Finance Hack: Prioritize Cutting Expenses

Amanda Peterson

October 12, 2023  •  2 Minute Read

Banking & Investing, Financial Tips, Money Saving Tips

If you're eager to take charge of your financial situation, you might be pondering where to begin. Should you tackle debt, establish an emergency fund, explore a side hustle, or invest in further education to boost your income? These are all commendable aspirations, but prioritizing your first step can be a tough decision. There's one strategic move that can resolve a multitude of financial issues at once: lowering your expenses. And - it's the best financial decision you can make!

5 Reasons Why Expense Reduction Matters Most

1. Build An Emergency Fund

Living on a tight budget can leave you financially vulnerable to unexpected expenses like a leaking roof or car breakdown. To protect against these unforeseen costs, it's essential to maintain an emergency fund covering one to six months' worth of expenses. This fund serves as a financial safety net for unexpected bills.

2. Less Expenses Equals An Instant Raise

Imagine your monthly income is $4,000 after taxes, and you're accumulating credit card debt due to overspending. Despite not receiving a raise for years, you can make a significant change. By cutting back on dining out, reducing grocery expenses, canceling unnecessary subscriptions, and trimming non-essential spending, you could save $1,500 each month, improving your financial situation without requiring a raise.

3. Be Better Prepared for Financial Hardships

Think about unexpected situations like job loss or sudden illness. Living paycheck-to-paycheck can turn these into financial disasters. But having flexibility in your budget, saving a few hundred or thousand dollars each month, makes it easier to handle setbacks and build the necessary funds to overcome them.

4. More Opportunity To Save

Cutting bills not only frees up money for debt repayment but also streamlines saving. Imagine this: You decide to pay off debt while saving a few hundred dollars monthly. Soon, you shift from struggling to make ends meet and accumulating debt to clearing debts and building savings.

5. Disposable Income Helps Pay Off Debt

Extra disposable income simplifies debt repayment. The best approach? Put more toward high-interest debts to clear them fast. An extra $1,500 or any amount can speed up debt reduction. Also, consider a 0% APR credit card for faster progress. These cards offer interest-free periods of 9 to 21 months, some with zero balance transfer fees, saving you money on interest and making your journey to debt freedom more straightforward.

In Conclusion

Reducing debt and saving are crucial financial goals, but they're hard to achieve without changing spending habits. To make progress, the key is trimming expenses and making sacrifices. If you aim for better finances this year, be prepared to make those necessary sacrifices.