Decreasing your Expenses

• Start tracking expenses before tackling how much you spend
• Mandatory expenses such as accommodation or food take logical decisions to decrease them. Look at switching or downgrading.
• Discretionary expenses are what make us happy, tackling these expenses will be an emotional decision
• If a discretionary expense is not making you happy then cut it off.
• Don’t deprive yourself of experiences
• Invest the savings that you made

Before we start to tackle our expenses, we need to be more financially aware of what we are spending our money on. We should know how much we spend per month on each category and whether it is a mandatory spend or a discretionary spend. If you are not already doing so, it is time to open an Excel spreadsheet and start entering some numbers. See the topic on tracking expenses.

If you don’t know where you are, it is impossible to know how to get to where you want to go. Imagine going to one of those maps in a shopping centre, the one that show where each retail shop is, if it doesn’t have a ‘you are here’ on it, it is impossible to figure out how to get to the shop you want. That is what tracking your expenses does; it show you where you are financially.  

Mandatory expenses covers such items as accommodation, food, transport, utilities; these items will need to be paid each month in order to survive. Everybody needs a place to live and normally this will incur a cost such as rent or mortgage. We cannot survive long without food, which makes food mandatory and in order to go to work we need to pay for transport… and here is the catch22 – in order to pay for the transport, we need to work!

We can look at changes to mandatory expenses in a logical fashion. Normally, these expenses can be decreased without affecting your happiness. Looking at accommodation, can we move to a cheaper rental, a smaller place, or one that may not be in the centre of the town. If you have a mortgage, can you negotiate or switch to a lower rate?

Some food items can be purchased in wholesale, which may be more money upfront but in the long run will cost you less per item. If you have a business and you are registered for VAT then you can get an application to Musgraves Wholesale or any other food wholesaler. This is where you can get non-perishable goods at wholesale prices. Other ways of saving on food is by not buying name brand items. The store branded items are usually just as good as the name-branded items but a lot cheaper.

If you shop around for other utility (electric, gas, TV) companies, you can usually get a cheaper rate. I would recommend doing this once per year. Try switcher.ie or bonkers.ie to see comparisons. Some electric companies are offering up to €150 sign on bonus.

Insurance is another mandatory item, always, always, shop around when your renewal is up. It is very easy to shop around now as you can get a quote online from most insurance companies. Tip: use a temporary email address when filling in the quote details otherwise, you will be bombarded by email from them. Try ucompare.ie for insurance comparison.

It is difficult to save on transport, if you need a car to get to work then that is a mandatory item. If it is possible to get public transport then see if it would save you money by purchasing a monthly or a yearly tax saver ticket. Needless to say, that if you are on the lookout for a newer car then it makes more sense to buy a second-hand car. See my post on whether to purchase a newer car or keep the one that you have, here.

Discretionary expenses are different to the mandatory expenses though, these expenses determine what makes us happy. Your expense-tracking file should be sectioned so that you can see which are mandatory expenses and which are discretionary expenses. We tend to spend our discretionary money on emotional things. For example, eating out at restaurants, golfing, meeting up with friends for drinks, or going to movies.

Take a look at our expense tracking file to see where your discretionary money is going and ensure that it is getting spent on what makes you happy. If it doesn’t make you happy then this should be the first thing to stop spending your money on or at least cut back. For example, a friend of mine once told me that when they started tracking their expenses they cut back on eating out so often; they were eating out 4 – 5 times per week. He said it was mainly through laziness, as they didn’t want to cook. Now, they have set a policy that they will eat out once per week. He said that he actually enjoys it more now as it seems more of a special occasion and they go to nicer restaurants because they can spend more on their meals.

We don’t want to deprive ourselves of the good things in life or life experiences; if meeting up with your friends for a drink every now and then makes you happy then keep doing that. However, if you are paying extra for convenience then this should be looked at to see if you can stop that waste.

Making changes to discretionary spending requires emotionally changes whereas cutting your mandatory expenses requires logical changes.

Travel Hacks

I usually book AirBNB for accommodation, I get some great deals and it’s a lot cheaper than getting a hotel room. I tend to get the Airbnb accommodation that is on the outskirts of the town, which will be a lot cheaper than an apartment or house in the middle of the town. I just booked a lovely log cabin in the French countryside for €43 per night.

Another one that I discovered, when booking a return flight, check to see how much two single flights will be. There have been some instances when I was able to book two single flights Dublin to Lyon and Lyon to Dublin that was cheaper then booking Dublin to Lyon return. I find Skyscanner to be an excellent resource for getting the cheapest flights. You can compare all the different airlines in one quick search.

Any money you do save per month, get it working for you by investing it. Figure out how much you saved and either pay off high interest debt or invest it. For every €100 per month that you can cut in expenses, will cut your overall investment needed by €32,000 over 15 years. Also, that €100 per month invested will increase your investment pot by €32,000 over 15 years. As our American cousins would say “A double-whammy”

Do your own due diligence, get financial advice before investing in anything. I am not a financial adviser nor do I give advice in any fashion. This information is provided based on my own research and experience.