Cutting Expenses To Save for a Big Purchase? Here’s the 1 Thing To Cut First
Written by
Cindy Lamothe
Edited by
Amber Barkley
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Whether your resolution this year was to save for a big-ticket purchase or start putting aside more money — it’s time to start slashing those costs and finding ways to live more frugally.
“If you’re saving for a large purchase, such as a home or a car, cutting expenses can help you reach that savings goal faster,” said Ann Martin, director of operations of CreditDonkey.
Knowing what to cut out, however, can seem tricky. But according to David Kemmerer, CEO of CoinLedger, there are typically lots of expenses you can trim back when you’re focusing on saving for a large purchase.
“This could mean cutting back on streaming services and other subscriptions or memberships like a gym — in favor of weights at home and outdoor exercise,” he explained. “I would also recommend things like reassessing your phone plan, cable or internet package if you have one, and so on. These are the types of expenses that are a necessity but can typically be cut back to a more economical option or renegotiated for a lower rate.”
GOBankingRates consulted with financial experts to get their recommendations on the one expense you should slash first to help you reach your goal.
Insurance Premiums
Insurance broker Griff Harris said one major expense that often flies under the radar is your insurance premiums. “Clients have saved hundreds, sometimes thousands, of dollars annually by auditing their insurance policies.”
He explained that it’s common to find that individuals are either over-insured or paying for coverage that doesn’t align with their current circumstances.
“Take, for example, a client who, after an in-depth review, realized they were paying for a low deductible on an older car that was no longer justified by the vehicle’s value,” he said. “By adjusting their deductible, they redirected these funds towards the down payment on a new home.”
He added that analyzing your insurance expenses and making necessary adjustments can be a game-changer in financial planning for a significant investment.
Transportation Costs
If you own a car, Andy Chang, finance expert and founder of The Credit Review, recommends considering ways to reduce its financial impact.
“For many, their car is a significant monthly expense when you factor in payments, insurance, maintenance and fuel,” he explained. “Switching to a more fuel-efficient vehicle, negotiating insurance rates or utilizing public transportation or cycling where feasible could result in substantial savings.”
He said carpooling or even transitioning to a single car household, if possible, could also substantially cut costs.
Similarly, Janita Grift, frugal living expert and owner of Frugal Fun Finance, believes reducing your transportation costs will keep you on track with your goals.
“Seriously consider if you need two cars or if you can carpool with your partner or a coworker,” she suggested. “If you want to live even cheaper, can you get rid of all your vehicles and completely rely on public transportation?”
“Personally,” she said, “I’ve saved nearly $800 per month simply by not owning a car and opting for taking the bus and train to work instead.”
Discretionary Spending
According to David Rafalovsky, CEO of Oxygen, when considering how to save for a big purchase, the primary expense to scrutinize and potentially reduce is discretionary spending — particularly dining out, entertainment and non-essential shopping.
“These areas, while contributing to our enjoyment and quality of life, can cumulatively drain resources that could be allocated towards achieving significant financial goals,” he said.
Carter Seuthe, CEO of Credit Summit Consolidation, agreed. “Lots of people have some bloat in their budgets when it comes to entertainment, and I have usually found that lots of this bloat is present in streaming service fees or other subscription-type expenses.”
Seuthe said that when you’re saving for a big purchase, it’s worth going through your budget with a fine-tooth comb to identify some of these recurring expenses you can cut.
Experts also note that discretionary spending is more within our immediate control compared to fixed expenses such as housing or utility bills, offering a more accessible opportunity for cost-cutting. Additionally, the impact of reducing these expenses can be substantial over time, without dramatically altering one’s quality of life.
“For instance, opting for home-cooked meals instead of dining out regularly, or choosing more cost-effective entertainment options, can free up a considerable amount of money,” said Rafalovsky.
He said this strategy not only fosters a culture of mindfulness towards spending but also accelerates the path towards financial milestones.
“This approach underscores the importance of budgeting and financial planning,” Rafalovsky explained. “By carefully monitoring where money is spent, individuals can identify areas of excessive expenditure and redirect those funds towards their savings goals. It’s not merely about cutting costs but reallocating resources in a manner that aligns with one’s financial objectives.”
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