote for car insurance from a different company. If their quote is lower, take that to your existing insurer and ask them to match. If they can’t, then switch providers.
“Threatening” to terminate your services can also help you obtain lower rates. Cell phone providers and cable television services are especially known for this. Ask for their retention department and they will offer you the best rates available.
How to Drastically Cut Household Expenses – Research & Shop Around
- Obtain new quotes for your insurance policies
- Seek cheaper service plans from cell phone, Internet, and cable providers
- Shop around with other utility companies [or within your current ones] to find the least expensive plan
- Threaten to cancel your services if unable to lower your payment
Clip Coupons & Shop at Discount Retailers
Couponing had a huge popularity surge a few years ago but has recently seemed to die off. However, the value of clipping coupons is immeasurable when learning how to drastically cut household expenses. Search your local newspaper, use coupon websites, and keep the mailers that come in your mailbox. You can find coupons for anything from groceries to pharmaceuticals.
There are also several stores that are purposed to serve as discount retailers. Stores like Aldi’s and Big Lots aim to provide quality merchandise at rock bottom prices.
How to Drastically Cut Household Expenses – Clip Coupons & Shop at Discount Retailers
- Search your local newspaper and postal mailers for coupons
- Use coupon websites to find the best coupons: Coupons.com, Lozo, and Krazy Coupon Lady
- Shop at discount retailers like Aldi’s or Big Lots
What tips do you have on how to drastically cut household expenses?