April 29th, 2020 | Updated on June 17th, 2020
Saving for a rainy day is an age-old practice, even though not everyone embraces it.
Sometimes though, it doesn’t just rain. It storms. 2020 is a perfect example.
The COVID-19 pandemic has swept through the globe, leaving millions jobless and forcing many more to blow through what they had saved for a rainy day.
If you have an income or still have money left in your savings kitty, you have to practice sound financial management.
An effective way is to spend as little as possible. Not sure how to do this?
Here’s how to drastically cut expenses and improve your finances.
1. Identify Your Primary Expenses
When the economy is thriving and your income isn’t under any imminent threat, it’s easy to adopt a pricier lifestyle.
You start paying for luxuries and end up assuming they’re basic needs.
It’s not until a crisis hits that you reevaluate your lifestyle and find unnecessary expenses that have been taking away your money.
This is why you ought to have a clear picture of your primary expenses at all times.
These are expenses that, come rain or sunshine, must be met; otherwise, there will be serious ramifications.
We’re talking about things like rent or mortgage payments, energy and water bills, food, and healthcare.
Once you’ve identified your primary expenses, sum them up. This is the amount of money that you have to spend, at the very least.
So, if your income is lower than this amount, trouble is about to come your way, unless you make big changes.
This is the best time to reassess your primary expenses and see whether there’s something you can do about them.
2. Move To A Cheaper House (If You’re A Tenant)
If you’re a tenant, rent will always be one of your biggest monthly expenses. As such, when you’re looking to drastically cut your expenses, moving to a cheaper house will yield tangible results.
Let’s say you’re currently paying $2,000 a month for a 2-bedroom apartment. If you move into an apartment that costs $1,500 (which isn’t a steep downgrade), you’ll be saving $500 a month.
If you were to save this amount, you’ll have a cool $6,000 after one year.
Sure, it’s understandable that moving, especially to a cheaper house, isn’t an idea most people would be willing to embrace.
This could mean moving to another neighborhood in the cheaper side of town or even into a small house.
But when the stakes are high, perhaps you’re likely to lose your job in the coming months as a result of the coronavirus, you have to make the move.
Or, if you live on your own and your parent’s home isn’t far away, why not move back in with them and ride out the crisis without placing undue financial pressure on your shoulders?
3. Cancel Those Streaming Subscriptions
You probably started with Netflix. Then perhaps added HBO, Disney+, and before you knew it, you had more streaming subscriptions than you could even keep up with.
Purchased individually, TV streaming subscription costs are light on your budget.
However, if you have two or more, you’re spending at least $20 a month on services that don’t add much value to your life.
When times are good, fine. Treat yourself. But when you need to reduce your expenses significantly, halt those subscriptions and divert the money elsewhere.
The same goes for other types of subscriptions you probably don’t need right now.
For example, if you have cable TV too, you don’t have to subscribe to the most expensive bundle.
Downgrade, but ensure you’ve access to news channels. If you have subscribed to multiple digital newspapers like The New York Times and The Washington Post, you can do with one –unless you’re a journalist or journalism student who needs to keep up with the news.
4. Make Meals At Home
Food delivery is a lucrative business in the United States, and that’s because Americans love their food the way Germans love their cars – fast.
One survey established that the average American spends about $1,200 a year on fast food.
Imagine what $1,200 could do to your budget right now. It can, for instance, settle your energy and water bills for the rest of the year.
The good news is you can have this money. You just need to enjoy making meals at home.
Home meals are not just healthy. They save you big bucks, too. Yes, you have to spend on groceries, but if you can keep your eyes on discounts, like this Kroger weekly deal, you could make a good saving.
Also, when you rely on fast meals, you have to order a new meal every time you’re hungry. But when you cook at home, dinner’s leftovers can be the next day’s brunch.
5. Ditch That Car
If your car isn’t an asset to you (you don’t use it to generate income), ditching it can do your quest to cut expenses a lot of good.
Between auto insurance payments and the cost of gas, repairs, and parking, a car can be a money hog. While not everyone might be in a position to stop using their car, those who’re able to can save good money.
If your city has great public transportation or you live a few blocks away from your office or you work from home, you can easily let go of your car. Your finances will thank you.
6. Learn How To Drastically Cut Expenses
Tough or uncertain economic times call for drastic measures; otherwise, you’ll run out of cash and possibly spiral into debt.
With this guide on how to drastically cut expenses, you now know the measures you can implement.
From making adjustments to your primary expenses to making home meals and ditching your car, there’s no shortage of effective strategies. Keep reading our blog for more budgeting and money tips.