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3 Steps to Cutting Expenses

December 8, 2012

    Q: How Can I Cut My Monthly Expenses?

    A: With every client that I work with, we like to do a financial profile to see where they are at now and what do we need to do to get them to their goals. One of the areas in the financial profile is a discussion we will have concerning expenses and how to lower them. The old financial adage is there are only two ways to make money. Either go out and earn more or cut your expenses so that you spend less. The best is if you can do both. So today, I thought I would share some thoughts on cutting expenses.

    Step One:
    To reduce your spending, you first need to know where your money goes. Start out by keeping track of all of your expenses for a month. None are too small or insignificant: the daily newspaper, coffee on the way to work, an extra gallon of milk, that burger at the fast-food outlet.

    Step Two:
    Next, categorize the expenses so you can see what you spend and where you spend it. Be sure to factor into your monthly expenses a prorated portion of the annual cost of your irregular expenses like clothes, gifts, car maintenance and insurance premiums.

    Expenses generally fall into two categories. Essential expenses are ones you can’t avoid like rent, utilities, groceries and car insurance. Discretionary expenses are ones you choose to incur for example eating out, entertainment, gifts and videos. Discretionary expenses are the ones over which you will have the most control. Do you buy a lot of books? Try the library instead. Take coffee or lunch to work rather than buy it once you get there. Limit eating out to once a week rather than twice.

    Although essential expenses are fixed, there may be ways to reduce them. Make sure you shut off the lights and TV when you leave the room. E-mail your distant friends and relatives rather than call them long-distance. Change the oil in your car on a regular basis to avoid more costly repairs due to neglect. Review your insurance policies: Can you save on your premiums by taking a nonsmoker discount or increasing your deductibles? Clip the grocery store coupons, always shop from a list, and avoid the impulse items at the end of the aisles.

    Step Three:
    Pick a realistic goal for your monthly spending reduction and try not to make too many changes all at once. To see how big a difference this can make, do the math. If you start by committing to reduce your spending by $2 a day, that’s $730 a year! Set the saved money aside, perhaps in a savings account for your planned vacation, or use it for a specific purpose, such as reducing debt faster.

    Trying to keep your expenses under control is a very important step in financial planning and that is why I spend a lot of time with clients understanding where their money goes. So as we prepare to enter the new year make a commitment to know where your money goes because this is also important in being good Stewards of your money.

    So make sure you have your financial affairs in order and a good way to start this process would be to contact me by e-mail at or call me toll free at (888) 914-9909. I would be more than happy to review your financial situation with you to make sure your financial house is in order, and thank you for joining me this week for your retirement minute.

    Until next week!


    John Bearss - Financial Advisor

    About the Author

    John Bearss (Retirement Specialist)

    John R. Bearss is a retirement specialist. He has been successfully helping clients nearing retirement generate lifetime income streams for 25 years. He can be reached by phone at (888) 914-9909.

    Disclaimer: Investing involves risk. Always do your own due diligence and consult a trusted financial professional before making any investing or financial decisions. John Bearss is a retirement specialist.  He is also a registered representative of and offers securities through SICOR Securities, Inc., Member FINRA, MSRB, SIPC, 6500 Poe Avenue, Suite 105, Dayton, OH  45414 | (937) 890.3101.   Neither SICOR Securities, Inc., Lifetime Decisions Management nor their representatives provide legal or tax advice.  Please consult your CPA or qualified tax advisor before making any decisions.  Lifetime Decisions Management, Inc. and SICOR Securities, Inc. are not affiliated.

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