How to Reduce Household Expenses
By Steve Gillman - June 8, 2013
Yes, there is a short list of ways to reduce household expenses
below. But you can get that kind of list all over. To add value
for the reader then, some key principles are described in detail.
In particular it is explained why certain expenses are more important
We all want to save money if we can do so in ways that don't
affect our quality of life. Thus, while many of us will not turn
down that thermostat for reasons of comfort, we might buy a programmable
thermostat which turns down the heat when we are out of the house.
There are always ways to reduce household expenses without much
sacrifice. As mentioned, some of those are listed below. But
if you're really serious about cutting your costs, why not consider
those household expenses before you buy a home?
When you are shopping for a house, look past the immediate
appearance to the expense profile of each one you consider buying.
Some homes will have higher taxes, some will heat more or less
efficiently. Insurance will be higher in a flood plain, and so
on. To avoid starting out with permanently higher expenses, compare
your options fairly. And to do that, get a monthly figure for
each of these categories for each home you look at (you can at
least estimate if you have insufficient information): mortgage
loan payment, property taxes, HOA dues, insurance, heat, electricity,
water (watch for huge lawns), commuting costs based on your current
job location, other costs (yard care if you don't do it yourself,
higher maintenance if the home is old, etc).
Of course, this doesn't help if you already own a home, so
now we'll look at some of the ways you can cut your current expenditures.
Following that you'll learn why it is more important to cut some
expenses versus others. But here's the short list of ways to
reduce household expenses:
- Turn off the automated sprinkler when rain is forecast.
- Use cheap substitutes in place of expensive cleaners (vinegar
to clean windows, for example).
- Buy generic foods.
- Eat more of what's on sale and less of the more-expensive
- Carpool to work.
- Plan errands well to get everything done in one trip instead
- Buy in bulk at "shopping club" stores.
- Put up a clothes line and hang your laundry to save on dryer
- Turn the hot water down if it is set higher than 140 degrees.
- Landscape in ways that reduce the need for water (have a
rock garden instead of flowers, for example).
- Add insulation to attic to reduce heating costs.
- Replace all incandescent light bulbs with fluorescent bulbs.
- Get new insurance quotes to find a cheaper policy.
- Pay down your mortgage loan to the level where you can have
the mortgage insurance canceled.
- Refinance your mortgage loan if the new rate will be substantially
lower and you plan to stay a while.
Obviously there are a hundred more things we could add to
the list. But which kinds of cost reductions are the most important
ones? There is a clue in the paragraph above about buying a house
with the right "expense profile." You see, it is the
expenses which are more fixed which should take priority when
you are looking to save money. That includes the last five items
on our list, for example. Why should you give priority to these
kinds of expenses? A short story will help make this clear...
Bob watched a lot of pay-per-view television, left the lights
on all over the house, bought all the best foods, and generally
didn't worry about the price of things when shopping. His co-worker
Tom, who had about the same amount of income, bought generic
toilet paper, kept the heat set at 65 degrees, bought furniture
in thrift stores, and generally bought the cheapest of everything.
Then the company cut both men's hours permanently, reducing their
paychecks by half. Soon Tom was in serious financial trouble,
while Bob was still doing okay. How is that possible? Here's
the rest of the story...
Bob lived in a smaller home with lower taxes and cheaper insurance
and a smaller mortgage loan. He owed less than 80% of the value
of his home, so mortgage insurance was no longer required by
the lender. He had a well-insulated house that was easy to heat.
He has colored stone for a yard, which required no watering.
He lived less than a mile from work, which saved him money on
gasoline. The bottom line is that he had very low fixed expenses.
All he had to do when hard times came was to stop buying things,
eat cheaper foods, turn off the cable television, and so on.
He could even walk to work to save money. In other words his
expenditures were mostly the kind that could be stopped immediately.
Meanwhile, Tom, who was known as a penny-pincher, had bought
nice big home with a nice big green lawn in a great neighborhood
because he thought it would be a good investment, and so he paid
out quite a bit more every month for the loan payments, mortgage
insurance, and homeowners insurance. His "investment"
required a lot of water to keep that lawn green, and although
he had installed fluorescent bulbs and additional insulation
in the home, the size alone made his heating bills higher than
Bob's. He had a ten-mile drive to work as well, so he had to
spend more on gas and auto maintenance. In other words he had
high fixed expenses. When hard times hit he wasn't able to cut
his costs by very much, so he was soon in trouble.
It makes sense to reduce household expenses in any way that
doesn't require real sacrifice, since this at least frees up
money for other things you might want. But it is especially important
to reduce the fixed and semi-fixed expenses if you want greater