For the past few years, the cost of living has risen to ludicrous heights, especially in America. High inflation rates make the price of basic commodities like gas, grocery store items, and energy costs even more costly for the average citizen. Financial goals are getting derailed, and people’s take-home pay is getting smaller and smaller.
In Canada, inflation rates surged to 3.3% in July 2023, according to Reuters. Meanwhile, in the U.S., inflation swelled to 3.2% in the same period. With rocky economies, this can leave you vulnerable to financial traps that might take years to recover from or, worse, leave you totally broke.
With this in mind, having a nice financial cushion in case of emergencies and unforeseen events is really an advantage. It feels nice to know that you can always reach out to your emergency fund in case of calamities, unexpected property damage, medical emergencies, and the like. Developing practical and creative ways to save money can prevent potential financial ruin that might become difficult to recover from.
So, to keep you on the right track, here are nine short-term and long-term strategies to cut down your cost of living. These strategies may not only save you from the stress of a broken economy. But they may also help you maintain a fiscally smart lifestyle.
Re-examine Your Spending Habits
Prevention is better than cure, they say. And, in the context of building a crisis-resilient financial status, this could not be more true. To cut your expenses, it’s important to re-assess your spending habits and identify which ones you can improve on. Always lookout for unseen charges or subscriptions linked to your credit cards or bank account.
Pay Off Small Loans First
There’s this thing called the “Snowball Effect”. It allows you to determine which debts to pay first and which utility bills to prioritize. The Snowball Effect is simply paying off the debt with the lowest interest rate first. Then, you take the money you allocated toward that payment to pay off the next small debt, and so on, until all your debts are paid.
In contrast, you could go the opposite route with what is called the “Avalanche Method”. With this approach, you focus on paying the loans with the highest interest rates first.
Try To Eat Out Less
Enjoying life with friends and food is important and is a must for a well-lived life filled with rich memories and experiences (not to mention your mental health). However, the costs of dining out, especially if you do it multiple times in a week, can stack up quickly and may derail your financial goals.
Instead of dining out, try meal planning and use the money you save to build a little rainy day fund. Also, try to keep food deliveries to a minimum. You’ll be amazed at how much your monthly costs will reduced.
Stop Shopping Luxury
Buy generic items instead of luxury brands – or just buy stuff you can afford. A general rule of thumb to follow is if you can’t in cash, don’t buy it. You really can’t afford it.
And if you can buy it in cash but end up in debt because of it, it’s really not worth it.
Adjust Your Insurance Policy
If it’s getting difficult to pay your insurance premiums, it’s time to reduce it. A lot of insurance companies allow adjustments to policies to adapt to your financial situation. You can also research websites like the National Association of Insurance Commissioners for other insurance companies that have better terms than your current one.
Stop Buying The Latest iPhone (or Tech Gadgets)
Almost every year, the iPhone and other tech brands roll out a new model, and everyone just clamors for it. If you really think about it, though, the hype is rarely really worth it. Most newer models don’t really offer features significant enough to make the most bang out of your buck. So, if your phone still works, there’s really no reason to buy a new one.
Make A Shopping List
Be honest, the grocery store is like a wonderland for adults. Especially if you love to cook. So, having a shopping list can help you stay on a budget and reduce your monthly expenses. So before you head to the store, look around the house and list what you need from the supermarket. And stick to your list!
Look For Netflix Alternatives
There are so many streaming services out there that are better and cheaper than Netflix. We get it, Netflix produces great content. But over the years, subscription prices have become so expensive and passwords can’t be shared with people who aren’t in the same physical households anymore. So, to reduce your monthly payments, you might want to look into alternative streaming platforms.
Always Check Your Lights, Appliances, And Air Conditioner
Utility bills are ones that you simply can’t cut out of your budget. So, unless you want to live in the woods, get water from the river, and build your own fire, it’s important to keep up with these monthly payments. (Though, to be honest, living off the grid in today’s world can actually sound like a nice break)
You can save a lot by ensuring appliances and lights are turned off when not in use. Plus, you can avoid accidents and prevent further financial losses by being extra cautious. If you’re going to be away from your home for the afternoon, set your air conditioner or heater to an eco-friendly mode. During really hot and really cold months, it can actually end up saving you quite a bit!
If the COVID-19 virus taught us anything as a society, it’s important to be prepared financially for any curve ball life throws us. Times are hard, and the economy is unpredictable, so cutting down your cost of living can help give you a bit of a cushion.
So, make an honest inventory of your finances, get creative, educate yourself, and don’t be afraid to experiment to reach your financial goals!