Friday, 11 July 2008

How to cut down on living expenses or how to survive a tough economy

Times are tough. Tighten your belts! The advice of financial advisers rings out loud and clear. Reduce debt, reduce living expenses, and tighten your belt.

The ever increasing prices of fuel and food have wreaked havoc in households around the world. The cost of simply driving to work and feeding the family has created a shortfall in disposable income that makes it difficult to keep up with car and mortgage repayments. South Africans have to face another negative financial pressure. The central bank has responded to these inflationary pressures with repeated increases in the rate of interest. It has certainly become much more difficult for the average man and woman in the street to make ends meet. How can ordinary people survive these extra costs? Already tightly squeezed, is it possible to cut living expenses even more?

What if your belt is already on the last notch? The solution is simple. Add another notch. You always wanted to be thinner. Right?

Luckily, many of us have quite an affluent lifestyle (even if we don't realise it!) so the possibilities of cutting back are abundant. We don't often realise that many regularly used items add very little value to our lives. Identify what is important and plan around keeping these.

Some years ago the local press reported widely on a prominent business woman that killed herself and her children. She had suffered a major financial setback and was about to lose her multi-million dollar home. She could not face the prospect of this loss. What she didn't realise is that money and material things come and go. Would a smaller home in a cheaper neighbourhood really have spelled the end of the world?

As long as your health is intact and you have a strong resolve to live, it is possible to recover from almost anything. Even if you don't make a full financial recovery, life can still be rich and rewarding.

Cutting down on living expenses is an option that is open to almost everyone as a solution to financial setbacks and hard times. The objective in cutting back must be to achieve the greatest possible saving by cutting back on items that don't really affect our lifestyle.

To begin, draw up a list of everything that you spend on a month to month basis. Identify the shortfall or the required saving. Examine your budget closely. What do you spend each month on sweets, crisps, fizzy drinks and cakes? Many people are taken aback when confronted with the monthly total. Smoking can be a huge expense both on a daily basis and in the long term in terms of our health and related expenses.

Review your alcohol spending. Alcohol can be a major drain on the household economy. No suggestion that you eliminate it altogether, but consider cutting back. Lunches at work can add up to a considerable sum. Consider making packed lunches instead.

Of course fuel is one of the growing expenses on our day to day lives. Limiting the fuel that we use is a priority. Plan your journeys to include everything that you need. Avoid unnecessary repeat trips to the shops and rediscover the joy of walking. Learn how to drive more economically, and make sure that your tires are inflated correctly.

There could be a lot of scope to reduce your electricity bill. Simply switch off whatever you are not using including lights, appliances and the computer. Swap your light bulbs for energy efficient equivalents that use about 10% of the power requirements. Small savings can add up to major savings over the course of a month.

Consider cutting back on entertainment. Cable or Satellite TV are expensive options. Frequent take-away meals may save on effort, but cost much more than a home cooked meal.

If these measures are not enough, then consider changing your accommodation. Could you live more cheaply elsewhere? Consider exchanging the fuel guzzling vehicle for a more economical model. Perhaps if you move closer to work you could also save on fuel. But these items are last resorts.

Avoid cashing in your investments unless doing so would eliminate debt. Eliminating debt can usually lead to a lower cost lifestyle and provides the opportunity for further investment. If you can pay off the home or car loan by cashing in investments then go ahead. The payments that are eliminated can be used to fund new investments in a fairly short space of time.

Cutting down on living expenses may appear to be totally impossible at first glance. Focus on what is important to you and what can be eliminated. Giving up unnecessary spending may be all that is required. Debt elimination can help a great deal towards solving financial problems. In some cases it will be necessary to make drastic changes, but do this only once you have thoroughly reviewed and adjusted your daily spending habits.

1 comment:

cruzinthegalaxie said...

Thanks for the good info.