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?