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Month: May 2018

The case for cutting the small expenses

The case for cutting the small expenses

If you want to spend less, you can cut big expenses or small expenses. Or you can cut a combination of both.

It doesn’t take a genius to figure out that cutting big expenses will save more. But that’s not to say you shouldn’t worry about the small expenses.

When you’re stuck with big expenses

There are some big expenses that we can choose to go without, or that we can reduce. Obvious examples are holidays and luxury vehicles. You might not want to cut back in these places, but they can make a big difference quickly. If these aren’t things that are in your budget in the first place, this doesn’t really help.

There are other big expenses that we can’t choose to go without, or at least cannot do so easily. For example, the cost of a rail season ticket or a car that you need for commuting, the costs of accomodation or the costs of child care.

You might be able to make slight savings here and there, but ultimately you’re stuck with significant costs that you have little control over.

Just because most of your income might be tied up in some big, immovable expenses, that’s not to say it’s not worth trying to cut the small expenses. It definitely is.

Why it’s worth cutting small expenses

Cutting out a daily coffee or weekly takeaway isn’t going to make you rich, but it could help you get a more firm financial footing.

Let’s say you spend £20 per week on a takeaway. By cutting the number of takeaways that you order in a year in half, you’ll save £520.

Having £520 in savings will allow you to pay your home insurance premium as an annual lump sum, rather than a monthly premium with interest. You’ll also have the amount that you were paying monthly that you can save for next year’s premium.

In the following year, you might find that you save £520 on takeaways, save money paying your home insurance as a single premium, AND get lower home and car insurance quotes that allow you to pay your car insurance as an annual premium too. Now you’re not paying interest on your home or car insurance. Plus, you’re freeing up the monthly payment that will allow you to save up for next year’s payment.

Life gets cheaper as you get richer

It’s crazy but it’s true, everything is more expensive when you have no money. Pre-payment meters and insurance, the cost of credit and availability of deals. Even food shopping is cheapest when you have the money to bulk buy.

The number of small expenses that you have and control will affect how much you can save. It might not be enough to afford a house or counter the astronomical costs of childcare, but it can give you a bit of breathing space, a firmer footing and some peace of mind.

What are your thoughts on cutting the smaller expenses?

They’re probably doing it with debt

They’re probably doing it with debt

Have you ever looked at someone’s life and wondered how they’re doing it? How they’re affording nice cars, days out, designer clothes and overseas holidays?

Perfectly curated Instagram feeds and glamorous Facebook statuses mean everyone has more people to keep up with. It’s difficult to see how people are affording lavish lifestyles but easy wonder how people afford a seemingly constant stream of expensive things.

Behind the scenes

Firstly, it’s easy to show what you want to show on social media. Secondly, there could be any number of reasons behind someone’s ability to spend lots. They may get family help or have received a large inheritance. Lots of people make extra money side hustling for cash (perhaps your neighbour is a huge, anonymous blogger!) Some people will be reaping the benefits of buy to lets or other investments.

There’s a good chance that lots (most?) of them are paying for it with debt, especially since credit card debt is supposedly growing at the fastest rate since the recession (theweek.co.uk). At some point, they’ll need to pay that debt back, and that will hamper them from being able to build their savings and invest for their future.

You do you

Is it likely that the people you’re seeing are astute financial guardians? If you’re seeing lots of lavish expenses, the answer is probably not.

Being frustrated or disheartened that people have what you don’t have isn’t going to change your situation. Instead, you need to do you. So whether that’s changing your expectations or desires, slashing your costs or increasing your income, or taking some time out from social media, focus on what you’re doing with your life rather than looking longingly at other people’s lives.

There’s a good chance, a few years from now, they’ll be looking back at you wondering how you’re so with it and financially secure.